<PAGE> 1
As filed with the Securities and Exchange Commission on February 12, 1999
1933 Act Registration No. 2-57526
1940 Act Registration No. 811-2699
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-1A
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 [X]
Pre-Effective Amendment No. [ ]
--
Post-Effective Amendment No. 46 [X]
--
and/or
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 [X]
Amendment No. 42 [X]
--
(Check appropriate box or boxes.)
AIM GROWTH SERIES
---------------------------------
(Exact name of Registrant as Specified in Charter)
11 Greenway Plaza, Suite 100, Houston, TX 77046
------------------------------------------------------
(Address of Principal Executive Offices) (Zip Code)
Registrant's Telephone Number, including Area Code: (713) 626-1919
---------------
Copy to:
Samuel D. Sirko, Esq. Arthur J. Brown, Esq.
A I M Advisors, Inc. R. Darrell Mounts, Esq.
11 Greenway Plaza, Suite 100 Kirkpatrick & Lockhart LLP
Houston, Texas 77046 1800 Massachusetts Avenue, N.W.,
(Name and Address of Agent for 2nd Floor
Service) Washington, D.C. 20036
Approximate Date of Proposed Public Offering: As soon as practicable after the
effective date of this Amendment
It is proposed that this filing will become effective (check appropriate box):
- immediately upon filing pursuant to paragraph (b)
- on (date) pursuant to paragraph (b)
- 60 days after filing pursuant to paragraph (a)(1)
[X] on May 3, 1999 pursuant to paragraph (a)(1)
- 75 days after filing pursuant to paragraph (a)(2)
- on (date) pursuant to paragraph (a)(2)
If appropriate, check the following box:
- This post-effective amendment designates a new effective date for a
previously filed post-effective amendment.
Title of Securities Being Registered: Shares of Beneficial Interest
Certain Series of the AIM Growth Series are "feeder funds" in a
"master/feeder" fund arrangement. This Post-Effective Amendment No. 46 includes
a manually executed signature page for one master trust, Growth Portfolio.
<PAGE> 2
The information in this prospectus is not complete and may be changed. We may
not sell these securities until the registration statement filed with the
Securities and Exchange Commission is effective. This prospectus is not an offer
to sell these securities and is not soliciting an offer to buy these securities
in any state where the offer or sale is not permitted.
Subject to Completion dated February 12, 1999
[AIM LOGO APPEARS HERE]
AIM BASIC VALUE FUND
PROSPECTUS
MAY 3, 1999
AIM Basic Value Fund seeks to provide long-term growth of capital.
This prospectus contains important information. Please read it before investing
and keep it for future reference.
An investment in the fund is not a deposit of a bank and is not insured or
guaranteed by the Federal Deposit Insurance Corporation or any other government
agency. There is a risk that you could lose a portion or all of your money.
AS WITH ALL OTHER MUTUAL FUND SECURITIES, THE SECURITIES AND EXCHANGE
COMMISSION HAS NOT APPROVED OR DISAPPROVED THESE SECURITIES OR DETERMINED
WHETHER THE INFORMATION IN THIS PROSPECTUS IS ADEQUATE OR ACCURATE. ANYONE
WHO TELLS YOU OTHERWISE IS COMMITTING A CRIME.
1
<PAGE> 3
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
INVESTMENT OBJECTIVE AND STRATEGIES ....................................... 3
PRINCIPAL RISKS OF INVESTING IN THE FUND .................................. 3
PERFORMANCE INFORMATION ................................................... 5
ANNUAL TOTAL RETURNS ............................................. 5
PERFORMANCE TABLE ................................................ 6
FEE TABLE AND EXPENSE EXAMPLE ............................................. 7
FEE TABLE ........................................................ 7
EXPENSE EXAMPLE .................................................. 7
FUND MANAGEMENT ........................................................... 9
THE ADVISOR ...................................................... 9
ADVISOR COMPENSATION ............................................. 9
PORTFOLIO MANAGERS ............................................... 9
OTHER INFORMATION ......................................................... 10
INITIAL SALES CHARGES FOR CLASS A SHARES ......................... 10
DIVIDENDS AND DISTRIBUTIONS ...................................... 10
FINANCIAL HIGHLIGHTS ...................................................... 11
SHAREHOLDER INFORMATION ................................................... A-1
CHOOSING A SHARE CLASS ........................................... A-1
PURCHASING SHARES ................................................ A-4
REDEEMING SHARES ................................................. A-5
EXCHANGING SHARES ................................................ A-7
PRICING OF SHARES ................................................ A-8
TAXES ............................................................ A-8
OBTAINING ADDITIONAL INFORMATION .................................. BACK COVER PAGE
</TABLE>
The AIM Family of Funds--Registered Trademark--, The AIM Family of Funds and
Design (i.e., the AIM logo), AIM and Design, AIM, AIM LINK, AIM Institutional
Funds, aimfunds.com, La Familia AIM de Fondos--Registered Trademark--, La
Familia AIM de Fondos and Design and Invest with Discipline are registered
service marks and AIM Bank Connection is a service mark of A I M Management
Group Inc.
2
<PAGE> 4
INVESTMENT OBJECTIVE AND STRATEGIES
The fund's investment objective is long-term growth of capital.
The fund seeks to achieve its objective by investing all of its investable
assets in the Value Portfolio (the portfolio), which in turn normally invests at
least 65% of its total assets in equity securities of U.S. issuers that have
market capitalizations of greater than $500 million and that the portfolio
managers believe to be undervalued in relation to long-term earning power or
other factors.
The portfolio may also invest up to 35% of its total assets in equity securities
of U.S. issuers that have market capitalizations of less than $500 million and
in investment-grade non-convertible debt securities, U.S. government securities
and high-quality money market instruments issued by U.S. issuers. The portfolio
may also invest up to 10% of its total assets in securities of foreign issuers
in the form of American Depositary Receipts (ADRs) or similar securities.
In selecting investments, the portfolio managers seek to identify those
companies whose prospects and growth potential are undervalued by investors and
that provide the potential for attractive returns. The portfolio managers
usually sell a particular security when any of those factors materially changes.
The portfolio managers allocate investments among fixed income securities based
on their views as to the best values then currently available in the
marketplace.
[In anticipation of or in response to adverse market conditions or for cash
management purposes, the portfolio may hold all or a portion of its assets in
cash, high-quality money market or high-quality domestic debt securities. As a
result, the fund or the portfolio may not achieve its investment objective.]
[The portfolio may engage in active and frequent trading of portfolio securities
to achieve its investment objective. If the portfolio does trade in this way, it
may incur increased transaction costs and brokerage commissions, both of which
can lower the actual return on your investment. Active trading may also increase
short-term capital gains and losses, which may affect the taxes you have to
pay.]
If the fund's Board of Trustees determines that it is in the best interests of
the fund and its shareholders, the fund may redeem its investment in the
portfolio.
PRINCIPAL RISKS OF INVESTING IN THE FUND
There is a risk that you could lose all or a portion of your investment in the
fund. The value of your investment in the fund will go up and down with the
prices of the securities in which the portfolio invests. The price of equity
securities goes up and down in response to many factors, including the
historical and prospective earnings of the issuer of the stock, the value of its
assets, general economic conditions, interest rates, investor perceptions, and
market liquidity. [Debt securities are particularly vulnerable to credit risk
and interest rate fluctuations. When interest rates rise, bond prices fall; the
longer a bond's duration, the more sensitive it is to this risk.]
[The fund also may invest in securities issued by foreign companies, which have
additional risks, including exchange rate changes, political and economic
upheaval, the relative lack of information about these companies, relatively low
market liquidity and the potential lack of strict financial and accounting
controls and standards.]
The fund could be adversely affected if the computer systems used by the fund's
investment advisor and the fund's other service providers do not properly
process and calculate date-related information from and after January 1, 2000.
The fund's investment advisor and independent technology consultants are
working to avoid year 2000-related problems in its systems and to obtain
assurances from other service providers that they are taking similar steps. In
addition, issuers of securities in which the fund invests may be adversely
affected by year 2000-related problems. This could have an impact on the value
of the fund's investments and its share price.
3
<PAGE> 5
An investment in the fund is not a deposit of a bank and is not insured or
guaranteed by the Federal Deposit Insurance Corporation or any other government
agency.
4
<PAGE> 6
PERFORMANCE INFORMATION
The bar chart and table shown below provide an indication of the risks of
investing in the fund. The fund's past performance is not necessarily an
indication of its future performance.
ANNUAL TOTAL RETURNS
The following bar chart shows changes in the performance of the fund's Class A
shares from year to year. The bar chart does not reflect sales loads. If it did,
the annual total returns shown would be lower.
[GRAPH]
BASIC VALUE
<TABLE>
<CAPTION>
Year Return %
---- --------
<S> <C>
1996 ............................................ 15.12%
1997 ............................................ 27.23%
1998 ............................................ 7.02%
</TABLE>
During the period shown in the bar chart, the highest quarterly return was
15.01% (quarter ended 9/30/97) and the lowest quarterly return was (12.63)%
(quarter ended 9/30/98).
5
<PAGE> 7
PERFORMANCE TABLE
The following performance table shows how the fund's average annual total
returns for one year and since inception compared to those of a broad-based
securities market index.
<TABLE>
<CAPTION>
=================================================================================================
Average Annual Total Returns
(for the periods ended December 31, 1998)
Since Inception
1 Year Inception Date
- -------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Class A 7.02% 19.09% 10/18/95
- -------------------------------------------------------------------------------------------------
Class B 6.34 18.34 10/18/95
- -------------------------------------------------------------------------------------------------
Class C -- -- 5/3/99
- -------------------------------------------------------------------------------------------------
S&P 500 Index(1) 28.60 29.06(2) 10/31/95
=================================================================================================
</TABLE>
(1) The S&P 500 Index is an unmanaged index of common stocks frequently used as
a general measure of U.S. stock market performance.
(2) The average annual total return given is since the date closest to the
inception date of the class with the longest performance history.
6
<PAGE> 8
FEE TABLE AND EXPENSE EXAMPLE
FEE TABLE
This table describes the fees and expenses that you may pay if you buy and hold
shares of the fund:
<TABLE>
<CAPTION>
Class A Class B Class C
------- ------- -------
<S> <C> <C> <C>
Shareholder Fees (fees paid directly from your investment)
Maximum Sales Charge (Load) Imposed on Purchases
(as a percentage of offering price) 5.50% None None
Maximum Deferred Sales Charge (Load)
(as a percentage of original purchase price
or redemption proceeds, whichever is less) None(1) 5.00 1.00
Annual Fund Operating Expenses
(expenses that are deducted from fund assets)(2)
Management Fees [0.00%] [0.00%] [0.00%]
Distribution and/or Service (12b-1) Fees [0.35] [1.00] [1.00]
Other Expenses [0.00] [0.00] [0.00]
Total Annual Fund Operating Expenses [0.00] [0.00] [0.00]
===== ===== =====
Expense Reimbursement(3) [0.00] [0.00] [0.00]
Net Expenses [0.00] [0.00] [0.00]
</TABLE>
- -------------------
(1) If you buy $1,000,000 or more of Class A shares and redeem these shares
within 18 months from the date of purchase, you may pay a 1% contingent
deferred sales charge (CDSC) at the time of redemption.
(2) This fee table, and the expense example below, reflects the expenses of
both the fund and the portfolio.
(3) The investment advisor has agreed to limit expenses through May 31, 2000.
The waiver may not be terminated.
As a result of 12b-1 fees, long-term shareholders in the fund may pay more than
the maximum permitted initial sales charge.
EXPENSE EXAMPLE
This example is intended to help you compare the costs of investing in different
classes of the fund with the cost of investing in other mutual funds.
The example assumes that you invest $10,000 in the fund for the time periods
indicated and then redeem all of your shares at the end of those periods. The
example also assumes that your investment has a 5% return each year and that the
fund's operating expenses remain the same. Although your actual returns and
costs may be higher or lower, based on these assumptions your costs would be:
<TABLE>
<CAPTION>
1 Year 3 Years 5 Years 10 Years
------ ------- ------- --------
<S> <C> <C> <C> <C>
Class A $ $ $ $
Class B
Class C
</TABLE>
7
<PAGE> 9
You would pay the following expenses if you did not redeem your shares:
<TABLE>
<CAPTION>
1 Year 3 Years 5 Years 10 Years
------ ------- ------- --------
<S> <C> <C> <C> <C>
Class A $ $ $ $
Class B
Class C
</TABLE>
8
<PAGE> 10
FUND MANAGEMENT
THE ADVISOR
A I M Advisors, Inc. (the advisor) serves as the investment manager for the
Basic Value Portfolio (the portfolio) and the fund, and is responsible for their
day-to-day management. The advisor is located at 11 Greenway Plaza, Suite 100,
Houston, Texas 77046-1173. The advisor supervises all aspects of the portfolio's
and the fund's operations and provides investment advisory services to the
portfolio, including obtaining and evaluating economic, statistical and
financial information to formulate and implement investment programs for the
portfolio.
The advisor has acted as an investment advisor since its organization in 1976.
Today, the advisor, together with its subsidiaries, advises or manages over 110
investment portfolios, including the fund, encompassing a broad range of
investment objectives.
ADVISOR COMPENSATION
During the fiscal year ended December 31, 1998, the advisor received
compensation of ____% of average net assets.
PORTFOLIO MANAGERS
The advisor uses a team approach to investment management. The individual
members of the team who are primarily responsible for the day-to-day management
of the portfolio, all of whom are officers of A I M Capital Management, Inc., a
wholly owned subsidiary of the advisor, are
o Bret W. Stanley, Senior Portfolio Manager, who has been responsible for the
fund since 1998 and has been associated with the advisor and/or its
affiliates since 1998. From 1994 to 1998, he was Vice President and
portfolio manager with Van Kampen American Capital Asset Management, Inc.
o Evan G. Harrel, Senior Portfolio Manager, who has been responsible for the
fund since 1998 and has been associated with the advisor and/or its
affiliates since 1998. From 1994 to 1998, he was Vice President and
portfolio manager with Van Kampen American Capital Asset Management, Inc.
9
<PAGE> 11
OTHER INFORMATION
INITIAL SALES CHARGES FOR CLASS A SHARES
Purchases of Class A shares of the fund are subject to the maximum 5.50% initial
sales charge as listed under the heading "Category I Initial Sales Charges" in
the "Shareholder Information--Choosing a Share Class" section of this
prospectus.
DIVIDENDS AND DISTRIBUTIONS
Dividends
The fund generally declares and pays dividends, if any, annually.
Capital Gains Distributions
The fund generally distributes long-term and short-term capital gains (including
any net gains from foreign currency transactions), if any, annually.
10
<PAGE> 12
FINANCIAL HIGHLIGHTS
The financial highlights table is intended to help you understand the fund's
financial performance. Certain information reflects financial results for a
single fund share.
The total returns in the table represent the rate that an investor would have
earned (or lost) on an investment in the fund (assuming reinvestment of all
dividends and distributions).
This information has been audited by PricewaterhouseCoopers LLP, whose report,
along with the fund's financial statements, is included in the fund's annual
report which is available upon request.
<TABLE>
<CAPTION>
October 18,
1995 to
Class A Year Ended December 31, December 31,
- -------- ------------------------------------ ------------
1998 1997(b) 1996 1995
------- ------- ------- ------------
<S> <C> <C> <C> <C>
Net asset value, beginning of period $ xx.xx $ xx.xx $ xx.xx $ xx.xx
- ---------------------------------------------------------- ------- ------- ------- -------
Income from investment operations:
Net investment income (loss) (x.xx) (a) (x.xx) (c) (x.xx) (x.xx)
- ---------------------------------------------------------- ------- ------- ------- -------
Net gains on securities (both realized and unrealized) (x.xx) (x.xx) (x.xx) (x.xx)
- ---------------------------------------------------------- ------- ------- ------- -------
Total from investment operations (x.xx) (x.xx) (x.xx) (x.xx)
========================================================== ======= ======= ======= =======
Less distributions: (x.xx) (x.xx) (x.xx) (x.xx)
------- ------- ------- -------
Dividends from net investment income: (x.xx) (x.xx) (x.xx) (x.xx)
- ---------------------------------------------------------- ------- ------- ------- -------
Distributions from capital gains: (x.xx) (x.xx) (x.xx) (x.xx)
- ---------------------------------------------------------- ------- ------- ------- -------
Total distributions (x.xx) (x.xx) (x.xx) (x.xx)
- ---------------------------------------------------------- ------- ------- ------- -------
Net asset value, end of period $ xx.xx $ xx.xx $ xx.xx $ xx.xx
========================================================== ======= ======= ======= =======
Total return (b) (x.xx)% (x.xx)% (x.xx)% (x.xx)%
========================================================== ======= ======= ======= =======
Ratios/supplemental data:
Net assets, end of period (000s omitted) $xx,xxx $xx,xxx $xx,xxx $xx,xxx
========================================================== ======= ======= ======= =======
Ratio of expenses to average net assets (c) x.xx% x.xx% x.xx% x.xx%
========================================================== ======= ======= ======= =======
Ratio of net investment income (loss) to
average net assets (c) (x.xx)% (d) (x.xx)% (x.xx)% (x.xx)%
========================================================== ======= ======= ======= =======
Portfolio turnover rate xx% (d) xx% xx% xx%
========================================================== ======= ======= ======= =======
</TABLE>
(a) Calculated using average shares outstanding.
(b) Does not deduct sales charges.
(c) After fee waivers and/or expense reimbursements. The ratios of expenses to
average net assets prior to fee waivers and/or expense reimbursements were
x.xx%, x.xx%, x.xx% and x.xx% for 1998-1995.
(d) After fee waivers and/or expense reimbursements. The ratios of net
investment income (loss) to average net assets prior to fee waivers and/or
expense reimbursements were x.xx%, x.xx% x.xx% and x.xx% for 1998-1995.
11
<PAGE> 13
<TABLE>
<CAPTION>
October 18, 1995 to
Class B Year Ended December 31, December 31,
- ------- --------------------------------------- -------------------
1998 1997 1996 1995
------- ------- ------- -------
<S> <C> <C> <C> <C>
Net asset value, beginning of period $ xx.xx $ xx.xx $ xx.xx $ xx.xx
- ------------------------------------------------------- ------- ------- ------- -------
Income from investment operations:
Net investment income (loss) (x.xx) (x.xx) (x.xx) (x.xx)
- ------------------------------------------------------- ------- ------- ------- -------
Net gains (losses) on securities
(both realized and unrealized (x.xx) (x.xx) (x.xx) (x.xx)
- ------------------------------------------------------- ------- ------- ------- -------
Total from investment operations (x.xx) (x.xx) (x.xx) (x.xx)
======================================================= ======= ======= ======= =======
Distributions from net realized gains (x.xx) (x.xx) -- (x.xx)
- ------------------------------------------------------- ------- ------- ------- -------
Net asset value, end of period $ xx.xx $ xx.xx $ xx.xx $ xx.xx
======================================================= ======= ======= ======= =======
Total return (a) (x.xx)% (x.xx)% (x.xx)% (x.xx)%
======================================================= ======= ======= ======= =======
Ratios/supplement data:
Net assets, end of period (000s omitted) $xx,xxx $xx,xxx $xx,xxx $xx,xxx
======================================================= ======= ======= ======= =======
Ratio of expenses to average net assets (b) x.xx% (c)(d) x.xx% (c)(d) x.xx% x.xx%
======================================================= ======= ======= ======= =======
Ratio of net investment income (loss) to
average net assets (x.xx)% (c) (x.xx)% (c) (x.xx)% (x.xx)%
======================================================= ======= ======= ======= =======
Portfolio turnover rate xx% xx% xx% xx%
======================================================= ======= ======= ======= =======
</TABLE>
(a) Calculated using average shares outstanding.
(b) Does not deduct sales charges and for periods less than one year, total
returns are not annualized.
(c) After fee waivers and/or expenses reimbursements. Ratios of expenses to
average net assets prior to fee waivers and/or expense reimbursements are
x.xx%, x.xx%, x.xx% and x.xx%, respectively for 1998-1995.
(d) Ratios are based on average net assets of $xxx,xxx,xxx.
(e) Ratio includes indirectly paid expenses. Excluding indirectly paid
expenses, the ratio of expenses to average net assets would have been
x.xx%.
(f) Annualized.
(g) 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 are (x.xx%), (x.xx)%, (x.xx)% and (x.xx)%, respectively for
1998-1995.
(h) The average commission rate paid is the total brokerage commissions paid on
applicable purchases and sales of securities for the period divided by the
total number of related shares purchased and sold, which is required to be
disclosed for fiscal years beginning September 1, 1995 and thereafter.
12
<PAGE> 14
Shareholder Information
- --------------------------------------------------------------------------------
CHOOSING A SHARE CLASS
Many of the funds advised by the advisor (the AIM Funds) have multiple classes
of shares, each class representing an interest in the same portfolio of
investments. When choosing a share class, you should consider the factors below:
<TABLE>
<CAPTION>
CLASS A CLASS B CLASS C
- ---------------------------------------------------------------------------------------------------------
<S> <C> <C>
- - Initial sales charge - No initial sales charge - No initial sales charge
- - Reduced or waived initial sales - Contingent deferred sales - Contingent deferred sales
charge for certain purchases charge on redemptions within six charge on redemptions within
years one year
- - Lower distribution and service - 12b-1 fee of 1.00% - 12b-1 fee of 1.00%
(12b-1) fee than Class B or
Class C shares (See "Fee Table
and Expense Example")
- Converts to Class A shares - Does not convert to Class A
after eight years along with a shares
pro rata portion of its
reinvested dividends and
distributions*
- - Generally more appropriate for - Purchase orders limited to - Generally more appropriate
long-term investors amounts less than $250,000 for short-term investors
</TABLE>
* AIM Money Market Fund: Class B shares convert to AIM Cash Reserve Shares.
AIM Global Trends Fund: If you held Class B shares on May 29, 1998 and
continue to hold them, those shares will convert to Class A shares of that
fund seven years after your date of purchase. If you exchange those shares
for Class B shares of another AIM Fund, the shares into which you exchanged
will not convert to Class A shares until eight years after your date of
purchase of the original shares.
- --------------------------------------------------------------------------------
DISTRIBUTION AND SERVICE (12B-1) FEES
Each AIM Fund (except AIM Tax-Free Intermediate Fund) has adopted 12b-1 plans
that allow the AIM Fund to pay distribution fees to A I M Distributors, Inc.
(the distributor) for the sale and distribution of its shares and fees for
services provided to shareholders, all or a substantial portion of which are
paid to the dealer of record. Because the AIM Fund pays these fees out of its
assets on an ongoing basis, over time these fees will increase the cost of your
investment and may cost you more than paying other types of sales charges.
MCF-03/99
A-1
<PAGE> 15
SALES CHARGES
Generally, you will not pay a sales charge on purchases or redemptions of Class
A shares of AIM Tax-Exempt Cash Fund and AIM Cash Reserve Shares of AIM Money
Market Fund. You may be charged a contingent deferred sales charge if you redeem
AIM Cash Reserve Shares of AIM Money Market Fund acquired through certain
exchanges. Sales charges on all other AIM Funds and classes of those Funds are
detailed below. As used below, the term "offering price" with respect to all
categories of Class A shares includes the initial sales charge.
INITIAL SALES CHARGES
The AIM Funds are grouped into three categories with respect to initial sales
charges. The "Other Information" section of your prospectus will tell you in
what category your particular AIM Fund is classified.
<TABLE>
<CAPTION>
CATEGORY I INITIAL SALES CHARGES
<S> <C> <C>
- ----------------------------------------------------------
<CAPTION>
INVESTOR'S
SALES CHARGE
------------------------
AMOUNT OF INVESTMENT AS A % OF AS A % OF
IN SINGLE TRANSACTION OFFERING PRICE INVESTMENT
- ----------------------------------------------------------
<S> <C> <C>
Less than $ 25,000 5.50% 5.82%
$ 25,000 but less than $ 50,000 5.25 5.54
$ 50,000 but less than $ 100,000 4.75 4.99
$100,000 but less than $ 250,000 3.75 3.90
$250,000 but less than $ 500,000 3.00 3.09
$500,000 but less than $1,000,000 2.00 2.04
- ----------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
CATEGORY II INITIAL SALES CHARGES
<S> <C> <C>
- ----------------------------------------------------------
<CAPTION>
INVESTOR'S
SALES CHARGE
------------------------
AMOUNT OF INVESTMENT AS A % OF AS A % OF
IN SINGLE TRANSACTION OFFERING PRICE INVESTMENT
- ----------------------------------------------------------
<S> <C> <C>
Less than $ 50,000 4.75% 4.99%
$ 50,000 but less than $ 100,000 4.00 4.17
$100,000 but less than $ 250,000 3.75 3.90
$250,000 but less than $ 500,000 2.50 2.56
$500,000 but less than $1,000,000 2.00 2.04
- ----------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
CATEGORY III INITIAL SALES CHARGES
<S> <C> <C>
- ----------------------------------------------------------
<CAPTION>
INVESTOR'S
SALES CHARGE
------------------------
AMOUNT OF INVESTMENT AS A % OF AS A % OF
IN SINGLE TRANSACTION OFFERING PRICE INVESTMENT
- ----------------------------------------------------------
<S> <C> <C>
Less than $ 100,000 1.00% 1.01%
$100,000 but less than $ 250,000 0.75 0.76
$250,000 but less than $1,000,000 0.50 0.50
- ----------------------------------------------------------
</TABLE>
CONTINGENT DEFERRED SALES CHARGES FOR CLASS A SHARES
You can purchase $1,000,000 or more of Class A shares at net asset value.
However, if you purchase shares of that amount in Categories I or II, they will
be subject to a contingent deferred sales charge (CDSC) of 1% if you redeem them
prior to 18 months after the date of purchase. The distributor may pay a dealer
concession and/or a service fee for purchases of $1,000,000 or more.
CONTINGENT DEFERRED SALES CHARGES FOR
CLASS B AND CLASS C SHARES
You can purchase Class B and Class C shares at their net asset value per share.
However, when you redeem them, they are subject to a CDSC in the following
percentages:
<TABLE>
<CAPTION>
YEAR SINCE
PURCHASE MADE CLASS B CLASS C
- ----------------------------------------------------------
<S> <C> <C>
First 5% 1%
Second 4 None
Third 3 None
Fourth 3 None
Fifth 2 None
Sixth 1 None
Seventh and following None None
- ----------------------------------------------------------
</TABLE>
A-2
<PAGE> 16
REDUCED SALES CHARGES AND SALES CHARGE EXCEPTIONS
You may qualify for reduced sales charges or sales charge exceptions. To qualify
for these reductions or exceptions, you or your financial consultant must
provide sufficient information at the time of purchase to verify that your
purchase qualifies for such treatment.
REDUCED SALES CHARGES
You may be eligible to buy Class A shares at reduced initial sales charge rates
under Rights of Accumulation or Letters of Intent under certain circumstances.
Rights of Accumulation
You may combine your new purchases of Class A shares with Class A shares
currently owned for the purpose of qualifying for the lower initial sales charge
rates that apply to larger purchases. The applicable initial sales charge for
the new purchase is based on the total of your current purchase and the current
value of all Class A shares you own.
Letters of Intent
Under a Letter of Intent (LOI), you commit to purchase a specified dollar amount
of Class A shares of AIM Funds during a 13-month period. The amount you agree to
purchase determines the initial sales charge you pay. If the full face amount of
the LOI is not invested by the end of the 13-month period, your account will be
adjusted to the higher initial sales charge level for the amount actually
invested.
INITIAL SALES CHARGE EXCEPTIONS
You will not pay initial sales charges
- - on shares purchased by reinvesting dividends and distributions;
- - when exchanging shares among certain AIM Funds;
- - when using the reinstatement privilege; and
- - when a merger, consolidation, or acquisition of assets of an AIM Fund occurs.
CONTINGENT DEFERRED SALES CHARGE (CDSC) EXCEPTIONS
You will not pay a CDSC
- - if you redeem Class B shares you held for more than six years;
- - if you redeem Class C shares you held for more than one year;
- - if you redeem shares acquired through reinvestment of dividends and
distributions; and
- - on increases in the net asset value of your shares.
There may be other situations when you may be able to purchase or redeem shares
at reduced or without sales charges. Consult the fund's Statement of Additional
Information for details.
A-3
<PAGE> 17
PURCHASING SHARES
MINIMUM INVESTMENTS PER AIM FUND ACCOUNT
The minimum investments for AIM Fund accounts (except for investments in AIM
Small Cap Opportunities Fund) are as follows:
<TABLE>
<CAPTION>
INITIAL ADDITIONAL
TYPE OF ACCOUNT INVESTMENTS INVESTMENTS
- ----------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Savings Plans (money-purchase/profit sharing $ 0 ($25 per AIM Fund investment for $25
plans, 401(k) plans, Simplified Employee Pension salary deferrals from Savings Plans)
(SEP) accounts, Salary Reduction (SARSEP)
accounts, Savings Incentive Match Plans for
Employee IRA (Simple IRA) accounts, 403(b) or
457 plans)
Automatic Investment Plans 50 50
IRA, Education IRA or Roth IRA 250 50
All other accounts 500 50
- ----------------------------------------------------------------------------------------------------------------
</TABLE>
HOW TO PURCHASE SHARES
You may purchase shares using one of the options below.
<TABLE>
<CAPTION>
PURCHASE OPTIONS
- ----------------------------------------------------------------------------------------------------------
OPENING AN ACCOUNT ADDING TO AN ACCOUNT
- ----------------------------------------------------------------------------------------------------------
<S> <C> <C>
Through a Financial Consultant Contact your financial consultant. Same
By Mail Mail completed Account Application Mail your check and the remittance
and purchase payment to the slip from your confirmation
transfer agent, statement to the transfer agent.
A I M Fund Services, Inc.,
P.O. Box 4739,
Houston, TX 77210-4739.
By Wire Mail completed Account Application Call the transfer agent to receive
to the transfer agent. Call the a reference number. Then, use the
transfer agent at (800) 959-4246 to wire instructions at left.
receive a reference number. Then,
use the following wire
instructions:
Beneficiary Bank ABA/Routing #:
113000609
Beneficiary Account Number:
00100366807
Beneficiary Account Name: A I M
Fund Services, Inc.
RFB: Fund Name, Reference #
OBI: Your Name, Account #
By AIM Bank Connection(SM) Open your account using one of the Mail completed AIM Bank
methods described above. Connection(SM) form to the transfer
agent. Once the transfer agent has
received the form, call the
transfer agent to place your
purchase.
- ----------------------------------------------------------------------------------------------------------
</TABLE>
A-4
<PAGE> 18
SPECIAL PLANS
AUTOMATIC INVESTMENT PLAN
You can arrange for periodic investments in any of the AIM Funds by authorizing
the AIM Fund to withdraw the amount of your investment from your bank account on
a day or dates you specify and in an amount of at least $50. You may stop the
Automatic Investment Plan at any time by giving the transfer agent notice ten
days prior to your next scheduled withdrawal.
DOLLAR COST AVERAGING
Dollar Cost Averaging allows you to make automatic monthly or quarterly
exchanges, if permitted, from one AIM Fund account to one or more other AIM Fund
accounts with the identical registration. The account from which exchanges are
to be made must have a minimum balance of $5,000 before you can use this option.
Exchanges will occur on (or about) the 10th or 25th day of the month, whichever
you specify, in the amount you specify. The minimum amount you can exchange to
another AIM Fund is $50.
AUTOMATIC DIVIDEND INVESTMENT
All of your dividends and distributions may be paid in cash or invested in any
AIM Fund at net asset value. Unless you specify otherwise, your dividends and
distributions will automatically be reinvested in the same AIM Fund. You may
invest your dividends and distributions (1) into another AIM Fund in the same
class of shares; or (2) from Class A shares into AIM Cash Reserve Shares of AIM
Money Market Fund, or vice versa.
You must comply with the following requirements to be eligible to invest your
dividends and distributions in shares of another AIM Fund:
(1) Your account balance (a) in the AIM Fund paying the dividend must be at
least $5,000; or (b) in the AIM Fund receiving the dividend must be at least
$500;
(2) Both accounts must have identical registration information; and
(3) You must have completed an authorization form to reinvest dividends into
another AIM Fund.
PORTFOLIO REBALANCING PROGRAM
If you have at least $5,000 in your account, you may participate in the
Portfolio Rebalancing Program. Under this Program, you can designate how the
total value of your AIM Fund holdings should be rebalanced, on a percentage
basis, between two and ten of your AIM Funds on a quarterly, semiannual or
annual basis. Your portfolio will be rebalanced through the exchange of shares
in one or more of your AIM Funds for shares of the same class of one or more
other AIM Funds in your portfolio. If you wish to participate in the Program,
make changes or cancel the Program, the transfer agent must receive your request
to participate, changes or cancellation in good order at least five business
days prior to the next rebalancing date, which is normally the 28th day of the
last month of the period you choose. We may modify, suspend or terminate the
Program at any time on 60 days' prior written notice.
RETIREMENT PLANS
Shares of most of the AIM Funds can be purchased through
tax-sheltered retirement plans made available to corporations, individuals and
employees of non-profit organizations and public schools. A plan document must
be adopted to establish a retirement plan. You may use AIM Funds-sponsored
retirement plans, which include IRAs, Education IRAs, Roth IRAs, 403(b) plans,
401(k) plans, SIMPLE IRA plans, SEP/SARSEP plans and Money Purchase/Profit
Sharing plans, or another sponsor's retirement plan. The plan custodian of the
AIM Funds-sponsored retirement plan assesses an annual maintenance fee of $10.
Contact your financial consultant for details.
REDEEMING SHARES
REDEMPTION FEES
We will not charge you any fees to redeem your shares; however, your broker or
financial consultant may charge service fees for handling these transactions.
Your shares may be subject to a contingent deferred sales charge (CDSC).
COMPUTING A CDSC
The CDSC on redemptions of shares is computed based on the lower of their
original purchase price or current market value, net of reinvested dividends and
capital gains distributions. In determining whether to charge a CDSC, we will
assume that you have redeemed shares on which there is no CDSC first and, then,
shares in the order of purchase.
REDEMPTION OF AIM CASH RESERVE SHARES OF
AIM MONEY MARKET FUND ACQUIRED BY EXCHANGE
If you redeem AIM Cash Reserve Shares acquired by exchange from Class A shares
subject to a CDSC within eighteen months of the purchase of the Class A shares,
you will be charged a CDSC.
REDEMPTION OF CLASS B SHARES ACQUIRED BY
EXCHANGE FROM AIM FLOATING RATE FUND
If you redeem Class B shares you acquired by exchange via a tender offer by AIM
Floating Rate Fund, the early withdrawal charge applicable to shares of AIM
Floating Rate Fund will be applied instead of the CDSC normally applicable to
Class B shares.
A-5
<PAGE> 19
HOW TO REDEEM SHARES
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
Through a Financial Contact your financial consultant.
Consultant
By Mail Send a written request to the transfer agent. Requests must
include (1) original signatures of all registered owners;
(2) the name of the AIM Fund and your account number; (3) if
the transfer agent does not hold your shares, endorsed share
certificates or share certificates accompanied by an
executed stock power; and (4) signature guarantees, if
necessary (see below). The transfer agent may require that
you provide additional information, such as corporate
resolutions or powers of attorney, if applicable. If you are
redeeming from an IRA account, you must include a statement
of whether or not you are at least 59 1/2 years old and
whether you wish to have federal income tax withheld from
your proceeds. The transfer agent may require certain other
information before you can redeem from an employer-sponsored
retirement plan. Contact your employer for details.
By Telephone Call the transfer agent. You will be allowed to redeem by
telephone if (1) the proceeds are to be mailed to the
address on record with us or transferred electronically to a
pre-authorized checking account; (2) the address on record
with us has not been changed within the last thirty days;
(3) you do not hold physical share certificates; (4) you can
provide proper identification information; (5) the proceeds
of the redemption do not exceed $50,000; and (6) you have
not previously declined the telephone redemption privilege.
Certain accounts, including retirement accounts and 403(b)
plans, may not redeem by telephone. The transfer agent must
receive your call during the hours the NYSE is open for
business in order to effect the redemption at that day's
closing price.
</TABLE>
- --------------------------------------------------------------------------------
TIMING AND METHOD OF PAYMENT
We normally will send out checks within one business day, and in any event no
more than seven days, after we accept your request to redeem. If you redeem
shares recently purchased by check, you will be required to wait up to ten
business days before we will send your redemption proceeds. This delay is
necessary to ensure that the purchase check has cleared.
REDEMPTION BY MAIL
If you mail us a request in good order to redeem your shares, we will mail you a
check in the amount of the redemption proceeds to the address on record with us.
If your request is not in good order, you may have to provide us with additional
documentation in order to redeem your shares.
REDEMPTION BY TELEPHONE
If you redeem by telephone, we will mail you a check in the amount of the
redemption proceeds to your address of record (if there has been no change
communicated to the transfer agent within the previous 30 days) or transmit them
electronically to your pre-authorized bank account. We use reasonable procedures
to confirm that instructions communicated by telephone are genuine and are not
liable for telephone instructions that are reasonably believed to be genuine.
PAYMENT FOR SYSTEMATIC WITHDRAWALS
You may arrange for regular monthly or quarterly withdrawals from your account
of at least $50. You also may make annual withdrawals if you own Class A shares.
We will redeem enough shares from your account to cover the amount withdrawn.
You must have an account balance of at least $5,000 to establish a Systematic
Withdrawal Plan. You can stop this plan at any time by giving ten days prior
notice to the transfer agent.
EXPEDITED REDEMPTIONS
(AIM Cash Reserve Shares of AIM Money Market Fund only)
If we receive your redemption order before 11:30 a.m. Eastern Time, we will try
to transmit payment of redemption proceeds on that same day. If we receive your
redemption order after 11:30 a.m. Eastern Time and before the close of trading
on the New York Stock Exchange (NYSE), we generally will transmit payment on the
next business day.
REDEMPTIONS BY CHECK
(Class A shares of AIM Tax-Exempt Cash Fund and AIM Cash Reserve Shares of AIM
Money Market Fund only)
You may redeem shares of these AIM Funds by writing checks in amounts of $250 or
more if you have completed an authorization form. Redemption by check is not
available for retirement accounts.
SIGNATURE GUARANTEES
We require a signature guarantee when you redeem by mail and
(1) the amount is greater than $50,000;
(2) you request that payment be made to someone other than the name registered
on the account;
(3) you request that payment be sent somewhere other than the bank of record on
the account; or
(4) you request that payment be sent to a new address or an address that changed
in the last 30 days.
The transfer agent will accept a guarantee of your signature by a number of
financial institutions. Call the transfer agent for additional information. Some
institutions have transaction amount maximums for these guarantees. Please check
with the guarantor institution.
A-6
<PAGE> 20
REINSTATEMENT PRIVILEGE (Class A shares only)
You may, within 90 days after you sell Class A shares (except Class A shares of
AIM Tax-Exempt Cash Fund), reinvest all or part of your redemption proceeds in
Class A shares of any AIM Fund at net asset value in an identically registered
account. If you sold Class A shares of AIM Limited Maturity Treasury Fund or AIM
Tax-Free Intermediate Fund, you will incur an initial sales charge reflecting
the difference between the initial sales charges on those Funds and the ones in
which you will be investing. In addition, if you paid a contingent deferred
sales charge (CDSC) on any reinstated amount, you will not be subject to a CDSC
if you later redeem that amount. You must notify the transfer agent in writing
at the time you reinstate that you are exercising your reinstatement privilege.
You may exercise this privilege only once per year.
REDEMPTIONS BY THE AIM FUNDS
If your account has been open at least one year, you have not made an additional
purchase in the account during the past six calendar months, and the value of
your account falls below $500 for three consecutive months due to redemptions or
exchanges (excluding retirement accounts), the AIM Funds have the right to
redeem the account after giving you 60 days' prior written notice. You may avoid
having your account redeemed during the notice period by bringing the account
value up to $500 or by utilizing the Automatic Investment Plan.
If an AIM Fund determines that you have provided incorrect information in
opening an account or in the course of conducting subsequent transactions, the
AIM Fund may, in its discretion, redeem the account and distribute the proceeds
to you.
EXCHANGING SHARES
You may, under certain circumstances, exchange shares in one AIM Fund for those
of another AIM Fund. Before requesting an exchange, review the prospectus of the
AIM Fund you wish to acquire. Exchange privileges also apply to holders of the
Connecticut General Guaranteed Account, established for tax-qualified group
annuities, for contracts purchased on or before June 30, 1992.
PERMITTED EXCHANGES
Except as otherwise stated below, you may exchange your shares for shares of the
same class of another AIM Fund. You also may exchange AIM Cash Reserve Shares of
AIM Money Market Fund for Class A shares of another AIM Fund, or vice versa. You
may be required to pay an initial sales charge when exchanging from a Fund with
a lower initial sales charge than the one into which you are exchanging. If you
exchange from Class A shares not subject to a CDSC into Class A shares subject
to those charges, you will be charged a CDSC when you redeem the exchanged
shares. The CDSC charged on redemption of those shares will be calculated
starting on the date you acquired those shares through exchange.
YOU WILL NOT PAY A SALES CHARGE WHEN EXCHANGING:
(1) Class A shares with an initial sales charge (except for Class A shares of
AIM Limited Maturity Treasury Fund and AIM Tax-Free Intermediate Fund) for
Class A shares of another AIM Fund or AIM Cash Reserve Shares of AIM Money
Market Fund;
(2) Class A shares of AIM Limited Maturity Treasury Fund and AIM Tax-Free
Intermediate Fund for
(a) one another;
(b) AIM Cash Reserve Shares of AIM Money Market Fund or Class A shares of
AIM Tax-Exempt Cash Fund; or
(c) Class A shares of another AIM Fund, but only if
(i) you acquired the original shares before May 1, 1994; or
(ii) you acquired the original shares on or after May 1, 1994 by way of
an exchange from shares with higher sales charges;
(3) AIM Cash Reserve Shares of AIM Money Market Fund or Class A shares of AIM
Tax-Exempt Cash Fund for
(a) one another;
(b) Class A shares of an AIM Fund subject to an initial sales charge (except
for Class A shares of AIM Limited Maturity Treasury Fund and AIM
Tax-Free Intermediate Fund), but only if you acquired the original
shares
(i) prior to May 1, 1994 by exchange from Class A shares subject to an
initial sales charge;
(ii) on or after May 1, 1994 by exchange from Class A shares subject to
an initial sales charge (except for Class A shares of AIM Limited
Maturity Treasury Fund and AIM Tax-Free Intermediate Fund); or
(c) Class A shares of AIM Limited Maturity Treasury Fund and AIM Tax-Free
Intermediate Fund, but only if you acquired the original shares by
exchange from Class A shares subject to an initial sales charge; or
(4) Class B shares for other Class B shares, and Class C shares for other Class
C shares.
EXCHANGES NOT PERMITTED
You may not exchange Class A shares subject to contingent deferred sales charges
for Class A shares of AIM Limited Maturity Treasury Fund, AIM Tax-Free
Intermediate Fund or AIM Tax-Exempt Cash Fund.
EXCHANGE CONDITIONS
The following conditions apply to all exchanges:
- - You must meet the minimum purchase requirements for the AIM Fund into which
you are exchanging;
- - Shares of the AIM Fund you wish to acquire must be qualified for sale in your
state of residence;
- - Exchanges must be made between accounts with identical registration
information;
A-7
<PAGE> 21
- - The account you wish to exchange from must have a certified tax identification
number (or the Fund has received an appropriate Form W-8 or W-9);
- - Shares must have been held for at least one day prior to the exchange; and
- - If you have physical share certificates, you must return them to the transfer
agent prior to the exchange.
TERMS OF EXCHANGE
Under unusual market conditions, an AIM Fund may delay the issuance of shares
being purchased in an exchange for up to five business days if it determines
that it would be materially disadvantaged by the immediate transfer of exchange
proceeds. There is no fee for exchanges. The exchange privilege is not an option
or right to purchase shares. Any of the participating AIM Funds or the
distributor may modify or discontinue this privilege at any time.
BY MAIL
If you wish to make an exchange by mail, you must include original signatures of
each registered owner exactly as the shares are registered, the account
registration and account number, the dollar amount or number of shares to be
exchanged and the names of the AIM Funds from which and into which the exchange
is to be made.
BY TELEPHONE
Conditions that apply to exchanges by telephone are the same as redemptions by
telephone, including that the transfer agent must receive exchange requests
during the hours the NYSE is open for business; however, you still will be
allowed to exchange by telephone even if you have changed your address of record
within the preceding 30 days.
EXCHANGING CLASS B AND CLASS C SHARES
If you make an exchange involving Class B or Class C shares, the amount of time
you held the original shares will be added to the holding period of the Class B
or Class C shares, respectively, into which you exchanged for the purpose of
calculating contingent deferred sales charges (CDSC) if you later redeem the
exchanged shares. If you redeem Class B shares acquired by exchange via a tender
offer by AIM Floating Rate Fund, you will be credited with the time period you
held the shares of AIM Floating Rate Fund for the purpose of computing the early
withdrawal charge applicable to those shares.
EACH AIM FUND AND THE DISTRIBUTOR RESERVE THE RIGHT AT ANY TIME TO REJECT OR
CANCEL ANY PART OF ANY PURCHASE OR EXCHANGE ORDER; MODIFY ANY TERMS OR
CONDITIONS OF PURCHASE OF SHARES OF ANY AIM FUND; OR WITHDRAW ALL OR ANY PART
OF THE OFFERING MADE BY THIS PROSPECTUS.
PRICING OF SHARES
DETERMINATION OF NET ASSET VALUE
The price of each AIM Fund's shares is the fund's net asset value per share. The
AIM Funds value portfolio securities for which market quotations are readily
available at market value. The AIM Funds value short-term investments maturing
within 60 days at amortized cost, which approximates market value. AIM Money
Market Fund and AIM Tax-Exempt Cash Fund value all their securities at amortized
cost. AIM High Income Municipal Fund, AIM Municipal Bond Fund, AIM Tax-Exempt
Bond Fund of Connecticut and AIM Tax-Free Intermediate Fund value variable rate
securities that have an unconditional demand or put feature exercisable within
seven days or less at par, which reflects the market value of such securities.
The AIM Funds value all other securities and assets at their fair value.
Securities and other assets quoted in foreign currencies are valued in U.S.
dollars based on the prevailing exchange rates on that day. In addition, if,
between the time trading ends on a particular security and the close of the New
York Stock Exchange (NYSE), events occur that materially affect the value of the
security, the AIM Funds may value the security at its fair value as determined
in good faith by or under the supervision of the Board of Directors or Trustees
of the AIM Fund. The effect of using fair value pricing is that an AIM Fund's
net asset value will be subject to the judgment of the Board of Directors or
Trustees or its designee instead of being determined by the market. Because some
of the AIM Funds may invest in securities that are primarily listed on foreign
exchanges, the value of those funds' shares may change on days when you will not
be able to purchase or redeem shares.
Each AIM Fund determines the net asset value of its shares as of the close of
the NYSE on each day the NYSE is open for business. AIM Money Market Fund also
determines its net asset value as of 12:00 noon Eastern Time on each day the
NYSE is open for business.
TIMING OF ORDERS
You can purchase, exchange or redeem shares during the hours the NYSE is open
for business. The AIM Funds price purchase, exchange and redemption orders at
the net asset value calculated after the transfer agent receives an order in
good form. An AIM Fund may postpone the right of redemption only under unusual
circumstances, such as when the NYSE restricts or suspends trading.
TAXES
In general, dividends and distributions you receive are taxable as ordinary
income or long-term capital gains for federal income tax purposes, whether you
reinvest them in additional shares or take them in cash. Distributions are
taxable to you at different rates depending on the length of time the fund holds
its assets. Different tax rates apply to ordinary income and long-term capital
gain distributions, regardless of how long you have held your shares. Every
year, you will be sent information showing the amount of dividends and
distributions you received from each AIM Fund during the prior year.
A-8
<PAGE> 22
Any long-term or short-term capital gains realized from redemptions of AIM
Fund shares will be subject to federal income tax. Exchanges of shares for
shares of another AIM Fund are treated as a sale, and any gain realized on the
transaction will generally be subject to federal income tax.
The foreign, state and local tax consequences of investing in AIM Fund shares
may differ materially from the federal income tax consequences described above.
You should consult your tax advisor before investing.
A-9
<PAGE> 23
[BACK COVER PAGE]
OBTAINING ADDITIONAL INFORMATION
More information may be obtained free of charge upon request. The Statement of
Additional Information (SAI), a current version of which is on file with the
Securities and Exchange Commission (SEC), contains more details about the fund
and is incorporated by reference into the prospectus (is legally a part of this
prospectus). Annual and semiannual reports to shareholders contain additional
information about the fund's investments. The fund's annual report also
discusses the market conditions and investment strategies that significantly
affected the fund's performance during its last fiscal year.
If you have questions about this fund, another fund in The AIM Family of Funds
or your account, or wish to obtain free copies of the fund's current SAI or
annual or semiannual reports, please contact us:
BY MAIL: A I M Distributors, Inc.
11 Greenway Plaza, Suite 100
Houston, TX 77046-1173
BY TELEPHONE: (800) 347-4246
BY E-MAIL: [email protected]
ON THE INTERNET: http://www.aimfunds.com (prospectuses and annual and
semiannual reports only)
You also can obtain copies of the fund's SAI and other information at the SEC's
Public Reference Room in Washington, D.C., on the SEC's website
(http://www.sec.gov), or by sending a letter, including a duplicating fee, to
the SEC's Public Reference Section, Washington, D.C. 20549-6009. Please call the
SEC at 1-800-SEC-0330 for information about the Public Reference Room.
AIM Basic Value Fund
SEC 1940 Act File number: 811-2699
<PAGE> 24
The information in this prospectus is not complete and may be changed. We may
not sell these securities until the registration statement filed with the
Securities and Exchange Commission is effective. This prospectus is not an offer
to sell these securities and is not soliciting an offer to buy these securities
in any state where the offer or sale is not permitted.
Subject to Completion dated February 12, 1999
[AIM LOGO APPEARS HERE]
AIM EUROPE GROWTH FUND
PROSPECTUS
MAY 3, 1999
AIM Europe Growth Fund seeks to provide long-term growth of capital.
This prospectus contains important information. Please read it before investing
and keep it for future reference.
An investment in the fund is not a deposit of a bank and is not insured or
guaranteed by the Federal Deposit Insurance Corporation or any other government
agency. There is a risk that you could lose a portion or all of your money.
AS WITH ALL OTHER MUTUAL FUND SECURITIES, THE SECURITIES AND
EXCHANGE COMMISSION HAS NOT APPROVED OR DISAPPROVED THESE SECURITIES OR
DETERMINED WHETHER THE INFORMATION IN THIS PROSPECTUS IS ADEQUATE OR
ACCURATE. ANYONE WHO TELLS YOU OTHERWISE IS COMMITTING A CRIME.
1
<PAGE> 25
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
<S> <C>
INVESTMENT OBJECTIVE AND STRATEGIES......................................................................3
PRINCIPAL RISKS OF INVESTING IN THE FUND.................................................................3
PERFORMANCE INFORMATION..................................................................................5
ANNUAL TOTAL RETURNS............................................................................5
PERFORMANCE TABLE...............................................................................6
FEE TABLE AND EXPENSE EXAMPLE............................................................................7
FEE TABLE.......................................................................................7
EXPENSE EXAMPLE.................................................................................7
FUND MANAGEMENT..........................................................................................9
THE ADVISOR AND SUBADVISOR......................................................................9
ADVISOR COMPENSATION............................................................................9
PORTFOLIO MANAGER...............................................................................9
OTHER INFORMATION.......................................................................................10
INITIAL SALES CHARGES FOR CLASS A SHARES.......................................................10
DIVIDENDS AND DISTRIBUTIONS....................................................................10
FINANCIAL HIGHLIGHTS....................................................................................11
SHAREHOLDER INFORMATION................................................................................A-1
CHOOSING A SHARE CLASS........................................................................A-1
PURCHASING SHARES.............................................................................A-4
REDEEMING SHARES..............................................................................A-5
EXCHANGING SHARES.............................................................................A-7
PRICING OF SHARES.............................................................................A-8
TAXES.........................................................................................A-8
OBTAINING ADDITIONAL INFORMATION...........................................................BACK COVER PAGE
</TABLE>
The AIM Family of Funds--Registered Trademark--, The AIM Family of Funds and
Design (i.e., the AIM logo), AIM and Design, AIM, AIM LINK, AIM Institutional
Funds, aimfunds.com, La Familia AIM de Fondos--Registered Trademark--, La
Familia AIM de Fondos and Design and Invest with Discipline are registered
service marks and AIM Bank Connection is a service mark of A I M Management
Group Inc.
2
<PAGE> 26
INVESTMENT OBJECTIVE AND STRATEGIES
The fund's investment objective is long-term growth of capital.
The fund seeks to achieve its objective by investing, normally, at least 65% of
its total assets in equity securities of issuers domiciled in eighteen countries
located in Europe. These countries are designated as the fund's primary
investment area and the list of countries may be revised with the approval of
the fund's Board of Trustees. The fund considers a company to be domiciled in a
particular country if it (i) is organized under the laws of a particular country
and has a principal office in a particular country; or (ii) derives 50% or more
of its total revenues from business in that country provided that, in the view
of the fund's portfolio managers, the value of the issuers' securities tend to
reflect such country's development to a greater extent than developments
elsewhere.
The fund may invest up to 35% of its total assets in equity securities of
issuers domiciled outside of its primary investment area. The fund may also
invest up to 35% of its total assets in U.S. and foreign investment-grade debt
securities, or securities deemed by the fund's subadvisor to be of comparable
quality. These debt securities could include U.S. and foreign government
securities and corporate debt securities.
In selecting investments, the fund's portfolio managers seek to identify those
countries and industries where political and economic factors, including
currency movements, are likely to produce above-average growth rates. The fund's
portfolio managers then balance the potential benefits with the risks of
investing in those countries and industries. The fund's portfolio managers
usually sell a particular security when any of those factors materially changes.
[In anticipation of or in response to adverse market conditions, the fund may
invest up to 100% of its total assets in the securities of U.S. issuers and
denominated in U.S. dollars. During periods of adverse market conditions or for
cash management purposes, in addition to investing in the securities of U.S.
issuers, the fund may hold all or a portion of its assets in cash (U.S. dollars,
foreign currency or multinational currency units), money market securities, or
high quality debt securities issued by corporations or the U.S. or a foreign
government. As a result, the fund may not achieve its investment objective.]
[The fund may engage in active and frequent trading of portfolio securities to
achieve its investment objective. If the fund does trade in this way, it may
incur increased transaction costs and brokerage commissions, both of which can
lower the actual return on your investment. Active trading may also increase
short-term capital gains and losses, which may affect the taxes you have to
pay.]
PRINCIPAL RISKS OF INVESTING IN THE FUND
There is a risk that you could lose all or a portion of your investment in the
fund. The value of your investment in the fund will go up and down with the
prices of the securities in which the fund invests. The price of equity
securities goes up and down in response to many factors, including the
historical and prospective earnings of the issuer of the stock, the value of its
assets, general economic conditions, interest rates, investor perceptions, and
market liquidity. [Debt securities are particularly vulnerable to credit risk
and interest rate fluctuations. When interest rates rise, bond prices fall; the
longer a bond's duration, the more sensitive it is to this risk.]
Because the fund focuses its investments in European countries, the value of
your shares may rise and fall more than the value of shares of a fund that
invests in a broader geographic region.
The prices of foreign securities may be further affected by other factors,
including:
3
<PAGE> 27
o Currency Exchange Rates -- The dollar value of the fund's foreign
investments will be affected by changes in the exchange rates between the
dollar and the currencies in which those investments are traded.
o Political and Economic Conditions -- The value of the fund's investments
may be adversely affected by political and social instability and by
changes in economic or taxation policies.
o Regulations -- Foreign companies generally are subject to less stringent
regulations, including financial and accounting controls, than are U.S.
companies. As a result, among other things, there generally is less
publicly available information about foreign companies than about U.S.
companies.
o Markets -- The securities markets of other countries are smaller than U.S.
securities markets. As a result, many foreign securities may be less liquid
and more volatile than U.S. securities.
[If the seller of a repurchase agreement in which the fund invests defaults on
its obligation or declares bankruptcy, the fund may experience delays in selling
the securities underlying the repurchase agreement. As a result, the fund may
incur losses arising from decline in the value of those securities, reduced
levels of income and expenses of enforcing its rights.]
The fund could be adversely affected if the computer systems used by the fund's
investment advisor and the fund's other service providers do not properly
process and calculate date-related information from and after January 1, 2000.
The fund's investment advisor and independent technology consultants are
working to avoid year 2000-related problems in its systems and to obtain
assurances from other service providers that they are taking similar steps. In
addition, issuers of securities in which the fund invests may be adversely
affected by year 2000-related problems. This could have an impact on the value
of the fund's investments and its share price.
An investment in the fund is not a deposit of a bank and is not insured or
guaranteed by the Federal Deposit Insurance Corporation or any other government
agency.
4
<PAGE> 28
PERFORMANCE INFORMATION
The bar chart and table shown below provide an indication of the risks of
investing in the fund. The fund's past performance is not necessarily an
indication of its future performance.
ANNUAL TOTAL RETURNS
The following bar chart shows changes in the performance of the fund's Class A
shares from year to year. The bar chart does not reflect sales loads. If it did,
the annual total returns shown would be lower.
[GRAPH]
EUROPE GROWTH
<TABLE>
<CAPTION>
YEAR RETURN(%)
---- --------
<S> <C>
1989......................................... 40.62%
1990......................................... (14.72)%
1991......................................... 4.33%
1992......................................... (11.26)%
1993......................................... 28.32%
1994......................................... (5.80)%
1995......................................... 9.86%
1996......................................... 19.61%
1997......................................... 11.20%
1998......................................... 16.63%
</TABLE>
During the period shown in the bar chart, the highest quarterly return was
23.25% (quarter ended 3/31/98) and the lowest quarterly return was (21.04)%
(quarter ended 9/30/98).
5
<PAGE> 29
PERFORMANCE TABLE
The following performance table shows how the fund's average annual total
returns for one, five and ten years and since inception compare to those of a
broad-based securities market index.
<TABLE>
<CAPTION>
=======================================================================================================
Average Annual Total Returns
(for the periods ended December 31,
1998) Since Inception
1 Year 5 Years 10 Years Inception Date
- -------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Class A 16.63% 9.93% 8.62% 13.06% 7/18/85
- -------------------------------------------------------------------------------------------------------
Class B 15.80 9.23 -- 11.53 4/1/93
- -------------------------------------------------------------------------------------------------------
Class C -- -- -- -- 5/3/99
- -------------------------------------------------------------------------------------------------------
MSCI Europe Index(1) 28.53 19.10 15.23 18.29(2) 7/31/85
=======================================================================================================
</TABLE>
(1) The MSCI Europe Index measures performance for 14 European developed
country stock markets. The index is capitalization weighted. Companies
included in the index replicate the industry composition of each local
market and, in addition, represent a sampling of large, medium and small
capitalization companies from each local market, taking into account the
stock's liquidity.
(2) The average annual total return given is since the date closest to the
inception date of the class with the longest performance history.
6
<PAGE> 30
FEE TABLE AND EXPENSE EXAMPLE
FEE TABLE
This table describes the fees and expenses that you may pay if you buy and hold
shares of the fund:
<TABLE>
<CAPTION>
Class A Class B Class C
------- ------- -------
<S> <C> <C> <C>
Shareholder Fees (fees paid directly from your investment)
Maximum Sales Charge (Load) Imposed on Purchases
(as a percentage of offering price) 5.50% None None
Maximum Deferred Sales Charge (Load)
(as a percentage of original purchase price
or redemption proceeds, whichever is less) None(1) 5.00 1.00
Annual Fund Operating Expenses
(expenses that are deducted from fund assets)
Management Fees [0.00%] [0.00%] [0.00%]
Distribution and/or Service (12b-1) Fees [0.35] [1.00] [1.00]
Other Expenses [0.00] [0.00] [0.00]
Total Annual Fund Operating Expenses [0.00] [0.00] [0.00]
====== ====== ======
Expense Reimbursement(2) [0.00] [0.00] [0.00]
Net Expenses [0.00] [0.00] [0.00]
</TABLE>
- ---------------
(1) If you buy $1,000,000 or more of Class A shares and redeem these shares
within 18 months from the date of purchase, you may pay a 1% contingent
deferred sales charge (CDSC) at the time of redemption.
[(2) The investment advisor has agreed to limit expenses through May 31, 2000.
The waiver may not be terminated.]
As a result of 12b-1 fees, long-term shareholders in the fund may pay more than
the maximum permitted initial sales charge.
EXPENSE EXAMPLE
This example is intended to help you compare the costs of investing in different
classes of the fund with the cost of investing in other mutual funds.
The example assumes that you invest $10,000 in the fund for the time periods
indicated and then redeem all of your shares at the end of those periods. The
example also assumes that your investment has a 5% return each year and that the
fund's operating expenses remain the same. Although your actual returns and
costs may be higher or lower, based on these assumptions your costs would be:
<TABLE>
<CAPTION>
1 Year 3 Years 5 Years 10 Years
------ ------- ------- --------
<S> <C> <C> <C> <C>
Class A $ $ $ $
Class B
Class C
</TABLE>
7
<PAGE> 31
You would pay the following expenses if you did not redeem your shares:
<TABLE>
<CAPTION>
1 Year 3 Years 5 Years 10 Years
------ ------- ------- --------
<S> <C> <C> <C> <C>
Class A $ $ $ $
Class B
Class C
</TABLE>
8
<PAGE> 32
FUND MANAGEMENT
THE ADVISOR AND SUBADVISOR
A I M Advisors, Inc. (the advisor) serves as the fund's investment advisor.
INVESCO Asset Management Ltd. (the subadvisor) an affiliate of the advisor, is
the fund's subadvisor and is responsible for its day-to-day management. The
advisor is located at 11 Greenway Plaza, Suite 100, Houston, Texas 77046-1173.
The subadvisor is located at 11 Devonshire Square, London EC2M 4YR, England. The
advisors supervise all aspects of the fund's operations and provide investment
advisory services to the fund, including obtaining and evaluating economic,
statistical and financial information to formulate and implement investment
programs for the fund.
The advisor has acted as an investment advisor since its organization in 1976
and the subadvisor has acted as an investment advisor since its organization in
______________. Today, the advisor, together with its subsidiaries, advises or
manages over 110 investment portfolios, including the fund, encompassing a broad
range of investment objectives.
ADVISOR COMPENSATION
During the fiscal year ended December 31, 1998, the advisor received
compensation of __% of average net assets.
PORTFOLIO MANAGER
The advisor uses a team approach to investment management. The individual member
of the team who is primarily responsible for the day-to-day management of the
fund's portfolio, [who is an officer of the subadvisor,] is
o Steven Chamberlain, Portfolio Manager, who has been responsible for the
fund since 1999 and has been associated with the advisor and/or its
affiliates since 1989.
9
<PAGE> 33
OTHER INFORMATION
INITIAL SALES CHARGES FOR CLASS A SHARES
Purchases of Class A shares of the fund are subject to the maximum 5.50% initial
sales charge as listed under the heading "Category I Initial Sales Charges" in
the "Shareholder Information--Choosing a Share Class" section of this
prospectus.
DIVIDENDS AND DISTRIBUTIONS
Dividends
The fund generally declares and pays dividends, if any, annually.
Capital Gains Distributions
The fund generally distributes long-term and short-term capital gains (including
any net gains from foreign currency transactions), if any, annually.
10
<PAGE> 34
FINANCIAL HIGHLIGHTS
The financial highlights table is intended to help you understand the fund's
financial performance. Certain information reflects financial results for a
single fund share.
The total returns in the table represent the rate that an investor would have
earned (or lost) on an investment in the fund (assuming reinvestment of all
dividends and distributions).
This information has been audited by PricewaterhouseCoopers LLP, whose report,
along with the fund's financial statements, is included in the fund's annual
report which is available upon request.
<TABLE>
<CAPTION>
Class A Year Ended December 31,
- ------- ---------------------------------------------------------------------
1998 1997 1996 1995 1994
---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of period $xx.xx $xx.xx $ xx.xx $xx.xx $xx.xx
- ----------------------------------------------------- ---------- ---------- ---------- ---------- ----------
Income from investment operations:
Net investment income (loss) (x.xx)(a) (x.xx)(a) (x.xx)(a) (x.xx) (x.xx)
- ----------------------------------------------------- ---------- ---------- ---------- ---------- ----------
Net gains on securities
(both realized and unrealized) (x.xx) (x.xx) (x.xx) (x.xx) (x.xx)
- ----------------------------------------------------- ---------- ---------- ---------- ---------- ----------
Total from investment operations (x.xx) x.xx x.xx x.xx x.xx
===================================================== ========== ========== ========== ========== ==========
Distributions from net realized gains (x.xx) (x.xx) (x.xx) (x.xx) -----
- ----------------------------------------------------- ---------- ---------- ---------- ---------- ----------
Net asset value, end of period $xx.xx $xx.xx $xx.xx $xx.xx $xx.xx
===================================================== ========== ========== ========== ========== ==========
Total return(b) (x.xx)% (x.xx)% (x.xx)% (x.xx)% (x.xx)%
===================================================== ========== ========== ========== ========== ==========
Ratios/supplemental data:
Net assets, end of period (000s omitted)(c) $xx,xxx $x,xxx,xxx $x,xxx,xxx $x,xxx,xxx $x,xxx,xxx
===================================================== ========== ========== ========== ========== ==========
Ratio of expenses to average net assets(c) x.xx%(d) x.xx x.xx x.xx x.xx
===================================================== ========== ========== ========== ========== ==========
Ratio of net investment income (loss)
to average net assets(c) (x.xx)%(d) (x.xx)% (x.xx)% (x.xx)% (x.xx)%
===================================================== ========== ========== ========== ========== ==========
Portfolio turnover rate xx% xx% xx% xx% xx%
===================================================== ========== ========== ========== ========== ==========
</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
x.xx%, x.xx%, x.xx% and x.xx% for 1998-1995.
(d) After fee waivers and/or expense reimbursements. Ratios of net investment
income (loss) to average net assets prior to fee waivers and/or expense
reimbursements were x.xx%, x.xx%, x.xx% and x.xx% for 1998-1995.
11
<PAGE> 35
<TABLE>
<CAPTION>
Class B Year Ended December 31,
- ------- ---------------------------------------------------------------------
1998 1997 1996 1995 1994
---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of period $ xx.xx $ xx.xx $ xx.xx $ xx.xx $ xx.xx
- ---------------------------------------------- ---------- ---------- ---------- ---------- ----------
Income from investment operations:
Net investment income (loss) (x.xx) (x.xx) (x.xx) (x.xx) (x.xx)
- ---------------------------------------------- ---------- ---------- ---------- ---------- ----------
Net gains (losses) on securities
(both realized and unrealized (x.xx) (x.xx) (x.xx) (x.xx) (x.xx)
- ---------------------------------------------- ---------- ---------- ---------- ---------- ----------
Total from investment operations (x.xx) (x.xx) (x.xx) (x.xx) (x.xx)
============================================== ========== ========== ========== ========== ==========
Distributions from net realized gains (x.xx) (x.xx) --- (x.xx) (x.xx)
- ---------------------------------------------- ---------- ---------- ---------- ---------- ----------
Net asset value, end of period $ xx.xx $ xx.xx $ xx.xx $ xx.xx $ xx.xx
============================================== ========== ========== ========== ========== ==========
Total return(a) (x.xx)% (x.xx)% (x.xx)% (x.xx)% (x.xx)%
============================================== ========== ========== ========== ========== ==========
Ratios/supplement data:
Net assets, end of period (000s omitted) $ xx,xxx $ xx,xxx $ xx,xxx $ xx,xxx $ xx,xxx
============================================== ========== ========== ========== ========== ==========
Ratio of expenses to average net assets(b) x.xx%(c)(d) x.xx%(c)(d) x.xx% x.xx% x.xx%
============================================== ========== ========== ========== ========== ==========
Ratio of net investment income (loss)
to average net assets (x.xx)%(c) (x.xx)%(c) (x.xx)% (x.xx)% (x.xx)%
============================================== ========== ========== ========== ========== ==========
Portfolio turnover rate xx% xx% xx% xx% xx%
============================================== ========== ========== ========== ========== ==========
</TABLE>
(a) Calculated using average shares outstanding.
(b) Does not deduct sales charges and for periods less than one year, total
returns are not annualized.
(c) After fee waivers and/or expenses reimbursements. Ratios of expenses to
average net assets prior to fee waivers and/or expense reimbursements are
x.xx%, x.xx%, x.xx% and x.xx%, respectively for 1998-1995.
(d) Ratios are based on average net assets of $xxx,xxx,xxx.
(e) Ratio includes indirectly paid expenses. Excluding indirectly paid
expenses, the ratio of expenses to average net assets would have been
x.xx%.
(f) Annualized.
(g) 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 are (x.xx%), (x.xx)%, (x.xx)% and (x.xx)%, respectively for
1998-1995.
(h) The average commission rate paid is the total brokerage commissions paid on
applicable purchases and sales of securities for the period divided by the
total number of related shares purchased and sold, which is required to be
disclosed for fiscal years beginning September 1, 1995 and thereafter.
12
<PAGE> 36
Shareholder Information
- --------------------------------------------------------------------------------
CHOOSING A SHARE CLASS
Many of the funds advised by the advisor (the AIM Funds) have multiple classes
of shares, each class representing an interest in the same portfolio of
investments. When choosing a share class, you should consider the factors below:
<TABLE>
<CAPTION>
CLASS A CLASS B CLASS C
- ---------------------------------------------------------------------------------------------------------
<S> <C> <C>
- - Initial sales charge - No initial sales charge - No initial sales charge
- - Reduced or waived initial sales - Contingent deferred sales - Contingent deferred sales
charge for certain purchases charge on redemptions within six charge on redemptions within
years one year
- - Lower distribution and service - 12b-1 fee of 1.00% - 12b-1 fee of 1.00%
(12b-1) fee than Class B or
Class C shares (See "Fee Table
and Expense Example")
- Converts to Class A shares - Does not convert to Class A
after eight years along with a shares
pro rata portion of its
reinvested dividends and
distributions*
- - Generally more appropriate for - Purchase orders limited to - Generally more appropriate
long-term investors amounts less than $250,000 for short-term investors
</TABLE>
* AIM Money Market Fund: Class B shares convert to AIM Cash Reserve Shares.
AIM Global Trends Fund: If you held Class B shares on May 29, 1998 and
continue to hold them, those shares will convert to Class A shares of that
fund seven years after your date of purchase. If you exchange those shares
for Class B shares of another AIM Fund, the shares into which you exchanged
will not convert to Class A shares until eight years after your date of
purchase of the original shares.
- --------------------------------------------------------------------------------
DISTRIBUTION AND SERVICE (12B-1) FEES
Each AIM Fund (except AIM Tax-Free Intermediate Fund) has adopted 12b-1 plans
that allow the AIM Fund to pay distribution fees to A I M Distributors, Inc.
(the distributor) for the sale and distribution of its shares and fees for
services provided to shareholders, all or a substantial portion of which are
paid to the dealer of record. Because the AIM Fund pays these fees out of its
assets on an ongoing basis, over time these fees will increase the cost of your
investment and may cost you more than paying other types of sales charges.
MCF-03/99
A-1
<PAGE> 37
SALES CHARGES
Generally, you will not pay a sales charge on purchases or redemptions of Class
A shares of AIM Tax-Exempt Cash Fund and AIM Cash Reserve Shares of AIM Money
Market Fund. You may be charged a contingent deferred sales charge if you redeem
AIM Cash Reserve Shares of AIM Money Market Fund acquired through certain
exchanges. Sales charges on all other AIM Funds and classes of those Funds are
detailed below. As used below, the term "offering price" with respect to all
categories of Class A shares includes the initial sales charge.
INITIAL SALES CHARGES
The AIM Funds are grouped into three categories with respect to initial sales
charges. The "Other Information" section of your prospectus will tell you in
what category your particular AIM Fund is classified.
<TABLE>
<CAPTION>
CATEGORY I INITIAL SALES CHARGES
<S> <C> <C>
- ----------------------------------------------------------
<CAPTION>
INVESTOR'S
SALES CHARGE
------------------------
AMOUNT OF INVESTMENT AS A % OF AS A % OF
IN SINGLE TRANSACTION OFFERING PRICE INVESTMENT
- ----------------------------------------------------------
<S> <C> <C>
Less than $ 25,000 5.50% 5.82%
$ 25,000 but less than $ 50,000 5.25 5.54
$ 50,000 but less than $ 100,000 4.75 4.99
$100,000 but less than $ 250,000 3.75 3.90
$250,000 but less than $ 500,000 3.00 3.09
$500,000 but less than $1,000,000 2.00 2.04
- ----------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
CATEGORY II INITIAL SALES CHARGES
<S> <C> <C>
- ----------------------------------------------------------
<CAPTION>
INVESTOR'S
SALES CHARGE
------------------------
AMOUNT OF INVESTMENT AS A % OF AS A % OF
IN SINGLE TRANSACTION OFFERING PRICE INVESTMENT
- ----------------------------------------------------------
<S> <C> <C>
Less than $ 50,000 4.75% 4.99%
$ 50,000 but less than $ 100,000 4.00 4.17
$100,000 but less than $ 250,000 3.75 3.90
$250,000 but less than $ 500,000 2.50 2.56
$500,000 but less than $1,000,000 2.00 2.04
- ----------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
CATEGORY III INITIAL SALES CHARGES
<S> <C> <C>
- ----------------------------------------------------------
<CAPTION>
INVESTOR'S
SALES CHARGE
------------------------
AMOUNT OF INVESTMENT AS A % OF AS A % OF
IN SINGLE TRANSACTION OFFERING PRICE INVESTMENT
- ----------------------------------------------------------
<S> <C> <C>
Less than $ 100,000 1.00% 1.01%
$100,000 but less than $ 250,000 0.75 0.76
$250,000 but less than $1,000,000 0.50 0.50
- ----------------------------------------------------------
</TABLE>
CONTINGENT DEFERRED SALES CHARGES FOR CLASS A SHARES
You can purchase $1,000,000 or more of Class A shares at net asset value.
However, if you purchase shares of that amount in Categories I or II, they will
be subject to a contingent deferred sales charge (CDSC) of 1% if you redeem them
prior to 18 months after the date of purchase. The distributor may pay a dealer
concession and/or a service fee for purchases of $1,000,000 or more.
CONTINGENT DEFERRED SALES CHARGES FOR
CLASS B AND CLASS C SHARES
You can purchase Class B and Class C shares at their net asset value per share.
However, when you redeem them, they are subject to a CDSC in the following
percentages:
<TABLE>
<CAPTION>
YEAR SINCE
PURCHASE MADE CLASS B CLASS C
- ----------------------------------------------------------
<S> <C> <C>
First 5% 1%
Second 4 None
Third 3 None
Fourth 3 None
Fifth 2 None
Sixth 1 None
Seventh and following None None
- ----------------------------------------------------------
</TABLE>
A-2
<PAGE> 38
REDUCED SALES CHARGES AND SALES CHARGE EXCEPTIONS
You may qualify for reduced sales charges or sales charge exceptions. To qualify
for these reductions or exceptions, you or your financial consultant must
provide sufficient information at the time of purchase to verify that your
purchase qualifies for such treatment.
REDUCED SALES CHARGES
You may be eligible to buy Class A shares at reduced initial sales charge rates
under Rights of Accumulation or Letters of Intent under certain circumstances.
Rights of Accumulation
You may combine your new purchases of Class A shares with Class A shares
currently owned for the purpose of qualifying for the lower initial sales charge
rates that apply to larger purchases. The applicable initial sales charge for
the new purchase is based on the total of your current purchase and the current
value of all Class A shares you own.
Letters of Intent
Under a Letter of Intent (LOI), you commit to purchase a specified dollar amount
of Class A shares of AIM Funds during a 13-month period. The amount you agree to
purchase determines the initial sales charge you pay. If the full face amount of
the LOI is not invested by the end of the 13-month period, your account will be
adjusted to the higher initial sales charge level for the amount actually
invested.
INITIAL SALES CHARGE EXCEPTIONS
You will not pay initial sales charges
- - on shares purchased by reinvesting dividends and distributions;
- - when exchanging shares among certain AIM Funds;
- - when using the reinstatement privilege; and
- - when a merger, consolidation, or acquisition of assets of an AIM Fund occurs.
CONTINGENT DEFERRED SALES CHARGE (CDSC) EXCEPTIONS
You will not pay a CDSC
- - if you redeem Class B shares you held for more than six years;
- - if you redeem Class C shares you held for more than one year;
- - if you redeem shares acquired through reinvestment of dividends and
distributions; and
- - on increases in the net asset value of your shares.
There may be other situations when you may be able to purchase or redeem shares
at reduced or without sales charges. Consult the fund's Statement of Additional
Information for details.
A-3
<PAGE> 39
PURCHASING SHARES
MINIMUM INVESTMENTS PER AIM FUND ACCOUNT
The minimum investments for AIM Fund accounts (except for investments in AIM
Small Cap Opportunities Fund) are as follows:
<TABLE>
<CAPTION>
INITIAL ADDITIONAL
TYPE OF ACCOUNT INVESTMENTS INVESTMENTS
- ----------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Savings Plans (money-purchase/profit sharing $ 0 ($25 per AIM Fund investment for $25
plans, 401(k) plans, Simplified Employee Pension salary deferrals from Savings Plans)
(SEP) accounts, Salary Reduction (SARSEP)
accounts, Savings Incentive Match Plans for
Employee IRA (Simple IRA) accounts, 403(b) or
457 plans)
Automatic Investment Plans 50 50
IRA, Education IRA or Roth IRA 250 50
All other accounts 500 50
- ----------------------------------------------------------------------------------------------------------------
</TABLE>
HOW TO PURCHASE SHARES
You may purchase shares using one of the options below.
<TABLE>
<CAPTION>
PURCHASE OPTIONS
- ----------------------------------------------------------------------------------------------------------
OPENING AN ACCOUNT ADDING TO AN ACCOUNT
- ----------------------------------------------------------------------------------------------------------
<S> <C> <C>
Through a Financial Consultant Contact your financial consultant. Same
By Mail Mail completed Account Application Mail your check and the remittance
and purchase payment to the slip from your confirmation
transfer agent, statement to the transfer agent.
A I M Fund Services, Inc.,
P.O. Box 4739,
Houston, TX 77210-4739.
By Wire Mail completed Account Application Call the transfer agent to receive
to the transfer agent. Call the a reference number. Then, use the
transfer agent at (800) 959-4246 to wire instructions at left.
receive a reference number. Then,
use the following wire
instructions:
Beneficiary Bank ABA/Routing #:
113000609
Beneficiary Account Number:
00100366807
Beneficiary Account Name: A I M
Fund Services, Inc.
RFB: Fund Name, Reference #
OBI: Your Name, Account #
By AIM Bank Connection(SM) Open your account using one of the Mail completed AIM Bank
methods described above. Connection(SM) form to the transfer
agent. Once the transfer agent has
received the form, call the
transfer agent to place your
purchase.
- ----------------------------------------------------------------------------------------------------------
</TABLE>
A-4
<PAGE> 40
SPECIAL PLANS
AUTOMATIC INVESTMENT PLAN
You can arrange for periodic investments in any of the AIM Funds by authorizing
the AIM Fund to withdraw the amount of your investment from your bank account on
a day or dates you specify and in an amount of at least $50. You may stop the
Automatic Investment Plan at any time by giving the transfer agent notice ten
days prior to your next scheduled withdrawal.
DOLLAR COST AVERAGING
Dollar Cost Averaging allows you to make automatic monthly or quarterly
exchanges, if permitted, from one AIM Fund account to one or more other AIM Fund
accounts with the identical registration. The account from which exchanges are
to be made must have a minimum balance of $5,000 before you can use this option.
Exchanges will occur on (or about) the 10th or 25th day of the month, whichever
you specify, in the amount you specify. The minimum amount you can exchange to
another AIM Fund is $50.
AUTOMATIC DIVIDEND INVESTMENT
All of your dividends and distributions may be paid in cash or invested in any
AIM Fund at net asset value. Unless you specify otherwise, your dividends and
distributions will automatically be reinvested in the same AIM Fund. You may
invest your dividends and distributions (1) into another AIM Fund in the same
class of shares; or (2) from Class A shares into AIM Cash Reserve Shares of AIM
Money Market Fund, or vice versa.
You must comply with the following requirements to be eligible to invest your
dividends and distributions in shares of another AIM Fund:
(1) Your account balance (a) in the AIM Fund paying the dividend must be at
least $5,000; or (b) in the AIM Fund receiving the dividend must be at least
$500;
(2) Both accounts must have identical registration information; and
(3) You must have completed an authorization form to reinvest dividends into
another AIM Fund.
PORTFOLIO REBALANCING PROGRAM
If you have at least $5,000 in your account, you may participate in the
Portfolio Rebalancing Program. Under this Program, you can designate how the
total value of your AIM Fund holdings should be rebalanced, on a percentage
basis, between two and ten of your AIM Funds on a quarterly, semiannual or
annual basis. Your portfolio will be rebalanced through the exchange of shares
in one or more of your AIM Funds for shares of the same class of one or more
other AIM Funds in your portfolio. If you wish to participate in the Program,
make changes or cancel the Program, the transfer agent must receive your request
to participate, changes or cancellation in good order at least five business
days prior to the next rebalancing date, which is normally the 28th day of the
last month of the period you choose. We may modify, suspend or terminate the
Program at any time on 60 days' prior written notice.
RETIREMENT PLANS
Shares of most of the AIM Funds can be purchased through
tax-sheltered retirement plans made available to corporations, individuals and
employees of non-profit organizations and public schools. A plan document must
be adopted to establish a retirement plan. You may use AIM Funds-sponsored
retirement plans, which include IRAs, Education IRAs, Roth IRAs, 403(b) plans,
401(k) plans, SIMPLE IRA plans, SEP/SARSEP plans and Money Purchase/Profit
Sharing plans, or another sponsor's retirement plan. The plan custodian of the
AIM Funds-sponsored retirement plan assesses an annual maintenance fee of $10.
Contact your financial consultant for details.
REDEEMING SHARES
REDEMPTION FEES
We will not charge you any fees to redeem your shares; however, your broker or
financial consultant may charge service fees for handling these transactions.
Your shares may be subject to a contingent deferred sales charge (CDSC).
COMPUTING A CDSC
The CDSC on redemptions of shares is computed based on the lower of their
original purchase price or current market value, net of reinvested dividends and
capital gains distributions. In determining whether to charge a CDSC, we will
assume that you have redeemed shares on which there is no CDSC first and, then,
shares in the order of purchase.
REDEMPTION OF AIM CASH RESERVE SHARES OF
AIM MONEY MARKET FUND ACQUIRED BY EXCHANGE
If you redeem AIM Cash Reserve Shares acquired by exchange from Class A shares
subject to a CDSC within eighteen months of the purchase of the Class A shares,
you will be charged a CDSC.
REDEMPTION OF CLASS B SHARES ACQUIRED BY
EXCHANGE FROM AIM FLOATING RATE FUND
If you redeem Class B shares you acquired by exchange via a tender offer by AIM
Floating Rate Fund, the early withdrawal charge applicable to shares of AIM
Floating Rate Fund will be applied instead of the CDSC normally applicable to
Class B shares.
A-5
<PAGE> 41
HOW TO REDEEM SHARES
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
Through a Financial Contact your financial consultant.
Consultant
By Mail Send a written request to the transfer agent. Requests must
include (1) original signatures of all registered owners;
(2) the name of the AIM Fund and your account number; (3) if
the transfer agent does not hold your shares, endorsed share
certificates or share certificates accompanied by an
executed stock power; and (4) signature guarantees, if
necessary (see below). The transfer agent may require that
you provide additional information, such as corporate
resolutions or powers of attorney, if applicable. If you are
redeeming from an IRA account, you must include a statement
of whether or not you are at least 59 1/2 years old and
whether you wish to have federal income tax withheld from
your proceeds. The transfer agent may require certain other
information before you can redeem from an employer-sponsored
retirement plan. Contact your employer for details.
By Telephone Call the transfer agent. You will be allowed to redeem by
telephone if (1) the proceeds are to be mailed to the
address on record with us or transferred electronically to a
pre-authorized checking account; (2) the address on record
with us has not been changed within the last thirty days;
(3) you do not hold physical share certificates; (4) you can
provide proper identification information; (5) the proceeds
of the redemption do not exceed $50,000; and (6) you have
not previously declined the telephone redemption privilege.
Certain accounts, including retirement accounts and 403(b)
plans, may not redeem by telephone. The transfer agent must
receive your call during the hours the NYSE is open for
business in order to effect the redemption at that day's
closing price.
</TABLE>
- --------------------------------------------------------------------------------
TIMING AND METHOD OF PAYMENT
We normally will send out checks within one business day, and in any event no
more than seven days, after we accept your request to redeem. If you redeem
shares recently purchased by check, you will be required to wait up to ten
business days before we will send your redemption proceeds. This delay is
necessary to ensure that the purchase check has cleared.
REDEMPTION BY MAIL
If you mail us a request in good order to redeem your shares, we will mail you a
check in the amount of the redemption proceeds to the address on record with us.
If your request is not in good order, you may have to provide us with additional
documentation in order to redeem your shares.
REDEMPTION BY TELEPHONE
If you redeem by telephone, we will mail you a check in the amount of the
redemption proceeds to your address of record (if there has been no change
communicated to the transfer agent within the previous 30 days) or transmit them
electronically to your pre-authorized bank account. We use reasonable procedures
to confirm that instructions communicated by telephone are genuine and are not
liable for telephone instructions that are reasonably believed to be genuine.
PAYMENT FOR SYSTEMATIC WITHDRAWALS
You may arrange for regular monthly or quarterly withdrawals from your account
of at least $50. You also may make annual withdrawals if you own Class A shares.
We will redeem enough shares from your account to cover the amount withdrawn.
You must have an account balance of at least $5,000 to establish a Systematic
Withdrawal Plan. You can stop this plan at any time by giving ten days prior
notice to the transfer agent.
EXPEDITED REDEMPTIONS
(AIM Cash Reserve Shares of AIM Money Market Fund only)
If we receive your redemption order before 11:30 a.m. Eastern Time, we will try
to transmit payment of redemption proceeds on that same day. If we receive your
redemption order after 11:30 a.m. Eastern Time and before the close of trading
on the New York Stock Exchange (NYSE), we generally will transmit payment on the
next business day.
REDEMPTIONS BY CHECK
(Class A shares of AIM Tax-Exempt Cash Fund and AIM Cash Reserve Shares of AIM
Money Market Fund only)
You may redeem shares of these AIM Funds by writing checks in amounts of $250 or
more if you have completed an authorization form. Redemption by check is not
available for retirement accounts.
SIGNATURE GUARANTEES
We require a signature guarantee when you redeem by mail and
(1) the amount is greater than $50,000;
(2) you request that payment be made to someone other than the name registered
on the account;
(3) you request that payment be sent somewhere other than the bank of record on
the account; or
(4) you request that payment be sent to a new address or an address that changed
in the last 30 days.
The transfer agent will accept a guarantee of your signature by a number of
financial institutions. Call the transfer agent for additional information. Some
institutions have transaction amount maximums for these guarantees. Please check
with the guarantor institution.
A-6
<PAGE> 42
REINSTATEMENT PRIVILEGE (Class A shares only)
You may, within 90 days after you sell Class A shares (except Class A shares of
AIM Tax-Exempt Cash Fund), reinvest all or part of your redemption proceeds in
Class A shares of any AIM Fund at net asset value in an identically registered
account. If you sold Class A shares of AIM Limited Maturity Treasury Fund or AIM
Tax-Free Intermediate Fund, you will incur an initial sales charge reflecting
the difference between the initial sales charges on those Funds and the ones in
which you will be investing. In addition, if you paid a contingent deferred
sales charge (CDSC) on any reinstated amount, you will not be subject to a CDSC
if you later redeem that amount. You must notify the transfer agent in writing
at the time you reinstate that you are exercising your reinstatement privilege.
You may exercise this privilege only once per year.
REDEMPTIONS BY THE AIM FUNDS
If your account has been open at least one year, you have not made an additional
purchase in the account during the past six calendar months, and the value of
your account falls below $500 for three consecutive months due to redemptions or
exchanges (excluding retirement accounts), the AIM Funds have the right to
redeem the account after giving you 60 days' prior written notice. You may avoid
having your account redeemed during the notice period by bringing the account
value up to $500 or by utilizing the Automatic Investment Plan.
If an AIM Fund determines that you have provided incorrect information in
opening an account or in the course of conducting subsequent transactions, the
AIM Fund may, in its discretion, redeem the account and distribute the proceeds
to you.
EXCHANGING SHARES
You may, under certain circumstances, exchange shares in one AIM Fund for those
of another AIM Fund. Before requesting an exchange, review the prospectus of the
AIM Fund you wish to acquire. Exchange privileges also apply to holders of the
Connecticut General Guaranteed Account, established for tax-qualified group
annuities, for contracts purchased on or before June 30, 1992.
PERMITTED EXCHANGES
Except as otherwise stated below, you may exchange your shares for shares of the
same class of another AIM Fund. You also may exchange AIM Cash Reserve Shares of
AIM Money Market Fund for Class A shares of another AIM Fund, or vice versa. You
may be required to pay an initial sales charge when exchanging from a Fund with
a lower initial sales charge than the one into which you are exchanging. If you
exchange from Class A shares not subject to a CDSC into Class A shares subject
to those charges, you will be charged a CDSC when you redeem the exchanged
shares. The CDSC charged on redemption of those shares will be calculated
starting on the date you acquired those shares through exchange.
YOU WILL NOT PAY A SALES CHARGE WHEN EXCHANGING:
(1) Class A shares with an initial sales charge (except for Class A shares of
AIM Limited Maturity Treasury Fund and AIM Tax-Free Intermediate Fund) for
Class A shares of another AIM Fund or AIM Cash Reserve Shares of AIM Money
Market Fund;
(2) Class A shares of AIM Limited Maturity Treasury Fund and AIM Tax-Free
Intermediate Fund for
(a) one another;
(b) AIM Cash Reserve Shares of AIM Money Market Fund or Class A shares of
AIM Tax-Exempt Cash Fund; or
(c) Class A shares of another AIM Fund, but only if
(i) you acquired the original shares before May 1, 1994; or
(ii) you acquired the original shares on or after May 1, 1994 by way of
an exchange from shares with higher sales charges;
(3) AIM Cash Reserve Shares of AIM Money Market Fund or Class A shares of AIM
Tax-Exempt Cash Fund for
(a) one another;
(b) Class A shares of an AIM Fund subject to an initial sales charge (except
for Class A shares of AIM Limited Maturity Treasury Fund and AIM
Tax-Free Intermediate Fund), but only if you acquired the original
shares
(i) prior to May 1, 1994 by exchange from Class A shares subject to an
initial sales charge;
(ii) on or after May 1, 1994 by exchange from Class A shares subject to
an initial sales charge (except for Class A shares of AIM Limited
Maturity Treasury Fund and AIM Tax-Free Intermediate Fund); or
(c) Class A shares of AIM Limited Maturity Treasury Fund and AIM Tax-Free
Intermediate Fund, but only if you acquired the original shares by
exchange from Class A shares subject to an initial sales charge; or
(4) Class B shares for other Class B shares, and Class C shares for other Class
C shares.
EXCHANGES NOT PERMITTED
You may not exchange Class A shares subject to contingent deferred sales charges
for Class A shares of AIM Limited Maturity Treasury Fund, AIM Tax-Free
Intermediate Fund or AIM Tax-Exempt Cash Fund.
EXCHANGE CONDITIONS
The following conditions apply to all exchanges:
- - You must meet the minimum purchase requirements for the AIM Fund into which
you are exchanging;
- - Shares of the AIM Fund you wish to acquire must be qualified for sale in your
state of residence;
- - Exchanges must be made between accounts with identical registration
information;
A-7
<PAGE> 43
- - The account you wish to exchange from must have a certified tax identification
number (or the Fund has received an appropriate Form W-8 or W-9);
- - Shares must have been held for at least one day prior to the exchange; and
- - If you have physical share certificates, you must return them to the transfer
agent prior to the exchange.
TERMS OF EXCHANGE
Under unusual market conditions, an AIM Fund may delay the issuance of shares
being purchased in an exchange for up to five business days if it determines
that it would be materially disadvantaged by the immediate transfer of exchange
proceeds. There is no fee for exchanges. The exchange privilege is not an option
or right to purchase shares. Any of the participating AIM Funds or the
distributor may modify or discontinue this privilege at any time.
BY MAIL
If you wish to make an exchange by mail, you must include original signatures of
each registered owner exactly as the shares are registered, the account
registration and account number, the dollar amount or number of shares to be
exchanged and the names of the AIM Funds from which and into which the exchange
is to be made.
BY TELEPHONE
Conditions that apply to exchanges by telephone are the same as redemptions by
telephone, including that the transfer agent must receive exchange requests
during the hours the NYSE is open for business; however, you still will be
allowed to exchange by telephone even if you have changed your address of record
within the preceding 30 days.
EXCHANGING CLASS B AND CLASS C SHARES
If you make an exchange involving Class B or Class C shares, the amount of time
you held the original shares will be added to the holding period of the Class B
or Class C shares, respectively, into which you exchanged for the purpose of
calculating contingent deferred sales charges (CDSC) if you later redeem the
exchanged shares. If you redeem Class B shares acquired by exchange via a tender
offer by AIM Floating Rate Fund, you will be credited with the time period you
held the shares of AIM Floating Rate Fund for the purpose of computing the early
withdrawal charge applicable to those shares.
EACH AIM FUND AND THE DISTRIBUTOR RESERVE THE RIGHT AT ANY TIME TO REJECT OR
CANCEL ANY PART OF ANY PURCHASE OR EXCHANGE ORDER; MODIFY ANY TERMS OR
CONDITIONS OF PURCHASE OF SHARES OF ANY AIM FUND; OR WITHDRAW ALL OR ANY PART
OF THE OFFERING MADE BY THIS PROSPECTUS.
PRICING OF SHARES
DETERMINATION OF NET ASSET VALUE
The price of each AIM Fund's shares is the fund's net asset value per share. The
AIM Funds value portfolio securities for which market quotations are readily
available at market value. The AIM Funds value short-term investments maturing
within 60 days at amortized cost, which approximates market value. AIM Money
Market Fund and AIM Tax-Exempt Cash Fund value all their securities at amortized
cost. AIM High Income Municipal Fund, AIM Municipal Bond Fund, AIM Tax-Exempt
Bond Fund of Connecticut and AIM Tax-Free Intermediate Fund value variable rate
securities that have an unconditional demand or put feature exercisable within
seven days or less at par, which reflects the market value of such securities.
The AIM Funds value all other securities and assets at their fair value.
Securities and other assets quoted in foreign currencies are valued in U.S.
dollars based on the prevailing exchange rates on that day. In addition, if,
between the time trading ends on a particular security and the close of the New
York Stock Exchange (NYSE), events occur that materially affect the value of the
security, the AIM Funds may value the security at its fair value as determined
in good faith by or under the supervision of the Board of Directors or Trustees
of the AIM Fund. The effect of using fair value pricing is that an AIM Fund's
net asset value will be subject to the judgment of the Board of Directors or
Trustees or its designee instead of being determined by the market. Because some
of the AIM Funds may invest in securities that are primarily listed on foreign
exchanges, the value of those funds' shares may change on days when you will not
be able to purchase or redeem shares.
Each AIM Fund determines the net asset value of its shares as of the close of
the NYSE on each day the NYSE is open for business. AIM Money Market Fund also
determines its net asset value as of 12:00 noon Eastern Time on each day the
NYSE is open for business.
TIMING OF ORDERS
You can purchase, exchange or redeem shares during the hours the NYSE is open
for business. The AIM Funds price purchase, exchange and redemption orders at
the net asset value calculated after the transfer agent receives an order in
good form. An AIM Fund may postpone the right of redemption only under unusual
circumstances, such as when the NYSE restricts or suspends trading.
TAXES
In general, dividends and distributions you receive are taxable as ordinary
income or long-term capital gains for federal income tax purposes, whether you
reinvest them in additional shares or take them in cash. Distributions are
taxable to you at different rates depending on the length of time the fund holds
its assets. Different tax rates apply to ordinary income and long-term capital
gain distributions, regardless of how long you have held your shares. Every
year, you will be sent information showing the amount of dividends and
distributions you received from each AIM Fund during the prior year.
A-8
<PAGE> 44
Any long-term or short-term capital gains realized from redemptions of AIM
Fund shares will be subject to federal income tax. Exchanges of shares for
shares of another AIM Fund are treated as a sale, and any gain realized on the
transaction will generally be subject to federal income tax.
The foreign, state and local tax consequences of investing in AIM Fund shares
may differ materially from the federal income tax consequences described above.
You should consult your tax advisor before investing.
A-9
<PAGE> 45
[BACK COVER PAGE]
OBTAINING ADDITIONAL INFORMATION
More information may be obtained free of charge upon request. The Statement of
Additional Information (SAI), a current version of which is on file with the
Securities and Exchange Commission (SEC), contains more details about the fund
and is incorporated by reference into the prospectus (is legally a part of this
prospectus). Annual and semiannual reports to shareholders contain additional
information about the fund's investments. The fund's annual report also
discusses the market conditions and investment strategies that significantly
affected the fund's performance during its last fiscal year.
If you have questions about this fund, another fund in The AIM Family of Funds
or your account, or wish to obtain free copies of the fund's current SAI or
annual or semiannual reports, please contact us:
BY MAIL: A I M Distributors, Inc.
11 Greenway Plaza, Suite 100
Houston, TX 77046-1173
BY TELEPHONE: (800) 347-4246
BY E-MAIL: [email protected]
ON THE INTERNET: http://www.aimfunds.com (prospectuses and annual and
semiannual reports only)
You also can obtain copies of the fund's SAI and other information at the SEC's
Public Reference Room in Washington, D.C., on the SEC's website
(http://www.sec.gov), or by sending a letter, including a duplicating fee, to
the SEC's Public Reference Section, Washington, D.C. 20549-6009. Please call the
SEC at 1-800-SEC-0330 for information about the Public Reference Room.
AIM Europe Growth Fund
SEC 1940 Act file number: 811-2699
<PAGE> 46
The information in this prospectus is not complete and may be changed. We may
not sell these securities until the registration statement filed with the
Securities and Exchange Commission is effective. This prospectus is not an offer
to sell these securities and is not soliciting an offer to buy these securities
in any state where the offer or sale is not permitted.
Subject to Completion dated February 12, 1999
[AIM LOGO APPEARS HERE]
AIM JAPAN GROWTH FUND
PROSPECTUS
MAY 3, 1999
AIM Japan Growth Fund seeks to provide long-term growth of capital.
This prospectus contains important information. Please read it before investing
and keep it for future reference.
An investment in the fund is not a deposit of a bank and is not insured or
guaranteed by the Federal Deposit Insurance Corporation or any other government
agency. There is a risk that you could lose a portion or all of your money.
AS WITH ALL OTHER MUTUAL FUND SECURITIES, THE SECURITIES AND EXCHANGE COMMISSION
HAS NOT APPROVED OR DISAPPROVED THESE SECURITIES OR DETERMINED WHETHER THE
INFORMATION IN THIS PROSPECTUS IS ADEQUATE OR ACCURATE. ANYONE
WHO TELLS YOU OTHERWISE IS COMMITTING A CRIME.
1
<PAGE> 47
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
<S> <C>
INVESTMENT OBJECTIVE AND STRATEGIES.................................................................... 3
PRINCIPAL RISKS OF INVESTING IN THE FUND............................................................... 3
PERFORMANCE INFORMATION................................................................................ 5
ANNUAL TOTAL RETURNS.......................................................................... 5
PERFORMANCE TABLE............................................................................. 6
FEE TABLE AND EXPENSE EXAMPLE.......................................................................... 7
FEE TABLE..................................................................................... 7
EXPENSE EXAMPLE............................................................................... 7
FUND MANAGEMENT........................................................................................ 9
THE ADVISOR AND SUBADVISOR.................................................................... 9
ADVISOR COMPENSATION.......................................................................... 9
PORTFOLIO MANAGERS............................................................................ 9
OTHER INFORMATION...................................................................................... 10
INITIAL SALES CHARGES FOR CLASS A SHARES...................................................... 10
DIVIDENDS AND DISTRIBUTIONS................................................................... 10
FINANCIAL HIGHLIGHTS................................................................................... 11
SHAREHOLDER INFORMATION................................................................................ A-1
CHOOSING A SHARE CLASS........................................................................ A-1
PURCHASING SHARES............................................................................. A-4
REDEEMING SHARES.............................................................................. A-5
EXCHANGING SHARES............................................................................. A-7
PRICING OF SHARES............................................................................. A-8
TAXES......................................................................................... A-8
OBTAINING ADDITIONAL INFORMATION........................................................... BACK COVER PAGE
</TABLE>
The AIM Family of Funds--Registered Trademark--, The AIM Family of Funds and
Design (i.e., the AIM logo), AIM and Design, AIM, AIM LINK, AIM Institutional
Funds, aimfunds.com, La Familia AIM de Fondos--Registered Trademark--, La
Familia AIM de Fondos and Design and Invest with Discipline are registered
service marks and AIM Bank Connection is a service mark of A I M Management
Group Inc.
2
<PAGE> 48
INVESTMENT OBJECTIVE AND STRATEGIES
The fund's investment objective is long-term growth of capital.
The fund seeks to achieve its objective by investing, normally, at least 65% of
its total assets in equity securities of issuers domiciled in Japan. The fund
typically considers a company to be domiciled in Japan if it (i) is organized
under the laws of, or has its principal office in, Japan, or (2) normally
derives 50% or more of its total revenues from business in Japan, provided that,
in the view of the fund's portfolio managers, the value of the issuer's
securities tend to reflect Japan's development to a greater extent than
developments elsewhere.
The fund may invest up to 35% of its total assets in the equity securities of
issuers domiciled outside Japan. The fund may also invest up to 35% of its total
assets in U.S. and foreign investment-grade debt securities, or securities
deemed by the fund's subadvisor to be of comparable quality.
The fund may also invest in issuers in developing countries, i.e., those that
are in the initial stages of their industrial cycles.
In selecting investments, the fund's portfolio managers seek to identify
industries that, in view of political and economic considerations, including
currency movements, are likely to produce above-average growth rates. The
portfolio managers also attempt to identify those companies in countries and
industries that are best positioned and managed to take advantage of these
economic and political factors, but only after balancing the potential for
growth of selected companies in each market relative to the risks of investing
in that market. The portfolio managers further allocate investments among fixed
income securities of particular issuers on the basis of their views as to the
best values then currently available in the marketplace. The fund's portfolio
managers usually sell a particular security when any of those factors materially
changes.
[In anticipation of or in response to adverse market conditions or for cash
management purposes, the fund may hold all or a portion of its assets in cash
(U.S. dollars, foreign currencies or multinational currency units), money market
securities, or high-quality debt securities issued by corporations or the U.S.
or a foreign government. As a result, the fund may not achieve its investment
objective.]
PRINCIPAL RISKS OF INVESTING IN THE FUND
There is a risk that you could lose all or a portion of your investment in the
fund. The value of your investment in the fund will go up and down with the
prices of the securities in which the fund invests. The price of equity
securities goes up and down in response to many factors, including the
historical and prospective earnings of the issuer of the stock, the value of its
assets, general economic conditions, interest rates, investor perceptions, and
market liquidity. Debt securities are particularly vulnerable to credit risk and
interest rate fluctuations. When interest rates rise, bond prices fall; the
longer the bond's duration, the more sensitive it is to this risk.
Because the fund focuses its investments in Japan, the value of your shares may
rise and fall more than the value of shares of a fund that invests in a broader
geographic region. Additionally, the Japanese securities markets are less
regulated than those in the United States, and market prices may be distorted to
serve political or other purposes. In addition, shareholders' rights are not
always equally enforced.
The prices of foreign securities may be further affected by other factors
including:
o Currency Exchange Rates -- The dollar value of the fund's foreign
investments will be affected by changes in the rates between the dollar
and the currencies in which those investments are traded.
o Political and Economic Conditions -- The value of the fund's foreign
investments may be adversely affected by political and social
instability in their home countries and by changes in economic or
taxation policies in those countries.
3
<PAGE> 49
o Regulations -- Foreign companies generally are subject to less
stringent regulations, including financial and accounting controls,
than are U. S. companies. As a result, among other things, there
generally is less publicly available information about foreign
companies than about U.S. companies.
o Markets -- The securities markets of other countries are smaller than
U.S. securities markets. As a result, many foreign securities may be
less liquid and more volatile than the U.S. securities.
[To the extent that the fund invests in securities of issuers in developing
countries, the factors listed above may have a greater effect on the fund. For
example, many developing countries have, in the past, experienced high rates of
inflation or sharply devalued their currencies against the U.S. dollar, thereby
causing the value of investments in companies located in those countries to
decline. Transaction costs are often higher in developing countries and there
may be delays in settlement procedures. In addition, developing countries may
have greater political or economic instability, less regulation and smaller,
less liquid and more volatile markets than countries with more mature
economies.]
[If the seller of a repurchase agreement in which the fund invests defaults on
its obligation or declares bankruptcy, the fund may experience delays in selling
the securities underlying the repurchase agreement. As a result, the fund may
incur losses arising from decline in the value of those securities, reduced
levels of income and expenses of enforcing its rights.]
The fund could be adversely affected if the computer systems used by the fund's
investment advisor and the fund's other service providers do not properly
process and calculate date-related information from and after January 1, 2000.
The fund's investment advisor and independent technology consultants are
working to avoid year 2000-related problems in its systems and to obtain
assurances from other service providers that they are taking similar steps. In
addition, issuers of securities in which the fund invests may be adversely
affected by year 2000-related problems. This could have an impact on the value
of the fund's investments and its share price.
An investment in the fund is not a deposit of a bank and is not insured or
guaranteed by the Federal Deposit Insurance Corporation or any other government
agency.
4
<PAGE> 50
PERFORMANCE INFORMATION
The bar chart and table shown below provide an indication of the risks of
investing in the fund. The fund's past performance is not necessarily an
indication of its future performance.
ANNUAL TOTAL RETURNS
The following bar chart shows changes in the performance of the fund's Class A
shares from year to year. The bar chart does not reflect sales loads. If it did,
the annual total returns shown would be lower.
[GRAPH]
JAPAN GROWTH
<TABLE>
<CAPTION>
YEAR RETURN %
---- --------
<S> <C>
1989..................................................... 60.73
1990..................................................... 28.76
1991..................................................... (2.79)
1992..................................................... (21.51)
1993..................................................... 33.45
1994..................................................... 6.56
1995..................................................... 1.94
1996..................................................... (7.43)
1997..................................................... (7.99)
1998..................................................... (0.54)
</TABLE>
During the period shown in the bar chart, the highest quarterly return was
25.16% (quarter ended 9/30/89) and the lowest quarterly return was (28.63)%
(quarter ended 9/30/90).
5
<PAGE> 51
PERFORMANCE TABLE
The following performance table shows how the fund's average annual total
returns for one, five and ten years and since inception compare to those of a
broad-based securities market index.
<TABLE>
<CAPTION>
=========================================================================================================
Average Annual Total Returns
(for the periods ended December
31, 1998) Since Inception
1 Year 5 Years 10 Years Inception Date
- ---------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Class A (0.54)% (1.65)% 0.71% 10.81% 7/18/85
- ---------------------------------------------------------------------------------------------------------
Class B (1.25) (2.29) -- 0.78 4/1/93
- ---------------------------------------------------------------------------------------------------------
Class C -- -- -- -- 5/3/99
- ---------------------------------------------------------------------------------------------------------
MSCI Japan Index (1) 5.05 (3.69) (5.33) 7.98(2) 7/31/85
=========================================================================================================
</TABLE>
(1) The MSCI Japan Index is an arithmetic average, weighted by market value,
of the performance of 310 securities listed on the Japanese stock
exchanges.
(2) The average annual total return given is since the date closest to the
inception date of the class with the longest performance history.
6
<PAGE> 52
FEE TABLE AND EXPENSE EXAMPLE
FEE TABLE
This table describes the fees and expenses that you may pay if you buy and hold
shares of the fund:
<TABLE>
<CAPTION>
Class A Class B Class C
--------- -------- ---------
<S> <C> <C> <C>
Shareholder Fees (fees paid directly from your investment)
Maximum Sales Charge (Load) Imposed on Purchases
(as a percentage of offering price) 5.50% None None
Maximum Deferred Sales Charge (Load)
(as a percentage of original purchase price
or redemption proceeds, whichever is less) None(1) 5.00 1.00
Annual Fund Operating Expenses
(expenses that are deducted from fund assets)
Management Fees [0.00%] [0.00%] [0.00%]
Distribution and/or Service (12b-1) Fees [0.35] [1.00] [1.00]
Other Expenses [0.00] [0.00] [0.00]
Total Annual Fund Operating Expenses [0.00] [0.00] [0.00]
====== ====== ======
Expense Reimbursement(2) [0.00] [0.00] [0.00]
Net Expenses [0.00] [0.00] [0.00]
</TABLE>
- -------------------
(1) If you buy $1,000,000 or more of Class A shares and redeem these shares
within 18 months from the date of purchase, you may pay a 1% contingent
deferred sales charge (CDSC) at the time of redemption.
[(2) The investment advisor has agreed to limit expenses through May 31, 2000.
The waiver may not be terminated.]
As a result of 12b-1 fees, long-term shareholders in the fund may pay more than
the maximum permitted initial sales charge.
EXPENSE EXAMPLE
This example is intended to help you compare the costs of investing in different
classes of the fund with the cost of investing in other mutual funds.
The example assumes that you invest $10,000 in the fund for the time periods
indicated and then redeem all of your shares at the end of those periods. The
example also assumes that your investment has a 5% return each year and that the
fund's operating expenses remain the same. Although your actual returns and
costs may be higher or lower, based on these assumptions your costs would be:
<TABLE>
<CAPTION>
1 Year 3 Years 5 Years 10 Years
------ ------- ------- --------
<S> <C> <C> <C> <C>
Class A $ $ $ $
Class B
Class C
</TABLE>
7
<PAGE> 53
You would pay the following expenses if you did not redeem your shares:
<TABLE>
<CAPTION>
1 Year 3 Years 5 Years 10 Years
------ ------- ------- --------
<S> <C> <C> <C> <C>
Class A $ $ $ $
Class B
Class C
</TABLE>
8
<PAGE> 54
FUND MANAGEMENT
THE ADVISOR AND SUBADVISOR
A I M Advisors, Inc. (the advisor) serves as the fund's investment advisor.
INVESCO (NY), Inc. (the subadvisor) an affiliate of the advisor, is the fund's
subadvisor and is responsible for its day-to-day management. The advisor is
located at 11 Greenway Plaza, Suite 100, Houston, Texas 77046-1173. The
subadvisor is located at 1166 Avenue of the Americas, New York, New York 10036.
The advisors supervise all aspects of the fund's operations and provide
investment advisory services to the fund, including obtaining and evaluating
economic, statistical and financial information to formulate and implement
investment programs for the fund.
The advisor has acted as an investment advisor since its organization in 1976
and the subadvisor has acted as an investment advisor since its organization in
___________. Today, the advisor, together with its subsidiaries, advises or
manages over 110 investment portfolios, including the fund, encompassing a broad
range of investment objectives.
ADVISOR COMPENSATION
During the fiscal year ended December 31, 1998, the advisor received
compensation of ____% of average net assets.
PORTFOLIO MANAGER
The advisor uses a team approach to investment management. The individual member
of the team who is primarily responsible for the day-to-day management of the
fund's portfolio, [who is an officer of the subadvisor,] is
o Andrew Callender, Portfolio Manager, who has been responsible for the
fund since 1997 and has been associated with the advisor and/or its
affiliates since 1990.
9
<PAGE> 55
OTHER INFORMATION
INITIAL SALES CHARGES FOR CLASS A SHARES
Purchases of Class A shares of the fund are subject to the maximum 5.50% initial
sales charge as listed under the heading "Category I Initial Sales Charges" in
the "Shareholder Information--Choosing a Share Class" section of this
prospectus.
DIVIDENDS AND DISTRIBUTIONS
Dividends
The fund generally declares and pays dividends, if any, annually.
Capital Gains Distributions
The fund generally distributes long-term and short-term capital gains (including
any net gains from foreign currency transactions), if any, annually.
10
<PAGE> 56
FINANCIAL HIGHLIGHTS
The financial highlights table is intended to help you understand the fund's
financial performance. Certain information reflects financial results for a
single fund share.
The total returns in the table represent the rate that an investor would have
earned (or lost) on an investment in the fund (assuming reinvestment of all
dividends and distributions).
This information has been audited by PricewaterhouseCoopers LLP, whose report,
along with the fund's financial statements, is included in the fund's annual
report which is available upon request.
<TABLE>
<CAPTION>
Class A Year Ended December 31,
- ------- --------------------------------------------------------------------
1998 1997 1996 1995 1994
------------ ------------- ------------ ---------- ----------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of period $ xx.xx $ xx.xx $ xx.xx $ xx.xx $ xx.xx
- --------------------------------------------------------- -------- ---------- ----------- ---------- ----------
Income from investment operations:
Net investment income (loss) (x.xx)(a) (x.xx)(a) (x.xx)(a) (x.xx) (x.xx)
- --------------------------------------------------------- -------- ---------- ----------- ---------- ----------
Net gains on securities (both realized and unrealized) (x.xx) (x.xx) (x.xx) (x.xx) (x.xx)
========================================================= ======== =========== =========== ========== ==========
Total from investment operations (x.xx) x.xx x.xx x.xx x.xx
- --------------------------------------------------------- -------- ---------- ----------- ---------- ----------
Distributions from net realized gains (x.xx) (x.xx) (x.xx) (x.xx) --
- --------------------------------------------------------- -------- ---------- ----------- ---------- ----------
Net asset value, end of period $ xx.xx $ xx.xx $ xx.xx $ xx.xx $ xx.xx
========================================================= ======== =========== =========== ========== ==========
Total return (b) (x.xx)% (x.xx)% (x.xx)% (x.xx)% (x.xx)%
========================================================= ======== =========== =========== ========== ==========
Ratios/supplemental data:
Net assets, end of period (000s omitted) $ xx,xxx $ x,xxx,xxx $ x,xxx,xxx $ x,xxx,xxx $x,xxx,xxx
========================================================= ======== =========== =========== =========== ==========
Ratio of expenses to average net assets (c) x.xx%(d) x.xx x.xx x.xx x.xx
========================================================= ======== =========== =========== =========== ==========
Ratio of net investment income (loss) to average
net assets (c) (x.xx)%(d) (x.xx)% (x.xx)% (x.xx)% (x.xx)%
========================================================= ======== =========== =========== =========== ==========
Portfolio turnover rate xx% xx% xx% xx% xx%
========================================================= ======== =========== =========== =========== ==========
</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
x.xx%, x.xx%, x.xx% and x.xx% for 1998-1995.
(d) After fee waivers and/or expense reimbursements. Ratios of net investment
income (loss) to average net assets prior to fee waivers and/or expense
reimbursements were x.xx%, x.xx%, x.xx% and x.xx% for 1998 - 1995.
11
<PAGE> 57
<TABLE>
<CAPTION>
Year Ended December 31,
-------------------------------------------------------------------
Class B 1998 1997 1996 1995 1994
- ------- ------------ ------------ --------- ---------- ---------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of period $ xx.xx $ xx.xx $ xx.xx $ xx.xx $ xx.xx
- ----------------------------------------------------------- -------- -------- -------- -------- -------
Income from investment operations:
Net investment income (loss) (x.xx) (x.xx) (x.xx) (x.xx) (x.xx)
- ----------------------------------------------------------- -------- -------- -------- -------- -------
Net gains (losses) on securities (both realized and
unrealized) (x.xx) (x.xx) (x.xx) (x.xx) (x.xx)
- ----------------------------------------------------------- -------- -------- -------- -------- -------
Total from investment operations (x.xx) (x.xx) (x.xx) (x.xx) (x.xx)
=========================================================== ======== ======== ======== ======== =======
Distributions from net realized gains (x.xx) (x.xx) -- (x.xx) (x.xx)
- ----------------------------------------------------------- -------- -------- -------- -------- -------
Net asset value, end of period $ xx.xx $ xx.xx $ xx.xx $ xx.xx $ xx.xx
=========================================================== ======== ======== ======== ======== =======
Total return (a) (x.xx)% (x.xx)% (x.xx)% (x.xx)% (x.xx)%
=========================================================== ======== ======== ======== ======== =======
Ratios/supplement data:
Net assets, end of period (000s omitted) $ xx,xxx $ xx,xxx $ xx,xxx $ xx,xxx $ xx,xxx
=========================================================== ======== ======== ======== ======== =======
Ratio of expenses to average net assets (b) x.xx%(c)(d) x.xx%(c)(d) x.xx% x.xx% x.xx%
=========================================================== ======== ======== ======== ======== =======
Ratio of net investment income (loss) to average net
assets (f) (x.xx)%(c) (x.xx)%(c) (x.xx)% (x.xx)% (x.xx)%
=========================================================== ======== ======== ======== ======== =======
Portfolio turnover rate xx% xx% xx% xx% xx%
=========================================================== ======== ======== ======== ======== =======
</TABLE>
(a) Calculated using average shares outstanding.
(b) Does not deduct sales charges and for periods less than one year, total
returns are not annualized.
(c) After fee waivers and/or expenses reimbursements. Ratios of expenses to
average net assets prior to fee waivers and/or expense reimbursements are
x.xx%, x.xx%, x.xx% and x.xx%, respectively for 1998-1995.
(d) Ratios are based on average net assets of $xxx,xxx,xxx.
(e) Ratio includes indirectly paid expenses. Excluding indirectly paid
expenses, the ratio of expenses to average net assets would have been
x.xx%.
(f) Annualized.
(g) 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 are (x.xx%), (x.xx)%, (x.xx)% and (x.xx)%, respectively for
1998-1995.
(h) The average commission rate paid is the total brokerage commissions paid on
applicable purchases and sales of securities for the period divided by the
total number of related shares purchased and sold, which is required to be
disclosed for fiscal years beginning September 1, 1995 and thereafter.
12
<PAGE> 58
Shareholder Information
- --------------------------------------------------------------------------------
CHOOSING A SHARE CLASS
Many of the funds advised by the advisor (the AIM Funds) have multiple classes
of shares, each class representing an interest in the same portfolio of
investments. When choosing a share class, you should consider the factors below:
<TABLE>
<CAPTION>
CLASS A CLASS B CLASS C
- ---------------------------------------------------------------------------------------------------------
<S> <C> <C>
- - Initial sales charge - No initial sales charge - No initial sales charge
- - Reduced or waived initial sales - Contingent deferred sales - Contingent deferred sales
charge for certain purchases charge on redemptions within six charge on redemptions within
years one year
- - Lower distribution and service - 12b-1 fee of 1.00% - 12b-1 fee of 1.00%
(12b-1) fee than Class B or
Class C shares (See "Fee Table
and Expense Example")
- Converts to Class A shares - Does not convert to Class A
after eight years along with a shares
pro rata portion of its
reinvested dividends and
distributions*
- - Generally more appropriate for - Purchase orders limited to - Generally more appropriate
long-term investors amounts less than $250,000 for short-term investors
</TABLE>
* AIM Money Market Fund: Class B shares convert to AIM Cash Reserve Shares.
AIM Global Trends Fund: If you held Class B shares on May 29, 1998 and
continue to hold them, those shares will convert to Class A shares of that
fund seven years after your date of purchase. If you exchange those shares
for Class B shares of another AIM Fund, the shares into which you exchanged
will not convert to Class A shares until eight years after your date of
purchase of the original shares.
- --------------------------------------------------------------------------------
DISTRIBUTION AND SERVICE (12B-1) FEES
Each AIM Fund (except AIM Tax-Free Intermediate Fund) has adopted 12b-1 plans
that allow the AIM Fund to pay distribution fees to A I M Distributors, Inc.
(the distributor) for the sale and distribution of its shares and fees for
services provided to shareholders, all or a substantial portion of which are
paid to the dealer of record. Because the AIM Fund pays these fees out of its
assets on an ongoing basis, over time these fees will increase the cost of your
investment and may cost you more than paying other types of sales charges.
MCF-03/99
A-1
<PAGE> 59
SALES CHARGES
Generally, you will not pay a sales charge on purchases or redemptions of Class
A shares of AIM Tax-Exempt Cash Fund and AIM Cash Reserve Shares of AIM Money
Market Fund. You may be charged a contingent deferred sales charge if you redeem
AIM Cash Reserve Shares of AIM Money Market Fund acquired through certain
exchanges. Sales charges on all other AIM Funds and classes of those Funds are
detailed below. As used below, the term "offering price" with respect to all
categories of Class A shares includes the initial sales charge.
INITIAL SALES CHARGES
The AIM Funds are grouped into three categories with respect to initial sales
charges. The "Other Information" section of your prospectus will tell you in
what category your particular AIM Fund is classified.
<TABLE>
<CAPTION>
CATEGORY I INITIAL SALES CHARGES
<S> <C> <C>
- ----------------------------------------------------------
<CAPTION>
INVESTOR'S
SALES CHARGE
------------------------
AMOUNT OF INVESTMENT AS A % OF AS A % OF
IN SINGLE TRANSACTION OFFERING PRICE INVESTMENT
- ----------------------------------------------------------
<S> <C> <C>
Less than $ 25,000 5.50% 5.82%
$ 25,000 but less than $ 50,000 5.25 5.54
$ 50,000 but less than $ 100,000 4.75 4.99
$100,000 but less than $ 250,000 3.75 3.90
$250,000 but less than $ 500,000 3.00 3.09
$500,000 but less than $1,000,000 2.00 2.04
- ----------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
CATEGORY II INITIAL SALES CHARGES
<S> <C> <C>
- ----------------------------------------------------------
<CAPTION>
INVESTOR'S
SALES CHARGE
------------------------
AMOUNT OF INVESTMENT AS A % OF AS A % OF
IN SINGLE TRANSACTION OFFERING PRICE INVESTMENT
- ----------------------------------------------------------
<S> <C> <C>
Less than $ 50,000 4.75% 4.99%
$ 50,000 but less than $ 100,000 4.00 4.17
$100,000 but less than $ 250,000 3.75 3.90
$250,000 but less than $ 500,000 2.50 2.56
$500,000 but less than $1,000,000 2.00 2.04
- ----------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
CATEGORY III INITIAL SALES CHARGES
<S> <C> <C>
- ----------------------------------------------------------
<CAPTION>
INVESTOR'S
SALES CHARGE
------------------------
AMOUNT OF INVESTMENT AS A % OF AS A % OF
IN SINGLE TRANSACTION OFFERING PRICE INVESTMENT
- ----------------------------------------------------------
<S> <C> <C>
Less than $ 100,000 1.00% 1.01%
$100,000 but less than $ 250,000 0.75 0.76
$250,000 but less than $1,000,000 0.50 0.50
- ----------------------------------------------------------
</TABLE>
CONTINGENT DEFERRED SALES CHARGES FOR CLASS A SHARES
You can purchase $1,000,000 or more of Class A shares at net asset value.
However, if you purchase shares of that amount in Categories I or II, they will
be subject to a contingent deferred sales charge (CDSC) of 1% if you redeem them
prior to 18 months after the date of purchase. The distributor may pay a dealer
concession and/or a service fee for purchases of $1,000,000 or more.
CONTINGENT DEFERRED SALES CHARGES FOR
CLASS B AND CLASS C SHARES
You can purchase Class B and Class C shares at their net asset value per share.
However, when you redeem them, they are subject to a CDSC in the following
percentages:
<TABLE>
<CAPTION>
YEAR SINCE
PURCHASE MADE CLASS B CLASS C
- ----------------------------------------------------------
<S> <C> <C>
First 5% 1%
Second 4 None
Third 3 None
Fourth 3 None
Fifth 2 None
Sixth 1 None
Seventh and following None None
- ----------------------------------------------------------
</TABLE>
A-2
<PAGE> 60
REDUCED SALES CHARGES AND SALES CHARGE EXCEPTIONS
You may qualify for reduced sales charges or sales charge exceptions. To qualify
for these reductions or exceptions, you or your financial consultant must
provide sufficient information at the time of purchase to verify that your
purchase qualifies for such treatment.
REDUCED SALES CHARGES
You may be eligible to buy Class A shares at reduced initial sales charge rates
under Rights of Accumulation or Letters of Intent under certain circumstances.
Rights of Accumulation
You may combine your new purchases of Class A shares with Class A shares
currently owned for the purpose of qualifying for the lower initial sales charge
rates that apply to larger purchases. The applicable initial sales charge for
the new purchase is based on the total of your current purchase and the current
value of all Class A shares you own.
Letters of Intent
Under a Letter of Intent (LOI), you commit to purchase a specified dollar amount
of Class A shares of AIM Funds during a 13-month period. The amount you agree to
purchase determines the initial sales charge you pay. If the full face amount of
the LOI is not invested by the end of the 13-month period, your account will be
adjusted to the higher initial sales charge level for the amount actually
invested.
INITIAL SALES CHARGE EXCEPTIONS
You will not pay initial sales charges
- - on shares purchased by reinvesting dividends and distributions;
- - when exchanging shares among certain AIM Funds;
- - when using the reinstatement privilege; and
- - when a merger, consolidation, or acquisition of assets of an AIM Fund occurs.
CONTINGENT DEFERRED SALES CHARGE (CDSC) EXCEPTIONS
You will not pay a CDSC
- - if you redeem Class B shares you held for more than six years;
- - if you redeem Class C shares you held for more than one year;
- - if you redeem shares acquired through reinvestment of dividends and
distributions; and
- - on increases in the net asset value of your shares.
There may be other situations when you may be able to purchase or redeem shares
at reduced or without sales charges. Consult the fund's Statement of Additional
Information for details.
A-3
<PAGE> 61
PURCHASING SHARES
MINIMUM INVESTMENTS PER AIM FUND ACCOUNT
The minimum investments for AIM Fund accounts (except for investments in AIM
Small Cap Opportunities Fund) are as follows:
<TABLE>
<CAPTION>
INITIAL ADDITIONAL
TYPE OF ACCOUNT INVESTMENTS INVESTMENTS
- ----------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Savings Plans (money-purchase/profit sharing $ 0 ($25 per AIM Fund investment for $25
plans, 401(k) plans, Simplified Employee Pension salary deferrals from Savings Plans)
(SEP) accounts, Salary Reduction (SARSEP)
accounts, Savings Incentive Match Plans for
Employee IRA (Simple IRA) accounts, 403(b) or
457 plans)
Automatic Investment Plans 50 50
IRA, Education IRA or Roth IRA 250 50
All other accounts 500 50
- ----------------------------------------------------------------------------------------------------------------
</TABLE>
HOW TO PURCHASE SHARES
You may purchase shares using one of the options below.
<TABLE>
<CAPTION>
PURCHASE OPTIONS
- ----------------------------------------------------------------------------------------------------------
OPENING AN ACCOUNT ADDING TO AN ACCOUNT
- ----------------------------------------------------------------------------------------------------------
<S> <C> <C>
Through a Financial Consultant Contact your financial consultant. Same
By Mail Mail completed Account Application Mail your check and the remittance
and purchase payment to the slip from your confirmation
transfer agent, statement to the transfer agent.
A I M Fund Services, Inc.,
P.O. Box 4739,
Houston, TX 77210-4739.
By Wire Mail completed Account Application Call the transfer agent to receive
to the transfer agent. Call the a reference number. Then, use the
transfer agent at (800) 959-4246 to wire instructions at left.
receive a reference number. Then,
use the following wire
instructions:
Beneficiary Bank ABA/Routing #:
113000609
Beneficiary Account Number:
00100366807
Beneficiary Account Name: A I M
Fund Services, Inc.
RFB: Fund Name, Reference #
OBI: Your Name, Account #
By AIM Bank Connection(SM) Open your account using one of the Mail completed AIM Bank
methods described above. Connection(SM) form to the transfer
agent. Once the transfer agent has
received the form, call the
transfer agent to place your
purchase.
- ----------------------------------------------------------------------------------------------------------
</TABLE>
A-4
<PAGE> 62
SPECIAL PLANS
AUTOMATIC INVESTMENT PLAN
You can arrange for periodic investments in any of the AIM Funds by authorizing
the AIM Fund to withdraw the amount of your investment from your bank account on
a day or dates you specify and in an amount of at least $50. You may stop the
Automatic Investment Plan at any time by giving the transfer agent notice ten
days prior to your next scheduled withdrawal.
DOLLAR COST AVERAGING
Dollar Cost Averaging allows you to make automatic monthly or quarterly
exchanges, if permitted, from one AIM Fund account to one or more other AIM Fund
accounts with the identical registration. The account from which exchanges are
to be made must have a minimum balance of $5,000 before you can use this option.
Exchanges will occur on (or about) the 10th or 25th day of the month, whichever
you specify, in the amount you specify. The minimum amount you can exchange to
another AIM Fund is $50.
AUTOMATIC DIVIDEND INVESTMENT
All of your dividends and distributions may be paid in cash or invested in any
AIM Fund at net asset value. Unless you specify otherwise, your dividends and
distributions will automatically be reinvested in the same AIM Fund. You may
invest your dividends and distributions (1) into another AIM Fund in the same
class of shares; or (2) from Class A shares into AIM Cash Reserve Shares of AIM
Money Market Fund, or vice versa.
You must comply with the following requirements to be eligible to invest your
dividends and distributions in shares of another AIM Fund:
(1) Your account balance (a) in the AIM Fund paying the dividend must be at
least $5,000; or (b) in the AIM Fund receiving the dividend must be at least
$500;
(2) Both accounts must have identical registration information; and
(3) You must have completed an authorization form to reinvest dividends into
another AIM Fund.
PORTFOLIO REBALANCING PROGRAM
If you have at least $5,000 in your account, you may participate in the
Portfolio Rebalancing Program. Under this Program, you can designate how the
total value of your AIM Fund holdings should be rebalanced, on a percentage
basis, between two and ten of your AIM Funds on a quarterly, semiannual or
annual basis. Your portfolio will be rebalanced through the exchange of shares
in one or more of your AIM Funds for shares of the same class of one or more
other AIM Funds in your portfolio. If you wish to participate in the Program,
make changes or cancel the Program, the transfer agent must receive your request
to participate, changes or cancellation in good order at least five business
days prior to the next rebalancing date, which is normally the 28th day of the
last month of the period you choose. We may modify, suspend or terminate the
Program at any time on 60 days' prior written notice.
RETIREMENT PLANS
Shares of most of the AIM Funds can be purchased through
tax-sheltered retirement plans made available to corporations, individuals and
employees of non-profit organizations and public schools. A plan document must
be adopted to establish a retirement plan. You may use AIM Funds-sponsored
retirement plans, which include IRAs, Education IRAs, Roth IRAs, 403(b) plans,
401(k) plans, SIMPLE IRA plans, SEP/SARSEP plans and Money Purchase/Profit
Sharing plans, or another sponsor's retirement plan. The plan custodian of the
AIM Funds-sponsored retirement plan assesses an annual maintenance fee of $10.
Contact your financial consultant for details.
REDEEMING SHARES
REDEMPTION FEES
We will not charge you any fees to redeem your shares; however, your broker or
financial consultant may charge service fees for handling these transactions.
Your shares may be subject to a contingent deferred sales charge (CDSC).
COMPUTING A CDSC
The CDSC on redemptions of shares is computed based on the lower of their
original purchase price or current market value, net of reinvested dividends and
capital gains distributions. In determining whether to charge a CDSC, we will
assume that you have redeemed shares on which there is no CDSC first and, then,
shares in the order of purchase.
REDEMPTION OF AIM CASH RESERVE SHARES OF
AIM MONEY MARKET FUND ACQUIRED BY EXCHANGE
If you redeem AIM Cash Reserve Shares acquired by exchange from Class A shares
subject to a CDSC within eighteen months of the purchase of the Class A shares,
you will be charged a CDSC.
REDEMPTION OF CLASS B SHARES ACQUIRED BY
EXCHANGE FROM AIM FLOATING RATE FUND
If you redeem Class B shares you acquired by exchange via a tender offer by AIM
Floating Rate Fund, the early withdrawal charge applicable to shares of AIM
Floating Rate Fund will be applied instead of the CDSC normally applicable to
Class B shares.
A-5
<PAGE> 63
HOW TO REDEEM SHARES
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
Through a Financial Contact your financial consultant.
Consultant
By Mail Send a written request to the transfer agent. Requests must
include (1) original signatures of all registered owners;
(2) the name of the AIM Fund and your account number; (3) if
the transfer agent does not hold your shares, endorsed share
certificates or share certificates accompanied by an
executed stock power; and (4) signature guarantees, if
necessary (see below). The transfer agent may require that
you provide additional information, such as corporate
resolutions or powers of attorney, if applicable. If you are
redeeming from an IRA account, you must include a statement
of whether or not you are at least 59 1/2 years old and
whether you wish to have federal income tax withheld from
your proceeds. The transfer agent may require certain other
information before you can redeem from an employer-sponsored
retirement plan. Contact your employer for details.
By Telephone Call the transfer agent. You will be allowed to redeem by
telephone if (1) the proceeds are to be mailed to the
address on record with us or transferred electronically to a
pre-authorized checking account; (2) the address on record
with us has not been changed within the last thirty days;
(3) you do not hold physical share certificates; (4) you can
provide proper identification information; (5) the proceeds
of the redemption do not exceed $50,000; and (6) you have
not previously declined the telephone redemption privilege.
Certain accounts, including retirement accounts and 403(b)
plans, may not redeem by telephone. The transfer agent must
receive your call during the hours the NYSE is open for
business in order to effect the redemption at that day's
closing price.
</TABLE>
- --------------------------------------------------------------------------------
TIMING AND METHOD OF PAYMENT
We normally will send out checks within one business day, and in any event no
more than seven days, after we accept your request to redeem. If you redeem
shares recently purchased by check, you will be required to wait up to ten
business days before we will send your redemption proceeds. This delay is
necessary to ensure that the purchase check has cleared.
REDEMPTION BY MAIL
If you mail us a request in good order to redeem your shares, we will mail you a
check in the amount of the redemption proceeds to the address on record with us.
If your request is not in good order, you may have to provide us with additional
documentation in order to redeem your shares.
REDEMPTION BY TELEPHONE
If you redeem by telephone, we will mail you a check in the amount of the
redemption proceeds to your address of record (if there has been no change
communicated to the transfer agent within the previous 30 days) or transmit them
electronically to your pre-authorized bank account. We use reasonable procedures
to confirm that instructions communicated by telephone are genuine and are not
liable for telephone instructions that are reasonably believed to be genuine.
PAYMENT FOR SYSTEMATIC WITHDRAWALS
You may arrange for regular monthly or quarterly withdrawals from your account
of at least $50. You also may make annual withdrawals if you own Class A shares.
We will redeem enough shares from your account to cover the amount withdrawn.
You must have an account balance of at least $5,000 to establish a Systematic
Withdrawal Plan. You can stop this plan at any time by giving ten days prior
notice to the transfer agent.
EXPEDITED REDEMPTIONS
(AIM Cash Reserve Shares of AIM Money Market Fund only)
If we receive your redemption order before 11:30 a.m. Eastern Time, we will try
to transmit payment of redemption proceeds on that same day. If we receive your
redemption order after 11:30 a.m. Eastern Time and before the close of trading
on the New York Stock Exchange (NYSE), we generally will transmit payment on the
next business day.
REDEMPTIONS BY CHECK
(Class A shares of AIM Tax-Exempt Cash Fund and AIM Cash Reserve Shares of AIM
Money Market Fund only)
You may redeem shares of these AIM Funds by writing checks in amounts of $250 or
more if you have completed an authorization form. Redemption by check is not
available for retirement accounts.
SIGNATURE GUARANTEES
We require a signature guarantee when you redeem by mail and
(1) the amount is greater than $50,000;
(2) you request that payment be made to someone other than the name registered
on the account;
(3) you request that payment be sent somewhere other than the bank of record on
the account; or
(4) you request that payment be sent to a new address or an address that changed
in the last 30 days.
The transfer agent will accept a guarantee of your signature by a number of
financial institutions. Call the transfer agent for additional information. Some
institutions have transaction amount maximums for these guarantees. Please check
with the guarantor institution.
A-6
<PAGE> 64
REINSTATEMENT PRIVILEGE (Class A shares only)
You may, within 90 days after you sell Class A shares (except Class A shares of
AIM Tax-Exempt Cash Fund), reinvest all or part of your redemption proceeds in
Class A shares of any AIM Fund at net asset value in an identically registered
account. If you sold Class A shares of AIM Limited Maturity Treasury Fund or AIM
Tax-Free Intermediate Fund, you will incur an initial sales charge reflecting
the difference between the initial sales charges on those Funds and the ones in
which you will be investing. In addition, if you paid a contingent deferred
sales charge (CDSC) on any reinstated amount, you will not be subject to a CDSC
if you later redeem that amount. You must notify the transfer agent in writing
at the time you reinstate that you are exercising your reinstatement privilege.
You may exercise this privilege only once per year.
REDEMPTIONS BY THE AIM FUNDS
If your account has been open at least one year, you have not made an additional
purchase in the account during the past six calendar months, and the value of
your account falls below $500 for three consecutive months due to redemptions or
exchanges (excluding retirement accounts), the AIM Funds have the right to
redeem the account after giving you 60 days' prior written notice. You may avoid
having your account redeemed during the notice period by bringing the account
value up to $500 or by utilizing the Automatic Investment Plan.
If an AIM Fund determines that you have provided incorrect information in
opening an account or in the course of conducting subsequent transactions, the
AIM Fund may, in its discretion, redeem the account and distribute the proceeds
to you.
EXCHANGING SHARES
You may, under certain circumstances, exchange shares in one AIM Fund for those
of another AIM Fund. Before requesting an exchange, review the prospectus of the
AIM Fund you wish to acquire. Exchange privileges also apply to holders of the
Connecticut General Guaranteed Account, established for tax-qualified group
annuities, for contracts purchased on or before June 30, 1992.
PERMITTED EXCHANGES
Except as otherwise stated below, you may exchange your shares for shares of the
same class of another AIM Fund. You also may exchange AIM Cash Reserve Shares of
AIM Money Market Fund for Class A shares of another AIM Fund, or vice versa. You
may be required to pay an initial sales charge when exchanging from a Fund with
a lower initial sales charge than the one into which you are exchanging. If you
exchange from Class A shares not subject to a CDSC into Class A shares subject
to those charges, you will be charged a CDSC when you redeem the exchanged
shares. The CDSC charged on redemption of those shares will be calculated
starting on the date you acquired those shares through exchange.
YOU WILL NOT PAY A SALES CHARGE WHEN EXCHANGING:
(1) Class A shares with an initial sales charge (except for Class A shares of
AIM Limited Maturity Treasury Fund and AIM Tax-Free Intermediate Fund) for
Class A shares of another AIM Fund or AIM Cash Reserve Shares of AIM Money
Market Fund;
(2) Class A shares of AIM Limited Maturity Treasury Fund and AIM Tax-Free
Intermediate Fund for
(a) one another;
(b) AIM Cash Reserve Shares of AIM Money Market Fund or Class A shares of
AIM Tax-Exempt Cash Fund; or
(c) Class A shares of another AIM Fund, but only if
(i) you acquired the original shares before May 1, 1994; or
(ii) you acquired the original shares on or after May 1, 1994 by way of
an exchange from shares with higher sales charges;
(3) AIM Cash Reserve Shares of AIM Money Market Fund or Class A shares of AIM
Tax-Exempt Cash Fund for
(a) one another;
(b) Class A shares of an AIM Fund subject to an initial sales charge (except
for Class A shares of AIM Limited Maturity Treasury Fund and AIM
Tax-Free Intermediate Fund), but only if you acquired the original
shares
(i) prior to May 1, 1994 by exchange from Class A shares subject to an
initial sales charge;
(ii) on or after May 1, 1994 by exchange from Class A shares subject to
an initial sales charge (except for Class A shares of AIM Limited
Maturity Treasury Fund and AIM Tax-Free Intermediate Fund); or
(c) Class A shares of AIM Limited Maturity Treasury Fund and AIM Tax-Free
Intermediate Fund, but only if you acquired the original shares by
exchange from Class A shares subject to an initial sales charge; or
(4) Class B shares for other Class B shares, and Class C shares for other Class
C shares.
EXCHANGES NOT PERMITTED
You may not exchange Class A shares subject to contingent deferred sales charges
for Class A shares of AIM Limited Maturity Treasury Fund, AIM Tax-Free
Intermediate Fund or AIM Tax-Exempt Cash Fund.
EXCHANGE CONDITIONS
The following conditions apply to all exchanges:
- - You must meet the minimum purchase requirements for the AIM Fund into which
you are exchanging;
- - Shares of the AIM Fund you wish to acquire must be qualified for sale in your
state of residence;
- - Exchanges must be made between accounts with identical registration
information;
A-7
<PAGE> 65
- - The account you wish to exchange from must have a certified tax identification
number (or the Fund has received an appropriate Form W-8 or W-9);
- - Shares must have been held for at least one day prior to the exchange; and
- - If you have physical share certificates, you must return them to the transfer
agent prior to the exchange.
TERMS OF EXCHANGE
Under unusual market conditions, an AIM Fund may delay the issuance of shares
being purchased in an exchange for up to five business days if it determines
that it would be materially disadvantaged by the immediate transfer of exchange
proceeds. There is no fee for exchanges. The exchange privilege is not an option
or right to purchase shares. Any of the participating AIM Funds or the
distributor may modify or discontinue this privilege at any time.
BY MAIL
If you wish to make an exchange by mail, you must include original signatures of
each registered owner exactly as the shares are registered, the account
registration and account number, the dollar amount or number of shares to be
exchanged and the names of the AIM Funds from which and into which the exchange
is to be made.
BY TELEPHONE
Conditions that apply to exchanges by telephone are the same as redemptions by
telephone, including that the transfer agent must receive exchange requests
during the hours the NYSE is open for business; however, you still will be
allowed to exchange by telephone even if you have changed your address of record
within the preceding 30 days.
EXCHANGING CLASS B AND CLASS C SHARES
If you make an exchange involving Class B or Class C shares, the amount of time
you held the original shares will be added to the holding period of the Class B
or Class C shares, respectively, into which you exchanged for the purpose of
calculating contingent deferred sales charges (CDSC) if you later redeem the
exchanged shares. If you redeem Class B shares acquired by exchange via a tender
offer by AIM Floating Rate Fund, you will be credited with the time period you
held the shares of AIM Floating Rate Fund for the purpose of computing the early
withdrawal charge applicable to those shares.
EACH AIM FUND AND THE DISTRIBUTOR RESERVE THE RIGHT AT ANY TIME TO REJECT OR
CANCEL ANY PART OF ANY PURCHASE OR EXCHANGE ORDER; MODIFY ANY TERMS OR
CONDITIONS OF PURCHASE OF SHARES OF ANY AIM FUND; OR WITHDRAW ALL OR ANY PART
OF THE OFFERING MADE BY THIS PROSPECTUS.
PRICING OF SHARES
DETERMINATION OF NET ASSET VALUE
The price of each AIM Fund's shares is the fund's net asset value per share. The
AIM Funds value portfolio securities for which market quotations are readily
available at market value. The AIM Funds value short-term investments maturing
within 60 days at amortized cost, which approximates market value. AIM Money
Market Fund and AIM Tax-Exempt Cash Fund value all their securities at amortized
cost. AIM High Income Municipal Fund, AIM Municipal Bond Fund, AIM Tax-Exempt
Bond Fund of Connecticut and AIM Tax-Free Intermediate Fund value variable rate
securities that have an unconditional demand or put feature exercisable within
seven days or less at par, which reflects the market value of such securities.
The AIM Funds value all other securities and assets at their fair value.
Securities and other assets quoted in foreign currencies are valued in U.S.
dollars based on the prevailing exchange rates on that day. In addition, if,
between the time trading ends on a particular security and the close of the New
York Stock Exchange (NYSE), events occur that materially affect the value of the
security, the AIM Funds may value the security at its fair value as determined
in good faith by or under the supervision of the Board of Directors or Trustees
of the AIM Fund. The effect of using fair value pricing is that an AIM Fund's
net asset value will be subject to the judgment of the Board of Directors or
Trustees or its designee instead of being determined by the market. Because some
of the AIM Funds may invest in securities that are primarily listed on foreign
exchanges, the value of those funds' shares may change on days when you will not
be able to purchase or redeem shares.
Each AIM Fund determines the net asset value of its shares as of the close of
the NYSE on each day the NYSE is open for business. AIM Money Market Fund also
determines its net asset value as of 12:00 noon Eastern Time on each day the
NYSE is open for business.
TIMING OF ORDERS
You can purchase, exchange or redeem shares during the hours the NYSE is open
for business. The AIM Funds price purchase, exchange and redemption orders at
the net asset value calculated after the transfer agent receives an order in
good form. An AIM Fund may postpone the right of redemption only under unusual
circumstances, such as when the NYSE restricts or suspends trading.
TAXES
In general, dividends and distributions you receive are taxable as ordinary
income or long-term capital gains for federal income tax purposes, whether you
reinvest them in additional shares or take them in cash. Distributions are
taxable to you at different rates depending on the length of time the fund holds
its assets. Different tax rates apply to ordinary income and long-term capital
gain distributions, regardless of how long you have held your shares. Every
year, you will be sent information showing the amount of dividends and
distributions you received from each AIM Fund during the prior year.
A-8
<PAGE> 66
Any long-term or short-term capital gains realized from redemptions of AIM
Fund shares will be subject to federal income tax. Exchanges of shares for
shares of another AIM Fund are treated as a sale, and any gain realized on the
transaction will generally be subject to federal income tax.
The foreign, state and local tax consequences of investing in AIM Fund shares
may differ materially from the federal income tax consequences described above.
You should consult your tax advisor before investing.
A-9
<PAGE> 67
[BACK COVER PAGE]
OBTAINING ADDITIONAL INFORMATION
More information may be obtained free of charge upon request. The Statement of
Additional Information (SAI), a current version of which is on file with the
Securities and Exchange Commission (SEC), contains more details about the fund
and is incorporated by reference into the prospectus (is legally a part of this
prospectus). Annual and semiannual reports to shareholders contain additional
information about the fund's investments. The fund's annual report also
discusses the market conditions and investment strategies that significantly
affected the fund's performance during its last fiscal year.
If you have questions about this fund, another fund in The AIM Family of Funds
or your account, or wish to obtain free copies of the fund's current SAI or
annual or semiannual reports, please contact us:
BY MAIL: A I M Distributors, Inc.
11 Greenway Plaza, Suite 100
Houston, TX 77046-1173
BY TELEPHONE: (800) 347-4246
BY E-MAIL: [email protected]
ON THE INTERNET: http://www.aimfunds.com (prospectuses and annual and
semiannual reports only)
You also can obtain copies of the fund's SAI and other information at the SEC's
Public Reference Room in Washington, D.C., on the SEC's website
(http://www.sec.gov), or by sending a letter, including a duplicating fee, to
the SEC's Public Reference Section, Washington, D.C. 20549-6009. Please call the
SEC at 1-800-SEC-0330 for information about the Public Reference Room.
AIM Japan Growth Fund
SEC 1940 Act file number: 811-2699
<PAGE> 68
The information in this prospectus is not complete and may be changed. We may
not sell these securities until the registration statement filed with the
Securities and Exchange Commission is effective. This prospectus is not an offer
to sell these securities and is not soliciting an offer to buy these securities
in any state where the offer or sale is not permitted.
Subject to Completion dated February 12, 1999
[AIM LOGO APPEARS HERE]
AIM MID CAP EQUITY FUND
PROSPECTUS
MAY 3, 1999
AIM Mid Cap Equity Fund seeks to provide long-term growth of capital.
This prospectus contains important information. Please read it before investing
and keep it for future reference.
An investment in the fund is not a deposit of a bank and is not insured or
guaranteed by the Federal Deposit Insurance Corporation or any other government
agency. There is a risk that you could lose a portion or all of your money.
AS WITH ALL OTHER MUTUAL FUND SECURITIES, THE SECURITIES AND EXCHANGE
COMMISSION HAS NOT APPROVED OR DISAPPROVED THESE SECURITIES OR
DETERMINED WHETHER THE INFORMATION IN THIS PROSPECTUS IS
ADEQUATE OR ACCURATE. ANYONE WHO TELLS YOU
OTHERWISE IS COMMITTING A CRIME.
1
<PAGE> 69
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
<S> <C>
INVESTMENT OBJECTIVE AND STRATEGIES.............................................................3
PRINCIPAL RISKS OF INVESTING IN THE FUND........................................................3
PERFORMANCE INFORMATION.........................................................................5
ANNUAL TOTAL RETURNS...................................................................5
PERFORMANCE TABLE......................................................................6
FEE TABLE AND EXPENSE EXAMPLE...................................................................7
FEE TABLE..............................................................................7
EXPENSE EXAMPLE........................................................................7
FUND MANAGEMENT.................................................................................9
THE ADVISOR............................................................................9
ADVISOR COMPENSATION...................................................................9
PORTFOLIO MANAGERS.....................................................................9
OTHER INFORMATION..............................................................................10
INITIAL SALES CHARGES FOR CLASS A SHARES..............................................10
DIVIDENDS AND DISTRIBUTIONS...........................................................10
FINANCIAL HIGHLIGHTS...........................................................................11
SHAREHOLDER INFORMATION.......................................................................A-1
CHOOSING A SHARE CLASS...............................................................A-1
PURCHASING SHARES....................................................................A-4
REDEEMING SHARES.....................................................................A-5
EXCHANGING SHARES....................................................................A-7
PRICING OF SHARES....................................................................A-8
TAXES................................................................................A-8
OBTAINING ADDITIONAL INFORMATION..................................................BACK COVER PAGE
</TABLE>
The AIM Family of Funds--Registered Trademark--, The AIM Family of Funds and
Design (i.e., the AIM logo), AIM and Design, AIM, AIM LINK, AIM Institutional
Funds, aimfunds.com, La Familia AIM de Fondos--Registered Trademark--, La
Familia AIM de Fondos and Design and Invest with Discipline are registered
service marks and AIM Bank Connection is a service mark of A I M Management
Group Inc.
2
<PAGE> 70
INVESTMENT OBJECTIVE AND STRATEGIES
The fund's investment objective is long-term growth of capital.
The fund seeks to achieve its objective by investing, normally, at least 65% of
its total assets in equity securities of United States issuers that have market
capitalizations within the range of market capitalizations of companies included
in the Russell Mid Cap(TM) Index.
The fund may invest up to 35% of its total assets in equity securities of other
U.S. issuers and of foreign issuers in the form of American Depositary Receipts
or other securities convertible into the securities of foreign issuers. The fund
may also invest up to 35% of its total assets in investment-grade debt
securities of U.S. and foreign issuers. These debt securities could include U.S.
and foreign government securities and corporate debt securities.
In selecting investments, AIM seeks to identify those companies that are, in
AIM's view, undervalued relative to current or projected earnings, or the
current market value of assets owned by the company. The primary emphasis of
AIM's search for undervalued equity securities is in four categories: (1)
out-of-favor cyclical growth companies; (2) established growth companies that
are undervalued compared to historical relative valuation parameters; (3)
companies where there is early but tangible evidence of improving prospects
which are not yet reflected in the value of the companies' equity securities;
and (4) companies whose equity securities are selling at prices that do not yet
reflect the current market value of their assets.
[In anticipation of or in response to adverse market conditions or for cash
management purposes, the fund may hold all or a portion of its assets in cash
(U.S. dollars, foreign currencies or multi-national currency units), money
market securities, or high quality debt securities issued by corporations or the
U.S. or a foreign government. As a result, the fund may not achieve its
investment objective]
[The fund may engage in active and frequent trading of portfolio securities to
achieve its investment objective. If the fund does trade in this way, it may
incur increased transaction costs and brokerage commissions, both of which can
lower the actual return on your investment. Active trading may also increase
short-term capital gains and losses, which may affect the taxes you have to
pay.]
PRINCIPAL RISKS OF INVESTING IN THE FUND
There is a risk that you could lose all or a portion of your investment in the
fund. The value of your investment in the fund will go up and down with the
prices of the securities in which the fund invests. The price of equity
securities rises and falls in response to many factors, including the historical
and prospective earnings of the issuer of the stock, the value of its assets,
general economic conditions, interest rates, investor perceptions, and market
liquidity. [Debt securities are particularly vulnerable to credit risk and
interest rate fluctuations. When interest rates rise, bond prices fall; the
longer a bond's duration, the more sensitive it is to this risk.]
Foreign securities have additional risks, including exchange rate changes,
political and economic upheaval, the relative lack of information about these
companies, relatively low market liquidity, the potential lack of information
about these companies, relatively low market liquidity and the potential lack of
strict financial and accounting controls and standards.
[If the seller of a repurchase agreement in which the fund invests defaults on
its obligation or declares bankruptcy, the fund may experience delays in selling
the securities underlying the repurchase agreement. As a result, the fund may
incur losses arising from decline in the value of those securities, reduced
levels of income and expenses of enforcing its rights.]
The fund could be adversely affected if the computer systems used by the fund's
investment advisor and the fund's other service providers do not properly
process and calculate date-related information from and after January 1, 2000.
The fund's investment advisor and independent technology consultants are
working to avoid year 2000-related problems in its systems and to obtain
assurances from other service providers that they are taking similar steps. In
addition, issuers of securities in which the fund invests may be adversely
affected by year 2000-related problems. This could have an impact on the value
of the fund's investments and its share price.
3
<PAGE> 71
An investment in the fund is not a deposit of a bank and is not insured or
guaranteed by the Federal Deposit Insurance Corporation or any other government
agency.
4
<PAGE> 72
PERFORMANCE INFORMATION
The bar chart and table shown below provide an indication of the risks of
investing in the fund. The fund's past performance is not necessarily an
indication of its future performance.
ANNUAL TOTAL RETURNS
The following bar chart shows changes in the performance of the fund's Class A
shares from year to year. The bar chart does not reflect sales loads. If it did,
the annual total returns shown would be lower.
Mid Cap Equity
[GRAPH]
<TABLE>
<CAPTION>
Year Return
---- ------
<S> <C>
1989 ............................................ 54.77%
1990 ............................................ (7.4)%
1991 ............................................ 19.29%
1992 ............................................ 31.74%
1993 ............................................ 8.34%
1994 ............................................ 15.69%
1995 ............................................ 23.23%
1996 ............................................ 15.65%
1997 ............................................ 14.05%
1998 ............................................ (4.71)%
</TABLE>
During the period shown in the bar chart, the highest quarterly return was
25.61% (quarter ended 12/31/92) and the lowest quarterly return was (25.00)%
(quarter ended 9/30/98).
5
<PAGE> 73
PERFORMANCE TABLE
The following performance table shows how the fund's average annual total
returns for one, five and ten years and since inception compare to those of a
broad-based securities market index.
<TABLE>
<CAPTION>
=========================================================================================================
Average Annual Total Returns
(for the periods ended December
31, 1998) Since Inception
1 Year 5 Years 10 Years Inception Date
- ---------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Class A (4.71)% 12.37% 15.90% 13.12% 6/9/87
- ---------------------------------------------------------------------------------------------------------
Class B (5.41) 11.64 --- 12.94 4/1/93
- ---------------------------------------------------------------------------------------------------------
Class C --- --- --- --- 5/3/99
- ---------------------------------------------------------------------------------------------------------
Russell Mid Cap(TM)Index(1) 10.09 17.35 16.69 14.46(2) 5/31/87
=========================================================================================================
</TABLE>
(1) The Russell Mid Cap(TM) Index comprises the capitalization-weighted average
price of 800 selected common stocks of medium-size domestic companies. Its
performance includes the effect of reinvested dividends and is measured in
U.S. dollars.
(2) The average annual total return given is since the date closest to the
inception date of the class with the longest performance history.
6
<PAGE> 74
FEE TABLE AND EXPENSE EXAMPLE
FEE TABLE
This table describes the fees and expenses that you may pay if you buy and hold
shares of the fund:
<TABLE>
<CAPTION>
Class A Class B Class C
------- ------- -------
<S> <C> <C> <C>
Shareholder Fees (fees paid directly from your investment)
Maximum Sales Charge (Load) Imposed on Purchases
(as a percentage of offering price) 5.50% None None
Maximum Deferred Sales Charge (Load)
(as a percentage of original purchase price
or redemption proceeds, whichever is less) None(1) 5.00 1.00
Annual Fund Operating Expenses
(expenses that are deducted from fund assets)
Management Fees [0.00%] [0.00%] [0.00%]
Distribution and/or Service (12b-1) Fees [0.35] [1.00] [1.00]
Other Expenses [0.00] [0.00] [0.00]
Total Annual Fund Operating Expenses [0.00] [0.00] [0.00]
====== ====== ======
Expense Reimbursements(2) [0.00] [0.00] [0.00]
Net Expenses [0.00] [0.00] [0.00]
</TABLE>
(1) If you buy $1,000,000 or more of Class A shares and redeem these shares
within 18 months from the date of purchase, you may pay a 1% contingent
deferred sales charge (CDSC) at the time of redemption.
[(2) The investment advisor has agreed to limit expenses through May 31, 2000.
The waiver may not be terminated.]
As a result of 12b-1 fees, long-term shareholders in the fund may pay more than
the maximum permitted initial sales charge.
EXPENSE EXAMPLE
This example is intended to help you compare the costs of investing in different
classes of the fund with the cost of investing in other mutual funds.
The example assumes that you invest $10,000 in the fund for the time periods
indicated and then redeem all of your shares at the end of those periods. The
example also assumes that your investment has a 5% return each year and that the
fund's operating expenses remain the same. Although your actual returns and
costs may be higher or lower, based on these assumptions your costs would be:
<TABLE>
<CAPTION>
1 Year 3 Years 5 Years 10 Years
------ ------- ------- --------
<S> <C> <C> <C> <C>
Class A $ $ $ $
Class B
Class C
</TABLE>
7
<PAGE> 75
You would pay the following expenses if you did not redeem your shares:
<TABLE>
<CAPTION>
1 Year 3 Years 5 Years 10 Years
------ ------- ------- --------
<S> <C> <C> <C> <C>
Class A $ $ $ $
Class B
Class C
</TABLE>
8
<PAGE> 76
FUND MANAGEMENT
THE ADVISOR
A I M Advisors, Inc. (the advisor) serves as the fund's investment advisor and
is responsible for its day-to-day management. The advisor is located at 11
Greenway Plaza, Suite 100, Houston, Texas 77046-1173. The advisor supervises all
aspects of the fund's operations and provides investment advisory services to
the fund, including obtaining and evaluating economic, statistical and financial
information to formulate and implement investment programs for the fund.
The advisor has acted as an investment advisor since its organization in 1976.
Today, the advisor, together with its subsidiaries, advises or manages over 110
investment portfolios, including the fund, encompassing a broad range of
investment objectives.
ADVISOR COMPENSATION
During the fiscal year ended December 31, 1998, the advisor received
compensation of ____% of average net assets.
PORTFOLIO MANAGERS
The advisor uses a team approach to investment management. The individual
members of the team who are primarily responsible for the day-to-day management
of the fund's portfolio, all of whom are officers of A I M Capital Management,
Inc., a wholly owned subsidiary of the advisor, are
o Ronald S. Sloan, Senior Portfolio Manager, who has been responsible for
the fund since 1998 and has been associated with the advisor and/or its
affiliates since 1998. From 1993 to 1998, he was President of Verissimo
Research & Management, Inc.
o Paul J. Rasplicka, Senior Portfolio Manager, who has been responsible
for the fund since 1998 and has been associated with the advisor and/or
its affiliates since 1994.
o Robert A. Shelton, Portfolio Manager, who has been responsible for the
fund since 1998 and has been associated with the advisor and/or its
affiliates since 1995. Prior to 1995, he was a financial analyst for CS
First Boston.
9
<PAGE> 77
OTHER INFORMATION
INITIAL SALES CHARGES FOR CLASS A SHARES
Purchases of Class A shares of the fund are subject to the maximum 5.50% initial
sales charge as listed under the heading "Category I Initial Sales Charges" in
the "Shareholder Information--Choosing a Share Class" section of this
prospectus.
DIVIDENDS AND DISTRIBUTIONS
Dividends
The fund generally declares and pays dividends, if any, annually.
Capital Gains Distributions
The fund generally distributes long-term and short-term capital gains (including
any net gains from foreign currency transactions), if any, annually.
10
<PAGE> 78
FINANCIAL HIGHLIGHTS
The financial highlights table is intended to help you understand the fund's
financial performance. Certain information reflects financial results for a
single fund share.
The total returns in the table represent the rate that an investor would have
earned (or lost) on an investment in the fund (assuming reinvestment of all
dividends and distributions).
This information has been audited by PricewaterhouseCoopers LLP, whose report,
along with the fund's financial statements, is included in the fund's annual
report which is available upon request.
<TABLE>
<CAPTION>
Class A Year Ended December 31,
- ------- ------------------------------------------------------------------
1998 1997 1996 1995 1994
------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of period $ xx.xx $ xx.xx $ xx.xx $ xx.xx $ xx.xx
- --------------------------------------------------------------- ------- ---------- ---------- ---------- ----------
Income from investment operations:
Net investment income (loss) (x.xx) (a) (x.xx) (a) (x.xx) (x.xx) (x.xx)
- --------------------------------------------------------------- ------- ---------- ---------- ---------- ----------
Net gains on securities (both realized and unrealized) (x.xx) (x.xx) (x.xx) (x.xx) (x.xx)
=============================================================== ------- ---------- ---------- ---------- ----------
Total from investment operations (x.xx) x.xx x.xx x.xx x.xx
- --------------------------------------------------------------- ------- ---------- ---------- ---------- ----------
Distributions from net realized gains (x.xx) (x.xx) (x.xx) (x.xx) --
- --------------------------------------------------------------- ------- ---------- ---------- ---------- ----------
Net asset value, end of period $ xx.xx $ xx.xx $ xx.xx $ xx.xx $ xx.xx
=============================================================== ======= ========== ========== ========== ==========
Total return (b) (x.xx)% (x.xx)% (x.xx)% (x.xx)% (x.xx)%
=============================================================== ======= ========== ========== ========== ==========
Ratios/supplemental data:
Net assets, end of period (000s ommitted) (c) $xx,xxx $x,xxx,xxx $x,xxx,xxx $x,xxx,xxx $x,xxx,xxx
=============================================================== ======= ========== ========== ========== ==========
Ratio of expenses to average net assets (c) x.xx% (d) x.xx x.xx x.xx x.xx
=============================================================== ======= ========== ========== ========== ==========
Ratio of net investment income (loss) to average net assets (c) (x.xx)%(d) (x.xx)% (x.xx)% (x.xx)% (x.xx)%
=============================================================== ======= ========== ========== ========== ==========
Portfolio turnover rate xx% xx% xx% xx% xx%
=============================================================== ======= ========== ========== ========== ==========
</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
x.xx%, x.xx%, x.xx% and x.xx% for 1998-1995.
(d) After fee waivers and/or expense reimbursements. Ratios of net investment
income (loss) to average net assets prior to fee waivers and/or expense
reimbursements were x.xx%, x.xx%, x.xx% and x.xx% for 1998-1995.
11
<PAGE> 79
<TABLE>
<CAPTION>
Class B Year Ended December 31,
- ------- ------------------------------------------------------------
1998 1997 1996 1995 1994
------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of period $ xx.xx $ xx.xx $ xx.xx $ xx.xx $ xx.xx
- --------------------------------------------------------------- ------- ------- ------- ------- -------
Income from investment operations:
Net investment income (loss) (x.xx) (x.xx) (x.xx) (x.xx) (x.xx)
- --------------------------------------------------------------- ------- ------- ------- ------- -------
Net gains on securities (both realized and unrealized) (x.xx) (x.xx) (x.xx) (x.xx) (x.xx)
=============================================================== ------- ------- ------- ------- -------
Total from investment operations (x.xx) (x.xx) (x.xx) (x.xx) (x.xx)
- --------------------------------------------------------------- ------- ------- ------- ------- -------
Distributions from net realized gains (x.xx) (x.xx) -- (x.xx) (x.xx)
- --------------------------------------------------------------- ------- ------- ------- ------- -------
Net asset value, end of period $ xx.xx $ xx.xx $ xx.xx $ xx.xx $ xx.xx
=============================================================== ======= ======= ======= ======= =======
Total return (a) (x.xx)% (x.xx)% (x.xx)% (x.xx)% (x.xx)%
=============================================================== ======= ======= ======= ======= =======
Ratios/supplemental data:
Net assets, end of period (000s ommitted) $xx,xxx $xx,xxx $xx,xxx $xx,xxx $xx,xxx
=============================================================== ======= ======= ======= ======= =======
Ratio of expenses to average net assets (b) x.xx% (c)(d) x.xx% (c)(d) x.xx% x.xx% x.xx%
=============================================================== ======= ======= ======= ======= =======
Ratio of net investment income (loss) to average net assets (f) (x.xx)%(c) (x.xx)%(c) (x.xx)% (x.xx)% (x.xx)%
=============================================================== ======= ======= ======= ======= =======
Portfolio turnover rate xx% xx% xx% xx% xx%
=============================================================== ======= ======= ======= ======= =======
</TABLE>
(a) Calculated using average shares outstanding.
(b) Does not deduct sales charges and for periods less than one year, total
returns are not annualized.
(c) After fee waivers and/or expenses reimbursements. Ratios of expenses to
average net assets prior to fee waivers and/or expense reimbursements are
x.xx%, x.xx%, x.xx% and x.xx%, respectively for 1998-1995.
(d) Ratios are based on average net assets of $xxx,xxx,xxx.
(e) Ratio includes indirectly paid expenses. Excluding indirectly paid
expenses, the ratio of expenses to average net assets would have been
x.xx%.
(f) Annualized.
(g) 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 are (x.xx%), (x.xx)%, (x.xx)% and (x.xx)%, respectively for
1998-1995.
(h) The average commission rate paid is the total brokerage commissions paid on
applicable purchases and sales of securities for the period divided by the
total number of related shares purchased and sold, which is required to be
disclosed for fiscal years beginning September 1, 1995 and thereafter.
12
<PAGE> 80
Shareholder Information
- --------------------------------------------------------------------------------
CHOOSING A SHARE CLASS
Many of the funds advised by the advisor (the AIM Funds) have multiple classes
of shares, each class representing an interest in the same portfolio of
investments. When choosing a share class, you should consider the factors below:
<TABLE>
<CAPTION>
CLASS A CLASS B CLASS C
- ---------------------------------------------------------------------------------------------------------
<S> <C> <C>
- - Initial sales charge - No initial sales charge - No initial sales charge
- - Reduced or waived initial sales - Contingent deferred sales - Contingent deferred sales
charge for certain purchases charge on redemptions within six charge on redemptions within
years one year
- - Lower distribution and service - 12b-1 fee of 1.00% - 12b-1 fee of 1.00%
(12b-1) fee than Class B or
Class C shares (See "Fee Table
and Expense Example")
- Converts to Class A shares - Does not convert to Class A
after eight years along with a shares
pro rata portion of its
reinvested dividends and
distributions*
- - Generally more appropriate for - Purchase orders limited to - Generally more appropriate
long-term investors amounts less than $250,000 for short-term investors
</TABLE>
* AIM Money Market Fund: Class B shares convert to AIM Cash Reserve Shares.
AIM Global Trends Fund: If you held Class B shares on May 29, 1998 and
continue to hold them, those shares will convert to Class A shares of that
fund seven years after your date of purchase. If you exchange those shares
for Class B shares of another AIM Fund, the shares into which you exchanged
will not convert to Class A shares until eight years after your date of
purchase of the original shares.
- --------------------------------------------------------------------------------
DISTRIBUTION AND SERVICE (12B-1) FEES
Each AIM Fund (except AIM Tax-Free Intermediate Fund) has adopted 12b-1 plans
that allow the AIM Fund to pay distribution fees to A I M Distributors, Inc.
(the distributor) for the sale and distribution of its shares and fees for
services provided to shareholders, all or a substantial portion of which are
paid to the dealer of record. Because the AIM Fund pays these fees out of its
assets on an ongoing basis, over time these fees will increase the cost of your
investment and may cost you more than paying other types of sales charges.
MCF-03/99
A-1
<PAGE> 81
SALES CHARGES
Generally, you will not pay a sales charge on purchases or redemptions of Class
A shares of AIM Tax-Exempt Cash Fund and AIM Cash Reserve Shares of AIM Money
Market Fund. You may be charged a contingent deferred sales charge if you redeem
AIM Cash Reserve Shares of AIM Money Market Fund acquired through certain
exchanges. Sales charges on all other AIM Funds and classes of those Funds are
detailed below. As used below, the term "offering price" with respect to all
categories of Class A shares includes the initial sales charge.
INITIAL SALES CHARGES
The AIM Funds are grouped into three categories with respect to initial sales
charges. The "Other Information" section of your prospectus will tell you in
what category your particular AIM Fund is classified.
<TABLE>
<CAPTION>
CATEGORY I INITIAL SALES CHARGES
<S> <C> <C>
- ----------------------------------------------------------
<CAPTION>
INVESTOR'S
SALES CHARGE
------------------------
AMOUNT OF INVESTMENT AS A % OF AS A % OF
IN SINGLE TRANSACTION OFFERING PRICE INVESTMENT
- ----------------------------------------------------------
<S> <C> <C>
Less than $ 25,000 5.50% 5.82%
$ 25,000 but less than $ 50,000 5.25 5.54
$ 50,000 but less than $ 100,000 4.75 4.99
$100,000 but less than $ 250,000 3.75 3.90
$250,000 but less than $ 500,000 3.00 3.09
$500,000 but less than $1,000,000 2.00 2.04
- ----------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
CATEGORY II INITIAL SALES CHARGES
<S> <C> <C>
- ----------------------------------------------------------
<CAPTION>
INVESTOR'S
SALES CHARGE
------------------------
AMOUNT OF INVESTMENT AS A % OF AS A % OF
IN SINGLE TRANSACTION OFFERING PRICE INVESTMENT
- ----------------------------------------------------------
<S> <C> <C>
Less than $ 50,000 4.75% 4.99%
$ 50,000 but less than $ 100,000 4.00 4.17
$100,000 but less than $ 250,000 3.75 3.90
$250,000 but less than $ 500,000 2.50 2.56
$500,000 but less than $1,000,000 2.00 2.04
- ----------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
CATEGORY III INITIAL SALES CHARGES
<S> <C> <C>
- ----------------------------------------------------------
<CAPTION>
INVESTOR'S
SALES CHARGE
------------------------
AMOUNT OF INVESTMENT AS A % OF AS A % OF
IN SINGLE TRANSACTION OFFERING PRICE INVESTMENT
- ----------------------------------------------------------
<S> <C> <C>
Less than $ 100,000 1.00% 1.01%
$100,000 but less than $ 250,000 0.75 0.76
$250,000 but less than $1,000,000 0.50 0.50
- ----------------------------------------------------------
</TABLE>
CONTINGENT DEFERRED SALES CHARGES FOR CLASS A SHARES
You can purchase $1,000,000 or more of Class A shares at net asset value.
However, if you purchase shares of that amount in Categories I or II, they will
be subject to a contingent deferred sales charge (CDSC) of 1% if you redeem them
prior to 18 months after the date of purchase. The distributor may pay a dealer
concession and/or a service fee for purchases of $1,000,000 or more.
CONTINGENT DEFERRED SALES CHARGES FOR
CLASS B AND CLASS C SHARES
You can purchase Class B and Class C shares at their net asset value per share.
However, when you redeem them, they are subject to a CDSC in the following
percentages:
<TABLE>
<CAPTION>
YEAR SINCE
PURCHASE MADE CLASS B CLASS C
- ----------------------------------------------------------
<S> <C> <C>
First 5% 1%
Second 4 None
Third 3 None
Fourth 3 None
Fifth 2 None
Sixth 1 None
Seventh and following None None
- ----------------------------------------------------------
</TABLE>
A-2
<PAGE> 82
REDUCED SALES CHARGES AND SALES CHARGE EXCEPTIONS
You may qualify for reduced sales charges or sales charge exceptions. To qualify
for these reductions or exceptions, you or your financial consultant must
provide sufficient information at the time of purchase to verify that your
purchase qualifies for such treatment.
REDUCED SALES CHARGES
You may be eligible to buy Class A shares at reduced initial sales charge rates
under Rights of Accumulation or Letters of Intent under certain circumstances.
Rights of Accumulation
You may combine your new purchases of Class A shares with Class A shares
currently owned for the purpose of qualifying for the lower initial sales charge
rates that apply to larger purchases. The applicable initial sales charge for
the new purchase is based on the total of your current purchase and the current
value of all Class A shares you own.
Letters of Intent
Under a Letter of Intent (LOI), you commit to purchase a specified dollar amount
of Class A shares of AIM Funds during a 13-month period. The amount you agree to
purchase determines the initial sales charge you pay. If the full face amount of
the LOI is not invested by the end of the 13-month period, your account will be
adjusted to the higher initial sales charge level for the amount actually
invested.
INITIAL SALES CHARGE EXCEPTIONS
You will not pay initial sales charges
- - on shares purchased by reinvesting dividends and distributions;
- - when exchanging shares among certain AIM Funds;
- - when using the reinstatement privilege; and
- - when a merger, consolidation, or acquisition of assets of an AIM Fund occurs.
CONTINGENT DEFERRED SALES CHARGE (CDSC) EXCEPTIONS
You will not pay a CDSC
- - if you redeem Class B shares you held for more than six years;
- - if you redeem Class C shares you held for more than one year;
- - if you redeem shares acquired through reinvestment of dividends and
distributions; and
- - on increases in the net asset value of your shares.
There may be other situations when you may be able to purchase or redeem shares
at reduced or without sales charges. Consult the fund's Statement of Additional
Information for details.
A-3
<PAGE> 83
PURCHASING SHARES
MINIMUM INVESTMENTS PER AIM FUND ACCOUNT
The minimum investments for AIM Fund accounts (except for investments in AIM
Small Cap Opportunities Fund) are as follows:
<TABLE>
<CAPTION>
INITIAL ADDITIONAL
TYPE OF ACCOUNT INVESTMENTS INVESTMENTS
- ----------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Savings Plans (money-purchase/profit sharing $ 0 ($25 per AIM Fund investment for $25
plans, 401(k) plans, Simplified Employee Pension salary deferrals from Savings Plans)
(SEP) accounts, Salary Reduction (SARSEP)
accounts, Savings Incentive Match Plans for
Employee IRA (Simple IRA) accounts, 403(b) or
457 plans)
Automatic Investment Plans 50 50
IRA, Education IRA or Roth IRA 250 50
All other accounts 500 50
- ----------------------------------------------------------------------------------------------------------------
</TABLE>
HOW TO PURCHASE SHARES
You may purchase shares using one of the options below.
<TABLE>
<CAPTION>
PURCHASE OPTIONS
- ----------------------------------------------------------------------------------------------------------
OPENING AN ACCOUNT ADDING TO AN ACCOUNT
- ----------------------------------------------------------------------------------------------------------
<S> <C> <C>
Through a Financial Consultant Contact your financial consultant. Same
By Mail Mail completed Account Application Mail your check and the remittance
and purchase payment to the slip from your confirmation
transfer agent, statement to the transfer agent.
A I M Fund Services, Inc.,
P.O. Box 4739,
Houston, TX 77210-4739.
By Wire Mail completed Account Application Call the transfer agent to receive
to the transfer agent. Call the a reference number. Then, use the
transfer agent at (800) 959-4246 to wire instructions at left.
receive a reference number. Then,
use the following wire
instructions:
Beneficiary Bank ABA/Routing #:
113000609
Beneficiary Account Number:
00100366807
Beneficiary Account Name: A I M
Fund Services, Inc.
RFB: Fund Name, Reference #
OBI: Your Name, Account #
By AIM Bank Connection(SM) Open your account using one of the Mail completed AIM Bank
methods described above. Connection(SM) form to the transfer
agent. Once the transfer agent has
received the form, call the
transfer agent to place your
purchase.
- ----------------------------------------------------------------------------------------------------------
</TABLE>
A-4
<PAGE> 84
SPECIAL PLANS
AUTOMATIC INVESTMENT PLAN
You can arrange for periodic investments in any of the AIM Funds by authorizing
the AIM Fund to withdraw the amount of your investment from your bank account on
a day or dates you specify and in an amount of at least $50. You may stop the
Automatic Investment Plan at any time by giving the transfer agent notice ten
days prior to your next scheduled withdrawal.
DOLLAR COST AVERAGING
Dollar Cost Averaging allows you to make automatic monthly or quarterly
exchanges, if permitted, from one AIM Fund account to one or more other AIM Fund
accounts with the identical registration. The account from which exchanges are
to be made must have a minimum balance of $5,000 before you can use this option.
Exchanges will occur on (or about) the 10th or 25th day of the month, whichever
you specify, in the amount you specify. The minimum amount you can exchange to
another AIM Fund is $50.
AUTOMATIC DIVIDEND INVESTMENT
All of your dividends and distributions may be paid in cash or invested in any
AIM Fund at net asset value. Unless you specify otherwise, your dividends and
distributions will automatically be reinvested in the same AIM Fund. You may
invest your dividends and distributions (1) into another AIM Fund in the same
class of shares; or (2) from Class A shares into AIM Cash Reserve Shares of AIM
Money Market Fund, or vice versa.
You must comply with the following requirements to be eligible to invest your
dividends and distributions in shares of another AIM Fund:
(1) Your account balance (a) in the AIM Fund paying the dividend must be at
least $5,000; or (b) in the AIM Fund receiving the dividend must be at least
$500;
(2) Both accounts must have identical registration information; and
(3) You must have completed an authorization form to reinvest dividends into
another AIM Fund.
PORTFOLIO REBALANCING PROGRAM
If you have at least $5,000 in your account, you may participate in the
Portfolio Rebalancing Program. Under this Program, you can designate how the
total value of your AIM Fund holdings should be rebalanced, on a percentage
basis, between two and ten of your AIM Funds on a quarterly, semiannual or
annual basis. Your portfolio will be rebalanced through the exchange of shares
in one or more of your AIM Funds for shares of the same class of one or more
other AIM Funds in your portfolio. If you wish to participate in the Program,
make changes or cancel the Program, the transfer agent must receive your request
to participate, changes or cancellation in good order at least five business
days prior to the next rebalancing date, which is normally the 28th day of the
last month of the period you choose. We may modify, suspend or terminate the
Program at any time on 60 days' prior written notice.
RETIREMENT PLANS
Shares of most of the AIM Funds can be purchased through
tax-sheltered retirement plans made available to corporations, individuals and
employees of non-profit organizations and public schools. A plan document must
be adopted to establish a retirement plan. You may use AIM Funds-sponsored
retirement plans, which include IRAs, Education IRAs, Roth IRAs, 403(b) plans,
401(k) plans, SIMPLE IRA plans, SEP/SARSEP plans and Money Purchase/Profit
Sharing plans, or another sponsor's retirement plan. The plan custodian of the
AIM Funds-sponsored retirement plan assesses an annual maintenance fee of $10.
Contact your financial consultant for details.
REDEEMING SHARES
REDEMPTION FEES
We will not charge you any fees to redeem your shares; however, your broker or
financial consultant may charge service fees for handling these transactions.
Your shares may be subject to a contingent deferred sales charge (CDSC).
COMPUTING A CDSC
The CDSC on redemptions of shares is computed based on the lower of their
original purchase price or current market value, net of reinvested dividends and
capital gains distributions. In determining whether to charge a CDSC, we will
assume that you have redeemed shares on which there is no CDSC first and, then,
shares in the order of purchase.
REDEMPTION OF AIM CASH RESERVE SHARES OF
AIM MONEY MARKET FUND ACQUIRED BY EXCHANGE
If you redeem AIM Cash Reserve Shares acquired by exchange from Class A shares
subject to a CDSC within eighteen months of the purchase of the Class A shares,
you will be charged a CDSC.
REDEMPTION OF CLASS B SHARES ACQUIRED BY
EXCHANGE FROM AIM FLOATING RATE FUND
If you redeem Class B shares you acquired by exchange via a tender offer by AIM
Floating Rate Fund, the early withdrawal charge applicable to shares of AIM
Floating Rate Fund will be applied instead of the CDSC normally applicable to
Class B shares.
A-5
<PAGE> 85
HOW TO REDEEM SHARES
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
Through a Financial Contact your financial consultant.
Consultant
By Mail Send a written request to the transfer agent. Requests must
include (1) original signatures of all registered owners;
(2) the name of the AIM Fund and your account number; (3) if
the transfer agent does not hold your shares, endorsed share
certificates or share certificates accompanied by an
executed stock power; and (4) signature guarantees, if
necessary (see below). The transfer agent may require that
you provide additional information, such as corporate
resolutions or powers of attorney, if applicable. If you are
redeeming from an IRA account, you must include a statement
of whether or not you are at least 59 1/2 years old and
whether you wish to have federal income tax withheld from
your proceeds. The transfer agent may require certain other
information before you can redeem from an employer-sponsored
retirement plan. Contact your employer for details.
By Telephone Call the transfer agent. You will be allowed to redeem by
telephone if (1) the proceeds are to be mailed to the
address on record with us or transferred electronically to a
pre-authorized checking account; (2) the address on record
with us has not been changed within the last thirty days;
(3) you do not hold physical share certificates; (4) you can
provide proper identification information; (5) the proceeds
of the redemption do not exceed $50,000; and (6) you have
not previously declined the telephone redemption privilege.
Certain accounts, including retirement accounts and 403(b)
plans, may not redeem by telephone. The transfer agent must
receive your call during the hours the NYSE is open for
business in order to effect the redemption at that day's
closing price.
</TABLE>
- --------------------------------------------------------------------------------
TIMING AND METHOD OF PAYMENT
We normally will send out checks within one business day, and in any event no
more than seven days, after we accept your request to redeem. If you redeem
shares recently purchased by check, you will be required to wait up to ten
business days before we will send your redemption proceeds. This delay is
necessary to ensure that the purchase check has cleared.
REDEMPTION BY MAIL
If you mail us a request in good order to redeem your shares, we will mail you a
check in the amount of the redemption proceeds to the address on record with us.
If your request is not in good order, you may have to provide us with additional
documentation in order to redeem your shares.
REDEMPTION BY TELEPHONE
If you redeem by telephone, we will mail you a check in the amount of the
redemption proceeds to your address of record (if there has been no change
communicated to the transfer agent within the previous 30 days) or transmit them
electronically to your pre-authorized bank account. We use reasonable procedures
to confirm that instructions communicated by telephone are genuine and are not
liable for telephone instructions that are reasonably believed to be genuine.
PAYMENT FOR SYSTEMATIC WITHDRAWALS
You may arrange for regular monthly or quarterly withdrawals from your account
of at least $50. You also may make annual withdrawals if you own Class A shares.
We will redeem enough shares from your account to cover the amount withdrawn.
You must have an account balance of at least $5,000 to establish a Systematic
Withdrawal Plan. You can stop this plan at any time by giving ten days prior
notice to the transfer agent.
EXPEDITED REDEMPTIONS
(AIM Cash Reserve Shares of AIM Money Market Fund only)
If we receive your redemption order before 11:30 a.m. Eastern Time, we will try
to transmit payment of redemption proceeds on that same day. If we receive your
redemption order after 11:30 a.m. Eastern Time and before the close of trading
on the New York Stock Exchange (NYSE), we generally will transmit payment on the
next business day.
REDEMPTIONS BY CHECK
(Class A shares of AIM Tax-Exempt Cash Fund and AIM Cash Reserve Shares of AIM
Money Market Fund only)
You may redeem shares of these AIM Funds by writing checks in amounts of $250 or
more if you have completed an authorization form. Redemption by check is not
available for retirement accounts.
SIGNATURE GUARANTEES
We require a signature guarantee when you redeem by mail and
(1) the amount is greater than $50,000;
(2) you request that payment be made to someone other than the name registered
on the account;
(3) you request that payment be sent somewhere other than the bank of record on
the account; or
(4) you request that payment be sent to a new address or an address that changed
in the last 30 days.
The transfer agent will accept a guarantee of your signature by a number of
financial institutions. Call the transfer agent for additional information. Some
institutions have transaction amount maximums for these guarantees. Please check
with the guarantor institution.
A-6
<PAGE> 86
REINSTATEMENT PRIVILEGE (Class A shares only)
You may, within 90 days after you sell Class A shares (except Class A shares of
AIM Tax-Exempt Cash Fund), reinvest all or part of your redemption proceeds in
Class A shares of any AIM Fund at net asset value in an identically registered
account. If you sold Class A shares of AIM Limited Maturity Treasury Fund or AIM
Tax-Free Intermediate Fund, you will incur an initial sales charge reflecting
the difference between the initial sales charges on those Funds and the ones in
which you will be investing. In addition, if you paid a contingent deferred
sales charge (CDSC) on any reinstated amount, you will not be subject to a CDSC
if you later redeem that amount. You must notify the transfer agent in writing
at the time you reinstate that you are exercising your reinstatement privilege.
You may exercise this privilege only once per year.
REDEMPTIONS BY THE AIM FUNDS
If your account has been open at least one year, you have not made an additional
purchase in the account during the past six calendar months, and the value of
your account falls below $500 for three consecutive months due to redemptions or
exchanges (excluding retirement accounts), the AIM Funds have the right to
redeem the account after giving you 60 days' prior written notice. You may avoid
having your account redeemed during the notice period by bringing the account
value up to $500 or by utilizing the Automatic Investment Plan.
If an AIM Fund determines that you have provided incorrect information in
opening an account or in the course of conducting subsequent transactions, the
AIM Fund may, in its discretion, redeem the account and distribute the proceeds
to you.
EXCHANGING SHARES
You may, under certain circumstances, exchange shares in one AIM Fund for those
of another AIM Fund. Before requesting an exchange, review the prospectus of the
AIM Fund you wish to acquire. Exchange privileges also apply to holders of the
Connecticut General Guaranteed Account, established for tax-qualified group
annuities, for contracts purchased on or before June 30, 1992.
PERMITTED EXCHANGES
Except as otherwise stated below, you may exchange your shares for shares of the
same class of another AIM Fund. You also may exchange AIM Cash Reserve Shares of
AIM Money Market Fund for Class A shares of another AIM Fund, or vice versa. You
may be required to pay an initial sales charge when exchanging from a Fund with
a lower initial sales charge than the one into which you are exchanging. If you
exchange from Class A shares not subject to a CDSC into Class A shares subject
to those charges, you will be charged a CDSC when you redeem the exchanged
shares. The CDSC charged on redemption of those shares will be calculated
starting on the date you acquired those shares through exchange.
YOU WILL NOT PAY A SALES CHARGE WHEN EXCHANGING:
(1) Class A shares with an initial sales charge (except for Class A shares of
AIM Limited Maturity Treasury Fund and AIM Tax-Free Intermediate Fund) for
Class A shares of another AIM Fund or AIM Cash Reserve Shares of AIM Money
Market Fund;
(2) Class A shares of AIM Limited Maturity Treasury Fund and AIM Tax-Free
Intermediate Fund for
(a) one another;
(b) AIM Cash Reserve Shares of AIM Money Market Fund or Class A shares of
AIM Tax-Exempt Cash Fund; or
(c) Class A shares of another AIM Fund, but only if
(i) you acquired the original shares before May 1, 1994; or
(ii) you acquired the original shares on or after May 1, 1994 by way of
an exchange from shares with higher sales charges;
(3) AIM Cash Reserve Shares of AIM Money Market Fund or Class A shares of AIM
Tax-Exempt Cash Fund for
(a) one another;
(b) Class A shares of an AIM Fund subject to an initial sales charge (except
for Class A shares of AIM Limited Maturity Treasury Fund and AIM
Tax-Free Intermediate Fund), but only if you acquired the original
shares
(i) prior to May 1, 1994 by exchange from Class A shares subject to an
initial sales charge;
(ii) on or after May 1, 1994 by exchange from Class A shares subject to
an initial sales charge (except for Class A shares of AIM Limited
Maturity Treasury Fund and AIM Tax-Free Intermediate Fund); or
(c) Class A shares of AIM Limited Maturity Treasury Fund and AIM Tax-Free
Intermediate Fund, but only if you acquired the original shares by
exchange from Class A shares subject to an initial sales charge; or
(4) Class B shares for other Class B shares, and Class C shares for other Class
C shares.
EXCHANGES NOT PERMITTED
You may not exchange Class A shares subject to contingent deferred sales charges
for Class A shares of AIM Limited Maturity Treasury Fund, AIM Tax-Free
Intermediate Fund or AIM Tax-Exempt Cash Fund.
EXCHANGE CONDITIONS
The following conditions apply to all exchanges:
- - You must meet the minimum purchase requirements for the AIM Fund into which
you are exchanging;
- - Shares of the AIM Fund you wish to acquire must be qualified for sale in your
state of residence;
- - Exchanges must be made between accounts with identical registration
information;
A-7
<PAGE> 87
- - The account you wish to exchange from must have a certified tax identification
number (or the Fund has received an appropriate Form W-8 or W-9);
- - Shares must have been held for at least one day prior to the exchange; and
- - If you have physical share certificates, you must return them to the transfer
agent prior to the exchange.
TERMS OF EXCHANGE
Under unusual market conditions, an AIM Fund may delay the issuance of shares
being purchased in an exchange for up to five business days if it determines
that it would be materially disadvantaged by the immediate transfer of exchange
proceeds. There is no fee for exchanges. The exchange privilege is not an option
or right to purchase shares. Any of the participating AIM Funds or the
distributor may modify or discontinue this privilege at any time.
BY MAIL
If you wish to make an exchange by mail, you must include original signatures of
each registered owner exactly as the shares are registered, the account
registration and account number, the dollar amount or number of shares to be
exchanged and the names of the AIM Funds from which and into which the exchange
is to be made.
BY TELEPHONE
Conditions that apply to exchanges by telephone are the same as redemptions by
telephone, including that the transfer agent must receive exchange requests
during the hours the NYSE is open for business; however, you still will be
allowed to exchange by telephone even if you have changed your address of record
within the preceding 30 days.
EXCHANGING CLASS B AND CLASS C SHARES
If you make an exchange involving Class B or Class C shares, the amount of time
you held the original shares will be added to the holding period of the Class B
or Class C shares, respectively, into which you exchanged for the purpose of
calculating contingent deferred sales charges (CDSC) if you later redeem the
exchanged shares. If you redeem Class B shares acquired by exchange via a tender
offer by AIM Floating Rate Fund, you will be credited with the time period you
held the shares of AIM Floating Rate Fund for the purpose of computing the early
withdrawal charge applicable to those shares.
EACH AIM FUND AND THE DISTRIBUTOR RESERVE THE RIGHT AT ANY TIME TO REJECT OR
CANCEL ANY PART OF ANY PURCHASE OR EXCHANGE ORDER; MODIFY ANY TERMS OR
CONDITIONS OF PURCHASE OF SHARES OF ANY AIM FUND; OR WITHDRAW ALL OR ANY PART
OF THE OFFERING MADE BY THIS PROSPECTUS.
PRICING OF SHARES
DETERMINATION OF NET ASSET VALUE
The price of each AIM Fund's shares is the fund's net asset value per share. The
AIM Funds value portfolio securities for which market quotations are readily
available at market value. The AIM Funds value short-term investments maturing
within 60 days at amortized cost, which approximates market value. AIM Money
Market Fund and AIM Tax-Exempt Cash Fund value all their securities at amortized
cost. AIM High Income Municipal Fund, AIM Municipal Bond Fund, AIM Tax-Exempt
Bond Fund of Connecticut and AIM Tax-Free Intermediate Fund value variable rate
securities that have an unconditional demand or put feature exercisable within
seven days or less at par, which reflects the market value of such securities.
The AIM Funds value all other securities and assets at their fair value.
Securities and other assets quoted in foreign currencies are valued in U.S.
dollars based on the prevailing exchange rates on that day. In addition, if,
between the time trading ends on a particular security and the close of the New
York Stock Exchange (NYSE), events occur that materially affect the value of the
security, the AIM Funds may value the security at its fair value as determined
in good faith by or under the supervision of the Board of Directors or Trustees
of the AIM Fund. The effect of using fair value pricing is that an AIM Fund's
net asset value will be subject to the judgment of the Board of Directors or
Trustees or its designee instead of being determined by the market. Because some
of the AIM Funds may invest in securities that are primarily listed on foreign
exchanges, the value of those funds' shares may change on days when you will not
be able to purchase or redeem shares.
Each AIM Fund determines the net asset value of its shares as of the close of
the NYSE on each day the NYSE is open for business. AIM Money Market Fund also
determines its net asset value as of 12:00 noon Eastern Time on each day the
NYSE is open for business.
TIMING OF ORDERS
You can purchase, exchange or redeem shares during the hours the NYSE is open
for business. The AIM Funds price purchase, exchange and redemption orders at
the net asset value calculated after the transfer agent receives an order in
good form. An AIM Fund may postpone the right of redemption only under unusual
circumstances, such as when the NYSE restricts or suspends trading.
TAXES
In general, dividends and distributions you receive are taxable as ordinary
income or long-term capital gains for federal income tax purposes, whether you
reinvest them in additional shares or take them in cash. Distributions are
taxable to you at different rates depending on the length of time the fund holds
its assets. Different tax rates apply to ordinary income and long-term capital
gain distributions, regardless of how long you have held your shares. Every
year, you will be sent information showing the amount of dividends and
distributions you received from each AIM Fund during the prior year.
A-8
<PAGE> 88
Any long-term or short-term capital gains realized from redemptions of AIM
Fund shares will be subject to federal income tax. Exchanges of shares for
shares of another AIM Fund are treated as a sale, and any gain realized on the
transaction will generally be subject to federal income tax.
The foreign, state and local tax consequences of investing in AIM Fund shares
may differ materially from the federal income tax consequences described above.
You should consult your tax advisor before investing.
A-9
<PAGE> 89
[BACK COVER PAGE]
OBTAINING ADDITIONAL INFORMATION
More information may be obtained free of charge upon request. The Statement of
Additional Information (SAI), a current version of which is on file with the
Securities and Exchange Commission (SEC), contains more details about the fund
and is incorporated by reference into the prospectus (is legally a part of this
prospectus). Annual and semiannual reports to shareholders contain additional
information about the fund's investments. The fund's annual report also
discusses the market conditions and investment strategies that significantly
affected the fund's performance during its last fiscal year.
If you have questions about this fund, another fund in The AIM Family of Funds
or your account, or wish to obtain free copies of the fund's current SAI or
annual or semiannual reports, please contact us:
BY MAIL: A I M Distributors, Inc.
11 Greenway Plaza, Suite 100
Houston, TX 77046-1173
BY TELEPHONE: (800) 347-4246
BY E-MAIL: [email protected]
ON THE INTERNET: http://www.aimfunds.com (prospectuses and annual and
semiannual reports only)
You also can obtain copies of the fund's SAI and other information at the SEC's
Public Reference Room in Washington, D.C., on the SEC's website
(http://www.sec.gov), or by sending a letter, including a duplicating fee, to
the SEC's Public Reference Section, Washington, D.C. 20549-6009. Please call the
SEC at 1-800-SEC-0330 for information about the Public Reference Room.
AIM Mid Cap Equity Fund
SEC 1940 Act file number: 811-2699
<PAGE> 90
The information in this prospectus is not complete and may be changed. We may
not sell these securities until the registration statement filed with the
Securities and Exchange Commission is effective. This prospectus is not an offer
to sell these securities and is not soliciting an offer to buy these securities
in any state where the offer or sale is not permitted.
Subject to Completion dated February 12, 1999
[AIM LOGO]
AIM NEW PACIFIC GROWTH FUND
PROSPECTUS
MAY 3, 1999
AIM New Pacific Growth Fund seeks to provide long-term growth of capital.
This prospectus contains important information. Please read it before investing
and keep it for future reference.
An investment in the fund is not a deposit of a bank and is not insured or
guaranteed by the Federal Deposit Insurance Corporation or any other government
agency. There is a risk that you could lose a portion or all of your money.
AS WITH ALL OTHER MUTUAL FUND SECURITIES, THE SECURITIES AND EXCHANGE
COMMISSION HAS NOT APPROVED OR DISAPPROVED THESE SECURITIES OR DETERMINED
WHETHER THE INFORMATION IN THIS PROSPECTUS IS ADEQUATE OR
ACCURATE. ANYONE WHO TELLS YOU OTHERWISE IS COMMITTING A CRIME.
1
<PAGE> 91
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
<S> <C>
INVESTMENT OBJECTIVE AND STRATEGIES......................................................................3
PRINCIPAL RISKS OF INVESTING IN THE FUND.................................................................3
PERFORMANCE INFORMATION..................................................................................5
ANNUAL TOTAL RETURNS............................................................................5
PERFORMANCE TABLE...............................................................................6
FEE TABLE AND EXPENSE EXAMPLE............................................................................7
FEE TABLE.......................................................................................7
EXPENSE EXAMPLE.................................................................................7
FUND MANAGEMENT..........................................................................................9
THE ADVISOR AND SUBADVISOR......................................................................9
ADVISOR COMPENSATION............................................................................9
PORTFOLIO MANAGERS..............................................................................9
OTHER INFORMATION.......................................................................................10
INITIAL SALES CHARGES FOR CLASS A SHARES.......................................................10
DIVIDENDS AND DISTRIBUTIONS....................................................................10
FINANCIAL HIGHLIGHTS....................................................................................11
SHAREHOLDER INFORMATION................................................................................A-1
CHOOSING A SHARE CLASS........................................................................A-1
PURCHASING SHARES.............................................................................A-4
REDEEMING SHARES..............................................................................A-5
EXCHANGING SHARES.............................................................................A-7
PRICING OF SHARES.............................................................................A-8
TAXES.........................................................................................A-8
OBTAINING ADDITIONAL INFORMATION...........................................................BACK COVER PAGE
</TABLE>
The AIM Family of Funds--Registered Trademark--, The AIM Family of Funds and
Design (i.e., the AIM logo), AIM and Design, AIM, AIM LINK, AIM Institutional
Funds, aimfunds.com, La Familia AIM de Fondos--Registered Trademark--, La
Familia AIM de Fondos and Design and Invest with Discipline are registered
service marks and AIM Bank Connection is a service mark of A I M Management
Group Inc.
2
<PAGE> 92
INVESTMENT OBJECTIVE AND STRATEGIES
The fund's investment objective is long-term growth of capital.
The fund seeks to achieve its objective by investing, normally, at least 65% of
its total assets in equity securities of issuers domiciled in twelve countries,
other than Japan, located in the Pacific region. These countries are designated
as the fund's primary investment area, and the list of countries may be revised
with the approval of the fund's Board of Trustees. The fund considers a company
to be domiciled in a particular country if it (i) is organized under the laws of
a particular country or has a principal office in a particular country; or (ii)
derives 50% or more of its total revenues from business in that country,
provided that, in the view of the fund's portfolio managers, the value of the
issuers' securities tend to reflect such country's development to a greater
extent than developments elsewhere. The fund will normally invest in the
securities of companies located in at least three different countries.
The fund may invest up to 35% of its total assets in equity securities of
issuers domiciled outside of its primary investment area. The fund may also
invest up to 35% of its total assets in investment-grade debt securities, or
securities deemed by the fund's subadvisor to be of comparable quality. These
debt securities could include U.S. and foreign government securities and
corporate debt securities.
In selecting investments, the fund's portfolio managers seek to identify those
countries and industries where political and economic factors, including
currency movements, are likely to produce above-average growth rates. The fund's
portfolio managers then balance the potential benefits with the risks of
investing in those countries and industries. The fund's portfolio managers
usually sell a particular security when any of those factors materially changes.
[In anticipation of or in response to adverse market conditions or for cash
management purposes, the fund may hold all or a portion of its assets in cash
(U.S. dollars, foreign currencies or multinational currency units), money market
securities, or high-quality debt securities issued by corporations or the U.S.
or a foreign government. As a result, the fund may not achieve its investment
objective.]
[The fund may engage in active and frequent trading of portfolio securities to
achieve its investment objective. If the fund does trade in this way, it may
incur increased transaction costs, which can lower the actual return on your
investment. Active trading may also increase short-term capital gains and
losses, which may affect the taxes you have to pay.]
PRINCIPAL RISKS OF INVESTING IN THE FUND
There is a risk that you could lose all or a portion of your investment in the
fund. The value of your investment in the fund will go up and down with the
prices of the securities in which the fund invests. The price of equity
securities goes up and down in response to many factors, including the
historical and prospective earnings of the issuer of the stock, the value of its
assets, general economic conditions, interest rates, investor perceptions, and
market liquidity.
The value of the fund's shares is particularly vulnerable to factors affecting
Pacific region countries, such as substantial economic or regulatory changes.
Because the fund focuses its investments in Pacific region countries, the value
of your shares may rise and fall more than the value of shares of a fund that
invests more broadly.
The prices of foreign securities may be further affected by other factors
including:
o Currency exchange rates--The dollar value of the fund's foreign investments
will be affected by changes in the exchange rates between the dollar and
the currencies in which those investments are traded.
3
<PAGE> 93
o Political and economic conditions--The value of the fund's foreign
investments may be adversely affected by political and social instability
in their home countries and by changes in economic or taxation policies in
those countries.
o Regulations--Foreign companies generally are subject to less stringent
regulations, including financial and accounting controls, than are U.S.
companies. As a result, among other things, there generally is less
publicly available information about foreign companies than about U.S.
companies.
o Markets--The securities markets of other countries are smaller than U.S.
securities markets. As a result, many foreign securities may be less liquid
and more volatile than U.S. securities.
[To the extent that the fund invests in securities of issuers in developing
countries, the factors listed above may have a greater effect on the fund. For
example, many developing countries have, in the past, experienced high rates of
inflation or sharply devalued their currencies against the U.S. dollar, thereby
causing the value of investments in companies located in those countries to
decline. Transaction costs are often higher in developing countries and there
may be delays in settlement procedures. In addition, developing countries may
have greater political or economic instability, less regulation and smaller,
less liquid and more volatile markets than countries with more mature
economies.]
[If the seller of a repurchase agreement in which the fund invests defaults on
its obligation or declares bankruptcy, the fund may experience delays in selling
the securities underlying the repurchase agreement. As a result, the fund may
incur losses arising from decline in the value of those securities, reduced
levels of income and expenses of enforcing its rights.]
The fund could be adversely affected if the computer systems used by the fund's
investment advisor and the fund's other service providers do not properly
process and calculate date-related information from and after January 1, 2000.
The fund's investment advisor and independent technology consultants are
working to avoid year 2000-related problems in its systems and to obtain
assurances from other service providers that they are taking similar steps. In
addition, issuers of securities in which the fund invests may be adversely
affected by year 2000-related problems. This could have an impact on the value
of the fund's investments and its share price.
An investment in the fund is not a deposit of a bank and is not insured or
guaranteed by the Federal Deposit Insurance Corporation or any other government
agency.
4
<PAGE> 94
PERFORMANCE INFORMATION
The bar chart and table shown below provide an indication of the risks of
investing in the fund. The fund's past performance is not necessarily an
indication of its future performance.
ANNUAL TOTAL RETURNS
The following bar chart shows changes in the performance of the fund's Class A
shares from year to year. The bar chart does not reflect sales loads. If it did,
the annual total returns shown would be lower.
[GRAPH]
NEW PACIFIC GROWTH
<TABLE>
<CAPTION>
Year Return %
---- --------
<C> <S>
1989 48.12
1990 (10.96)
1991 13.07
1992 (7.96)
1993 60.6
1994 (19.73)
1995 7.45
1996 20.04
1997 (44.25)
1998 (19.09)
</TABLE>
During the period shown in the bar chart, the highest quarterly return was
23.94% (quarter ended 12/31/93) and the lowest quarterly return was (31.51)%
(quarter ended 12/31/97).
5
<PAGE> 95
PERFORMANCE TABLE
The following performance table shows how the fund's average annual total
returns for one, five and ten years and since inception compare to those of a
broad-based securities market index.
<TABLE>
<CAPTION>
=======================================================================================================
Average Annual Total Returns
(for the periods ended December 31,
1998) Since Inception
1 Year 5 Years 10 Years Inception Date
- -------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Class A (19.09)% (14.12)% 0.29% 8.43% 1/19/77
- -------------------------------------------------------------------------------------------------------
Class B (19.55) (14.72) --- (6.98) 4/1/93
- -------------------------------------------------------------------------------------------------------
Class C --- --- --- --- 5/3/99
- -------------------------------------------------------------------------------------------------------
MSCI AC Pacific Free ex-Japan (2.07) (7.75) 6.76 8.73(2) 12/31/77
Index(1)
=======================================================================================================
</TABLE>
(1) The MSCI AC Pacific Free ex-Japan Index is a group of unmanaged securities
from all developed and emerging markets in the Pacific Rim, excluding
Japan, tracked by Morgan Stanley Capital International. A "Free" Index
includes only securities available to non-domestic investors.
(2) The average annual total return given is since the date closest to the
inception date of the class with the longest history.
6
<PAGE> 96
FEE TABLE AND EXPENSE EXAMPLE
FEE TABLE
This table describes the fees and expenses that you may pay if you buy and hold
shares of the fund:
<TABLE>
<CAPTION>
Class A Class B Class C
------- ------- -------
<S> <C> <C> <C>
Shareholder Fees (fees paid directly from your investment)
Maximum Sales Charge (Load) Imposed on Purchases
(as a percentage of offering price) 5.50% None None
Maximum Deferred Sales Charge (Load)
(as a percentage of original purchase price
or redemption proceeds, whichever is less) None(1) 5.00 1.00
Annual Fund Operating Expenses
(expenses that are deducted from fund assets)
Management Fees [0.00%] [0.00%] [0.00%]
Distribution and/or Service (12b-1) Fees [0.35] [1.00] [1.00]
Other Expenses [0.00] [0.00] [0.00]
Total Annual Fund Operating Expenses [0.00] [0.00] [0.00]
===== ===== =====
Expense Reimbursement(2) [0.00] [0.00] [0.00]
Net Expenses [0.00] [0.00] [0.00]
</TABLE>
- --------------
(1) If you buy $1,000,000 or more of Class A shares and redeem these shares
within 18 months from the date of purchase, you may pay a 1% contingent
deferred sales charge (CDSC) at the time of redemption.
[(2) The investment advisor has agreed to limit expenses through May 31, 2000.
The waiver may not be terminated.]
As a result of 12b-1 fees, long-term shareholders in the fund may pay more than
the maximum permitted initial sales charge.
EXPENSE EXAMPLE
This example is intended to help you compare the costs of investing in different
classes of the fund with the cost of investing in other mutual funds.
The example assumes that you invest $10,000 in the fund for the time periods
indicated and then redeem all of your shares at the end of those periods. The
example also assumes that your investment has a 5% return each year and that the
fund's operating expenses remain the same. Although your actual returns and
costs may be higher or lower, based on these assumptions your costs would be:
<TABLE>
<CAPTION>
1 Year 3 Years 5 Years 10 Years
------ ------- ------- --------
<S> <C> <C> <C> <C>
Class A $ $ $ $
Class B
Class C
</TABLE>
You would pay the following expenses if you did not redeem your shares:
<TABLE>
<CAPTION>
1 Year 3 Years 5 Years 10 Years
------ ------- ------- --------
<S> <C> <C> <C> <C>
Class A $ $ $ $
Class B
Class C
</TABLE>
7
<PAGE> 97
FUND MANAGEMENT
THE ADVISOR AND SUBADVISOR
A I M Advisors, Inc. (the advisor) serves as the fund's investment advisor.
INVESCO (NY), Inc. (the subadvisor) an affiliate of the advisor, is the fund's
subadvisor and is responsible for its day-to-day management. The advisor is
located at 11 Greenway Plaza, Suite 100, Houston, Texas 77046-1173. The
subadvisor is located at 1166 Avenue of the Americas, New York, New York 10036.
The advisors supervise all aspects of the fund's operations and provide
investment advisory services to the fund, including obtaining and evaluating
economic, statistical and financial information to formulate and implement
investment programs for the fund.
The advisor has acted as an investment advisor since its organization in 1976
and the subadvisor has acted as an investment advisor since its organization in
________________. Today, the advisor, together with its subsidiaries, advises or
manages over 110 investment portfolios, including the fund, encompassing a broad
range of investment objectives.
ADVISOR COMPENSATION
During the fiscal year ended December 31, 1998, the advisor received
compensation of ____% of average net assets.
PORTFOLIO MANAGERS
The advisor uses a team approach to investment management. The individual
members of the team who are primarily responsible for the day-to-day management
of the fund's portfolio, [all of whom are officers of the subadvisor,] are
o Anna Tong, Portfolio Manager, who has been responsible for the fund since
1998 and has been associated with the advisor and/or its affiliates since
1985.
o Sammy Lau, Portfolio Manager, who has been responsible for the fund since
1998 and has been associated with the advisor and/or its affiliates since
December 1994. From November 1993 to November 1994, he was an Associate at
J.P. Morgan (Hong Kong).
8
<PAGE> 98
OTHER INFORMATION
INITIAL SALES CHARGES FOR CLASS A SHARES
Purchases of Class A shares of the fund are subject to the maximum 5.50% initial
sales charge as listed under the heading "Category I Initial Sales Charges" in
the "Shareholder Information--Choosing a Share Class" section of this
prospectus.
DIVIDENDS AND DISTRIBUTIONS
Dividends
The fund generally declares and pays dividends, if any, annually.
Capital Gains Distributions
The fund generally distributes long-term and short-term capital gains (including
any net gains from foreign currency transactions), if any, annually.
9
<PAGE> 99
FINANCIAL HIGHLIGHTS
The financial highlights table is intended to help you understand the fund's
financial performance. Certain information reflects financial results for a
single fund share.
The total returns in the table represent the rate that an investor would have
earned (or lost) on an investment in the fund (assuming reinvestment of all
dividends and distributions).
This information has been audited by PricewaterhouseCoopers LLP, whose report,
along with the fund's financial statements, is included in the fund's annual
report which is available upon request.
<TABLE>
<CAPTION>
Class A Year Ended December 31,
- -------- --------------------------------------------------------------------------
1998 1997 1996 1995 1994
------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of period $ xx.xx $ xx.xx $ xx.xx $ xx.xx $ xx.xx
- ----------------------------------------------- ------- ---------- ---------- ---------- ----------
Income from investment operations:
Net investment income (loss) (x.xx)(a) (x.xx)(a) (x.xx)(a) (x.xx) (x.xx)
- ----------------------------------------------- ------- ---------- ---------- ---------- ----------
Net gains on securities (both realized and
unrealized) (x.xx) (x.xx) (x.xx) (x.xx) (x.xx)
- ----------------------------------------------- ------- ---------- ---------- ---------- ----------
Total from investment operations (x.xx) x.xx x.xx x.xx x.xx
=============================================== ======= ========== ========== ========== ==========
Distributions from net realized gains (x.xx) (x.xx) (x.xx) (x.xx) --
- ----------------------------------------------- ------- ---------- ---------- ---------- ----------
Net asset value, end of period $ xx.xx $ xx.xx $ xx.xx $ xx.xx $ xx.xx
=============================================== ======= ========== ========== ========== ==========
Total return (b) (x.xx)% (x.xx)% (x.xx)% (x.xx)% (x.xx)%
=============================================== ======= ========== ========== ========== ==========
Ratios/supplemental data:
Net assets, end of period (000s omitted) $xx,xxx $x,xxx,xxx $x,xxx,xxx $x,xxx,xxx $x,xxx,xxx
=============================================== ======= ========== ========== ========== ==========
Ratio of expenses to average net assets (c) x.xx%(d) x.xx x.xx x.xx x.xx
=============================================== ======= ========== ========== ========== ==========
Ratio of net investment income (loss) to
average net assets (c) (x.xx)%(d) (x.xx)% (x.xx)% (x.xx)% (x.xx)%
=============================================== ======= ========== ========== ========== ==========
Portfolio turnover rate xx% xx% xx% xx% xx%
=============================================== ======= ========== ========== ========== ==========
</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
x.xx%, x.xx%, x.xx% and x.xx% for 1998-1995.
(d) After fee waivers and/or expense reimbursements. Ratios of net investment
income (loss) to average net assets prior to fee waivers and/or expense
reimbursements were x.xx%, x.xx%, x.xx% and x.xx% for 1998-1995.
10
<PAGE> 100
<TABLE>
<CAPTION>
Class B Year Ended December 31,
- ------- ------------------------------------------------------------------------------
1998 1997 1996 1995 1994
-------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of period $ xx.xx $ xx.xx $ xx.xx $ xx.xx $ xx.xx
- ------------------------------------------- -------- ---------- ---------- ---------- ----------
Income from investment operations:
Net investment income (loss) (x.xx) (x.xx) (x.xx) (x.xx) (x.xx)
- ------------------------------------------- -------- ---------- ---------- ---------- ----------
Net gains (losses) on securities (both
realized and unrealized) (x.xx) (x.xx) (x.xx) (x.xx) (x.xx)
- ------------------------------------------- -------- ---------- ---------- ---------- ----------
Total from investment operations (x.xx) (x.xx) (x.xx) (x.xx) (x.xx)
=========================================== ======== ========== ========== ========== ==========
Distributions from net realized gains (x.xx) (x.xx) --- (x.xx) (x.xx)
- ------------------------------------------- -------- ---------- ---------- ---------- ----------
Net asset value, end of period $ xx.xx $ xx.xx $ xx.xx $ xx.xx $ xx.xx
=========================================== ======== ========== ========== ========== ==========
Total return(a) (x.xx)% (x.xx)% (x.xx)% (x.xx)% (x.xx)%
=========================================== ======== ========== ========== ========== ==========
Ratios/supplemental data:
Net assets, end of period (000s omitted) $ xx,xxx $x,xxx,xxx $x,xxx,xxx $x,xxx,xxx $x,xxx,xxx
=========================================== ======== ========== ========== ========== ==========
Ratio of expenses to average net assets(b) x.xx%(c)(d) x.xx%(c)(d) x.xx% x.xx% x.xx%
=========================================== ======== ========== ========== ========== ==========
Ratio of net investment income (loss) to
average net assets(f) (x.xx)%(c) (x.xx)%(c) (x.xx)% (x.xx)% (x.xx)%
=========================================== ======== ========== ========== ========== ==========
Portfolio turnover rate xx% xx% xx% xx% xx%
=========================================== ======== ========== ========== ========== ==========
</TABLE>
(a) Calculated using average shares outstanding.
(b) Does not deduct sales charges and for periods less than one year, total
returns are not annualized.
(c) After fee waivers and/or expenses reimbursements. Ratios of expenses to
average net assets prior to fee waivers and/or expense reimbursements
are x.xx%, x.xx%, x.xx% and x.xx%, respectively for 1998-1995.
(d) Ratios are based on average net assets of $xxx,xxx,xxx.
(e) Ratio includes indirectly paid expenses. Excluding indirectly paid expenses,
the ratio of expenses to average net assets would have been x.xx%.
(f) Annualized.
(g) 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 are (x.xx%), (x.xx)%, (x.xx)% and (x.xx)%, respectively for
1998-1995.
(h) The average commission rate paid is the total brokerage commissions paid on
applicable purchases and sales of securities for the period divided by the
total number of related shares purchased and sold, which is required to be
disclosed for fiscal years beginning September 1, 1995 and thereafter.
11
<PAGE> 101
Shareholder Information
- --------------------------------------------------------------------------------
CHOOSING A SHARE CLASS
Many of the funds advised by the advisor (the AIM Funds) have multiple classes
of shares, each class representing an interest in the same portfolio of
investments. When choosing a share class, you should consider the factors below:
<TABLE>
<CAPTION>
CLASS A CLASS B CLASS C
- ---------------------------------------------------------------------------------------------------------
<S> <C> <C>
- - Initial sales charge - No initial sales charge - No initial sales charge
- - Reduced or waived initial sales - Contingent deferred sales - Contingent deferred sales
charge for certain purchases charge on redemptions within six charge on redemptions within
years one year
- - Lower distribution and service - 12b-1 fee of 1.00% - 12b-1 fee of 1.00%
(12b-1) fee than Class B or
Class C shares (See "Fee Table
and Expense Example")
- Converts to Class A shares - Does not convert to Class A
after eight years along with a shares
pro rata portion of its
reinvested dividends and
distributions*
- - Generally more appropriate for - Purchase orders limited to - Generally more appropriate
long-term investors amounts less than $250,000 for short-term investors
</TABLE>
* AIM Money Market Fund: Class B shares convert to AIM Cash Reserve Shares.
AIM Global Trends Fund: If you held Class B shares on May 29, 1998 and
continue to hold them, those shares will convert to Class A shares of that
fund seven years after your date of purchase. If you exchange those shares
for Class B shares of another AIM Fund, the shares into which you exchanged
will not convert to Class A shares until eight years after your date of
purchase of the original shares.
- --------------------------------------------------------------------------------
DISTRIBUTION AND SERVICE (12B-1) FEES
Each AIM Fund (except AIM Tax-Free Intermediate Fund) has adopted 12b-1 plans
that allow the AIM Fund to pay distribution fees to A I M Distributors, Inc.
(the distributor) for the sale and distribution of its shares and fees for
services provided to shareholders, all or a substantial portion of which are
paid to the dealer of record. Because the AIM Fund pays these fees out of its
assets on an ongoing basis, over time these fees will increase the cost of your
investment and may cost you more than paying other types of sales charges.
MCF-03/99
A-1
<PAGE> 102
SALES CHARGES
Generally, you will not pay a sales charge on purchases or redemptions of Class
A shares of AIM Tax-Exempt Cash Fund and AIM Cash Reserve Shares of AIM Money
Market Fund. You may be charged a contingent deferred sales charge if you redeem
AIM Cash Reserve Shares of AIM Money Market Fund acquired through certain
exchanges. Sales charges on all other AIM Funds and classes of those Funds are
detailed below. As used below, the term "offering price" with respect to all
categories of Class A shares includes the initial sales charge.
INITIAL SALES CHARGES
The AIM Funds are grouped into three categories with respect to initial sales
charges. The "Other Information" section of your prospectus will tell you in
what category your particular AIM Fund is classified.
<TABLE>
<CAPTION>
CATEGORY I INITIAL SALES CHARGES
<S> <C> <C>
- ----------------------------------------------------------
<CAPTION>
INVESTOR'S
SALES CHARGE
------------------------
AMOUNT OF INVESTMENT AS A % OF AS A % OF
IN SINGLE TRANSACTION OFFERING PRICE INVESTMENT
- ----------------------------------------------------------
<S> <C> <C>
Less than $ 25,000 5.50% 5.82%
$ 25,000 but less than $ 50,000 5.25 5.54
$ 50,000 but less than $ 100,000 4.75 4.99
$100,000 but less than $ 250,000 3.75 3.90
$250,000 but less than $ 500,000 3.00 3.09
$500,000 but less than $1,000,000 2.00 2.04
- ----------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
CATEGORY II INITIAL SALES CHARGES
<S> <C> <C>
- ----------------------------------------------------------
<CAPTION>
INVESTOR'S
SALES CHARGE
------------------------
AMOUNT OF INVESTMENT AS A % OF AS A % OF
IN SINGLE TRANSACTION OFFERING PRICE INVESTMENT
- ----------------------------------------------------------
<S> <C> <C>
Less than $ 50,000 4.75% 4.99%
$ 50,000 but less than $ 100,000 4.00 4.17
$100,000 but less than $ 250,000 3.75 3.90
$250,000 but less than $ 500,000 2.50 2.56
$500,000 but less than $1,000,000 2.00 2.04
- ----------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
CATEGORY III INITIAL SALES CHARGES
<S> <C> <C>
- ----------------------------------------------------------
<CAPTION>
INVESTOR'S
SALES CHARGE
------------------------
AMOUNT OF INVESTMENT AS A % OF AS A % OF
IN SINGLE TRANSACTION OFFERING PRICE INVESTMENT
- ----------------------------------------------------------
<S> <C> <C>
Less than $ 100,000 1.00% 1.01%
$100,000 but less than $ 250,000 0.75 0.76
$250,000 but less than $1,000,000 0.50 0.50
- ----------------------------------------------------------
</TABLE>
CONTINGENT DEFERRED SALES CHARGES FOR CLASS A SHARES
You can purchase $1,000,000 or more of Class A shares at net asset value.
However, if you purchase shares of that amount in Categories I or II, they will
be subject to a contingent deferred sales charge (CDSC) of 1% if you redeem them
prior to 18 months after the date of purchase. The distributor may pay a dealer
concession and/or a service fee for purchases of $1,000,000 or more.
CONTINGENT DEFERRED SALES CHARGES FOR
CLASS B AND CLASS C SHARES
You can purchase Class B and Class C shares at their net asset value per share.
However, when you redeem them, they are subject to a CDSC in the following
percentages:
<TABLE>
<CAPTION>
YEAR SINCE
PURCHASE MADE CLASS B CLASS C
- ----------------------------------------------------------
<S> <C> <C>
First 5% 1%
Second 4 None
Third 3 None
Fourth 3 None
Fifth 2 None
Sixth 1 None
Seventh and following None None
- ----------------------------------------------------------
</TABLE>
A-2
<PAGE> 103
REDUCED SALES CHARGES AND SALES CHARGE EXCEPTIONS
You may qualify for reduced sales charges or sales charge exceptions. To qualify
for these reductions or exceptions, you or your financial consultant must
provide sufficient information at the time of purchase to verify that your
purchase qualifies for such treatment.
REDUCED SALES CHARGES
You may be eligible to buy Class A shares at reduced initial sales charge rates
under Rights of Accumulation or Letters of Intent under certain circumstances.
Rights of Accumulation
You may combine your new purchases of Class A shares with Class A shares
currently owned for the purpose of qualifying for the lower initial sales charge
rates that apply to larger purchases. The applicable initial sales charge for
the new purchase is based on the total of your current purchase and the current
value of all Class A shares you own.
Letters of Intent
Under a Letter of Intent (LOI), you commit to purchase a specified dollar amount
of Class A shares of AIM Funds during a 13-month period. The amount you agree to
purchase determines the initial sales charge you pay. If the full face amount of
the LOI is not invested by the end of the 13-month period, your account will be
adjusted to the higher initial sales charge level for the amount actually
invested.
INITIAL SALES CHARGE EXCEPTIONS
You will not pay initial sales charges
- - on shares purchased by reinvesting dividends and distributions;
- - when exchanging shares among certain AIM Funds;
- - when using the reinstatement privilege; and
- - when a merger, consolidation, or acquisition of assets of an AIM Fund occurs.
CONTINGENT DEFERRED SALES CHARGE (CDSC) EXCEPTIONS
You will not pay a CDSC
- - if you redeem Class B shares you held for more than six years;
- - if you redeem Class C shares you held for more than one year;
- - if you redeem shares acquired through reinvestment of dividends and
distributions; and
- - on increases in the net asset value of your shares.
There may be other situations when you may be able to purchase or redeem shares
at reduced or without sales charges. Consult the fund's Statement of Additional
Information for details.
A-3
<PAGE> 104
PURCHASING SHARES
MINIMUM INVESTMENTS PER AIM FUND ACCOUNT
The minimum investments for AIM Fund accounts (except for investments in AIM
Small Cap Opportunities Fund) are as follows:
<TABLE>
<CAPTION>
INITIAL ADDITIONAL
TYPE OF ACCOUNT INVESTMENTS INVESTMENTS
- ----------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Savings Plans (money-purchase/profit sharing $ 0 ($25 per AIM Fund investment for $25
plans, 401(k) plans, Simplified Employee Pension salary deferrals from Savings Plans)
(SEP) accounts, Salary Reduction (SARSEP)
accounts, Savings Incentive Match Plans for
Employee IRA (Simple IRA) accounts, 403(b) or
457 plans)
Automatic Investment Plans 50 50
IRA, Education IRA or Roth IRA 250 50
All other accounts 500 50
- ----------------------------------------------------------------------------------------------------------------
</TABLE>
HOW TO PURCHASE SHARES
You may purchase shares using one of the options below.
<TABLE>
<CAPTION>
PURCHASE OPTIONS
- ----------------------------------------------------------------------------------------------------------
OPENING AN ACCOUNT ADDING TO AN ACCOUNT
- ----------------------------------------------------------------------------------------------------------
<S> <C> <C>
Through a Financial Consultant Contact your financial consultant. Same
By Mail Mail completed Account Application Mail your check and the remittance
and purchase payment to the slip from your confirmation
transfer agent, statement to the transfer agent.
A I M Fund Services, Inc.,
P.O. Box 4739,
Houston, TX 77210-4739.
By Wire Mail completed Account Application Call the transfer agent to receive
to the transfer agent. Call the a reference number. Then, use the
transfer agent at (800) 959-4246 to wire instructions at left.
receive a reference number. Then,
use the following wire
instructions:
Beneficiary Bank ABA/Routing #:
113000609
Beneficiary Account Number:
00100366807
Beneficiary Account Name: A I M
Fund Services, Inc.
RFB: Fund Name, Reference #
OBI: Your Name, Account #
By AIM Bank Connection(SM) Open your account using one of the Mail completed AIM Bank
methods described above. Connection(SM) form to the transfer
agent. Once the transfer agent has
received the form, call the
transfer agent to place your
purchase.
- ----------------------------------------------------------------------------------------------------------
</TABLE>
A-4
<PAGE> 105
SPECIAL PLANS
AUTOMATIC INVESTMENT PLAN
You can arrange for periodic investments in any of the AIM Funds by authorizing
the AIM Fund to withdraw the amount of your investment from your bank account on
a day or dates you specify and in an amount of at least $50. You may stop the
Automatic Investment Plan at any time by giving the transfer agent notice ten
days prior to your next scheduled withdrawal.
DOLLAR COST AVERAGING
Dollar Cost Averaging allows you to make automatic monthly or quarterly
exchanges, if permitted, from one AIM Fund account to one or more other AIM Fund
accounts with the identical registration. The account from which exchanges are
to be made must have a minimum balance of $5,000 before you can use this option.
Exchanges will occur on (or about) the 10th or 25th day of the month, whichever
you specify, in the amount you specify. The minimum amount you can exchange to
another AIM Fund is $50.
AUTOMATIC DIVIDEND INVESTMENT
All of your dividends and distributions may be paid in cash or invested in any
AIM Fund at net asset value. Unless you specify otherwise, your dividends and
distributions will automatically be reinvested in the same AIM Fund. You may
invest your dividends and distributions (1) into another AIM Fund in the same
class of shares; or (2) from Class A shares into AIM Cash Reserve Shares of AIM
Money Market Fund, or vice versa.
You must comply with the following requirements to be eligible to invest your
dividends and distributions in shares of another AIM Fund:
(1) Your account balance (a) in the AIM Fund paying the dividend must be at
least $5,000; or (b) in the AIM Fund receiving the dividend must be at least
$500;
(2) Both accounts must have identical registration information; and
(3) You must have completed an authorization form to reinvest dividends into
another AIM Fund.
PORTFOLIO REBALANCING PROGRAM
If you have at least $5,000 in your account, you may participate in the
Portfolio Rebalancing Program. Under this Program, you can designate how the
total value of your AIM Fund holdings should be rebalanced, on a percentage
basis, between two and ten of your AIM Funds on a quarterly, semiannual or
annual basis. Your portfolio will be rebalanced through the exchange of shares
in one or more of your AIM Funds for shares of the same class of one or more
other AIM Funds in your portfolio. If you wish to participate in the Program,
make changes or cancel the Program, the transfer agent must receive your request
to participate, changes or cancellation in good order at least five business
days prior to the next rebalancing date, which is normally the 28th day of the
last month of the period you choose. We may modify, suspend or terminate the
Program at any time on 60 days' prior written notice.
RETIREMENT PLANS
Shares of most of the AIM Funds can be purchased through
tax-sheltered retirement plans made available to corporations, individuals and
employees of non-profit organizations and public schools. A plan document must
be adopted to establish a retirement plan. You may use AIM Funds-sponsored
retirement plans, which include IRAs, Education IRAs, Roth IRAs, 403(b) plans,
401(k) plans, SIMPLE IRA plans, SEP/SARSEP plans and Money Purchase/Profit
Sharing plans, or another sponsor's retirement plan. The plan custodian of the
AIM Funds-sponsored retirement plan assesses an annual maintenance fee of $10.
Contact your financial consultant for details.
REDEEMING SHARES
REDEMPTION FEES
We will not charge you any fees to redeem your shares; however, your broker or
financial consultant may charge service fees for handling these transactions.
Your shares may be subject to a contingent deferred sales charge (CDSC).
COMPUTING A CDSC
The CDSC on redemptions of shares is computed based on the lower of their
original purchase price or current market value, net of reinvested dividends and
capital gains distributions. In determining whether to charge a CDSC, we will
assume that you have redeemed shares on which there is no CDSC first and, then,
shares in the order of purchase.
REDEMPTION OF AIM CASH RESERVE SHARES OF
AIM MONEY MARKET FUND ACQUIRED BY EXCHANGE
If you redeem AIM Cash Reserve Shares acquired by exchange from Class A shares
subject to a CDSC within eighteen months of the purchase of the Class A shares,
you will be charged a CDSC.
REDEMPTION OF CLASS B SHARES ACQUIRED BY
EXCHANGE FROM AIM FLOATING RATE FUND
If you redeem Class B shares you acquired by exchange via a tender offer by AIM
Floating Rate Fund, the early withdrawal charge applicable to shares of AIM
Floating Rate Fund will be applied instead of the CDSC normally applicable to
Class B shares.
A-5
<PAGE> 106
HOW TO REDEEM SHARES
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
Through a Financial Contact your financial consultant.
Consultant
By Mail Send a written request to the transfer agent. Requests must
include (1) original signatures of all registered owners;
(2) the name of the AIM Fund and your account number; (3) if
the transfer agent does not hold your shares, endorsed share
certificates or share certificates accompanied by an
executed stock power; and (4) signature guarantees, if
necessary (see below). The transfer agent may require that
you provide additional information, such as corporate
resolutions or powers of attorney, if applicable. If you are
redeeming from an IRA account, you must include a statement
of whether or not you are at least 59 1/2 years old and
whether you wish to have federal income tax withheld from
your proceeds. The transfer agent may require certain other
information before you can redeem from an employer-sponsored
retirement plan. Contact your employer for details.
By Telephone Call the transfer agent. You will be allowed to redeem by
telephone if (1) the proceeds are to be mailed to the
address on record with us or transferred electronically to a
pre-authorized checking account; (2) the address on record
with us has not been changed within the last thirty days;
(3) you do not hold physical share certificates; (4) you can
provide proper identification information; (5) the proceeds
of the redemption do not exceed $50,000; and (6) you have
not previously declined the telephone redemption privilege.
Certain accounts, including retirement accounts and 403(b)
plans, may not redeem by telephone. The transfer agent must
receive your call during the hours the NYSE is open for
business in order to effect the redemption at that day's
closing price.
</TABLE>
- --------------------------------------------------------------------------------
TIMING AND METHOD OF PAYMENT
We normally will send out checks within one business day, and in any event no
more than seven days, after we accept your request to redeem. If you redeem
shares recently purchased by check, you will be required to wait up to ten
business days before we will send your redemption proceeds. This delay is
necessary to ensure that the purchase check has cleared.
REDEMPTION BY MAIL
If you mail us a request in good order to redeem your shares, we will mail you a
check in the amount of the redemption proceeds to the address on record with us.
If your request is not in good order, you may have to provide us with additional
documentation in order to redeem your shares.
REDEMPTION BY TELEPHONE
If you redeem by telephone, we will mail you a check in the amount of the
redemption proceeds to your address of record (if there has been no change
communicated to the transfer agent within the previous 30 days) or transmit them
electronically to your pre-authorized bank account. We use reasonable procedures
to confirm that instructions communicated by telephone are genuine and are not
liable for telephone instructions that are reasonably believed to be genuine.
PAYMENT FOR SYSTEMATIC WITHDRAWALS
You may arrange for regular monthly or quarterly withdrawals from your account
of at least $50. You also may make annual withdrawals if you own Class A shares.
We will redeem enough shares from your account to cover the amount withdrawn.
You must have an account balance of at least $5,000 to establish a Systematic
Withdrawal Plan. You can stop this plan at any time by giving ten days prior
notice to the transfer agent.
EXPEDITED REDEMPTIONS
(AIM Cash Reserve Shares of AIM Money Market Fund only)
If we receive your redemption order before 11:30 a.m. Eastern Time, we will try
to transmit payment of redemption proceeds on that same day. If we receive your
redemption order after 11:30 a.m. Eastern Time and before the close of trading
on the New York Stock Exchange (NYSE), we generally will transmit payment on the
next business day.
REDEMPTIONS BY CHECK
(Class A shares of AIM Tax-Exempt Cash Fund and AIM Cash Reserve Shares of AIM
Money Market Fund only)
You may redeem shares of these AIM Funds by writing checks in amounts of $250 or
more if you have completed an authorization form. Redemption by check is not
available for retirement accounts.
SIGNATURE GUARANTEES
We require a signature guarantee when you redeem by mail and
(1) the amount is greater than $50,000;
(2) you request that payment be made to someone other than the name registered
on the account;
(3) you request that payment be sent somewhere other than the bank of record on
the account; or
(4) you request that payment be sent to a new address or an address that changed
in the last 30 days.
The transfer agent will accept a guarantee of your signature by a number of
financial institutions. Call the transfer agent for additional information. Some
institutions have transaction amount maximums for these guarantees. Please check
with the guarantor institution.
A-6
<PAGE> 107
REINSTATEMENT PRIVILEGE (Class A shares only)
You may, within 90 days after you sell Class A shares (except Class A shares of
AIM Tax-Exempt Cash Fund), reinvest all or part of your redemption proceeds in
Class A shares of any AIM Fund at net asset value in an identically registered
account. If you sold Class A shares of AIM Limited Maturity Treasury Fund or AIM
Tax-Free Intermediate Fund, you will incur an initial sales charge reflecting
the difference between the initial sales charges on those Funds and the ones in
which you will be investing. In addition, if you paid a contingent deferred
sales charge (CDSC) on any reinstated amount, you will not be subject to a CDSC
if you later redeem that amount. You must notify the transfer agent in writing
at the time you reinstate that you are exercising your reinstatement privilege.
You may exercise this privilege only once per year.
REDEMPTIONS BY THE AIM FUNDS
If your account has been open at least one year, you have not made an additional
purchase in the account during the past six calendar months, and the value of
your account falls below $500 for three consecutive months due to redemptions or
exchanges (excluding retirement accounts), the AIM Funds have the right to
redeem the account after giving you 60 days' prior written notice. You may avoid
having your account redeemed during the notice period by bringing the account
value up to $500 or by utilizing the Automatic Investment Plan.
If an AIM Fund determines that you have provided incorrect information in
opening an account or in the course of conducting subsequent transactions, the
AIM Fund may, in its discretion, redeem the account and distribute the proceeds
to you.
EXCHANGING SHARES
You may, under certain circumstances, exchange shares in one AIM Fund for those
of another AIM Fund. Before requesting an exchange, review the prospectus of the
AIM Fund you wish to acquire. Exchange privileges also apply to holders of the
Connecticut General Guaranteed Account, established for tax-qualified group
annuities, for contracts purchased on or before June 30, 1992.
PERMITTED EXCHANGES
Except as otherwise stated below, you may exchange your shares for shares of the
same class of another AIM Fund. You also may exchange AIM Cash Reserve Shares of
AIM Money Market Fund for Class A shares of another AIM Fund, or vice versa. You
may be required to pay an initial sales charge when exchanging from a Fund with
a lower initial sales charge than the one into which you are exchanging. If you
exchange from Class A shares not subject to a CDSC into Class A shares subject
to those charges, you will be charged a CDSC when you redeem the exchanged
shares. The CDSC charged on redemption of those shares will be calculated
starting on the date you acquired those shares through exchange.
YOU WILL NOT PAY A SALES CHARGE WHEN EXCHANGING:
(1) Class A shares with an initial sales charge (except for Class A shares of
AIM Limited Maturity Treasury Fund and AIM Tax-Free Intermediate Fund) for
Class A shares of another AIM Fund or AIM Cash Reserve Shares of AIM Money
Market Fund;
(2) Class A shares of AIM Limited Maturity Treasury Fund and AIM Tax-Free
Intermediate Fund for
(a) one another;
(b) AIM Cash Reserve Shares of AIM Money Market Fund or Class A shares of
AIM Tax-Exempt Cash Fund; or
(c) Class A shares of another AIM Fund, but only if
(i) you acquired the original shares before May 1, 1994; or
(ii) you acquired the original shares on or after May 1, 1994 by way of
an exchange from shares with higher sales charges;
(3) AIM Cash Reserve Shares of AIM Money Market Fund or Class A shares of AIM
Tax-Exempt Cash Fund for
(a) one another;
(b) Class A shares of an AIM Fund subject to an initial sales charge (except
for Class A shares of AIM Limited Maturity Treasury Fund and AIM
Tax-Free Intermediate Fund), but only if you acquired the original
shares
(i) prior to May 1, 1994 by exchange from Class A shares subject to an
initial sales charge;
(ii) on or after May 1, 1994 by exchange from Class A shares subject to
an initial sales charge (except for Class A shares of AIM Limited
Maturity Treasury Fund and AIM Tax-Free Intermediate Fund); or
(c) Class A shares of AIM Limited Maturity Treasury Fund and AIM Tax-Free
Intermediate Fund, but only if you acquired the original shares by
exchange from Class A shares subject to an initial sales charge; or
(4) Class B shares for other Class B shares, and Class C shares for other Class
C shares.
EXCHANGES NOT PERMITTED
You may not exchange Class A shares subject to contingent deferred sales charges
for Class A shares of AIM Limited Maturity Treasury Fund, AIM Tax-Free
Intermediate Fund or AIM Tax-Exempt Cash Fund.
EXCHANGE CONDITIONS
The following conditions apply to all exchanges:
- - You must meet the minimum purchase requirements for the AIM Fund into which
you are exchanging;
- - Shares of the AIM Fund you wish to acquire must be qualified for sale in your
state of residence;
- - Exchanges must be made between accounts with identical registration
information;
A-7
<PAGE> 108
- - The account you wish to exchange from must have a certified tax identification
number (or the Fund has received an appropriate Form W-8 or W-9);
- - Shares must have been held for at least one day prior to the exchange; and
- - If you have physical share certificates, you must return them to the transfer
agent prior to the exchange.
TERMS OF EXCHANGE
Under unusual market conditions, an AIM Fund may delay the issuance of shares
being purchased in an exchange for up to five business days if it determines
that it would be materially disadvantaged by the immediate transfer of exchange
proceeds. There is no fee for exchanges. The exchange privilege is not an option
or right to purchase shares. Any of the participating AIM Funds or the
distributor may modify or discontinue this privilege at any time.
BY MAIL
If you wish to make an exchange by mail, you must include original signatures of
each registered owner exactly as the shares are registered, the account
registration and account number, the dollar amount or number of shares to be
exchanged and the names of the AIM Funds from which and into which the exchange
is to be made.
BY TELEPHONE
Conditions that apply to exchanges by telephone are the same as redemptions by
telephone, including that the transfer agent must receive exchange requests
during the hours the NYSE is open for business; however, you still will be
allowed to exchange by telephone even if you have changed your address of record
within the preceding 30 days.
EXCHANGING CLASS B AND CLASS C SHARES
If you make an exchange involving Class B or Class C shares, the amount of time
you held the original shares will be added to the holding period of the Class B
or Class C shares, respectively, into which you exchanged for the purpose of
calculating contingent deferred sales charges (CDSC) if you later redeem the
exchanged shares. If you redeem Class B shares acquired by exchange via a tender
offer by AIM Floating Rate Fund, you will be credited with the time period you
held the shares of AIM Floating Rate Fund for the purpose of computing the early
withdrawal charge applicable to those shares.
EACH AIM FUND AND THE DISTRIBUTOR RESERVE THE RIGHT AT ANY TIME TO REJECT OR
CANCEL ANY PART OF ANY PURCHASE OR EXCHANGE ORDER; MODIFY ANY TERMS OR
CONDITIONS OF PURCHASE OF SHARES OF ANY AIM FUND; OR WITHDRAW ALL OR ANY PART
OF THE OFFERING MADE BY THIS PROSPECTUS.
PRICING OF SHARES
DETERMINATION OF NET ASSET VALUE
The price of each AIM Fund's shares is the fund's net asset value per share. The
AIM Funds value portfolio securities for which market quotations are readily
available at market value. The AIM Funds value short-term investments maturing
within 60 days at amortized cost, which approximates market value. AIM Money
Market Fund and AIM Tax-Exempt Cash Fund value all their securities at amortized
cost. AIM High Income Municipal Fund, AIM Municipal Bond Fund, AIM Tax-Exempt
Bond Fund of Connecticut and AIM Tax-Free Intermediate Fund value variable rate
securities that have an unconditional demand or put feature exercisable within
seven days or less at par, which reflects the market value of such securities.
The AIM Funds value all other securities and assets at their fair value.
Securities and other assets quoted in foreign currencies are valued in U.S.
dollars based on the prevailing exchange rates on that day. In addition, if,
between the time trading ends on a particular security and the close of the New
York Stock Exchange (NYSE), events occur that materially affect the value of the
security, the AIM Funds may value the security at its fair value as determined
in good faith by or under the supervision of the Board of Directors or Trustees
of the AIM Fund. The effect of using fair value pricing is that an AIM Fund's
net asset value will be subject to the judgment of the Board of Directors or
Trustees or its designee instead of being determined by the market. Because some
of the AIM Funds may invest in securities that are primarily listed on foreign
exchanges, the value of those funds' shares may change on days when you will not
be able to purchase or redeem shares.
Each AIM Fund determines the net asset value of its shares as of the close of
the NYSE on each day the NYSE is open for business. AIM Money Market Fund also
determines its net asset value as of 12:00 noon Eastern Time on each day the
NYSE is open for business.
TIMING OF ORDERS
You can purchase, exchange or redeem shares during the hours the NYSE is open
for business. The AIM Funds price purchase, exchange and redemption orders at
the net asset value calculated after the transfer agent receives an order in
good form. An AIM Fund may postpone the right of redemption only under unusual
circumstances, such as when the NYSE restricts or suspends trading.
TAXES
In general, dividends and distributions you receive are taxable as ordinary
income or long-term capital gains for federal income tax purposes, whether you
reinvest them in additional shares or take them in cash. Distributions are
taxable to you at different rates depending on the length of time the fund holds
its assets. Different tax rates apply to ordinary income and long-term capital
gain distributions, regardless of how long you have held your shares. Every
year, you will be sent information showing the amount of dividends and
distributions you received from each AIM Fund during the prior year.
A-8
<PAGE> 109
Any long-term or short-term capital gains realized from redemptions of AIM
Fund shares will be subject to federal income tax. Exchanges of shares for
shares of another AIM Fund are treated as a sale, and any gain realized on the
transaction will generally be subject to federal income tax.
The foreign, state and local tax consequences of investing in AIM Fund shares
may differ materially from the federal income tax consequences described above.
You should consult your tax advisor before investing.
A-9
<PAGE> 110
[BACK COVER PAGE]
OBTAINING ADDITIONAL INFORMATION
More information may be obtained free of charge upon request. The Statement of
Additional Information (SAI), a current version of which is on file with the
Securities and Exchange Commission (SEC), contains more details about the fund
and is incorporated by reference into the prospectus (is legally a part of this
prospectus). Annual and semiannual reports to shareholders contain additional
information about the fund's investments. The fund's annual report also
discusses the market conditions and investment strategies that significantly
affected the fund's performance during its last fiscal year.
If you have questions about this fund, another fund in The AIM Family of Funds
or your account, or wish to obtain free copies of the fund's current SAI or
annual or semiannual reports, please contact us:
BY MAIL: A I M Distributors, Inc.
11 Greenway Plaza, Suite 100
Houston, TX 77046-1173
BY TELEPHONE: (800) 347-4246
BY E-MAIL: [email protected]
ON THE INTERNET: http://www.aimfunds.com (prospectuses and annual and
semiannual reports only)
You also can obtain copies of the fund's SAI and other information at the SEC's
Public Reference Room in Washington, D.C., on the SEC's website
(http://www.sec.gov), or by sending a letter, including a duplicating fee, to
the SEC's Public Reference Section, Washington, D.C. 20549-6009. Please call the
SEC at 1-800-SEC-0330 for information about the Public Reference Room.
AIM New Pacific Growth Fund
SEC 1940 Act file number: 811-2699
<PAGE> 111
The information in this prospectus is not complete and may be changed. We may
not sell these securities until the registration statement filed with the
Securities and Exchange Commission is effective. This prospectus is not an offer
to sell these securities and is not soliciting an offer to buy these securities
in any state where the offer or sale is not permitted.
Subject to Completion dated February 12, 1999
[AIM LOGO]
AIM SMALL CAP GROWTH FUND
PROSPECTUS
MAY 3, 1999
AIM Small Cap Growth Fund seeks to provide long-term growth of capital.
This prospectus contains important information. Please read it before investing
and keep it for future reference.
An investment in the fund is not a deposit of a bank and is not insured or
guaranteed by the Federal Deposit Insurance Corporation or any other government
agency. There is a risk that you could lose a portion or all of your money.
AS WITH ALL OTHER MUTUAL FUND SECURITIES, THE SECURITIES AND EXCHANGE
COMMISSION HAS NOT APPROVED OR DISAPPROVED THESE SECURITIES OR
DETERMINED WHETHER THE INFORMATION IN THIS PROSPECTUS IS
ADEQUATE OR ACCURATE. ANYONE WHO TELLS YOU
OTHERWISE IS COMMITTING A CRIME.
1
<PAGE> 112
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
<S> <C>
INVESTMENT OBJECTIVE AND STRATEGIES..............................................3
PRINCIPAL RISKS OF INVESTING IN THE FUND.........................................3
PERFORMANCE INFORMATION..........................................................5
ANNUAL TOTAL RETURNS....................................................5
PERFORMANCE TABLE.......................................................6
FEE TABLE AND EXPENSE EXAMPLE....................................................7
FEE TABLE...............................................................7
EXPENSE EXAMPLE.........................................................7
FUND MANAGEMENT..................................................................9
THE ADVISOR.............................................................9
ADVISOR COMPENSATION....................................................9
PORTFOLIO MANAGERS......................................................9
OTHER INFORMATION...............................................................10
INITIAL SALES CHARGES FOR CLASS A SHARES...............................10
DIVIDENDS AND DISTRIBUTIONS............................................10
FINANCIAL HIGHLIGHTS............................................................11
SHAREHOLDER INFORMATION........................................................A-1
CHOOSING A SHARE CLASS................................................A-1
PURCHASING SHARES.....................................................A-4
REDEEMING SHARES......................................................A-5
EXCHANGING SHARES.....................................................A-7
PRICING OF SHARES.....................................................A-8
TAXES.................................................................A-8
OBTAINING ADDITIONAL INFORMATION...................................BACK COVER PAGE
</TABLE>
The AIM Family of Funds--Registered Trademark--, The AIM Family of Funds and
Design (i.e., the AIM logo), AIM and Design, AIM, AIM LINK, AIM Institutional
Funds, aimfunds.com, La Familia AIM de Fondos--Registered Trademark--, La
Familia AIM de Fondos and Design and Invest with Discipline are registered
service marks and AIM Bank Connection is a service mark of A I M Management
Group Inc.
2
<PAGE> 113
INVESTMENT OBJECTIVE AND STRATEGIES
The fund's investment objective is long-term growth of capital.
The fund seeks to achieve its objective by investing all of its investable
assets in the Small Cap Portfolio (the portfolio), which in turn normally
invests at least 65% of its total assets in equity securities of U.S. issuers
that have market capitalizations less than that of the largest company in the
Russell 2000--Registered Trademark-- Index.
The portfolio may also invest up to 35% of its total assets in equity securities
of U.S. issuers that have market capitalizations greater than that of the
largest company in the Russell 2000 Index, and in investment-grade
non-convertible debt securities, U.S. government securities and high-quality
money market instruments, all of which are issued by U.S. issuers. The portfolio
may also invest up to 10% of its total assets in securities of foreign issuers
in the form of American Depositary Receipts (ADRs) or similar securities.
In selecting investments, the portfolio managers seek to identify those
companies that have strong earnings momentum or demonstrate other potential for
growth of capital. The portfolio managers anticipate that the portfolio, when
fully invested, will generally be comprised of companies that are currently
experiencing a greater than anticipated increase in earnings. The portfolio
managers allocate investments among fixed income securities based on their views
as to the best values then currently available in the marketplace. The portfolio
managers usually sell a particular security when any of those factors materially
changes.
[In anticipation of or in response to adverse market conditions or for cash
management purposes, the portfolio may hold all or a portion of its assets in
cash, high-quality money market or high-quality domestic debt securities. As a
result, the fund or the portfolio may not achieve its investment objective.]
The portfolio may engage in active and frequent trading of portfolio securities
to achieve its investment objective. If the portfolio does trade in this way, it
may incur increased transaction costs and brokerage commissions, both of which
can lower the actual return on your investment. Active trading may also increase
short-term capital gains and losses, which may affect the taxes you have to pay.
If the fund's Board of Trustees determines that it is in the best interests of
the fund and its shareholders, the fund may redeem its investment in the
portfolio.
PRINCIPAL RISKS OF INVESTING IN THE FUND
There is a risk that you could lose all or a portion of your investment in the
fund. The value of your investment in the fund will go up and down with the
prices of the securities in which the portfolio invests. The price of equity
securities goes up and down in response to many factors, including the
historical and prospective earnings of the issuer of the stock, the value of its
assets, general economic conditions, interest rates, investor perceptions, and
market liquidity. This is especially true with respect to equity securities of
smaller companies, whose prices may go up and down more than equity securities
of larger, more-established companies. Also, since equity securities of smaller
companies may not be traded as often as equity securities of larger, more-
established companies, it may be difficult or impossible for the fund to sell
securities at a desirable price. [Debt securities are particularly vulnerable to
credit risk and interest rate fluctuations. When interest rates rise, bond
prices fall; the longer a bond's duration, the more sensitive it is to this
risk.]
The fund also may invest in securities issued by foreign companies, which have
additional risks, including exchange rate changes, political and economic
upheaval, the relative lack of information about these companies, relatively low
market liquidity and the potential lack of strict financial and accounting
controls and standards.
The fund could be adversely affected if the computer systems used by the fund's
investment advisor and the fund's other service providers do not properly
process and calculate date-related information from and after January 1, 2000.
The fund's investment advisor and independent technology consultants are
working to avoid year 2000-related problems in its systems and to obtain
assurances from other service providers that they are taking similar steps. In
addition, issuers of securities in which the fund invests may be adversely
affected by year 2000-related problems. This could have an impact on the value
of the fund's investments and its share price.
3
<PAGE> 114
An investment in the fund is not a deposit of a bank and is not insured or
guaranteed by the Federal Deposit Insurance Corporation or any other government
agency.
4
<PAGE> 115
PERFORMANCE INFORMATION
The bar chart and table shown below provide an indication of the risks of
investing in the fund. The fund's past performance is not necessarily an
indication of its future performance.
ANNUAL TOTAL RETURNS
The following bar chart shows changes in the performance of the fund's Class A
shares from year to year. The bar chart does not reflect sales loads. If it did,
the annual total returns shown would be lower.
Small Cap Growth
[BAR CHART]
<TABLE>
<CAPTION>
YEAR RETURN (%)
---- ----------
<C> <S>
1996 13.81
1997 16.22
1998 23.15
</TABLE>
During the period shown in the bar chart, the highest quarterly return was
30.28% (quarter ended 12/31/98) and the lowest quarterly return was (20.18)%
(quarter ended 9/30/98).
5
<PAGE> 116
PERFORMANCE TABLE
The following performance table shows how the fund's average annual total
returns for one year and since inception compared to those of a broad-based
securities market index.
<TABLE>
<CAPTION>
==================================================================================================
Average Annual Total Returns
(for the periods ended December 31, 1998)
Since Inception
1 Year Inception Date
- --------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Class A 23.15% 17.62% 10/18/95
- --------------------------------------------------------------------------------------------------
Class B 22.22 16.83 10/18/95
- --------------------------------------------------------------------------------------------------
Class C --- --- 5/3/99
- --------------------------------------------------------------------------------------------------
Russell 2000 Index(1) (2.55) 13.32(2) 10/31/95
==================================================================================================
</TABLE>
(1) The Russell 2000 Index is a widely recognized, unmanaged index of common
stocks that measures the performance of the 2,000 smallest companies in the
Russell 3000 Index, which measures the performance of the 3,000 largest
U.S. companies based on total market capitalization.
(2) The average annual total return given is since the date closest to the
inception date of Class A and Class B shares.
6
<PAGE> 117
FEE TABLE AND EXPENSE EXAMPLE
FEE TABLE
This table describes the fees and expenses that you may pay if you buy and hold
shares of the fund:
<TABLE>
<CAPTION>
Class A Class B Class C
------- ------- -------
<S> <C> <C> <C>
Shareholder Fees (fees paid directly from your investment)
Maximum Sales Charge (Load) Imposed on Purchases
(as a percentage of offering price) 5.50% None None
Maximum Deferred Sales Charge (Load)
(as a percentage of original purchase price
or redemption proceeds, whichever is less) None(1) 5.00 1.00
Annual Fund Operating Expenses
(expenses that are deducted from fund assets)(2)
Management Fees [0.00%] [0.00%] [0.00%]
Distribution and/or Service (12b-1) Fees [0.35] [1.00] [1.00]
Other Expenses [0.00] [0.00] [0.00]
Total Annual Fund Operating Expenses [0.00] [0.00] [0.00]
===== ===== =====
Expense Reimbursement(3) [0.00] [0.00] [0.00]
Net Expenses [0.00] [0.00] [0.00]
</TABLE>
- --------------------
(1) If you buy $1,000,000 or more of Class A shares and redeem these shares
within 18 months from the date of purchase, you may pay a 1% contingent
deferred sales charge (CDSC) at the time of redemption.
(2) This fee table, and the expense example below, reflects the expenses of
both the fund and the portfolio.
[(3) The investment advisor has agreed to limit expenses through May 31, 2000.
The waiver may not be terminated.]
As a result of 12b-1 fees, long-term shareholders in the fund may pay more than
the maximum permitted initial sales charge.
EXPENSE EXAMPLE
This example is intended to help you compare the costs of investing in different
classes of the fund with the cost of investing in other mutual funds.
The example assumes that you invest $10,000 in the fund for the time periods
indicated and then redeem all of your shares at the end of those periods. The
example also assumes that your investment has a 5% return each year and that the
fund's operating expenses remain the same. Although your actual returns and
costs may be higher or lower, based on these assumptions your costs would be:
<TABLE>
<CAPTION>
1 Year 3 Years 5 Years 10 Years
------ ------- ------- --------
<S> <C> <C> <C> <C>
Class A $ $ $ $
Class B
Class C
</TABLE>
You would pay the following expenses if you did not redeem your shares:
<TABLE>
<CAPTION>
1 Year 3 Years 5 Years 10 Years
------ ------- ------- --------
<S> <C> <C> <C> <C>
Class A $ $ $ $
Class B
Class C
</TABLE>
7
<PAGE> 118
FUND MANAGEMENT
THE ADVISOR
A I M Advisors, Inc. (the advisor) serves as the investment manager and
administrator for the Small Cap Portfolio (the portfolio) and the fund, and is
responsible for their day-to-day management. The advisor is located at 11
Greenway Plaza, Suite 100, Houston, Texas 77046-1173. The advisor supervises all
aspects of the portfolio's and the fund's operations and provides investment
advisory services to the portfolio, including obtaining and evaluating economic,
statistical and financial information to formulate and implement investment
programs for the portfolio.
The advisor has acted as an investment advisor since its organization in 1976.
Today, the advisor, together with its subsidiaries, advises or manages over 110
investment portfolios, including the fund, encompassing a broad range of
investment objectives.
ADVISOR COMPENSATION
During the fiscal year ended December 31, 1998, the advisor received
compensation of ____% of average net assets.
PORTFOLIO MANAGERS
The advisor uses a team approach to investment management. The individual
members of the team who are primarily responsible for the day-to-day management
of the portfolio, all of whom are officers of A I M Capital Management, Inc., a
wholly owned subsidiary of the advisor, are
o Robert M. Kippes, Senior Portfolio Manager, who has been responsible
for the fund since 1998 and has been associated with the advisor and/or
its affiliates since 1989.
o Paul J. Rasplicka, Senior Portfolio Manager, who has been responsible
for the fund since 1998 and has been associated with the advisor and/or
its affiliates since 1994.
8
<PAGE> 119
OTHER INFORMATION
INITIAL SALES CHARGES FOR CLASS A SHARES
Purchases of Class A shares of the fund are subject to the maximum 5.50% initial
sales charge as listed under the heading "Category I Initial Sales Charges" in
the "Shareholder Information--Choosing a Share Class" section of this
prospectus.
DIVIDENDS AND DISTRIBUTIONS
Dividends
The fund generally declares and pays dividends, if any, annually.
Capital Gains Distributions
The fund generally distributes long-term and short-term capital gains (including
any net gains from foreign currency transactions), if any, annually.
9
<PAGE> 120
FINANCIAL HIGHLIGHTS
The financial highlights table is intended to help you understand the fund's
financial performance. Certain information reflects financial results for a
single fund share.
The total returns in the table represent the rate that an investor would have
earned (or lost) on an investment in the fund (assuming reinvestment of all
dividends and distributions).
This information has been audited by PricewaterhouseCoopers LLP, whose report,
along with the fund's financial statements, is included in the fund's annual
report which is available upon request.
<TABLE>
<CAPTION>
October 18, 1995
Class A Year Ended December 31, to December 31,
- ------- -------------------------------------------- ---------------
1998 1997 1996 1995
----------- ------------- ------------- ---------------
<S> <C> <C> <C> <C>
Net asset value, beginning of period $ xx.xx $ xx.xx $ xx.xx $ xx.xx
- --------------------------------------------------------------- -------- ----------- ----------- -----------
Income from investment operations:
Net investment income (loss) (x.xx)(a) (x.xx)(a) (x.xx) (a) (x.xx)
- --------------------------------------------------------------- -------- ----------- ----------- -----------
Net gains on securities (both realized and unrealized) (x.xx) (x.xx) (x.xx) (x.xx)
- --------------------------------------------------------------- -------- ----------- ----------- -----------
Total from investment operations (x.xx) x.xx x.xx x.xx
=============================================================== ======== =========== =========== ===========
Distributions from net realized gains (x.xx) (x.xx) (x.xx) (x.xx)
- --------------------------------------------------------------- -------- ----------- ----------- -----------
Net asset value, end of period $ xx.xx $ xx.xx $ xx.xx $ xx.xx
=============================================================== ======== =========== =========== ===========
Total return (b) (x.xx)% (x.xx)% (x.xx)% (x.xx)%
=============================================================== ======== =========== =========== ===========
Ratios/supplemental data:
Net assets, end of period (000s omitted) $ xx,xxx $ x,xxx,xxx $ x,xxx,xxx $ x,xxx,xxx
=============================================================== ======== =========== =========== ===========
Ratio of expenses to average net assets (c) x.xx% (d) x.xx x.xx x.xx
=============================================================== ======== =========== =========== ===========
Ratio of net investment income (loss) to average net assets (c) (x.xx)%(d) (x.xx)% (x.xx)% (x.xx)%
=============================================================== ======== =========== =========== ===========
Portfolio turnover rate xx% xx% xx% xx%
=============================================================== ======== =========== =========== ===========
</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
x.xx%, x.xx%, x.xx% and x.xx% for 1998-1995.
(d) After fee waivers and/or expense reimbursements. Ratios of net investment
income (loss) to average net assets prior to fee waivers and/or expense
reimbursements were x.xx%, x.xx%, x.xx% and x.xx% for 1998-1995.
10
<PAGE> 121
<TABLE>
<CAPTION>
October 18, 1995
Class B Year Ended December 31, to December 31,
- ------- ---------------------------------------------- ----------------
1998 1997 1996 1995
------------- ------------- ------------ ----------------
<S> <C> <C> <C> <C>
Net asset value, beginning of period $ xx.xx(a) $ xx.xx (a) $ xx.xx (a) $ xx.xx
- ---------------------------------------------------------------- --------- -------- -------- ---------
Income from investment operations:
Net investment income (loss) (x.xx) (x.xx) (x.xx) (x.xx)
- ---------------------------------------------------------------- --------- -------- -------- ---------
Net gains (losses) on securities (both realized and unrealized) (x.xx) (x.xx) (x.xx) (x.xx)
- ---------------------------------------------------------------- --------- -------- -------- ---------
Total from investment operations (x.xx) (x.xx) (x.xx) (x.xx)
================================================================ ========= ======== ======= ========
Distributions from net realized gains (x.xx) (x.xx) -- (x.xx)
- ---------------------------------------------------------------- --------- -------- -------- ---------
Net asset value, end of period $ xx.xx $ xx.xx $ xx.xx $ xx.xx
================================================================ ========= ======== ======= ========
Total return (a) (x.xx)% (x.xx)% (x.xx)% (x.xx)%
================================================================ ========= ======== ======= ========
Ratios/supplement data:
Net assets, end of period (000s omitted) $ xx,xxx $ xx,xxx $ xx,xxx $ xx,xxx
================================================================ ========= ======== ======= ========
Ratio of expenses to average net assets (b) x.xx%(c)(d) x.xx%(c)(d) x.xx% x.xx%
================================================================ ========= ======== ======= ========
Ratio of net investment income (loss) to average net assets (f) (x.xx)%(c) (x.xx)%(c) (x.xx)% (x.xx)%
================================================================ ========= ======== ======= ========
Portfolio turnover rate xx% xx% xx% xx%
================================================================ ========= ======== ======= ========
</TABLE>
(a) Calculated using average shares outstanding.
(b) Does not deduct sales charges and for periods less than one year, total
returns are not annualized.
(c) After fee waivers and/or expenses reimbursements. Ratios of expenses to
average net assets prior to fee waivers and/or expense reimbursements are
x.xx%, x.xx%, x.xx% and x.xx%, respectively for 1998-1995.
(d) Ratios are based on average net assets of $xxx,xxx,xxx.
(e) Ratio includes indirectly paid expenses. Excluding indirectly paid
expenses, the ratio of expenses to average net assets would have been
x.xx%.
(f) Annualized.
(g) 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 are (x.xx%), (x.xx)%, (x.xx)% and (x.xx)%, respectively for
1998-1995.
(h) The average commission rate paid is the total brokerage commissions paid on
applicable purchases and sales of securities for the period divided by the
total number of related shares purchased and sold, which is required to be
disclosed for fiscal years beginning September 1, 1995 and thereafter.
11
<PAGE> 122
Shareholder Information
- --------------------------------------------------------------------------------
CHOOSING A SHARE CLASS
Many of the funds advised by the advisor (the AIM Funds) have multiple classes
of shares, each class representing an interest in the same portfolio of
investments. When choosing a share class, you should consider the factors below:
<TABLE>
<CAPTION>
CLASS A CLASS B CLASS C
- ---------------------------------------------------------------------------------------------------------
<S> <C> <C>
- - Initial sales charge - No initial sales charge - No initial sales charge
- - Reduced or waived initial sales - Contingent deferred sales - Contingent deferred sales
charge for certain purchases charge on redemptions within six charge on redemptions within
years one year
- - Lower distribution and service - 12b-1 fee of 1.00% - 12b-1 fee of 1.00%
(12b-1) fee than Class B or
Class C shares (See "Fee Table
and Expense Example")
- Converts to Class A shares - Does not convert to Class A
after eight years along with a shares
pro rata portion of its
reinvested dividends and
distributions*
- - Generally more appropriate for - Purchase orders limited to - Generally more appropriate
long-term investors amounts less than $250,000 for short-term investors
</TABLE>
* AIM Money Market Fund: Class B shares convert to AIM Cash Reserve Shares.
AIM Global Trends Fund: If you held Class B shares on May 29, 1998 and
continue to hold them, those shares will convert to Class A shares of that
fund seven years after your date of purchase. If you exchange those shares
for Class B shares of another AIM Fund, the shares into which you exchanged
will not convert to Class A shares until eight years after your date of
purchase of the original shares.
- --------------------------------------------------------------------------------
DISTRIBUTION AND SERVICE (12B-1) FEES
Each AIM Fund (except AIM Tax-Free Intermediate Fund) has adopted 12b-1 plans
that allow the AIM Fund to pay distribution fees to A I M Distributors, Inc.
(the distributor) for the sale and distribution of its shares and fees for
services provided to shareholders, all or a substantial portion of which are
paid to the dealer of record. Because the AIM Fund pays these fees out of its
assets on an ongoing basis, over time these fees will increase the cost of your
investment and may cost you more than paying other types of sales charges.
MCF-03/99
A-1
<PAGE> 123
SALES CHARGES
Generally, you will not pay a sales charge on purchases or redemptions of Class
A shares of AIM Tax-Exempt Cash Fund and AIM Cash Reserve Shares of AIM Money
Market Fund. You may be charged a contingent deferred sales charge if you redeem
AIM Cash Reserve Shares of AIM Money Market Fund acquired through certain
exchanges. Sales charges on all other AIM Funds and classes of those Funds are
detailed below. As used below, the term "offering price" with respect to all
categories of Class A shares includes the initial sales charge.
INITIAL SALES CHARGES
The AIM Funds are grouped into three categories with respect to initial sales
charges. The "Other Information" section of your prospectus will tell you in
what category your particular AIM Fund is classified.
<TABLE>
<CAPTION>
CATEGORY I INITIAL SALES CHARGES
<S> <C> <C>
- ----------------------------------------------------------
<CAPTION>
INVESTOR'S
SALES CHARGE
------------------------
AMOUNT OF INVESTMENT AS A % OF AS A % OF
IN SINGLE TRANSACTION OFFERING PRICE INVESTMENT
- ----------------------------------------------------------
<S> <C> <C>
Less than $ 25,000 5.50% 5.82%
$ 25,000 but less than $ 50,000 5.25 5.54
$ 50,000 but less than $ 100,000 4.75 4.99
$100,000 but less than $ 250,000 3.75 3.90
$250,000 but less than $ 500,000 3.00 3.09
$500,000 but less than $1,000,000 2.00 2.04
- ----------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
CATEGORY II INITIAL SALES CHARGES
<S> <C> <C>
- ----------------------------------------------------------
<CAPTION>
INVESTOR'S
SALES CHARGE
------------------------
AMOUNT OF INVESTMENT AS A % OF AS A % OF
IN SINGLE TRANSACTION OFFERING PRICE INVESTMENT
- ----------------------------------------------------------
<S> <C> <C>
Less than $ 50,000 4.75% 4.99%
$ 50,000 but less than $ 100,000 4.00 4.17
$100,000 but less than $ 250,000 3.75 3.90
$250,000 but less than $ 500,000 2.50 2.56
$500,000 but less than $1,000,000 2.00 2.04
- ----------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
CATEGORY III INITIAL SALES CHARGES
<S> <C> <C>
- ----------------------------------------------------------
<CAPTION>
INVESTOR'S
SALES CHARGE
------------------------
AMOUNT OF INVESTMENT AS A % OF AS A % OF
IN SINGLE TRANSACTION OFFERING PRICE INVESTMENT
- ----------------------------------------------------------
<S> <C> <C>
Less than $ 100,000 1.00% 1.01%
$100,000 but less than $ 250,000 0.75 0.76
$250,000 but less than $1,000,000 0.50 0.50
- ----------------------------------------------------------
</TABLE>
CONTINGENT DEFERRED SALES CHARGES FOR CLASS A SHARES
You can purchase $1,000,000 or more of Class A shares at net asset value.
However, if you purchase shares of that amount in Categories I or II, they will
be subject to a contingent deferred sales charge (CDSC) of 1% if you redeem them
prior to 18 months after the date of purchase. The distributor may pay a dealer
concession and/or a service fee for purchases of $1,000,000 or more.
CONTINGENT DEFERRED SALES CHARGES FOR
CLASS B AND CLASS C SHARES
You can purchase Class B and Class C shares at their net asset value per share.
However, when you redeem them, they are subject to a CDSC in the following
percentages:
<TABLE>
<CAPTION>
YEAR SINCE
PURCHASE MADE CLASS B CLASS C
- ----------------------------------------------------------
<S> <C> <C>
First 5% 1%
Second 4 None
Third 3 None
Fourth 3 None
Fifth 2 None
Sixth 1 None
Seventh and following None None
- ----------------------------------------------------------
</TABLE>
A-2
<PAGE> 124
REDUCED SALES CHARGES AND SALES CHARGE EXCEPTIONS
You may qualify for reduced sales charges or sales charge exceptions. To qualify
for these reductions or exceptions, you or your financial consultant must
provide sufficient information at the time of purchase to verify that your
purchase qualifies for such treatment.
REDUCED SALES CHARGES
You may be eligible to buy Class A shares at reduced initial sales charge rates
under Rights of Accumulation or Letters of Intent under certain circumstances.
Rights of Accumulation
You may combine your new purchases of Class A shares with Class A shares
currently owned for the purpose of qualifying for the lower initial sales charge
rates that apply to larger purchases. The applicable initial sales charge for
the new purchase is based on the total of your current purchase and the current
value of all Class A shares you own.
Letters of Intent
Under a Letter of Intent (LOI), you commit to purchase a specified dollar amount
of Class A shares of AIM Funds during a 13-month period. The amount you agree to
purchase determines the initial sales charge you pay. If the full face amount of
the LOI is not invested by the end of the 13-month period, your account will be
adjusted to the higher initial sales charge level for the amount actually
invested.
INITIAL SALES CHARGE EXCEPTIONS
You will not pay initial sales charges
- - on shares purchased by reinvesting dividends and distributions;
- - when exchanging shares among certain AIM Funds;
- - when using the reinstatement privilege; and
- - when a merger, consolidation, or acquisition of assets of an AIM Fund occurs.
CONTINGENT DEFERRED SALES CHARGE (CDSC) EXCEPTIONS
You will not pay a CDSC
- - if you redeem Class B shares you held for more than six years;
- - if you redeem Class C shares you held for more than one year;
- - if you redeem shares acquired through reinvestment of dividends and
distributions; and
- - on increases in the net asset value of your shares.
There may be other situations when you may be able to purchase or redeem shares
at reduced or without sales charges. Consult the fund's Statement of Additional
Information for details.
A-3
<PAGE> 125
PURCHASING SHARES
MINIMUM INVESTMENTS PER AIM FUND ACCOUNT
The minimum investments for AIM Fund accounts (except for investments in AIM
Small Cap Opportunities Fund) are as follows:
<TABLE>
<CAPTION>
INITIAL ADDITIONAL
TYPE OF ACCOUNT INVESTMENTS INVESTMENTS
- ----------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Savings Plans (money-purchase/profit sharing $ 0 ($25 per AIM Fund investment for $25
plans, 401(k) plans, Simplified Employee Pension salary deferrals from Savings Plans)
(SEP) accounts, Salary Reduction (SARSEP)
accounts, Savings Incentive Match Plans for
Employee IRA (Simple IRA) accounts, 403(b) or
457 plans)
Automatic Investment Plans 50 50
IRA, Education IRA or Roth IRA 250 50
All other accounts 500 50
- ----------------------------------------------------------------------------------------------------------------
</TABLE>
HOW TO PURCHASE SHARES
You may purchase shares using one of the options below.
<TABLE>
<CAPTION>
PURCHASE OPTIONS
- ----------------------------------------------------------------------------------------------------------
OPENING AN ACCOUNT ADDING TO AN ACCOUNT
- ----------------------------------------------------------------------------------------------------------
<S> <C> <C>
Through a Financial Consultant Contact your financial consultant. Same
By Mail Mail completed Account Application Mail your check and the remittance
and purchase payment to the slip from your confirmation
transfer agent, statement to the transfer agent.
A I M Fund Services, Inc.,
P.O. Box 4739,
Houston, TX 77210-4739.
By Wire Mail completed Account Application Call the transfer agent to receive
to the transfer agent. Call the a reference number. Then, use the
transfer agent at (800) 959-4246 to wire instructions at left.
receive a reference number. Then,
use the following wire
instructions:
Beneficiary Bank ABA/Routing #:
113000609
Beneficiary Account Number:
00100366807
Beneficiary Account Name: A I M
Fund Services, Inc.
RFB: Fund Name, Reference #
OBI: Your Name, Account #
By AIM Bank Connection(SM) Open your account using one of the Mail completed AIM Bank
methods described above. Connection(SM) form to the transfer
agent. Once the transfer agent has
received the form, call the
transfer agent to place your
purchase.
- ----------------------------------------------------------------------------------------------------------
</TABLE>
A-4
<PAGE> 126
SPECIAL PLANS
AUTOMATIC INVESTMENT PLAN
You can arrange for periodic investments in any of the AIM Funds by authorizing
the AIM Fund to withdraw the amount of your investment from your bank account on
a day or dates you specify and in an amount of at least $50. You may stop the
Automatic Investment Plan at any time by giving the transfer agent notice ten
days prior to your next scheduled withdrawal.
DOLLAR COST AVERAGING
Dollar Cost Averaging allows you to make automatic monthly or quarterly
exchanges, if permitted, from one AIM Fund account to one or more other AIM Fund
accounts with the identical registration. The account from which exchanges are
to be made must have a minimum balance of $5,000 before you can use this option.
Exchanges will occur on (or about) the 10th or 25th day of the month, whichever
you specify, in the amount you specify. The minimum amount you can exchange to
another AIM Fund is $50.
AUTOMATIC DIVIDEND INVESTMENT
All of your dividends and distributions may be paid in cash or invested in any
AIM Fund at net asset value. Unless you specify otherwise, your dividends and
distributions will automatically be reinvested in the same AIM Fund. You may
invest your dividends and distributions (1) into another AIM Fund in the same
class of shares; or (2) from Class A shares into AIM Cash Reserve Shares of AIM
Money Market Fund, or vice versa.
You must comply with the following requirements to be eligible to invest your
dividends and distributions in shares of another AIM Fund:
(1) Your account balance (a) in the AIM Fund paying the dividend must be at
least $5,000; or (b) in the AIM Fund receiving the dividend must be at least
$500;
(2) Both accounts must have identical registration information; and
(3) You must have completed an authorization form to reinvest dividends into
another AIM Fund.
PORTFOLIO REBALANCING PROGRAM
If you have at least $5,000 in your account, you may participate in the
Portfolio Rebalancing Program. Under this Program, you can designate how the
total value of your AIM Fund holdings should be rebalanced, on a percentage
basis, between two and ten of your AIM Funds on a quarterly, semiannual or
annual basis. Your portfolio will be rebalanced through the exchange of shares
in one or more of your AIM Funds for shares of the same class of one or more
other AIM Funds in your portfolio. If you wish to participate in the Program,
make changes or cancel the Program, the transfer agent must receive your request
to participate, changes or cancellation in good order at least five business
days prior to the next rebalancing date, which is normally the 28th day of the
last month of the period you choose. We may modify, suspend or terminate the
Program at any time on 60 days' prior written notice.
RETIREMENT PLANS
Shares of most of the AIM Funds can be purchased through
tax-sheltered retirement plans made available to corporations, individuals and
employees of non-profit organizations and public schools. A plan document must
be adopted to establish a retirement plan. You may use AIM Funds-sponsored
retirement plans, which include IRAs, Education IRAs, Roth IRAs, 403(b) plans,
401(k) plans, SIMPLE IRA plans, SEP/SARSEP plans and Money Purchase/Profit
Sharing plans, or another sponsor's retirement plan. The plan custodian of the
AIM Funds-sponsored retirement plan assesses an annual maintenance fee of $10.
Contact your financial consultant for details.
REDEEMING SHARES
REDEMPTION FEES
We will not charge you any fees to redeem your shares; however, your broker or
financial consultant may charge service fees for handling these transactions.
Your shares may be subject to a contingent deferred sales charge (CDSC).
COMPUTING A CDSC
The CDSC on redemptions of shares is computed based on the lower of their
original purchase price or current market value, net of reinvested dividends and
capital gains distributions. In determining whether to charge a CDSC, we will
assume that you have redeemed shares on which there is no CDSC first and, then,
shares in the order of purchase.
REDEMPTION OF AIM CASH RESERVE SHARES OF
AIM MONEY MARKET FUND ACQUIRED BY EXCHANGE
If you redeem AIM Cash Reserve Shares acquired by exchange from Class A shares
subject to a CDSC within eighteen months of the purchase of the Class A shares,
you will be charged a CDSC.
REDEMPTION OF CLASS B SHARES ACQUIRED BY
EXCHANGE FROM AIM FLOATING RATE FUND
If you redeem Class B shares you acquired by exchange via a tender offer by AIM
Floating Rate Fund, the early withdrawal charge applicable to shares of AIM
Floating Rate Fund will be applied instead of the CDSC normally applicable to
Class B shares.
A-5
<PAGE> 127
HOW TO REDEEM SHARES
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
Through a Financial Contact your financial consultant.
Consultant
By Mail Send a written request to the transfer agent. Requests must
include (1) original signatures of all registered owners;
(2) the name of the AIM Fund and your account number; (3) if
the transfer agent does not hold your shares, endorsed share
certificates or share certificates accompanied by an
executed stock power; and (4) signature guarantees, if
necessary (see below). The transfer agent may require that
you provide additional information, such as corporate
resolutions or powers of attorney, if applicable. If you are
redeeming from an IRA account, you must include a statement
of whether or not you are at least 59 1/2 years old and
whether you wish to have federal income tax withheld from
your proceeds. The transfer agent may require certain other
information before you can redeem from an employer-sponsored
retirement plan. Contact your employer for details.
By Telephone Call the transfer agent. You will be allowed to redeem by
telephone if (1) the proceeds are to be mailed to the
address on record with us or transferred electronically to a
pre-authorized checking account; (2) the address on record
with us has not been changed within the last thirty days;
(3) you do not hold physical share certificates; (4) you can
provide proper identification information; (5) the proceeds
of the redemption do not exceed $50,000; and (6) you have
not previously declined the telephone redemption privilege.
Certain accounts, including retirement accounts and 403(b)
plans, may not redeem by telephone. The transfer agent must
receive your call during the hours the NYSE is open for
business in order to effect the redemption at that day's
closing price.
</TABLE>
- --------------------------------------------------------------------------------
TIMING AND METHOD OF PAYMENT
We normally will send out checks within one business day, and in any event no
more than seven days, after we accept your request to redeem. If you redeem
shares recently purchased by check, you will be required to wait up to ten
business days before we will send your redemption proceeds. This delay is
necessary to ensure that the purchase check has cleared.
REDEMPTION BY MAIL
If you mail us a request in good order to redeem your shares, we will mail you a
check in the amount of the redemption proceeds to the address on record with us.
If your request is not in good order, you may have to provide us with additional
documentation in order to redeem your shares.
REDEMPTION BY TELEPHONE
If you redeem by telephone, we will mail you a check in the amount of the
redemption proceeds to your address of record (if there has been no change
communicated to the transfer agent within the previous 30 days) or transmit them
electronically to your pre-authorized bank account. We use reasonable procedures
to confirm that instructions communicated by telephone are genuine and are not
liable for telephone instructions that are reasonably believed to be genuine.
PAYMENT FOR SYSTEMATIC WITHDRAWALS
You may arrange for regular monthly or quarterly withdrawals from your account
of at least $50. You also may make annual withdrawals if you own Class A shares.
We will redeem enough shares from your account to cover the amount withdrawn.
You must have an account balance of at least $5,000 to establish a Systematic
Withdrawal Plan. You can stop this plan at any time by giving ten days prior
notice to the transfer agent.
EXPEDITED REDEMPTIONS
(AIM Cash Reserve Shares of AIM Money Market Fund only)
If we receive your redemption order before 11:30 a.m. Eastern Time, we will try
to transmit payment of redemption proceeds on that same day. If we receive your
redemption order after 11:30 a.m. Eastern Time and before the close of trading
on the New York Stock Exchange (NYSE), we generally will transmit payment on the
next business day.
REDEMPTIONS BY CHECK
(Class A shares of AIM Tax-Exempt Cash Fund and AIM Cash Reserve Shares of AIM
Money Market Fund only)
You may redeem shares of these AIM Funds by writing checks in amounts of $250 or
more if you have completed an authorization form. Redemption by check is not
available for retirement accounts.
SIGNATURE GUARANTEES
We require a signature guarantee when you redeem by mail and
(1) the amount is greater than $50,000;
(2) you request that payment be made to someone other than the name registered
on the account;
(3) you request that payment be sent somewhere other than the bank of record on
the account; or
(4) you request that payment be sent to a new address or an address that changed
in the last 30 days.
The transfer agent will accept a guarantee of your signature by a number of
financial institutions. Call the transfer agent for additional information. Some
institutions have transaction amount maximums for these guarantees. Please check
with the guarantor institution.
A-6
<PAGE> 128
REINSTATEMENT PRIVILEGE (Class A shares only)
You may, within 90 days after you sell Class A shares (except Class A shares of
AIM Tax-Exempt Cash Fund), reinvest all or part of your redemption proceeds in
Class A shares of any AIM Fund at net asset value in an identically registered
account. If you sold Class A shares of AIM Limited Maturity Treasury Fund or AIM
Tax-Free Intermediate Fund, you will incur an initial sales charge reflecting
the difference between the initial sales charges on those Funds and the ones in
which you will be investing. In addition, if you paid a contingent deferred
sales charge (CDSC) on any reinstated amount, you will not be subject to a CDSC
if you later redeem that amount. You must notify the transfer agent in writing
at the time you reinstate that you are exercising your reinstatement privilege.
You may exercise this privilege only once per year.
REDEMPTIONS BY THE AIM FUNDS
If your account has been open at least one year, you have not made an additional
purchase in the account during the past six calendar months, and the value of
your account falls below $500 for three consecutive months due to redemptions or
exchanges (excluding retirement accounts), the AIM Funds have the right to
redeem the account after giving you 60 days' prior written notice. You may avoid
having your account redeemed during the notice period by bringing the account
value up to $500 or by utilizing the Automatic Investment Plan.
If an AIM Fund determines that you have provided incorrect information in
opening an account or in the course of conducting subsequent transactions, the
AIM Fund may, in its discretion, redeem the account and distribute the proceeds
to you.
EXCHANGING SHARES
You may, under certain circumstances, exchange shares in one AIM Fund for those
of another AIM Fund. Before requesting an exchange, review the prospectus of the
AIM Fund you wish to acquire. Exchange privileges also apply to holders of the
Connecticut General Guaranteed Account, established for tax-qualified group
annuities, for contracts purchased on or before June 30, 1992.
PERMITTED EXCHANGES
Except as otherwise stated below, you may exchange your shares for shares of the
same class of another AIM Fund. You also may exchange AIM Cash Reserve Shares of
AIM Money Market Fund for Class A shares of another AIM Fund, or vice versa. You
may be required to pay an initial sales charge when exchanging from a Fund with
a lower initial sales charge than the one into which you are exchanging. If you
exchange from Class A shares not subject to a CDSC into Class A shares subject
to those charges, you will be charged a CDSC when you redeem the exchanged
shares. The CDSC charged on redemption of those shares will be calculated
starting on the date you acquired those shares through exchange.
YOU WILL NOT PAY A SALES CHARGE WHEN EXCHANGING:
(1) Class A shares with an initial sales charge (except for Class A shares of
AIM Limited Maturity Treasury Fund and AIM Tax-Free Intermediate Fund) for
Class A shares of another AIM Fund or AIM Cash Reserve Shares of AIM Money
Market Fund;
(2) Class A shares of AIM Limited Maturity Treasury Fund and AIM Tax-Free
Intermediate Fund for
(a) one another;
(b) AIM Cash Reserve Shares of AIM Money Market Fund or Class A shares of
AIM Tax-Exempt Cash Fund; or
(c) Class A shares of another AIM Fund, but only if
(i) you acquired the original shares before May 1, 1994; or
(ii) you acquired the original shares on or after May 1, 1994 by way of
an exchange from shares with higher sales charges;
(3) AIM Cash Reserve Shares of AIM Money Market Fund or Class A shares of AIM
Tax-Exempt Cash Fund for
(a) one another;
(b) Class A shares of an AIM Fund subject to an initial sales charge (except
for Class A shares of AIM Limited Maturity Treasury Fund and AIM
Tax-Free Intermediate Fund), but only if you acquired the original
shares
(i) prior to May 1, 1994 by exchange from Class A shares subject to an
initial sales charge;
(ii) on or after May 1, 1994 by exchange from Class A shares subject to
an initial sales charge (except for Class A shares of AIM Limited
Maturity Treasury Fund and AIM Tax-Free Intermediate Fund); or
(c) Class A shares of AIM Limited Maturity Treasury Fund and AIM Tax-Free
Intermediate Fund, but only if you acquired the original shares by
exchange from Class A shares subject to an initial sales charge; or
(4) Class B shares for other Class B shares, and Class C shares for other Class
C shares.
EXCHANGES NOT PERMITTED
You may not exchange Class A shares subject to contingent deferred sales charges
for Class A shares of AIM Limited Maturity Treasury Fund, AIM Tax-Free
Intermediate Fund or AIM Tax-Exempt Cash Fund.
EXCHANGE CONDITIONS
The following conditions apply to all exchanges:
- - You must meet the minimum purchase requirements for the AIM Fund into which
you are exchanging;
- - Shares of the AIM Fund you wish to acquire must be qualified for sale in your
state of residence;
- - Exchanges must be made between accounts with identical registration
information;
A-7
<PAGE> 129
- - The account you wish to exchange from must have a certified tax identification
number (or the Fund has received an appropriate Form W-8 or W-9);
- - Shares must have been held for at least one day prior to the exchange; and
- - If you have physical share certificates, you must return them to the transfer
agent prior to the exchange.
TERMS OF EXCHANGE
Under unusual market conditions, an AIM Fund may delay the issuance of shares
being purchased in an exchange for up to five business days if it determines
that it would be materially disadvantaged by the immediate transfer of exchange
proceeds. There is no fee for exchanges. The exchange privilege is not an option
or right to purchase shares. Any of the participating AIM Funds or the
distributor may modify or discontinue this privilege at any time.
BY MAIL
If you wish to make an exchange by mail, you must include original signatures of
each registered owner exactly as the shares are registered, the account
registration and account number, the dollar amount or number of shares to be
exchanged and the names of the AIM Funds from which and into which the exchange
is to be made.
BY TELEPHONE
Conditions that apply to exchanges by telephone are the same as redemptions by
telephone, including that the transfer agent must receive exchange requests
during the hours the NYSE is open for business; however, you still will be
allowed to exchange by telephone even if you have changed your address of record
within the preceding 30 days.
EXCHANGING CLASS B AND CLASS C SHARES
If you make an exchange involving Class B or Class C shares, the amount of time
you held the original shares will be added to the holding period of the Class B
or Class C shares, respectively, into which you exchanged for the purpose of
calculating contingent deferred sales charges (CDSC) if you later redeem the
exchanged shares. If you redeem Class B shares acquired by exchange via a tender
offer by AIM Floating Rate Fund, you will be credited with the time period you
held the shares of AIM Floating Rate Fund for the purpose of computing the early
withdrawal charge applicable to those shares.
EACH AIM FUND AND THE DISTRIBUTOR RESERVE THE RIGHT AT ANY TIME TO REJECT OR
CANCEL ANY PART OF ANY PURCHASE OR EXCHANGE ORDER; MODIFY ANY TERMS OR
CONDITIONS OF PURCHASE OF SHARES OF ANY AIM FUND; OR WITHDRAW ALL OR ANY PART
OF THE OFFERING MADE BY THIS PROSPECTUS.
PRICING OF SHARES
DETERMINATION OF NET ASSET VALUE
The price of each AIM Fund's shares is the fund's net asset value per share. The
AIM Funds value portfolio securities for which market quotations are readily
available at market value. The AIM Funds value short-term investments maturing
within 60 days at amortized cost, which approximates market value. AIM Money
Market Fund and AIM Tax-Exempt Cash Fund value all their securities at amortized
cost. AIM High Income Municipal Fund, AIM Municipal Bond Fund, AIM Tax-Exempt
Bond Fund of Connecticut and AIM Tax-Free Intermediate Fund value variable rate
securities that have an unconditional demand or put feature exercisable within
seven days or less at par, which reflects the market value of such securities.
The AIM Funds value all other securities and assets at their fair value.
Securities and other assets quoted in foreign currencies are valued in U.S.
dollars based on the prevailing exchange rates on that day. In addition, if,
between the time trading ends on a particular security and the close of the New
York Stock Exchange (NYSE), events occur that materially affect the value of the
security, the AIM Funds may value the security at its fair value as determined
in good faith by or under the supervision of the Board of Directors or Trustees
of the AIM Fund. The effect of using fair value pricing is that an AIM Fund's
net asset value will be subject to the judgment of the Board of Directors or
Trustees or its designee instead of being determined by the market. Because some
of the AIM Funds may invest in securities that are primarily listed on foreign
exchanges, the value of those funds' shares may change on days when you will not
be able to purchase or redeem shares.
Each AIM Fund determines the net asset value of its shares as of the close of
the NYSE on each day the NYSE is open for business. AIM Money Market Fund also
determines its net asset value as of 12:00 noon Eastern Time on each day the
NYSE is open for business.
TIMING OF ORDERS
You can purchase, exchange or redeem shares during the hours the NYSE is open
for business. The AIM Funds price purchase, exchange and redemption orders at
the net asset value calculated after the transfer agent receives an order in
good form. An AIM Fund may postpone the right of redemption only under unusual
circumstances, such as when the NYSE restricts or suspends trading.
TAXES
In general, dividends and distributions you receive are taxable as ordinary
income or long-term capital gains for federal income tax purposes, whether you
reinvest them in additional shares or take them in cash. Distributions are
taxable to you at different rates depending on the length of time the fund holds
its assets. Different tax rates apply to ordinary income and long-term capital
gain distributions, regardless of how long you have held your shares. Every
year, you will be sent information showing the amount of dividends and
distributions you received from each AIM Fund during the prior year.
A-8
<PAGE> 130
Any long-term or short-term capital gains realized from redemptions of AIM
Fund shares will be subject to federal income tax. Exchanges of shares for
shares of another AIM Fund are treated as a sale, and any gain realized on the
transaction will generally be subject to federal income tax.
The foreign, state and local tax consequences of investing in AIM Fund shares
may differ materially from the federal income tax consequences described above.
You should consult your tax advisor before investing.
A-9
<PAGE> 131
[BACK COVER PAGE]
OBTAINING ADDITIONAL INFORMATION
More information may be obtained free of charge upon request. The Statement of
Additional Information (SAI), a current version of which is on file with the
Securities and Exchange Commission (SEC), contains more details about the fund
and is incorporated by reference into the prospectus (is legally a part of this
prospectus). Annual and semiannual reports to shareholders contain additional
information about the fund's investments. The fund's annual report also
discusses the market conditions and investment strategies that significantly
affected the fund's performance during its last fiscal year.
If you have questions about this fund, another fund in The AIM Family of Funds
or your account, or wish to obtain free copies of the fund's current SAI or
annual or semiannual reports, please contact us:
BY MAIL: A I M Distributors, Inc.
11 Greenway Plaza, Suite 100
Houston, TX 77046-1173
BY TELEPHONE: (800) 347-4246
BY E-MAIL: [email protected]
ON THE INTERNET: http://www.aimfunds.com (prospectuses and annual and
semiannual reports only)
You also can obtain copies of the fund's SAI and other information at the SEC's
Public Reference Room in Washington, D.C., on the SEC's website
(http://www.sec.gov), or by sending a letter, including a duplicating fee, to
the SEC's Public Reference Section, Washington, D.C. 20549-6009. Please call the
SEC at 1-800-SEC-0330 for information about the Public Reference Room.
AIM Small Cap Growth Fund
SEC 1940 Act file number: 811-2699
<PAGE> 132
The information in this prospectus is not complete and may be changed. We may
not sell these securities until the registration statement filed with the
Securities and Exchange Commission is effective. This prospectus is not an offer
to sell these securities and is not soliciting an offer to buy these securities
in any state where the offer or sale is not permitted.
Subject to Completion dated February 12, 1999
[AIM LOGO APPEARS HERE]
AIM BASIC VALUE FUND
(ADVISOR CLASS)
PROSPECTUS
MAY 3, 1999
AIM Basic Value Fund seeks to provide long-term growth of capital.
This prospectus contains important information. Please read it before investing
and keep it for future reference.
An investment in the fund is not a deposit of a bank and is not insured or
guaranteed by the Federal Deposit Insurance Corporation or any other government
agency. There is a risk that you could lose a portion or all of your money.
AS WITH ALL OTHER MUTUAL FUND SECURITIES, THE SECURITIES AND EXCHANGE COMMISSION
HAS NOT APPROVED OR DISAPPROVED THESE SECURITIES OR DETERMINED WHETHER THE
INFORMATION IN THIS PROSPECTUS IS ADEQUATE OR ACCURATE. ANYONE WHO
TELLS YOU OTHERWISE IS COMMITTING A CRIME.
1
<PAGE> 133
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
<S> <C>
INVESTMENT OBJECTIVE AND STRATEGIES......................................................................3
PRINCIPAL RISKS OF INVESTING IN THE FUND.................................................................3
PERFORMANCE INFORMATION..................................................................................5
ANNUAL TOTAL RETURNS............................................................................5
PERFORMANCE TABLE...............................................................................6
FEE TABLE AND EXPENSE EXAMPLE............................................................................7
FEE TABLE.......................................................................................7
EXPENSE EXAMPLE.................................................................................7
FUND MANAGEMENT..........................................................................................8
THE ADVISOR.....................................................................................8
ADVISOR COMPENSATION............................................................................8
PORTFOLIO MANAGERS..............................................................................8
OTHER INFORMATION........................................................................................9
DIVIDENDS AND DISTRIBUTIONS.....................................................................9
FINANCIAL HIGHLIGHTS....................................................................................10
SHAREHOLDER INFORMATION................................................................................A-1
PURCHASING SHARES.............................................................................A-1
REDEEMING SHARES..............................................................................A-2
EXCHANGING SHARES.............................................................................A-3
PRICING OF SHARES.............................................................................A-4
TAXES.........................................................................................A-4
OBTAINING ADDITIONAL INFORMATION...........................................................BACK COVER PAGE
</TABLE>
The AIM Family of Funds--Registered Trademark--, The AIM Family of Funds and
Design (i.e., the AIM logo), AIM and Design, AIM, AIM LINK, AIM Institutional
Funds, aimfunds.com, La Familia AIM de Fondos--Registered Trademark--, La
Familia AIM de Fondos and Design and Invest with Discipline are registered
service marks and AIM Bank Connection is a service mark of A I M Management
Group Inc.
2
<PAGE> 134
INVESTMENT OBJECTIVE AND STRATEGIES
The fund's investment objective is long-term growth of capital.
The fund seeks to achieve its objective by investing all of its investable
assets in the Value Portfolio (the portfolio), which in turn normally invests at
least 65% of its total assets in equity securities of U.S. issuers that have
market capitalizations of greater than $500 million and that the portfolio
managers believe to be undervalued in relation to long-term earning power or
other factors.
The portfolio may also invest up to 35% of its total assets in equity securities
of U.S. issuers that have market capitalizations of less than $500 million and
in investment-grade non-convertible debt securities, U.S. government securities
and high-quality money market instruments issued by U.S. issuers. The portfolio
may also invest up to 10% of its total assets in securities of foreign issuers
in the form of American Depositary Receipts (ADRs) or similar securities.
In selecting investments, the portfolio managers seek to identify those
companies whose prospects and growth potential are undervalued by investors and
that provide the potential for attractive returns. The portfolio managers
allocate investments among fixed income securities based on their views as to
the best values then currently available in the marketplace. The portfolio
managers usually sell a particular security when any of those factors materially
changes.
[In anticipation of or in response to adverse market conditions or for cash
management purposes, the portfolio may hold all or a portion of its assets in
cash, high-quality money market or high-quality domestic debt securities. As a
result, the fund or the portfolio may not achieve its investment objective.]
The portfolio may engage in active and frequent trading of portfolio securities
to achieve its investment objective. If the portfolio does trade in this way, it
may incur increased transaction costs and brokerage commissions, both of which
can lower the actual return on your investment. Active trading may also increase
short-term capital gains and losses, which may affect the taxes you have to pay.
If the fund's Board of Trustees determines that it is in the best interests of
the fund and its shareholders, the fund may redeem its investment in the
portfolio.
PRINCIPAL RISKS OF INVESTING IN THE FUND
There is a risk that you could lose all or a portion of your investment in the
fund. The value of your investment in the fund will go up and down with the
prices of the securities in which the portfolio invests. The price of equity
securities goes up and down in response to many factors, including the
historical and prospective earnings of the issuer of the stock, the value of its
assets, general economic conditions, interest rates, investor perceptions, and
market liquidity. [Debt securities are particularly vulnerable to credit risk
and interest rate fluctuations. When interest rates rise, bond prices fall; the
longer a bond's duration, the more sensitive it is to this risk.]
The fund also may invest in securities issued by foreign companies, which have
additional risks, including exchange rate changes, political and economic
upheaval, the relative lack of information about these companies, relatively low
market liquidity and the potential lack of strict financial and accounting
controls and standards.
The fund could be adversely affected if the computer systems used by the fund's
investment advisor and the fund's other service providers do not properly
process and calculate date-related information from and after January 1, 2000.
The fund's investment advisor and independent technology consultants are
working to avoid year 2000-related problems in its systems and to obtain
assurances from other service providers that they are taking similar steps. In
addition, issuers of securities in which the fund invests may be adversely
affected by year 2000-related problems. This could have an impact on the value
of the fund's investments and its share price.
3
<PAGE> 135
An investment in the fund is not a deposit of a bank and is not insured or
guaranteed by the Federal Deposit Insurance Corporation or any other government
agency.
4
<PAGE> 136
PERFORMANCE INFORMATION
The bar chart and table shown below provide an indication of the risks of
investing in the fund. The fund's past performance is not necessarily an
indication of its future performance.
ANNUAL TOTAL RETURNS
The following bar chart shows changes in the performance of the fund's Advisor
Class shares from year to year.
Basic Value Adv
[GRAPH]
<TABLE>
<CAPTION>
Year Return %
---- --------
<S> <C>
1996 ............................................ 15.58%
1997 ............................................ 27.78%
1998 ............................................ 7.43%
</TABLE>
During the period shown in the bar chart, the highest quarterly return was
15.11% (quarter ended 12/31/98) and the lowest quarterly return was (12.52)%
(quarter ended 9/30/98).
5
<PAGE> 137
PERFORMANCE TABLE
The following performance table shows how the fund's average annual total
returns for one year and since inception compared to those of a broad-based
securities market index.
<TABLE>
<CAPTION>
==========================================================================================
Average Annual Total Returns Since Inception
(for the periods ended December 31, 1998) 1 Year Inception Date
- ------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Advisor Class 7.43% 19.57% 10/18/95
- ------------------------------------------------------------------------------------------
S&P 500 Index(1) 28.60 29.06(2) 10/31/95
==========================================================================================
</TABLE>
(1) The S&P 500 Index is an unmanaged index of common stocks frequently used as
a general measure of U.S. stock market performance.
(2) The average annual total return given is since the date closest to the
inception date of the Advisor Class.
6
<PAGE> 138
FEE TABLE AND EXPENSE EXAMPLE
FEE TABLE
This table describes the fees and expenses that you may pay if you buy and hold
shares of the fund:
<TABLE>
<CAPTION>
Advisor Class
-------------
<S> <C>
Shareholder Fees (fees paid directly from your investment)
Maximum Sales Charge (Load) Imposed on Purchases
(as a percentage of offering price) None
Maximum Deferred Sales Charge (Load)
(as a percentage of original purchase price
or redemption proceeds, whichever is less) None
Annual Fund Operating Expenses
(expenses that are deducted from fund assets)(1)
Management Fees [0.00%]
Distribution and/or Service (12b-1) Fees None
Other Expenses [0.00]
Total Annual Fund Operating Expenses [0.00]
======
Expense Reimbursements(2) [0.00]
Net Expenses [0.00]
</TABLE>
(1) This fee table, and the expense example below, reflects the expenses of
both the fund and the portfolio.
[(2) The investment advisor has agreed to limit expenses through May 31, 2000.
The waiver may not be terminated.]
EXPENSE EXAMPLE
This example is intended to help you compare the cost of investing in the
Advisor Class of the fund with the cost of investing in other mutual funds.
The example assumes that you invest $10,000 in the fund for the time periods
indicated and then redeem all of your shares at the end of those periods. The
example also assumes that your investment has a 5% return each year and that the
fund's operating expenses remain the same. Although your actual returns and
costs may be higher or lower, based on these assumptions your costs would be:
<TABLE>
<CAPTION>
1 Year 3 Years 5 Years 10 Years
------ ------- ------- --------
<S> <C> <C> <C> <C>
Advisor Class $ -- $ -- $ -- $ --
</TABLE>
7
<PAGE> 139
FUND MANAGEMENT
THE ADVISOR
A I M Advisors, Inc. (the advisor) serves as the investment manager and
administrator for the Basic Value Portfolio (the portfolio) and the fund, and is
responsible for their day-to-day management. The advisor is located at 11
Greenway Plaza, Suite 100, Houston, Texas 77046-1173. The advisor supervises all
aspects of the portfolio's and the fund's operations and provides investment
advisory services to the portfolio, including obtaining and evaluating economic,
statistical and financial information to formulate and implement investment
programs for the portfolio.
The advisor has acted as an investment advisor since its organization in 1976.
Today, the advisor, together with its subsidiaries, advises or manages over 110
investment portfolios, including the fund, encompassing a broad range of
investment objectives.
ADVISOR COMPENSATION
During the fiscal year ended December 31, 1998, the advisor received
compensation of % of average net assets.
PORTFOLIO MANAGERS
The advisor uses a team approach to investment management. The individual
members of the team who are primarily responsible for the day-to-day management
of the portfolio, [all of whom are officers of A I M Capital Management, Inc., a
wholly owned subsidiary of the advisor,] are
o Bret W. Stanley, Senior Portfolio Manager, who has been responsible for
the fund since 1998 and has been associated with the advisor and/or its
affiliates since 1998. From 1994 to 1998, he was Vice President and
portfolio manager with Van Kampen American Capital Asset Management,
Inc.
o Evan G. Harrel, Senior Portfolio Manager, who has been responsible for
the fund since 1998 and has been associated with the advisor and/or its
affiliates since 1998. From 1994 to 1998, he was Vice President of Van
Kampen American Capital Asset Management, Inc.
8
<PAGE> 140
OTHER INFORMATION
DIVIDENDS AND DISTRIBUTIONS
Dividends
The fund generally declares and pays dividends, if any, annually.
Capital Gains Distributions
The fund generally distributes long-term and short-term capital gains (including
any net gains from foreign currency transactions), if any, annually.
9
<PAGE> 141
FINANCIAL HIGHLIGHTS
The financial highlights table is intended to help you understand the fund's
financial performance. Certain information reflects financial results for a
single fund share.
The total returns in the table represent the rate that an investor would have
earned (or lost) on an investment in the fund (assuming reinvestment of all
dividends and distributions).
This information has been audited by PricewaterhouseCoopers LLP, whose report,
along with the fund's financial statements, is included in the fund's annual
report which is available upon request.
<TABLE>
<CAPTION>
October 18,
1995 to
Advisor Class Year Ended December 31, December 31,
- ------------- --------------------------------------------- -----------
1998 1997(b) 1996 1995
------------ ------------ ------------ ----------
<S> <C> <C> <C> <C>
Net asset value, beginning of period $ xx.xx $ xx.xx $ xx.xx $ xx.xx
- ----------------------------------------------------------------- -------- -------- -------- --------
Income from investment operations:
Net investment income (loss) (x.xx)(a) (x.xx)(a) (x.xx)(a) (x.xx)
- ----------------------------------------------------------------- -------- -------- -------- --------
Net gains on securities (both realized and unrealized) (x.xx) (x.xx) (x.xx) (x.xx)
- ----------------------------------------------------------------- -------- -------- -------- --------
Total from investment operations (x.xx) (x.xx) (x.xx) (x.xx)
================================================================= ======== ======== ======== ========
Less distributions: (x.xx) (x.xx) (x.xx) (x.xx)
Dividends from net investment income: (x.xx) (x.xx) (x.xx) (x.xx)
- ----------------------------------------------------------------- -------- -------- -------- --------
Distributions from capital gains: (x.xx) (x.xx) (x.xx) (x.xx)
- ----------------------------------------------------------------- -------- -------- -------- --------
Total distributions (x.xx) (x.xx) (x.xx) (x.xx)
- ----------------------------------------------------------------- -------- -------- -------- --------
Net asset value, end of period $ xx.xx $ xx.xx $ xx.xx $ xx.xx
================================================================= ======== ======== ======== ========
Total return (b) (x.xx)% (x.xx)% (x.xx)% (x.xx)%
================================================================= ======== ======== ======== ========
Ratios/supplemental data:
Net assets, end of period (000s omitted) $ xx,xxx $xx,xxx $ xx,xxx $ xx,xxx
================================================================= ======== ======== ======== ========
Ratio of expenses to average net assets (c) x.xx% x.xx% x.xx% x.xx%
================================================================= ======== ======== ======== ========
Ratio of net investment income (loss) to average net assets(c) (x.xx)%(d) (x.xx)% (x.xx)% (x.xx)%
================================================================= ======== ======== ======== ========
Portfolio turnover rate xx%(d) xx% xx% xx%
================================================================= ======== ======== ======== ========
</TABLE>
(a) Calculated using average shares outstanding.
(b) Does not deduct sales charges.
(c) After fee waivers and/or expense reimbursements. The ratios of expenses to
average net assets prior to fee waivers and/or expense reimbursements were
x.xx%, x.xx%, x.xx% and x.xx% for 1998-1995.
(d) After fee waivers and/or expense reimbursements. The ratios of net
investment income (loss) to average net assets prior to fee waivers and/or
expense reimbursements were x.xx%, x.xx% x.xx% and x.xx% for 1998-1995.
10
<PAGE> 142
Shareholder Information for Advisor Class Shares
- --------------------------------------------------------------------------------
PURCHASING SHARES
MINIMUM INVESTMENTS PER AIM ACCOUNT
The minimum initial investment for Advisor Class shares is $500; and the minimum
investment for purchases of additional Advisor Class shares is $50.
HOW TO PURCHASE SHARES
Shares offered by this prospectus are available for purchase only by certain
investors and are offered at net asset value without the imposition of a
front-end or contingent deferred sales charge or Rule 12b-1 fees. Advisor Class
shares are available through financial consultants (such as financial planners,
trust companies, bank trust departments, and registered investment advisors). In
order to purchase Advisor Class shares of any of the funds advised by the
advisor (the AIM Funds), your financial consultant, on your behalf, must submit
a fully completed new account application form directly to the transfer agent.
You may purchase shares using one of the options below.
<TABLE>
<CAPTION>
PURCHASE OPTIONS
- ----------------------------------------------------------------------------------------------------------
OPENING AN ACCOUNT ADDING TO AN ACCOUNT
- ----------------------------------------------------------------------------------------------------------
<S> <C> <C>
Through a Financial Consultant Contact your financial consultant. Same
By Mail Must be submitted by your financial Mail your check and the remittance
consultant. slip from your confirmation
statement to the transfer agent.
A I M Fund Services, Inc.
P.O. Box 4739
Houston, TX 77210-4739
By Wire Your financial consultant must mail Call the transfer agent to receive
a completed account application to a reference number. Then, use the
the transfer agent. You or your wire instructions at left.
financial consultant may call the
transfer agent at (800) 959-4246 to
receive a reference number. Then,
use the following wire
instructions:
Beneficiary Bank ABA/Routing #:
113000609
Beneficiary Account Number:
00100366807
Beneficiary Account Name: A I M
Fund Services, Inc.
RFB: Fund Name, Reference #
OBI: Your Name, Account #
By AIM Bank Connection(SM) Open your account using one of the Mail completed AIM Bank
methods described above. Connection(SM) form to the transfer
agent. Once the transfer agent has
received the form, call the
transfer agent to place your
purchase order.
- ----------------------------------------------------------------------------------------------------------
</TABLE>
A- 1 ADV--03/99
<PAGE> 143
SPECIAL PLANS
AUTOMATIC DIVIDEND INVESTMENT
All of your dividends and distributions may be paid in cash or invested in
Advisor Class shares of certain AIM Funds. Unless you specify otherwise, your
dividends and distributions will automatically be reinvested in the same AIM
Fund.
You must comply with the following requirements to be eligible to invest your
dividends and distributions in Advisor Class shares of another AIM Fund:
(1) Your account balance (a) in the AIM Fund paying the dividend or distribution
must be at least $5,000; or (b) in the AIM Fund receiving the dividend or
distribution must be at least $500;
(2) Both accounts must have identical registration information; and
(3) You must have completed an authorization form to reinvest dividends and
distributions into another AIM Fund.
PORTFOLIO REBALANCING PROGRAM
If you have at least $5,000 in your account, you may participate in the
Portfolio Rebalancing Program. Under this program, you can designate how the
total value of your holdings of Advisor Class shares of AIM Funds should be
rebalanced, on a percentage basis, between two and ten of your AIM Funds on a
quarterly, semiannual, or annual basis. Your portfolio will be rebalanced
through the exchange of shares in one or more of your AIM Funds for Advisor
Class shares of one or more other AIM Funds in your portfolio. If you wish to
participate in the Program, make changes or cancel the Program, the transfer
agent must receive your request to participate, changes, or cancellation in good
order at least five business days prior to the next rebalancing date, which is
normally the 28th day of the last month of the period you choose. You may
realize taxable gains from these exchanges. We may modify, suspend, or terminate
the program at any time on 60 days' prior written notice.
THE DISTRIBUTOR AND ITS AGENTS RESERVE THE RIGHT AT ANY TIME TO (1) REJECT OR
CANCEL ANY PART OF ANY PURCHASE OR EXCHANGE ORDER; (2) MODIFY ANY TERMS OR
CONDITIONS OF PURCHASE OF SHARES OF ANY AIM FUND; OR (3) WITHDRAW ALL OR ANY
PART OF THE OFFERING MADE BY THIS PROSPECTUS.
REDEEMING SHARES
REDEMPTION FEES
No redemption fee is imposed when shares are redeemed or repurchased; however,
dealers/financial institutions may charge service fees for handling repurchase
transactions.
HOW TO REDEEM SHARES
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
Through a Financial Contact your financial consultant.
Consultant
By Mail Send a written request to the transfer agent. Requests must
include (1) original signatures of all registered owners;
(2) the name of the AIM Fund and your account number; (3) if
the transfer agent does not hold your shares, endorsed share
certificates or share certificates accompanied by an
executed stock power; and (4) signature guarantees, if
necessary (see below). The transfer agent may require that
you provide additional information, such as corporate
resolutions or powers of attorney, if applicable.
By Telephone Call the transfer agent. You will be allowed to redeem by
telephone if (1) the proceeds are to be mailed to the
address on record with us or transferred electronically to a
pre-authorized checking account; (2) the address on record
with us has not been changed within the last 30 days; (3)
you do not hold physical share certificates; (4) you can
provide proper identification information; (5) the proceeds
of the redemption do not exceed $50,000; and (6) you have
not previously declined the telephone redemption privilege.
The transfer agent must receive your call during the hours
the New York Stock Exchange (NYSE) is open for business in
order to effect the redemption at that day's closing price.
</TABLE>
- --------------------------------------------------------------------------------
ADV--03/99 A- 2
<PAGE> 144
TIMING AND METHOD OF PAYMENT
We normally will send out checks within one business day, and in any event no
more than seven days, after we accept your request to redeem. If you redeem
shares recently purchased by check, you will be required to wait up to ten
business days before we will send your redemption proceeds. This delay is
necessary to ensure that the purchase check has cleared.
REDEMPTION BY MAIL
If you mail us a request in good order to redeem your shares, we will mail you a
check in the amount of the redemption proceeds at the address on record with us.
REDEMPTION BY TELEPHONE
If you redeem by telephone, we will mail you a check in the amount of the
redemption proceeds to your address of record (if there has been no change
communicated to the transfer agent within the previous 30 days) or transmit them
electronically to your pre-authorized bank account. We use reasonable procedures
to confirm that instructions communicated by telephone are genuine and are not
liable for telephone instructions that are reasonably believed to be genuine.
SIGNATURE GUARANTEES
We require a signature guarantee when you redeem by mail and
(1) the amount is greater than $50,000;
(2) you request that payment be made to someone other than the name registered
on the account;
(3) you request that payment be sent somewhere other than the bank of record on
the account; or
(4) you request that payment be sent to a new address or an address that changed
in the last 30 days.
The transfer agent will accept a guarantee of your signature by a number of
financial institutions. Call the transfer agent for additional information.
REDEMPTIONS BY THE AIM FUNDS
If your account has been open at least one year, you have not made an additional
purchase in the account during the past six calendar months, and the value of
your account falls below $500 for three consecutive months due to redemptions or
exchanges (excluding retirement accounts), the AIM Funds have the right to
redeem the account after giving you 60 days' prior written notice. You may avoid
having your account redeemed during the notice period by bringing the account
value up to $500.
If an AIM Fund determines that you have provided incorrect information in
opening an account or in the course of conducting subsequent transactions, the
AIM Fund may, in its discretion, redeem the account and distribute the proceeds
to you.
EXCHANGING SHARES
You may, under certain circumstances, exchange Advisor Class shares in one AIM
Fund for Advisor Class shares of another AIM Fund. Before requesting an
exchange, review the prospectus of the AIM Fund you wish to acquire.
EXCHANGE CONDITIONS
The following conditions apply to all exchanges:
- - You must meet the minimum purchase requirements for the AIM Fund into which
you are exchanging;
- - Shares of the AIM Fund you wish to acquire must be qualified for sale in your
state of residence;
- - Exchanges must be made between accounts with identical registration
information;
- - The account you wish to exchange from must have a certified tax identification
number (or the Fund has received an appropriate Form W-8 or W-9);
- - The AIM Fund from which you are exchanging must have received the full amount
of the purchase price for the shares being exchanged;
- - Recently acquired shares must have been held in your account for ten business
days, and all other shares must have been held for at least one day, prior to
the exchange; and
- - If you have physical share certificates, you must return them to the transfer
agent prior to the exchange.
TERMS OF EXCHANGE
Under unusual market conditions, an AIM Fund may delay the issuance of shares
being purchased in an exchange for up to five business days if it determines
that it would be materially disadvantaged by the immediate transfer of exchange
proceeds.
There is no fee for exchanges. The exchange privilege is not an option or
right to purchase shares. Any of the participating AIM Funds or the distributor
may modify or discontinue this privilege at any time.
BY MAIL
If you wish to make an exchange by mail, you must include original signatures of
each registered owner exactly as the shares are registered, the account
registration and account number, the dollar amount or number of shares to be
exchanged and the names of the AIM Funds from which and into which the exchange
is to be made.
BY TELEPHONE
Conditions that apply to exchanges by telephone are the same as redemptions by
telephone, including that the transfer agent must receive exchange requests
during the hours the New York Stock Exchange (NYSE) is open for business;
however, you still will be allowed to exchange by telephone even if you have
changed your address of record within the preceding 30 days.
A- 3 ADV--03/99
<PAGE> 145
PRICING OF SHARES
DETERMINATION OF NET ASSET VALUE
The price of each AIM Fund's shares is the fund's net asset value per share. The
AIM Funds value portfolio securities for which market quotations are readily
available at market value. The AIM Funds value short-term investments maturing
within 60 days at amortized cost, which approximates market value. The AIM Funds
value all other securities and assets at their fair value. Securities and other
assets quoted in foreign currencies are valued in U.S. dollars based on the
prevailing exchange rates on that day. In addition, if, between the time trading
ends on a particular security and the close of the New York Stock Exchange
(NYSE), events occur that materially affect the value of the security, the AIM
Funds may value the security at its fair value as determined in good faith by or
under the supervision of the Board of Trustees of the AIM Fund. The effect of
using fair value pricing is that an AIM Fund's net asset value will be subject
to the judgment of the Board of Trustees instead of being determined by the
market. Because some of the AIM Funds may invest in securities that are
primarily listed on foreign exchanges, the value of those funds' shares may
change on days when you will not be able to purchase or redeem shares.
Each AIM Fund determines the net asset value of its shares as of the close of
the NYSE on each day the NYSE is open for business.
TIMING OF ORDERS
You can purchase, exchange or redeem shares during the hours the NYSE is open
for business. The AIM Funds price purchase, exchange, and redemption orders
calculated at the net asset value after the transfer agent receives an order in
good form. An AIM Fund may postpone the right of redemption only under unusual
circumstances, such as when the NYSE restricts or suspends trading.
TAXES
In general, dividends and distributions you receive are taxable as ordinary
income or long-term capital gains for federal income tax purposes, whether you
reinvest them in additional shares or take them in cash. Distributions are
taxable to you at different rates depending on the length of time the fund holds
its assets. Different rates of tax apply to ordinary income and long-term
capital gain distributions. Every year, you will be sent information showing the
amount of dividends and distributions you received from each AIM Fund during the
prior year will be sent to you.
Any long-term or short-term capital gains realized from redemptions of AIM
Fund shares will be subject to federal income tax. Exchanges of shares for
shares of another AIM Fund are treated as a sale, and any gain realized on the
transaction will generally be subject to federal income tax.
The foreign, state, and local tax consequences of investing in AIM Fund shares
may differ materially from the federal income tax consequences described above.
You should consult your tax advisor before investing.
ADV--03/99 A- 4
<PAGE> 146
[BACK COVER PAGE]
OBTAINING ADDITIONAL INFORMATION
More information may be obtained free of charge upon request. The Statement of
Additional Information (SAI), a current version of which is on file with the
Securities and Exchange Commission (SEC), contains more details about the fund
and is incorporated by reference into the prospectus (is legally a part of this
prospectus). Annual and semiannual reports to shareholders contain additional
information about the fund's investments. The fund's annual report also
discusses the market conditions and investment strategies that significantly
affected the fund's performance during its last fiscal year.
If you have questions about this fund, another fund in The AIM Family of Funds
or your account, or wish to obtain free copies of the fund's current SAI or
annual or semiannual reports, please contact us:
BY MAIL: A I M Distributors, Inc.
11 Greenway Plaza, Suite 100
Houston, TX 77046-1173
BY TELEPHONE: (800) 347-4246
BY E-MAIL: [email protected]
ON THE INTERNET: http://www.aimfunds.com (prospectuses and annual and
semiannual reports only)
You also can obtain copies of the fund's SAI and other information at the SEC's
Public Reference Room in Washington, D.C., on the SEC's website
(http://www.sec.gov), or by sending a letter, including a duplicating fee, to
the SEC's Public Reference Section, Washington, D.C. 20549-6009. Please call the
SEC at 1-800-SEC-0330 for information about the Public Reference Room.
AIM Basic Value Fund - Advisor Class
SEC 1940 Act file number: 811-2699
<PAGE> 147
The information in this prospectus is not complete and may be changed. We may
not sell these securities until the registration statement filed with the
Securities and Exchange Commission is effective. This prospectus is not an offer
to sell these securities and is not soliciting an offer to buy these securities
in any state where the offer or sale is not permitted.
Subject to Completion dated February 12, 1999
[AIM LOGO]
AIM EUROPE GROWTH FUND
(ADVISOR CLASS)
PROSPECTUS
MAY 3, 1999
AIM Europe Growth Fund seeks to provide long-term growth of capital.
This prospectus contains important information. Please read it before investing
and keep it for future reference.
An investment in the fund is not a deposit of a bank and is not insured or
guaranteed by the Federal Deposit Insurance Corporation or any other government
agency. There is a risk that you could lose a portion or all of your money.
AS WITH ALL OTHER MUTUAL FUND SECURITIES, THE SECURITIES AND EXCHANGE COMMISSION
HAS NOT APPROVED OR DISAPPROVED THESE SECURITIES OR DETERMINED WHETHER THE
INFORMATION IN THIS PROSPECTUS IS ADEQUATE OR ACCURATE. ANYONE
WHO TELLS YOU OTHERWISE IS COMMITTING A CRIME.
1
<PAGE> 148
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
<S> <C>
INVESTMENT OBJECTIVE AND STRATEGIES.................................................................... 3
PRINCIPAL RISKS OF INVESTING IN THE FUND............................................................... 3
PERFORMANCE INFORMATION................................................................................ 5
ANNUAL TOTAL RETURNS.......................................................................... 5
PERFORMANCE TABLE............................................................................. 6
FEE TABLE AND EXPENSE EXAMPLE.......................................................................... 7
FEE TABLE..................................................................................... 7
EXPENSE EXAMPLE............................................................................... 7
FUND MANAGEMENT........................................................................................ 8
THE ADVISOR AND SUBADVISOR.................................................................... 8
ADVISOR COMPENSATION.......................................................................... 8
PORTFOLIO MANAGER............................................................................. 8
OTHER INFORMATION...................................................................................... 9
DIVIDENDS AND DISTRIBUTIONS................................................................... 9
FINANCIAL HIGHLIGHTS................................................................................... 10
SHAREHOLDER INFORMATION................................................................................ A-1
PURCHASING SHARES............................................................................. A-1
REDEEMING SHARES.............................................................................. A-2
EXCHANGING SHARES............................................................................. A-3
PRICING OF SHARES............................................................................. A-4
TAXES......................................................................................... A-4
OBTAINING ADDITIONAL INFORMATION............................................................BACK COVER PAGE
</TABLE>
The AIM Family of Funds--Registered Trademark--, The AIM Family of Funds and
Design (i.e., the AIM logo), AIM and Design, AIM, AIM LINK, AIM Institutional
Funds, aimfunds.com, La Familia AIM de Fondos--Registered Trademark--, La
Familia AIM de Fondos and Design and Invest with Discipline are registered
service marks and AIM Bank Connection is a service mark of A I M Management
Group Inc.
2
<PAGE> 149
INVESTMENT OBJECTIVE AND STRATEGIES
The fund's investment objective is long-term growth of capital.
The fund seeks to achieve its objective by investing, normally, at least 65% of
its total assets in equity securities of issuers domiciled in eighteen (twenty)
countries located in Europe. These countries are designated as the fund's
primary investment area and the list of countries may be revised with the
approval of the fund's Board of Trustees. The fund considers a company to be
domiciled in a particular country if it (i) is organized under the laws of a
particular country and has a principal office in a particular country; or (ii)
derives 50% or more of its total revenues from business in that country provided
that, in the view of the fund's portfolio managers, the value of the issuers'
securities tend to reflect such country's development to a greater extent than
developments elsewhere.
The fund may invest up to 35% of its total assets in the equity securities of
issuers domiciled outside of its primary investment area. The fund may also
invest up to 35% of its total assets in U.S. and foreign investment-grade debt
securities, or securities deemed by the fund's subadvisor to be of comparable
quality. These debt securities could include U.S. and foreign government
securities and corporate debt securities.
In selecting investments, the fund's portfolio managers seek to identify those
countries and industries where political and economic factors, including
currency movements, are likely to produce above-average growth rates. The fund's
portfolio managers then balance the potential benefits with the risks of
investing in those countries and industries. The fund's portfolio managers
usually sell a particular security when any of those factors materially changes.
[In anticipation of or in response to adverse market conditions, the fund may
invest up to 100% of its total assets in the securities of U.S. issuers and
denominated in U.S. dollars. During periods of adverse market conditions or for
cash management purposes, in addition to investing in the securities of U.S.
issuers, the fund may hold all or a portion of its assets in cash (U.S. dollars,
foreign currency or multinational currency units), money market securities, or
high quality debt securities issued by corporations or the U.S. or a foreign
government. As a result, the fund may not achieve its investment objective.]
[The fund may engage in active and frequent trading of portfolio securities to
achieve its investment objective. If the fund does trade in this way, it may
incur increased transaction costs and brokerage commissions, both of which can
lower the actual return on your investment. Active trading may also increase
short-term capital gains and losses, which may affect the taxes you have to
pay.]
PRINCIPAL RISKS OF INVESTING IN THE FUND
There is a risk that you could lose all or a portion of your investment in the
fund. The value of your investment in the fund will go up and down with the
prices of the securities in which the fund invests. The price of equity
securities goes up and down in response to many factors, including the
historical and prospective earnings of the issuer of the stock, the value of its
assets, general economic conditions, interest rates, investor perceptions, and
market liquidity. [Debt securities are particularly vulnerable to credit risk
and interest rate fluctuations. When interest rates rise, bond prices fall; the
longer a bond's duration, the more sensitive it is to this risk.]
Because the fund focuses its investments in European countries, the value of
your shares may rise and fall more than the value of shares of a fund that
invests in a broader geographic region.
The prices of foreign securities may be further affected by other factors,
including:
3
<PAGE> 150
o Currency Exchange Rates -- The dollar value of the fund's foreign
investments will be affected by changes in the exchange rates between the
dollar and the currencies in which those investments are traded.
o Political and Economic Conditions -- The value of the fund's investments
may be adversely affected by political and social instability and by
changes in economic or taxation policies.
o Regulations --Foreign companies generally are subject to less stringent
regulations, including financial and accounting controls, than are U.S.
companies. As a result, among other things, there generally is less
publicly available information about foreign companies than about U.S.
companies.
o Markets -- The securities markets of other countries are smaller than U.S.
securities markets. As a result, many foreign securities may be less liquid
and more volatile than U.S. securities.
[If the seller of a repurchase agreement in which the fund invests defaults on
its obligation or declares bankruptcy, the fund may experience delays in selling
the securities underlying the repurchase agreement. As a result, the fund may
incur losses arising from decline in the value of those securities, reduced
levels of income and expenses of enforcing its rights.]
The fund could be adversely affected if the computer systems used by the fund's
investment advisor and the fund's other service providers do not properly
process and calculate date-related information from and after January 1, 2000.
The fund's investment advisor and independent technology consultants are
working to avoid year 2000-related problems in its systems and to obtain
assurances from other service providers that they are taking similar steps. In
addition, issuers of securities in which the fund invests may be adversely
affected by year 2000-related problems. This could have an impact on the value
of the fund's investments and its share price.
An investment in the fund is not a deposit of a bank and is not insured or
guaranteed by the Federal Deposit Insurance Corporation or any other government
agency.
4
<PAGE> 151
PERFORMANCE INFORMATION
The bar chart and table shown below provide an indication of the risks of
investing in the fund. The fund's past performance is not necessarily an
indication of its future performance.
ANNUAL TOTAL RETURNS
The following bar chart shows changes in the performance of the fund's Advisor
Class shares from year to year.
[GRAPH]
Europe Growth Adv
<TABLE>
<CAPTION>
YEAR RETURN (%)
---- ----------
<S> <C>
1996 ...................... 20.21
1997 ...................... 11.64
1998 ...................... 16.88
</TABLE>
During the period shown in the bar chart, the highest quarterly return was
23.46% (quarter ended 3/31/98) and the lowest quarterly return was (21.06)%
(quarter ended 9/30/98).
5
<PAGE> 152
PERFORMANCE TABLE
The following performance table shows how the fund's average annual total
returns for one year and since completion compared to those of a broad-based
securities market index.
<TABLE>
<CAPTION>
=======================================================================================================
Average Annual Total Returns
(for the periods ended December 31, 1998)
Since Inception
1 Year Inception Date
- -------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Advisor Class 16.88% 15.55% 6/1/95
- -------------------------------------------------------------------------------------------------------
MSCI Europe Index (1) 28.53 22.94(2) 5/31/95
=======================================================================================================
</TABLE>
(1) The MSCI Europe Index measures performance for 14 European developed
country stock markets. The index is capitalization weighted. Companies
included in the index replicate the industry composition of each local
market and, in addition, represent a sampling of large, medium and small
capitalization companies from each local market, taking into account the
stock's liquidity.
(2) The average annual total return given is since the closest to the inception
date of the Advisor Class.
6
<PAGE> 153
FEE TABLE AND EXPENSE EXAMPLE
FEE TABLE
This table describes the fees and expenses that you may pay if you buy and hold
shares of the fund:
<TABLE>
<CAPTION>
Advisor Class
-------------
<S> <C>
Shareholder Fees (fees paid directly from your investment)
Maximum Sales Charge (Load) Imposed on Purchases
(as a percentage of offering price) None
Maximum Deferred Sales Charge (Load)
(as a percentage of original purchase price
or redemption proceeds, whichever is less) None
Annual Fund Operating Expenses
(expenses that are deducted from fund assets)
Management Fees [0.00%]
Distribution and/or Service (12b-1) Fees None
Other Expenses [0.00]
Total Annual Fund Operating Expenses [0.00]
=====
Expense Reimbursement (1) [0.00]
Net Expenses [0.00]
</TABLE>
- -------------------
[(1) The investment advisor has agreed to limit expenses through May 31, 2000.
The waiver may not be terminated.]
EXPENSE EXAMPLE
This example is intended to help you compare the cost of investing in the
Advisor Class of the fund with the cost of investing in other mutual funds.
The example assumes that you invest $10,000 in the fund for the time periods
indicated and then redeem all of your shares at the end of those periods. The
example also assumes that your investment has a 5% return each year and that the
fund's operating expenses remain the same. Although your actual returns and
costs may be higher or lower, based on these assumptions your costs would be:
<TABLE>
<CAPTION>
1 Year 3 Years 5 Years 10 Years
------ ------- ------- --------
<S> <C> <C> <C> <C>
Advisor Class $ -- $ -- $ -- $ --
</TABLE>
7
<PAGE> 154
FUND MANAGEMENT
THE ADVISOR AND SUBADVISOR
A I M Advisors, Inc. (the advisor) serves as the fund's investment advisor.
INVESCO Asset Management Ltd. (the subadvisor) an affiliate of the advisor, is
the fund's subadvisor and is responsible for its day-to-day management. The
advisor is located at 11 Greenway Plaza, Suite 100, Houston, Texas 77046-1173.
The subadvisor is located at 11 Devonshire Square, London, EC2M 4YR, England.
The advisors supervise all aspects of the fund's operations and provide
investment advisory services to the fund, including obtaining and evaluating
economic, statistical and financial information to formulate and implement
investment programs for the fund.
The advisor has acted as an investment advisor since its organization in 1976
and the subadvisor has acted as an investment adviser since its organization in
_______________________. Today, the advisor, together with its subsidiaries,
advises or manages over 110 investment portfolios, including the fund,
encompassing a broad range of investment objectives.
ADVISOR COMPENSATION
During the fiscal year ended December 31, 1998, the advisor received
compensation of __% of average net assets.
PORTFOLIO MANAGER
The advisor uses a team approach to investment management. The individual member
of the team who is primarily responsible for the day-to-day management of the
fund's portfolio, [who is an officer of the subadvisor,] is
o Steven Chamberlain, Portfolio Manager, who has been responsible for the
fund since 1999 and has been associated with the advisor and/or its
affiliates since 1989.
8
<PAGE> 155
OTHER INFORMATION
DIVIDENDS AND DISTRIBUTIONS
Dividends
The fund generally declares and pays dividends, if any, annually.
Capital Gains Distributions
The fund generally distributes long-term and short-term capital gains (including
any net gains from foreign currency transactions), if any, annually.
9
<PAGE> 156
FINANCIAL HIGHLIGHTS
The financial highlights table is intended to help you understand the fund's
financial performance. Certain information reflects financial results for a
single fund share.
The total returns in the table represent the rate that an investor would have
earned (or lost) on an investment in the fund (assuming reinvestment of all
dividends and distributions).
This information has been audited by PricewaterhouseCoopers LLP, whose report,
along with the fund's financial statements, is included in the fund's annual
report which is available upon request.
<TABLE>
<CAPTION>
June 1,
1995 to
Advisor Class Year Ended December 31, December 31,
- -------------- ----------------------------------------------- -------------
1998 1997(b) 1996 1995
-------------- -------------- ------------- -------------
<S> <C> <C> <C> <C>
Net asset value, beginning of period $ xx.xx $ xx.xx $ xx.xx $ xx.xx
- --------------------------------------------------------- --------- ---------- ----------- ---------
Income from investment operations:
Net investment income (loss) (x.xx)(a) (x.xx)(a) (x.xx)(a) (x.xx)
- --------------------------------------------------------- --------- ---------- ----------- ---------
Net gains on securities (both realized and unrealized) (x.xx) (x.xx) (x.xx) (x.xx)
========================================================= ========= ========== =========== =========
Total from investment operations (x.xx) (x.xx) (x.xx) (x.xx)
========================================================= ========= ========== =========== =========
Less distributions: (x.xx) (x.xx) (x.xx) (x.xx)
Dividends from net investment income: (x.xx) (x.xx) (x.xx) (x.xx)
- --------------------------------------------------------- --------- ---------- ----------- ---------
Distributions from capital gains: (x.xx) (x.xx) (x.xx) (x.xx)
========================================================= ========= ========== =========== =========
Total distributions (x.xx) (x.xx) (x.xx) (x.xx)
========================================================= ========= ========== =========== =========
Net asset value, end of period $ xx.xx $ xx.xx $ xx.xx $ xx.xx
========================================================= ========= ========== =========== =========
Total return (b) (x.xx)% (x.xx)% (x.xx)% (x.xx)%
========================================================= ========= ========== =========== =========
Ratios/supplemental data:
Net assets, end of period (000s omitted) $ xx,xxx $ xx,xxx $ xx,xxx $ xx,xxx
========================================================= ========= ========== =========== =========
Ratio of expenses to average net assets (c) x.xx% x.xx% x.xx% x.xx%
========================================================= ========= ========== =========== =========
Ratio of net investment income (loss) to
average net assets (c) (x.xx)%(d) (x.xx)% (x.xx)% (x.xx)%
========================================================= ========= ========== =========== =========
Portfolio turnover rate xx% (d) xx% xx% xx%
========================================================= ========= ========== =========== =========
</TABLE>
(a) Calculated using average shares outstanding.
(b) Does not deduct sales charges.
(c) After fee waivers and/or expense reimbursements. The ratios of expenses to
average net assets prior to fee waivers and/or expense reimbursements were
x.xx%, x.xx%, x.xx% and x.xx% for 1998-1995.
(d) After fee waivers and/or expense reimbursements. The ratios of net
investment income (loss) to average net assets prior to fee waivers and/or
expense reimbursements were x.xx%, x.xx% x.xx% and x.xx% for 1998-1995.
10
<PAGE> 157
Shareholder Information for Advisor Class Shares
- --------------------------------------------------------------------------------
PURCHASING SHARES
MINIMUM INVESTMENTS PER AIM ACCOUNT
The minimum initial investment for Advisor Class shares is $500; and the minimum
investment for purchases of additional Advisor Class shares is $50.
HOW TO PURCHASE SHARES
Shares offered by this prospectus are available for purchase only by certain
investors and are offered at net asset value without the imposition of a
front-end or contingent deferred sales charge or Rule 12b-1 fees. Advisor Class
shares are available through financial consultants (such as financial planners,
trust companies, bank trust departments, and registered investment advisors). In
order to purchase Advisor Class shares of any of the funds advised by the
advisor (the AIM Funds), your financial consultant, on your behalf, must submit
a fully completed new account application form directly to the transfer agent.
You may purchase shares using one of the options below.
<TABLE>
<CAPTION>
PURCHASE OPTIONS
- ----------------------------------------------------------------------------------------------------------
OPENING AN ACCOUNT ADDING TO AN ACCOUNT
- ----------------------------------------------------------------------------------------------------------
<S> <C> <C>
Through a Financial Consultant Contact your financial consultant. Same
By Mail Must be submitted by your financial Mail your check and the remittance
consultant. slip from your confirmation
statement to the transfer agent.
A I M Fund Services, Inc.
P.O. Box 4739
Houston, TX 77210-4739
By Wire Your financial consultant must mail Call the transfer agent to receive
a completed account application to a reference number. Then, use the
the transfer agent. You or your wire instructions at left.
financial consultant may call the
transfer agent at (800) 959-4246 to
receive a reference number. Then,
use the following wire
instructions:
Beneficiary Bank ABA/Routing #:
113000609
Beneficiary Account Number:
00100366807
Beneficiary Account Name: A I M
Fund Services, Inc.
RFB: Fund Name, Reference #
OBI: Your Name, Account #
By AIM Bank Connection(SM) Open your account using one of the Mail completed AIM Bank
methods described above. Connection(SM) form to the transfer
agent. Once the transfer agent has
received the form, call the
transfer agent to place your
purchase order.
- ----------------------------------------------------------------------------------------------------------
</TABLE>
A- 1 ADV--03/99
<PAGE> 158
SPECIAL PLANS
AUTOMATIC DIVIDEND INVESTMENT
All of your dividends and distributions may be paid in cash or invested in
Advisor Class shares of certain AIM Funds. Unless you specify otherwise, your
dividends and distributions will automatically be reinvested in the same AIM
Fund.
You must comply with the following requirements to be eligible to invest your
dividends and distributions in Advisor Class shares of another AIM Fund:
(1) Your account balance (a) in the AIM Fund paying the dividend or distribution
must be at least $5,000; or (b) in the AIM Fund receiving the dividend or
distribution must be at least $500;
(2) Both accounts must have identical registration information; and
(3) You must have completed an authorization form to reinvest dividends and
distributions into another AIM Fund.
PORTFOLIO REBALANCING PROGRAM
If you have at least $5,000 in your account, you may participate in the
Portfolio Rebalancing Program. Under this program, you can designate how the
total value of your holdings of Advisor Class shares of AIM Funds should be
rebalanced, on a percentage basis, between two and ten of your AIM Funds on a
quarterly, semiannual, or annual basis. Your portfolio will be rebalanced
through the exchange of shares in one or more of your AIM Funds for Advisor
Class shares of one or more other AIM Funds in your portfolio. If you wish to
participate in the Program, make changes or cancel the Program, the transfer
agent must receive your request to participate, changes, or cancellation in good
order at least five business days prior to the next rebalancing date, which is
normally the 28th day of the last month of the period you choose. You may
realize taxable gains from these exchanges. We may modify, suspend, or terminate
the program at any time on 60 days' prior written notice.
THE DISTRIBUTOR AND ITS AGENTS RESERVE THE RIGHT AT ANY TIME TO (1) REJECT OR
CANCEL ANY PART OF ANY PURCHASE OR EXCHANGE ORDER; (2) MODIFY ANY TERMS OR
CONDITIONS OF PURCHASE OF SHARES OF ANY AIM FUND; OR (3) WITHDRAW ALL OR ANY
PART OF THE OFFERING MADE BY THIS PROSPECTUS.
REDEEMING SHARES
REDEMPTION FEES
No redemption fee is imposed when shares are redeemed or repurchased; however,
dealers/financial institutions may charge service fees for handling repurchase
transactions.
HOW TO REDEEM SHARES
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
Through a Financial Contact your financial consultant.
Consultant
By Mail Send a written request to the transfer agent. Requests must
include (1) original signatures of all registered owners;
(2) the name of the AIM Fund and your account number; (3) if
the transfer agent does not hold your shares, endorsed share
certificates or share certificates accompanied by an
executed stock power; and (4) signature guarantees, if
necessary (see below). The transfer agent may require that
you provide additional information, such as corporate
resolutions or powers of attorney, if applicable.
By Telephone Call the transfer agent. You will be allowed to redeem by
telephone if (1) the proceeds are to be mailed to the
address on record with us or transferred electronically to a
pre-authorized checking account; (2) the address on record
with us has not been changed within the last 30 days; (3)
you do not hold physical share certificates; (4) you can
provide proper identification information; (5) the proceeds
of the redemption do not exceed $50,000; and (6) you have
not previously declined the telephone redemption privilege.
The transfer agent must receive your call during the hours
the New York Stock Exchange (NYSE) is open for business in
order to effect the redemption at that day's closing price.
</TABLE>
- --------------------------------------------------------------------------------
ADV--03/99 A- 2
<PAGE> 159
TIMING AND METHOD OF PAYMENT
We normally will send out checks within one business day, and in any event no
more than seven days, after we accept your request to redeem. If you redeem
shares recently purchased by check, you will be required to wait up to ten
business days before we will send your redemption proceeds. This delay is
necessary to ensure that the purchase check has cleared.
REDEMPTION BY MAIL
If you mail us a request in good order to redeem your shares, we will mail you a
check in the amount of the redemption proceeds at the address on record with us.
REDEMPTION BY TELEPHONE
If you redeem by telephone, we will mail you a check in the amount of the
redemption proceeds to your address of record (if there has been no change
communicated to the transfer agent within the previous 30 days) or transmit them
electronically to your pre-authorized bank account. We use reasonable procedures
to confirm that instructions communicated by telephone are genuine and are not
liable for telephone instructions that are reasonably believed to be genuine.
SIGNATURE GUARANTEES
We require a signature guarantee when you redeem by mail and
(1) the amount is greater than $50,000;
(2) you request that payment be made to someone other than the name registered
on the account;
(3) you request that payment be sent somewhere other than the bank of record on
the account; or
(4) you request that payment be sent to a new address or an address that changed
in the last 30 days.
The transfer agent will accept a guarantee of your signature by a number of
financial institutions. Call the transfer agent for additional information.
REDEMPTIONS BY THE AIM FUNDS
If your account has been open at least one year, you have not made an additional
purchase in the account during the past six calendar months, and the value of
your account falls below $500 for three consecutive months due to redemptions or
exchanges (excluding retirement accounts), the AIM Funds have the right to
redeem the account after giving you 60 days' prior written notice. You may avoid
having your account redeemed during the notice period by bringing the account
value up to $500.
If an AIM Fund determines that you have provided incorrect information in
opening an account or in the course of conducting subsequent transactions, the
AIM Fund may, in its discretion, redeem the account and distribute the proceeds
to you.
EXCHANGING SHARES
You may, under certain circumstances, exchange Advisor Class shares in one AIM
Fund for Advisor Class shares of another AIM Fund. Before requesting an
exchange, review the prospectus of the AIM Fund you wish to acquire.
EXCHANGE CONDITIONS
The following conditions apply to all exchanges:
- - You must meet the minimum purchase requirements for the AIM Fund into which
you are exchanging;
- - Shares of the AIM Fund you wish to acquire must be qualified for sale in your
state of residence;
- - Exchanges must be made between accounts with identical registration
information;
- - The account you wish to exchange from must have a certified tax identification
number (or the Fund has received an appropriate Form W-8 or W-9);
- - The AIM Fund from which you are exchanging must have received the full amount
of the purchase price for the shares being exchanged;
- - Recently acquired shares must have been held in your account for ten business
days, and all other shares must have been held for at least one day, prior to
the exchange; and
- - If you have physical share certificates, you must return them to the transfer
agent prior to the exchange.
TERMS OF EXCHANGE
Under unusual market conditions, an AIM Fund may delay the issuance of shares
being purchased in an exchange for up to five business days if it determines
that it would be materially disadvantaged by the immediate transfer of exchange
proceeds.
There is no fee for exchanges. The exchange privilege is not an option or
right to purchase shares. Any of the participating AIM Funds or the distributor
may modify or discontinue this privilege at any time.
BY MAIL
If you wish to make an exchange by mail, you must include original signatures of
each registered owner exactly as the shares are registered, the account
registration and account number, the dollar amount or number of shares to be
exchanged and the names of the AIM Funds from which and into which the exchange
is to be made.
BY TELEPHONE
Conditions that apply to exchanges by telephone are the same as redemptions by
telephone, including that the transfer agent must receive exchange requests
during the hours the New York Stock Exchange (NYSE) is open for business;
however, you still will be allowed to exchange by telephone even if you have
changed your address of record within the preceding 30 days.
A- 3 ADV--03/99
<PAGE> 160
PRICING OF SHARES
DETERMINATION OF NET ASSET VALUE
The price of each AIM Fund's shares is the fund's net asset value per share. The
AIM Funds value portfolio securities for which market quotations are readily
available at market value. The AIM Funds value short-term investments maturing
within 60 days at amortized cost, which approximates market value. The AIM Funds
value all other securities and assets at their fair value. Securities and other
assets quoted in foreign currencies are valued in U.S. dollars based on the
prevailing exchange rates on that day. In addition, if, between the time trading
ends on a particular security and the close of the New York Stock Exchange
(NYSE), events occur that materially affect the value of the security, the AIM
Funds may value the security at its fair value as determined in good faith by or
under the supervision of the Board of Trustees of the AIM Fund. The effect of
using fair value pricing is that an AIM Fund's net asset value will be subject
to the judgment of the Board of Trustees instead of being determined by the
market. Because some of the AIM Funds may invest in securities that are
primarily listed on foreign exchanges, the value of those funds' shares may
change on days when you will not be able to purchase or redeem shares.
Each AIM Fund determines the net asset value of its shares as of the close of
the NYSE on each day the NYSE is open for business.
TIMING OF ORDERS
You can purchase, exchange or redeem shares during the hours the NYSE is open
for business. The AIM Funds price purchase, exchange, and redemption orders
calculated at the net asset value after the transfer agent receives an order in
good form. An AIM Fund may postpone the right of redemption only under unusual
circumstances, such as when the NYSE restricts or suspends trading.
TAXES
In general, dividends and distributions you receive are taxable as ordinary
income or long-term capital gains for federal income tax purposes, whether you
reinvest them in additional shares or take them in cash. Distributions are
taxable to you at different rates depending on the length of time the fund holds
its assets. Different rates of tax apply to ordinary income and long-term
capital gain distributions. Every year, you will be sent information showing the
amount of dividends and distributions you received from each AIM Fund during the
prior year will be sent to you.
Any long-term or short-term capital gains realized from redemptions of AIM
Fund shares will be subject to federal income tax. Exchanges of shares for
shares of another AIM Fund are treated as a sale, and any gain realized on the
transaction will generally be subject to federal income tax.
The foreign, state, and local tax consequences of investing in AIM Fund shares
may differ materially from the federal income tax consequences described above.
You should consult your tax advisor before investing.
ADV--03/99 A- 4
<PAGE> 161
[BACK COVER PAGE]
OBTAINING ADDITIONAL INFORMATION
More information may be obtained free of charge upon request. The Statement of
Additional Information (SAI), a current version of which is on file with the
Securities and Exchange Commission (SEC), contains more details about the fund
and is incorporated by reference into the prospectus (is legally a part of this
prospectus). Annual and semiannual reports to shareholders contain additional
information about the fund's investments. The fund's annual report also
discusses the market conditions and investment strategies that significantly
affected the fund's performance during its last fiscal year.
If you have questions about this fund, another fund in The AIM Family of Funds
or your account, or wish to obtain free copies of the fund's current SAI or
annual or semiannual reports, please contact us:
BY MAIL: A I M Distributors, Inc.
11 Greenway Plaza, Suite 100
Houston, TX 77046-1173
BY TELEPHONE: (800) 347-4246
BY E-MAIL: [email protected]
ON THE INTERNET: http://www.aimfunds.com (prospectuses and annual and
semiannual reports only)
You also can obtain copies of the fund's SAI and other information at the SEC's
Public Reference Room in Washington, D.C., on the SEC's website
(http://www.sec.gov), or by sending a letter, including a duplicating fee, to
the SEC's Public Reference Section, Washington, D.C. 20549-6009. Please call the
SEC at 1-800-SEC-0330 for information about the Public Reference Room.
AIM Europe Growth Fund - Advisor Class
SEC 1940 Act file number: 811-2699
<PAGE> 162
The information in this prospectus is not complete and may be changed. We may
not sell these securities until the registration statement filed with the
Securities and Exchange Commission is effective. This prospectus is not an offer
to sell these securities and is not soliciting an offer to buy these securities
in any state where the offer or sale is not permitted.
Subject to Completion dated February 9, 1999
[AIM LOGO APPEARS HERE]
AIM JAPAN GROWTH FUND
(ADVISOR CLASS)
PROSPECTUS
MAY 3, 1999
AIM Japan Growth Fund seeks to provide long-term growth of capital.
This prospectus contains important information. Please read it before investing
and keep it for future reference.
An investment in the fund is not a deposit of a bank and is not insured or
guaranteed by the Federal Deposit Insurance Corporation or any other government
agency. There is a risk that you could lose a portion or all of your money.
AS WITH ALL OTHER MUTUAL FUND SECURITIES, THE SECURITIES AND EXCHANGE COMMISSION
HAS NOT APPROVED OR DISAPPROVED THESE SECURITIES OR DETERMINED WHETHER THE
INFORMATION IN THIS PROSPECTUS IS ADEQUATE OR ACCURATE. ANYONE WHO
TELLS YOU OTHERWISE IS COMMITTING A CRIME.
1
<PAGE> 163
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
<S> <C> <C>
INVESTMENT OBJECTIVE AND STRATEGIES......................................................................3
PRINCIPAL RISKS OF INVESTING IN THE FUND.................................................................3
PERFORMANCE INFORMATION..................................................................................5
ANNUAL TOTAL RETURNS............................................................................5
PERFORMANCE TABLE...............................................................................6
FEE TABLE AND EXPENSE EXAMPLE............................................................................7
FEE TABLE.......................................................................................7
EXPENSE EXAMPLE.................................................................................7
FUND MANAGEMENT..........................................................................................8
THE ADVISOR AND SUBADVISOR......................................................................8
ADVISOR COMPENSATION............................................................................8
PORTFOLIO MANAGER...............................................................................8
OTHER INFORMATION........................................................................................9
DIVIDENDS AND DISTRIBUTIONS.....................................................................9
FINANCIAL HIGHLIGHTS....................................................................................10
SHAREHOLDER INFORMATION................................................................................A-1
PURCHASING SHARES.............................................................................A-1
REDEEMING SHARES..............................................................................A-2
EXCHANGING SHARES.............................................................................A-3
PRICING OF SHARES.............................................................................A-4
TAXES.........................................................................................A-4
OBTAINING ADDITIONAL INFORMATION...........................................................BACK COVER PAGE
</TABLE>
The AIM Family of Funds--Registered Trademark--, The AIM Family of Funds and
Design (i.e., the AIM logo), AIM and Design, AIM, AIM LINK, AIM Institutional
Funds, aimfunds.com, La Familia AIM de Fondos--Registered Trademark--, La
Familia AIM de Fondos and Design and Invest with Discipline are registered
service marks and AIM Bank Connection is a service mark of A I M Management
Group Inc.
2
<PAGE> 164
INVESTMENT OBJECTIVE AND STRATEGIES
The fund's investment objective is long-term growth of capital.
The fund seeks to achieve its objective by investing, normally, at least 65% of
its total assets in equity securities of issuers domiciled in Japan. The fund
typically considers a company to be domiciled in Japan if it (i) is organized
under the laws of, or has its principal office in, Japan, or (2) normally
derives 50% or more of its total revenues from business in Japan, provided that,
in the view of the fund's portfolio managers, the value of the issuer's
securities tend to reflect Japan's development to a greater extent than
developments elsewhere.
The fund may invest up to 35% of its total assets in the equity securities of
issuers domiciled outside Japan. The fund may also invest up to 35% of its total
assets in U.S. and foreign investment-grade debt securities, or securities
deemed by the fund's subadvisor to be of comparable quality.
The fund may also invest in issuers in developing countries, i.e., those that
are in the initial stages of their industrial cycles.
In selecting investments, the fund's portfolio managers seek to identify
industries that, in view of political and economic considerations, including
currency movements, are likely to produce above-average growth rates. The
portfolio managers also attempt to identify those companies in countries and
industries that are best positioned and managed to take advantage of these
economic and political factors, but only after balancing the potential for
growth of selected companies in each market relative to the risks of investing
in that market. The portfolio managers further allocate investments among fixed
income securities of particular issuers on the basis of their views as to the
best values then currently available in the marketplace. The fund's portfolio
managers usually sell a particular security when any of those factors materially
changes.
[In anticipation of or in response to adverse market conditions or for cash
management purposes, the fund may hold all or a portion of its assets in cash
(U.S. dollars, foreign currencies or multinational currency units), money market
securities, or high-quality debt securities issued by corporations or the U.S.
or a foreign government. As a result, the fund may not achieve its investment
objective.]
PRINCIPAL RISKS OF INVESTING IN THE FUND
There is a risk that you could lose all or a portion of your investment in the
fund. The value of your investment in the fund will go up and down with the
prices of the securities in which the fund invests. The price of equity
securities goes up and down in response to many factors, including the
historical and prospective earnings of the issuer of the stock, the value of its
assets, general economic conditions, interest rates, investor perceptions, and
market liquidity. Debt securities are particularly vulnerable to credit risk and
interest rate fluctuations. When interest rates rise, bond prices fall; the
longer the bond's duration, the more sensitive it is to this risk.
Because the fund focuses its investments in Japan, the value of your shares may
rise and fall more than the value of shares of a fund that invests in a broader
geographic region. Additionally, the Japanese securities markets are less
regulated than those in the United States, and market prices may be distorted to
serve political or other purposes. In addition, shareholders' rights are not
always equally enforced.
The prices of foreign securities may be further affected by other factors
including:
o Currency Exchange Rates -- The dollar value of the fund's foreign
investments will be affected by changes in the rates between the dollar
and the currencies in which those investments are traded.
3
<PAGE> 165
o Political and Economic Conditions -- The value of the fund's foreign
investments may be adversely affected by political and social
instability in their home countries and by changes in economic or
taxation policies in those countries.
o Regulations -- Foreign companies generally are subject to less
stringent regulations, including financial and accounting controls,
than are U. S. companies. As a result, among other things, there
generally is less publicly available information about foreign
companies than about U.S. companies.
o Markets -- The securities markets of other countries are smaller than
U.S. securities markets. As a result, many foreign securities may be
less liquid and more volatile than the U.S. securities.
[To the extent that the fund invests in securities of issuers in developing
countries, the factors listed above may have a greater effect on the fund. For
example, many developing countries have, in the past, experienced high rates of
inflation or sharply devalued their currencies against the U.S. dollar, thereby
causing the value of investments in companies located in those countries to
decline. Transaction costs are often higher in developing countries and there
may be delays in settlement procedures. In addition, developing countries may
have greater political or economic instability, less regulation and smaller,
less liquid and more volatile markets than countries with more mature
economies.]
[If the seller of a repurchase agreement in which the fund invests defaults on
its obligation or declares bankruptcy, the fund may experience delays in selling
the securities underlying the repurchase agreement. As a result, the fund may
incur losses arising from decline in the value of those securities, reduced
levels of income and expenses of enforcing its rights.]
The fund could be adversely affected if the computer systems used by the fund's
investment advisor and the fund's other service providers do not properly
process and calculate date-related information from and after January 1, 2000.
The fund's investment advisor and independent technology consultants are
working to avoid year 2000-related problems in its systems and to obtain
assurances from other service providers that they are taking similar steps. In
addition, issuers of securities in which the fund invests may be adversely
affected by year 2000-related problems. This could have an impact on the value
of the fund's investments and its share price.
An investment in the fund is not a deposit of a bank and is not insured or
guaranteed by the Federal Deposit Insurance Corporation or any other government
agency.
4
<PAGE> 166
PERFORMANCE INFORMATION
The bar chart and table shown below provide an indication of the risks of
investing in the fund. The fund's past performance is not necessarily an
indication of its future performance.
ANNUAL TOTAL RETURNS
The following bar chart shows changes in the performance of the fund's Advisor
Class shares from year to year over a three-year period.
Japan Growth Adv
[GRAPH]
<TABLE>
<CAPTION>
YEAR RETURN %
---- --------
<S> <C>
1996............................................... (7.14)%
1997............................................... (7.54)%
1998............................................... (0.31)%
</TABLE>
During the three-year period shown in the bar chart, the highest quarterly
return was 14.74% (quarter ended 6/30/97) and the lowest quarterly return was
(9.02)% (quarter ended 12/31/97).
5
<PAGE> 167
PERFORMANCE TABLE
The following performance table shows how the fund's average annual total
returns for one year and since inception compared to those of a broad-based
securities market index.
<TABLE>
<CAPTION>
=====================================================================================================
Average Annual Total Returns Since Inception
(for the periods ended December 31, 1998) 1 Year Inception Date
- -----------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Advisor Class (0.31)% 0.13% 6/1/95
- -----------------------------------------------------------------------------------------------------
MSCI Japan Index(1) 5.05 (9.16)(2) --
=====================================================================================================
</TABLE>
(1) The MSCI Japan Index is an arithmetic average, weighted by market value, of
the performance of 310 securities listed on the Japanese stock exchanges.
It is an unmanaged index, includes the effect of reinvested dividends, and
is measured in U.S. dollars.
(2) The average annual total return given is since the date closest to the
inception date of the Advisor Class.
6
<PAGE> 168
FEE TABLE AND EXPENSE EXAMPLE
FEE TABLE
This table describes the fees and expenses that you may pay if you buy and hold
shares of the fund:
<TABLE>
<CAPTION>
Advisor Class
-------------
<S> <C>
Shareholder Fees (fees paid directly from your investment)
Maximum Sales Charge (Load) Imposed on Purchases
(as a percentage of offering price) None
Maximum Deferred Sales Charge (Load)
(as a percentage of original purchase price
or redemption proceeds, whichever is less) None
Annual Fund Operating Expenses
(expenses that are deducted from fund assets)
Management Fees [0.00%]
Distribution and/or Service (12b-1) Fees None
Other Expenses: [0.00]
Total Annual Fund Operating Expenses [0.00]
======
Expense Reimbursements(1) [0.00]
Net Expenses [0.00]
</TABLE>
- -------------------
[(1) The investment advisor has agreed to limit expenses through May 31, 2000.
The waiver may not be terminated.]
EXPENSE EXAMPLE
This example is intended to help you compare the cost of investing in the
Advisor Class of the fund with the cost of investing in other mutual funds.
The example assumes that you invest $10,000 in the fund for the time periods
indicated and then redeem all of your shares at the end of those periods. The
example also assumes that your investment has a 5% return each year and that the
fund's operating expenses remain the same. Although your actual returns and
costs may be higher or lower, based on these assumptions your costs would be:
<TABLE>
<CAPTION>
1 Year 3 Years 5 Years 10 Years
------ ------- ------- --------
<S> <C> <C> <C> <C>
Advisor Class $ -- $ -- $ -- $ --
</TABLE>
You would pay the following expenses if you did not redeem your shares:
<TABLE>
<CAPTION>
1 Year 3 Years 5 Years 10 Years
------ ------- ------- --------
<S> <C> <C> <C> <C>
Advisor Class $ -- $ -- $ -- $ --
</TABLE>
7
<PAGE> 169
FUND MANAGEMENT
THE ADVISOR AND SUBADVISOR
A I M Advisors, Inc. (the advisor) serves as the fund's investment advisor.
INVESCO (NY), Inc. (the subadvisor) an affiliate of the advisor, is the fund's
subadvisor and is responsible for its day-to-day management. The advisor is
located at 11 Greenway Plaza, Suite 100, Houston, Texas 77046-1173. The
subadvisor is located at [1166 Avenue of the Americas, New York, New York
10036]. The advisors supervise all aspects of the fund's operations and provide
investment advisory services to the fund, including obtaining and evaluating
economic, statistical and financial information to formulate and implement
investment programs for the fund.
The advisor has acted as an investment advisor since its organization in 1976
and the subadvisor has acted as an investment advisor since its organization in
__________. Today, the advisor, together with its subsidiaries, advises or
manages over 110 investment portfolios, including the fund, encompassing a broad
range of investment objectives.
ADVISOR COMPENSATION
During the fiscal year ended December 31, 1998, the advisor received
compensation of _____% of average net assets.
PORTFOLIO MANAGER
The advisor uses a team approach to investment management. The individual member
of the team who is primarily responsible for the day-to-day management of the
fund's portfolio, [who is an officer of the subadvisor,] is
o Andrew Callender, Portfolio Manager, who has been responsible for the
fund since 1997 and has been associated with the advisor and/or its
affiliates since 1990.
8
<PAGE> 170
OTHER INFORMATION
DIVIDENDS AND DISTRIBUTIONS
Capital Gains Distributions
The fund generally distributes long-term and short-term capital gains (including
any net gains from foreign currency transactions), if any, annually.
Dividends
The fund generally declares and pays dividends, if any, annually.
9
<PAGE> 171
FINANCIAL HIGHLIGHTS
The financial highlights table is intended to help you understand the fund's
financial performance. Certain information reflects financial results for a
single fund share.
The total returns in the table represent the rate that an investor would have
earned (or lost) on an investment in the fund (assuming reinvestment of all
dividends and distributions).
This information has been audited by PricewaterhouseCoopers LLP, whose report,
along with the fund's financial statements, is included in the fund's annual
report which is available upon request.
[TABLE TO BE REVISED]
<TABLE>
<CAPTION>
June 1,
Advisor Class Year Ended December 31, 1995 to
- ------------- --------------------------------------------- December 31,
1998 1997(b) 1996 1995
------------ ------------ ------------ ---------
<S> <C> <C> <C> <C>
Net asset value, beginning of period $ xx.xx $ xx.xx $ xx.xx $ xx.xx
- --------------------------------------------------------------- -------- -------- -------- --------
Income from investment operations:
Net investment income (loss) (x.xx)(a) (x.xx)(a) (x.xx)(a) (x.xx)
- --------------------------------------------------------------- -------- -------- -------- --------
Net gains on securities (both realized and unrealized) (x.xx) (x.xx) (x.xx) (x.xx)
- --------------------------------------------------------------- -------- -------- -------- --------
Total from investment operations (x.xx) (x.xx) (x.xx) (x.xx)
=============================================================== ======== ======== ======== ========
Less distributions: (x.xx) (x.xx) (x.xx) (x.xx)
Dividends from net investment income: (x.xx) (x.xx) (x.xx) (x.xx)
- --------------------------------------------------------------- -------- -------- -------- --------
Distributions from capital gains: (x.xx) (x.xx) (x.xx) (x.xx)
- --------------------------------------------------------------- -------- -------- -------- --------
Total distributions (x.xx) (x.xx) (x.xx) (x.xx)
- --------------------------------------------------------------- -------- -------- -------- --------
Net asset value, end of period $ xx.xx $ xx.xx $ xx.xx $ xx.xx
=============================================================== ======== ======== ======== ========
Total return (b) (x.xx)% (x.xx)% (x.xx)% (x.xx)%
=============================================================== ======== ======== ======== ========
Ratios/supplemental data:
Net assets, end of period (000s omitted) $ xx,xxx $ xx,xxx $ xx,xxx $ xx,xxx
=============================================================== ======== ======== ======== ========
Ratio of expenses to average net assets (c) x.xx% x.xx% x.xx% x.xx%
=============================================================== ======== ======== ======== ========
Ratio of net investment income (loss) to average net assets (c) (x.xx)%(d) (x.xx)% (x.xx)% (x.xx)%
=============================================================== ======== ======== ======== ========
Portfolio turnover rate xx%(d) xx% xx% xx%
=============================================================== ======== ======== ======== ========
</TABLE>
(a) Calculated using average shares outstanding.
(b) Does not deduct sales charges.
(c) After fee waivers and/or expense reimbursements. The ratios of expenses to
average net assets prior to fee waivers and/or expense reimbursements were
x.xx%, x.xx%, x.xx% and x.xx% for 1998-1995.
(d) After fee waivers and/or expense reimbursements. The ratios of net
investment income (loss) to average net assets prior to fee waivers and/or
expense reimbursements were x.xx%, x.xx% x.xx% and x.xx% for 1998-1995.
10
<PAGE> 172
Shareholder Information for Advisor Class Shares
- --------------------------------------------------------------------------------
PURCHASING SHARES
MINIMUM INVESTMENTS PER AIM ACCOUNT
The minimum initial investment for Advisor Class shares is $500; and the minimum
investment for purchases of additional Advisor Class shares is $50.
HOW TO PURCHASE SHARES
Shares offered by this prospectus are available for purchase only by certain
investors and are offered at net asset value without the imposition of a
front-end or contingent deferred sales charge or Rule 12b-1 fees. Advisor Class
shares are available through financial consultants (such as financial planners,
trust companies, bank trust departments, and registered investment advisors). In
order to purchase Advisor Class shares of any of the funds advised by the
advisor (the AIM Funds), your financial consultant, on your behalf, must submit
a fully completed new account application form directly to the transfer agent.
You may purchase shares using one of the options below.
<TABLE>
<CAPTION>
PURCHASE OPTIONS
- ----------------------------------------------------------------------------------------------------------
OPENING AN ACCOUNT ADDING TO AN ACCOUNT
- ----------------------------------------------------------------------------------------------------------
<S> <C> <C>
Through a Financial Consultant Contact your financial consultant. Same
By Mail Must be submitted by your financial Mail your check and the remittance
consultant. slip from your confirmation
statement to the transfer agent.
A I M Fund Services, Inc.
P.O. Box 4739
Houston, TX 77210-4739
By Wire Your financial consultant must mail Call the transfer agent to receive
a completed account application to a reference number. Then, use the
the transfer agent. You or your wire instructions at left.
financial consultant may call the
transfer agent at (800) 959-4246 to
receive a reference number. Then,
use the following wire
instructions:
Beneficiary Bank ABA/Routing #:
113000609
Beneficiary Account Number:
00100366807
Beneficiary Account Name: A I M
Fund Services, Inc.
RFB: Fund Name, Reference #
OBI: Your Name, Account #
By AIM Bank Connection(SM) Open your account using one of the Mail completed AIM Bank
methods described above. Connection(SM) form to the transfer
agent. Once the transfer agent has
received the form, call the
transfer agent to place your
purchase order.
- ----------------------------------------------------------------------------------------------------------
</TABLE>
A- 1 ADV--03/99
<PAGE> 173
SPECIAL PLANS
AUTOMATIC DIVIDEND INVESTMENT
All of your dividends and distributions may be paid in cash or invested in
Advisor Class shares of certain AIM Funds. Unless you specify otherwise, your
dividends and distributions will automatically be reinvested in the same AIM
Fund.
You must comply with the following requirements to be eligible to invest your
dividends and distributions in Advisor Class shares of another AIM Fund:
(1) Your account balance (a) in the AIM Fund paying the dividend or distribution
must be at least $5,000; or (b) in the AIM Fund receiving the dividend or
distribution must be at least $500;
(2) Both accounts must have identical registration information; and
(3) You must have completed an authorization form to reinvest dividends and
distributions into another AIM Fund.
PORTFOLIO REBALANCING PROGRAM
If you have at least $5,000 in your account, you may participate in the
Portfolio Rebalancing Program. Under this program, you can designate how the
total value of your holdings of Advisor Class shares of AIM Funds should be
rebalanced, on a percentage basis, between two and ten of your AIM Funds on a
quarterly, semiannual, or annual basis. Your portfolio will be rebalanced
through the exchange of shares in one or more of your AIM Funds for Advisor
Class shares of one or more other AIM Funds in your portfolio. If you wish to
participate in the Program, make changes or cancel the Program, the transfer
agent must receive your request to participate, changes, or cancellation in good
order at least five business days prior to the next rebalancing date, which is
normally the 28th day of the last month of the period you choose. You may
realize taxable gains from these exchanges. We may modify, suspend, or terminate
the program at any time on 60 days' prior written notice.
THE DISTRIBUTOR AND ITS AGENTS RESERVE THE RIGHT AT ANY TIME TO (1) REJECT OR
CANCEL ANY PART OF ANY PURCHASE OR EXCHANGE ORDER; (2) MODIFY ANY TERMS OR
CONDITIONS OF PURCHASE OF SHARES OF ANY AIM FUND; OR (3) WITHDRAW ALL OR ANY
PART OF THE OFFERING MADE BY THIS PROSPECTUS.
REDEEMING SHARES
REDEMPTION FEES
No redemption fee is imposed when shares are redeemed or repurchased; however,
dealers/financial institutions may charge service fees for handling repurchase
transactions.
HOW TO REDEEM SHARES
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
Through a Financial Contact your financial consultant.
Consultant
By Mail Send a written request to the transfer agent. Requests must
include (1) original signatures of all registered owners;
(2) the name of the AIM Fund and your account number; (3) if
the transfer agent does not hold your shares, endorsed share
certificates or share certificates accompanied by an
executed stock power; and (4) signature guarantees, if
necessary (see below). The transfer agent may require that
you provide additional information, such as corporate
resolutions or powers of attorney, if applicable.
By Telephone Call the transfer agent. You will be allowed to redeem by
telephone if (1) the proceeds are to be mailed to the
address on record with us or transferred electronically to a
pre-authorized checking account; (2) the address on record
with us has not been changed within the last 30 days; (3)
you do not hold physical share certificates; (4) you can
provide proper identification information; (5) the proceeds
of the redemption do not exceed $50,000; and (6) you have
not previously declined the telephone redemption privilege.
The transfer agent must receive your call during the hours
the New York Stock Exchange (NYSE) is open for business in
order to effect the redemption at that day's closing price.
</TABLE>
- --------------------------------------------------------------------------------
ADV--03/99 A- 2
<PAGE> 174
TIMING AND METHOD OF PAYMENT
We normally will send out checks within one business day, and in any event no
more than seven days, after we accept your request to redeem. If you redeem
shares recently purchased by check, you will be required to wait up to ten
business days before we will send your redemption proceeds. This delay is
necessary to ensure that the purchase check has cleared.
REDEMPTION BY MAIL
If you mail us a request in good order to redeem your shares, we will mail you a
check in the amount of the redemption proceeds at the address on record with us.
REDEMPTION BY TELEPHONE
If you redeem by telephone, we will mail you a check in the amount of the
redemption proceeds to your address of record (if there has been no change
communicated to the transfer agent within the previous 30 days) or transmit them
electronically to your pre-authorized bank account. We use reasonable procedures
to confirm that instructions communicated by telephone are genuine and are not
liable for telephone instructions that are reasonably believed to be genuine.
SIGNATURE GUARANTEES
We require a signature guarantee when you redeem by mail and
(1) the amount is greater than $50,000;
(2) you request that payment be made to someone other than the name registered
on the account;
(3) you request that payment be sent somewhere other than the bank of record on
the account; or
(4) you request that payment be sent to a new address or an address that changed
in the last 30 days.
The transfer agent will accept a guarantee of your signature by a number of
financial institutions. Call the transfer agent for additional information.
REDEMPTIONS BY THE AIM FUNDS
If your account has been open at least one year, you have not made an additional
purchase in the account during the past six calendar months, and the value of
your account falls below $500 for three consecutive months due to redemptions or
exchanges (excluding retirement accounts), the AIM Funds have the right to
redeem the account after giving you 60 days' prior written notice. You may avoid
having your account redeemed during the notice period by bringing the account
value up to $500.
If an AIM Fund determines that you have provided incorrect information in
opening an account or in the course of conducting subsequent transactions, the
AIM Fund may, in its discretion, redeem the account and distribute the proceeds
to you.
EXCHANGING SHARES
You may, under certain circumstances, exchange Advisor Class shares in one AIM
Fund for Advisor Class shares of another AIM Fund. Before requesting an
exchange, review the prospectus of the AIM Fund you wish to acquire.
EXCHANGE CONDITIONS
The following conditions apply to all exchanges:
- - You must meet the minimum purchase requirements for the AIM Fund into which
you are exchanging;
- - Shares of the AIM Fund you wish to acquire must be qualified for sale in your
state of residence;
- - Exchanges must be made between accounts with identical registration
information;
- - The account you wish to exchange from must have a certified tax identification
number (or the Fund has received an appropriate Form W-8 or W-9);
- - The AIM Fund from which you are exchanging must have received the full amount
of the purchase price for the shares being exchanged;
- - Recently acquired shares must have been held in your account for ten business
days, and all other shares must have been held for at least one day, prior to
the exchange; and
- - If you have physical share certificates, you must return them to the transfer
agent prior to the exchange.
TERMS OF EXCHANGE
Under unusual market conditions, an AIM Fund may delay the issuance of shares
being purchased in an exchange for up to five business days if it determines
that it would be materially disadvantaged by the immediate transfer of exchange
proceeds.
There is no fee for exchanges. The exchange privilege is not an option or
right to purchase shares. Any of the participating AIM Funds or the distributor
may modify or discontinue this privilege at any time.
BY MAIL
If you wish to make an exchange by mail, you must include original signatures of
each registered owner exactly as the shares are registered, the account
registration and account number, the dollar amount or number of shares to be
exchanged and the names of the AIM Funds from which and into which the exchange
is to be made.
BY TELEPHONE
Conditions that apply to exchanges by telephone are the same as redemptions by
telephone, including that the transfer agent must receive exchange requests
during the hours the New York Stock Exchange (NYSE) is open for business;
however, you still will be allowed to exchange by telephone even if you have
changed your address of record within the preceding 30 days.
A- 3 ADV--03/99
<PAGE> 175
PRICING OF SHARES
DETERMINATION OF NET ASSET VALUE
The price of each AIM Fund's shares is the fund's net asset value per share. The
AIM Funds value portfolio securities for which market quotations are readily
available at market value. The AIM Funds value short-term investments maturing
within 60 days at amortized cost, which approximates market value. The AIM Funds
value all other securities and assets at their fair value. Securities and other
assets quoted in foreign currencies are valued in U.S. dollars based on the
prevailing exchange rates on that day. In addition, if, between the time trading
ends on a particular security and the close of the New York Stock Exchange
(NYSE), events occur that materially affect the value of the security, the AIM
Funds may value the security at its fair value as determined in good faith by or
under the supervision of the Board of Trustees of the AIM Fund. The effect of
using fair value pricing is that an AIM Fund's net asset value will be subject
to the judgment of the Board of Trustees instead of being determined by the
market. Because some of the AIM Funds may invest in securities that are
primarily listed on foreign exchanges, the value of those funds' shares may
change on days when you will not be able to purchase or redeem shares.
Each AIM Fund determines the net asset value of its shares as of the close of
the NYSE on each day the NYSE is open for business.
TIMING OF ORDERS
You can purchase, exchange or redeem shares during the hours the NYSE is open
for business. The AIM Funds price purchase, exchange, and redemption orders
calculated at the net asset value after the transfer agent receives an order in
good form. An AIM Fund may postpone the right of redemption only under unusual
circumstances, such as when the NYSE restricts or suspends trading.
TAXES
In general, dividends and distributions you receive are taxable as ordinary
income or long-term capital gains for federal income tax purposes, whether you
reinvest them in additional shares or take them in cash. Distributions are
taxable to you at different rates depending on the length of time the fund holds
its assets. Different rates of tax apply to ordinary income and long-term
capital gain distributions. Every year, you will be sent information showing the
amount of dividends and distributions you received from each AIM Fund during the
prior year will be sent to you.
Any long-term or short-term capital gains realized from redemptions of AIM
Fund shares will be subject to federal income tax. Exchanges of shares for
shares of another AIM Fund are treated as a sale, and any gain realized on the
transaction will generally be subject to federal income tax.
The foreign, state, and local tax consequences of investing in AIM Fund shares
may differ materially from the federal income tax consequences described above.
You should consult your tax advisor before investing.
ADV--03/99 A- 4
<PAGE> 176
[BACK COVER PAGE]
OBTAINING ADDITIONAL INFORMATION
More information may be obtained free of charge upon request. The Statement of
Additional Information (SAI), a current version of which is on file with the
United States Securities and Exchange Commission (SEC), contains more details
about the fund and is incorporated by reference into the prospectus (is legally
a part of this prospectus). Annual and semiannual reports to shareholders
contain additional information about the fund's investments. The fund's annual
report also discusses the market conditions and investment strategies that
significantly affected the fund's performance during its last fiscal year.
If you have questions about this fund, another fund in The AIM Family of Funds
or your account, or wish to obtain free copies of the fund's current SAI or
annual or semiannual reports, please contact us:
BY MAIL: A I M Distributors, Inc.
11 Greenway Plaza, Suite 100
Houston, TX 77046-1173
BY TELEPHONE: (800) 347-4246
BY E-MAIL: [email protected]
ON THE INTERNET: http://www.aimfunds.com (prospectuses and annual and semiannual
reports only)
You also can obtain copies of the fund's SAI and other information at the SEC's
Public Reference Room in Washington, D.C., on the SEC's website
(http://www.sec.gov), or by sending a letter, including a duplicating fee, to
the SEC's Public Reference Section, Washington, D.C. 20549-6009. Please call the
SEC at 1-800-SEC-0330 for information about the Public Reference Room.
AIM Japan Growth Fund - Advisor Class
SEC 1940 Act file number: 811-2699
<PAGE> 177
The information in this prospectus is not complete and may be changed. We may
not sell these securities until the registration statement filed with the
Securities and Exchange Commission is effective. This prospectus is not an offer
to sell these securities and is not soliciting an offer to buy these securities
in any state where the offer or sale is not permitted.
Subject to Completion dated February 12, 1999
[AIM LOGO APPEARS HERE]
AIM MID CAP EQUITY FUND
(ADVISOR CLASS)
PROSPECTUS
MAY 3, 1999
AIM Mid Cap Equity Fund seeks to provide long-term growth of capital.
This prospectus contains important information. Please read it before investing
and keep it for future reference.
An investment in the fund is not a deposit of a bank and is not insured or
guaranteed by the Federal Deposit Insurance Corporation or any other government
agency. There is a risk that you could lose a portion or all of your money.
AS WITH ALL OTHER MUTUAL FUND SECURITIES, THE SECURITIES AND EXCHANGE
COMMISSION HAS NOT APPROVED OR DISAPPROVED THESE SECURITIES OR DETERMINED
WHETHER THE INFORMATION IN THIS PROSPECTUS IS ADEQUATE OR
ACCURATE. ANYONE WHO TELLS YOU OTHERWISE IS COMMITTING A CRIME.
1
<PAGE> 178
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
<S> <C>
INVESTMENT OBJECTIVE AND STRATEGIES......................................................................3
PRINCIPAL RISKS OF INVESTING IN THE FUND.................................................................3
PERFORMANCE INFORMATION..................................................................................5
ANNUAL TOTAL RETURNS............................................................................5
PERFORMANCE TABLE...............................................................................6
FEE TABLE AND EXPENSE EXAMPLE............................................................................7
FEE TABLE.......................................................................................7
EXPENSE EXAMPLE.................................................................................7
FUND MANAGEMENT..........................................................................................8
THE ADVISOR.....................................................................................8
ADVISOR COMPENSATION............................................................................8
PORTFOLIO MANAGERS..............................................................................8
OTHER INFORMATION........................................................................................9
DIVIDENDS AND DISTRIBUTIONS.....................................................................9
FINANCIAL HIGHLIGHTS....................................................................................10
SHAREHOLDER INFORMATION................................................................................A-1
PURCHASING SHARES.............................................................................A-1
REDEEMING SHARES..............................................................................A-2
EXCHANGING SHARES.............................................................................A-3
PRICING OF SHARES.............................................................................A-4
TAXES.........................................................................................A-4
OBTAINING ADDITIONAL INFORMATION...........................................................BACK COVER PAGE
</TABLE>
The AIM Family of Funds--Registered Trademark--, The AIM Family of Funds and
Design (i.e., the AIM logo), AIM and Design, AIM, AIM LINK, AIM Institutional
Funds, aimfunds.com, La Familia AIM de Fondos--Registered Trademark--, La
Familia AIM de Fondos and Design and Invest with Discipline are registered
service marks and AIM Bank Connection is a service mark of A I M Management
Group Inc.
2
<PAGE> 179
INVESTMENT OBJECTIVE AND STRATEGIES
The fund's investment objective is long-term growth of capital.
The fund seeks to achieve its objective by investing, normally, at least 65% of
its total assets in equity securities of United States issuers that have market
capitalizations within the range of market capitalizations of companies included
in the Russell Mid Cap(TM) Index.
The fund may invest up to 35% of its total assets in equity securities of other
U.S. issuers and of foreign issuers in the form of American Depositary Receipts
or other securities convertible into the securities of foreign issuers. The fund
may also invest up to 35% of its total assets in investment-grade debt
securities of U.S. and foreign issuers. These debt securities could include U.S.
and foreign government securities and corporate debt securities.
In selecting investments, AIM seeks to identify those companies that are, in
AIM's view, undervalued relative to current or projected earnings, or the
current market value of assets owned by the company. The primary emphasis of
AIM's search for undervalued equity securities is in four categories: (1)
out-of-favor cyclical growth companies; (2) established growth companies that
are undervalued compared to historical relative valuation parameters; (3)
companies where there is early but tangible evidence of improving prospects
which are not yet reflected in the value of the companies' equity securities;
and (4) companies whose equity securities are selling at prices that do not yet
reflect the current market value of their assets.
[In anticipation of or in response to adverse market conditions or for cash
management purposes, the fund may hold all or a portion of its assets in cash
(U.S. dollars, foreign currencies or multi-national currency units), money
market securities, or high quality debt securities issued by corporations or the
U.S. or a foreign government. As a result, the fund may not achieve its
investment objective.]
[The fund may engage in active and frequent trading of portfolio securities to
achieve its investment objective. If the fund does trade in this way, it may
incur increased transaction costs and brokerage commissions, both of which can
lower the actual return on your investment. Active trading may also increase
short-term capital gains and losses, which may affect the taxes you have to
pay.]
PRINCIPAL RISKS OF INVESTING IN THE FUND
There is a risk that you could lose all or a portion of your investment in the
fund. The value of your investment in the fund will go up and down with the
prices of the securities in which the fund invests. The price of equity
securities rises and falls in response to many factors, including the historical
and prospective earnings of the issuer of the stock, the value of its assets,
general economic conditions, interest rates, investor perceptions, and market
liquidity. [Debt securities are particularly vulnerable to credit risk and
interest rate fluctuations. When interest rates rise, bond prices fall; the
longer a bond's duration, the more sensitive it is to this risk.]
Foreign securities have additional risks, including exchange rate changes,
political and economic upheaval, the relative lack of information about these
companies, relatively low market liquidity, the potential lack of information
about these companies, relatively low market liquidity and the potential lack of
strict financial and accounting controls and standards.
[If the seller of a repurchase agreement in which the fund invests defaults on
its obligation or declares bankruptcy, the fund may experience delays in selling
the securities underlying the repurchase agreement. As a result, the fund may
incur losses arising from decline in the value of those securities, reduced
levels of income and expenses of enforcing its rights.]
The fund could be adversely affected if the computer systems used by the fund's
investment advisor and the fund's other service providers do not properly
process and calculate date-related information from and after January 1, 2000.
The fund's investment advisor and independent technology consultants are
working to avoid year 2000-related problems in its systems and to obtain
assurances from other service providers that they are taking similar steps. In
addition, issuers of securities in which the fund invests may be adversely
affected by year 2000-related problems. This could have an impact on the value
of the fund's investments and its share price.
3
<PAGE> 180
An investment in the fund is not a deposit of a bank and is not insured or
guaranteed by the Federal Deposit Insurance Corporation or any other government
agency.
4
<PAGE> 181
PERFORMANCE INFORMATION
The bar chart and table shown below provide an indication of the risks of
investing in the fund. The fund's past performance is not necessarily an
indication of its future performance.
ANNUAL TOTAL RETURNS
The following bar chart shows changes in the performance of the fund's Advisor
Class shares from year to year.
[MID CAP EQUITY ADV GRAPH]
<TABLE>
<CAPTION>
Year Return
---- ------
<S> <C>
1996 ............................................ 15.72%
1997 ............................................ 14.54%
1998 ............................................ -4.59%
</TABLE>
During the period shown in the bar chart, the highest quarterly return was
16.96% (quarter ended 9/30/97) and the lowest quarterly return was (25.04)%
(quarter ended 9/30/98).
5
<PAGE> 182
PERFORMANCE TABLE
The following performance table shows how the fund's average annual total
returns for one year and since inception compared to those of a broad-based
securities market index.
<TABLE>
<CAPTION>
======================================================================================================
Average Annual Total Returns
(for the periods ended December 31, 1998)
Since Inception
1 Year Inception Date
- ------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Advisor Class (4.59)% 8.26% 6/1/95
- ------------------------------------------------------------------------------------------------------
Russell Mid Cap(TM)Index (1) 10.09 20.71(2) 5/31/95
======================================================================================================
</TABLE>
(1) The Russell Mid Cap(TM) Index comprises the capitalization-weighted average
price of 800 selected common stocks of medium-size domestic companies. Its
performance includes the effect of reinvested dividends and is measured in
U.S. dollars.
(2) The average annual total return given is since the date closest to the
inception date of the Advisor Class.
6
<PAGE> 183
FEE TABLE AND EXPENSE EXAMPLE
FEE TABLE
This table describes the fees and expenses that you may pay if you buy and hold
shares of the fund:
<TABLE>
<CAPTION>
Advisor Class
-------------
<S> <C>
Shareholder Fees (fees paid directly from your investment)
Maximum Sales Charge (Load) Imposed on Purchases
(as a percentage of offering price) None
Maximum Deferred Sales Charge (Load)
(as a percentage of original purchase price
or redemption proceeds, whichever is less) None
Annual Fund Operating Expenses
(expenses that are deducted from fund assets)
Management Fees [0.00%]
Distribution and/or Service (12b-1) Fees None
Other Expenses [0.00]
Total Annual Fund Operating Expenses [0.00]
====
Expense Reimbursement(1) [0.00]
Net Expenses [0.00]
- -------------
[(1) The investment advisor has agreed to limit expenses through May 31, 2000.
The waiver may not be terminated.]
</TABLE>
EXPENSE EXAMPLE
This example is intended to help you compare the cost of investing in the
Advisor Class of the fund with the cost of investing in other mutual funds.
The example assumes that you invest $10,000 in the fund for the time periods
indicated and then redeem all of your shares at the end of those periods. The
example also assumes that your investment has a 5% return each year and that the
fund's operating expenses remain the same. Although your actual returns and
costs may be higher or lower, based on these assumptions your costs would be:
<TABLE>
<CAPTION>
1 Year 3 Years 5 Years 10 Years
------ ------- ------- --------
<S> <C> <C> <C> <C>
Advisor Class $ -- $ -- $ -- $ --
</TABLE>
7
<PAGE> 184
FUND MANAGEMENT
THE ADVISOR
A I M Advisors, Inc. (the advisor) serves as the fund's investment advisor and
is responsible for its day-to-day management. The advisor is located at 11
Greenway Plaza, Suite 100, Houston, Texas 77046-1173. The advisor supervises all
aspects of the fund's operations and provides investment advisory services to
the fund, including obtaining and evaluating economic, statistical and financial
information to formulate and implement investment programs for the fund.
The advisor has acted as an investment advisor since its organization in 1976.
Today, the advisor, together with its subsidiaries, advises or manages over 110
investment portfolios, including the fund, encompassing a broad range of
investment objectives.
ADVISOR COMPENSATION
During the fiscal year ended December 31, 1998, the advisor received
compensation of __% of average net assets.
PORTFOLIO MANAGERS
The advisor uses a team approach to investment management. The individual
members of the team who are primarily responsible for the day-to-day management
of the fund's portfolio, [all of whom are officers of A I M Capital Management,
Inc., a wholly owned subsidiary of the advisor], are
o Ronald S. Sloan, Senior Portfolio Manager, who has been responsible for
the fund since 1998 and has been associated with the advisor and/or its
affiliates since 1998. From 1993 to 1998, he was President of Verissimo
Research & Management, Inc.
o Paul J. Rasplicka, Senior Portfolio Manager, who has been responsible
for the fund since 1998 and has been associated with the advisor and/or
its affiliates since 1994.
o Robert A. Shelton, Portfolio Manager, who has been responsible for the
fund since 1998 and has been associated with the advisor and/or its
affiliates since 1995. Prior to 1995, he was a financial analyst for CS
First Boston.
8
<PAGE> 185
OTHER INFORMATION
DIVIDENDS AND DISTRIBUTIONS
Dividends
The fund generally declares and pays dividends, if any, annually.
Capital Gains Distributions
The fund generally distributes long-term and short-term capital gains (including
any net gains from foreign currency transactions), if any, annually.
9
<PAGE> 186
FINANCIAL HIGHLIGHTS
The financial highlights table is intended to help you understand the fund's
financial performance. Certain information reflects financial results for a
single fund share.
The total returns in the table represent the rate that an investor would have
earned (or lost) on an investment in the fund (assuming reinvestment of all
dividends and distributions).
This information has been audited by PricewaterhouseCoopers LLP, whose report,
along with the fund's financial statements, is included in the fund's annual
report which is available upon request.
<TABLE>
<CAPTION>
June 1,
1995 to
Advisor Class Year Ended December 31, December 31,
- ------------- ------------------------------------ ------------
1998 1997(b) 1996 1995
----------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
Net asset value, beginning of period $xx.xx $xx.xx $xx.xx $xx.xx
- ------------------------------------------------------- ----------- ---------- ---------- ----------
Income from investment operations:
Net investment income (loss) (x.xx) (a) (x.xx) (a) (x.xx) (a) (x.xx)
- ------------------------------------------------------- ----------- ---------- ---------- ----------
Net gains on securities (both realized and unrealized) (x.xx) (x.xx) (x.xx) (x.xx)
- ------------------------------------------------------- ----------- ---------- ---------- ----------
Total from investment operations (x.xx) (x.xx) (x.xx) (x.xx)
======================================================= =========== ========== ========== ==========
Less distributions: (x.xx) (x.xx) (x.xx) (x.xx)
Dividends from net investment income: (x.xx) (x.xx) (x.xx) (x.xx)
- ------------------------------------------------------- ----------- ---------- ---------- ----------
Distributions from capital gains: (x.xx) (x.xx) (x.xx) (x.xx)
- ------------------------------------------------------- ----------- ---------- ---------- ----------
Total distributions (x.xx) (x.xx) (x.xx) (x.xx)
- ------------------------------------------------------- ----------- ---------- ---------- ----------
Net asset value, end of period $xx.xx $xx.xx $xx.xx $xx.xx
======================================================= =========== ========== ========== ==========
Total return(b) (x.xx)% (x.xx)% (x.xx)% (x.xx)%
======================================================= =========== ========== ========== ==========
Ratios/supplemental data:
Net assets, end of period (000s omitted) $xx,xxx $xx,xxx $xx,xxx $xx,xxx
======================================================= =========== ========== ========== ==========
Ratio of expenses to average net assets(c) x.xx% x.xx% x.xx% x.xx%
======================================================= =========== ========== ========== ==========
Ratio of net investment income (loss) to average net (x.xx)% (d) (x.xx)% (x.xx)% (x.xx)%
assets(c)
======================================================= =========== ========== ========== ==========
Portfolio turnover rate xx% (d) xx% xx% xx%
======================================================= =========== ========== ========== ==========
</TABLE>
(a) Calculated using average shares outstanding.
(b) Does not deduct sales charges.
(c) After fee waivers and/or expense reimbursements. The ratios of expenses to
average net assets prior to fee waivers and/or expense reimbursements were
x.xx%, x.xx%, x.xx% and x.xx% for 1998-1995.
(d) After fee waivers and/or expense reimbursements. The ratios of net
investment income (loss) to average net assets prior to fee waivers and/or
expense reimbursements were x.xx%, x.xx%, x.xx% and x.xx% for 1998-1995.
10
<PAGE> 187
Shareholder Information for Advisor Class Shares
- --------------------------------------------------------------------------------
PURCHASING SHARES
MINIMUM INVESTMENTS PER AIM ACCOUNT
The minimum initial investment for Advisor Class shares is $500; and the minimum
investment for purchases of additional Advisor Class shares is $50.
HOW TO PURCHASE SHARES
Shares offered by this prospectus are available for purchase only by certain
investors and are offered at net asset value without the imposition of a
front-end or contingent deferred sales charge or Rule 12b-1 fees. Advisor Class
shares are available through financial consultants (such as financial planners,
trust companies, bank trust departments, and registered investment advisors). In
order to purchase Advisor Class shares of any of the funds advised by the
advisor (the AIM Funds), your financial consultant, on your behalf, must submit
a fully completed new account application form directly to the transfer agent.
You may purchase shares using one of the options below.
<TABLE>
<CAPTION>
PURCHASE OPTIONS
- ----------------------------------------------------------------------------------------------------------
OPENING AN ACCOUNT ADDING TO AN ACCOUNT
- ----------------------------------------------------------------------------------------------------------
<S> <C> <C>
Through a Financial Consultant Contact your financial consultant. Same
By Mail Must be submitted by your financial Mail your check and the remittance
consultant. slip from your confirmation
statement to the transfer agent.
A I M Fund Services, Inc.
P.O. Box 4739
Houston, TX 77210-4739
By Wire Your financial consultant must mail Call the transfer agent to receive
a completed account application to a reference number. Then, use the
the transfer agent. You or your wire instructions at left.
financial consultant may call the
transfer agent at (800) 959-4246 to
receive a reference number. Then,
use the following wire
instructions:
Beneficiary Bank ABA/Routing #:
113000609
Beneficiary Account Number:
00100366807
Beneficiary Account Name: A I M
Fund Services, Inc.
RFB: Fund Name, Reference #
OBI: Your Name, Account #
By AIM Bank Connection(SM) Open your account using one of the Mail completed AIM Bank
methods described above. Connection(SM) form to the transfer
agent. Once the transfer agent has
received the form, call the
transfer agent to place your
purchase order.
- ----------------------------------------------------------------------------------------------------------
</TABLE>
A- 1 ADV--03/99
<PAGE> 188
SPECIAL PLANS
AUTOMATIC DIVIDEND INVESTMENT
All of your dividends and distributions may be paid in cash or invested in
Advisor Class shares of certain AIM Funds. Unless you specify otherwise, your
dividends and distributions will automatically be reinvested in the same AIM
Fund.
You must comply with the following requirements to be eligible to invest your
dividends and distributions in Advisor Class shares of another AIM Fund:
(1) Your account balance (a) in the AIM Fund paying the dividend or distribution
must be at least $5,000; or (b) in the AIM Fund receiving the dividend or
distribution must be at least $500;
(2) Both accounts must have identical registration information; and
(3) You must have completed an authorization form to reinvest dividends and
distributions into another AIM Fund.
PORTFOLIO REBALANCING PROGRAM
If you have at least $5,000 in your account, you may participate in the
Portfolio Rebalancing Program. Under this program, you can designate how the
total value of your holdings of Advisor Class shares of AIM Funds should be
rebalanced, on a percentage basis, between two and ten of your AIM Funds on a
quarterly, semiannual, or annual basis. Your portfolio will be rebalanced
through the exchange of shares in one or more of your AIM Funds for Advisor
Class shares of one or more other AIM Funds in your portfolio. If you wish to
participate in the Program, make changes or cancel the Program, the transfer
agent must receive your request to participate, changes, or cancellation in good
order at least five business days prior to the next rebalancing date, which is
normally the 28th day of the last month of the period you choose. You may
realize taxable gains from these exchanges. We may modify, suspend, or terminate
the program at any time on 60 days' prior written notice.
THE DISTRIBUTOR AND ITS AGENTS RESERVE THE RIGHT AT ANY TIME TO (1) REJECT OR
CANCEL ANY PART OF ANY PURCHASE OR EXCHANGE ORDER; (2) MODIFY ANY TERMS OR
CONDITIONS OF PURCHASE OF SHARES OF ANY AIM FUND; OR (3) WITHDRAW ALL OR ANY
PART OF THE OFFERING MADE BY THIS PROSPECTUS.
REDEEMING SHARES
REDEMPTION FEES
No redemption fee is imposed when shares are redeemed or repurchased; however,
dealers/financial institutions may charge service fees for handling repurchase
transactions.
HOW TO REDEEM SHARES
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
Through a Financial Contact your financial consultant.
Consultant
By Mail Send a written request to the transfer agent. Requests must
include (1) original signatures of all registered owners;
(2) the name of the AIM Fund and your account number; (3) if
the transfer agent does not hold your shares, endorsed share
certificates or share certificates accompanied by an
executed stock power; and (4) signature guarantees, if
necessary (see below). The transfer agent may require that
you provide additional information, such as corporate
resolutions or powers of attorney, if applicable.
By Telephone Call the transfer agent. You will be allowed to redeem by
telephone if (1) the proceeds are to be mailed to the
address on record with us or transferred electronically to a
pre-authorized checking account; (2) the address on record
with us has not been changed within the last 30 days; (3)
you do not hold physical share certificates; (4) you can
provide proper identification information; (5) the proceeds
of the redemption do not exceed $50,000; and (6) you have
not previously declined the telephone redemption privilege.
The transfer agent must receive your call during the hours
the New York Stock Exchange (NYSE) is open for business in
order to effect the redemption at that day's closing price.
</TABLE>
- --------------------------------------------------------------------------------
ADV--03/99 A- 2
<PAGE> 189
TIMING AND METHOD OF PAYMENT
We normally will send out checks within one business day, and in any event no
more than seven days, after we accept your request to redeem. If you redeem
shares recently purchased by check, you will be required to wait up to ten
business days before we will send your redemption proceeds. This delay is
necessary to ensure that the purchase check has cleared.
REDEMPTION BY MAIL
If you mail us a request in good order to redeem your shares, we will mail you a
check in the amount of the redemption proceeds at the address on record with us.
REDEMPTION BY TELEPHONE
If you redeem by telephone, we will mail you a check in the amount of the
redemption proceeds to your address of record (if there has been no change
communicated to the transfer agent within the previous 30 days) or transmit them
electronically to your pre-authorized bank account. We use reasonable procedures
to confirm that instructions communicated by telephone are genuine and are not
liable for telephone instructions that are reasonably believed to be genuine.
SIGNATURE GUARANTEES
We require a signature guarantee when you redeem by mail and
(1) the amount is greater than $50,000;
(2) you request that payment be made to someone other than the name registered
on the account;
(3) you request that payment be sent somewhere other than the bank of record on
the account; or
(4) you request that payment be sent to a new address or an address that changed
in the last 30 days.
The transfer agent will accept a guarantee of your signature by a number of
financial institutions. Call the transfer agent for additional information.
REDEMPTIONS BY THE AIM FUNDS
If your account has been open at least one year, you have not made an additional
purchase in the account during the past six calendar months, and the value of
your account falls below $500 for three consecutive months due to redemptions or
exchanges (excluding retirement accounts), the AIM Funds have the right to
redeem the account after giving you 60 days' prior written notice. You may avoid
having your account redeemed during the notice period by bringing the account
value up to $500.
If an AIM Fund determines that you have provided incorrect information in
opening an account or in the course of conducting subsequent transactions, the
AIM Fund may, in its discretion, redeem the account and distribute the proceeds
to you.
EXCHANGING SHARES
You may, under certain circumstances, exchange Advisor Class shares in one AIM
Fund for Advisor Class shares of another AIM Fund. Before requesting an
exchange, review the prospectus of the AIM Fund you wish to acquire.
EXCHANGE CONDITIONS
The following conditions apply to all exchanges:
- - You must meet the minimum purchase requirements for the AIM Fund into which
you are exchanging;
- - Shares of the AIM Fund you wish to acquire must be qualified for sale in your
state of residence;
- - Exchanges must be made between accounts with identical registration
information;
- - The account you wish to exchange from must have a certified tax identification
number (or the Fund has received an appropriate Form W-8 or W-9);
- - The AIM Fund from which you are exchanging must have received the full amount
of the purchase price for the shares being exchanged;
- - Recently acquired shares must have been held in your account for ten business
days, and all other shares must have been held for at least one day, prior to
the exchange; and
- - If you have physical share certificates, you must return them to the transfer
agent prior to the exchange.
TERMS OF EXCHANGE
Under unusual market conditions, an AIM Fund may delay the issuance of shares
being purchased in an exchange for up to five business days if it determines
that it would be materially disadvantaged by the immediate transfer of exchange
proceeds.
There is no fee for exchanges. The exchange privilege is not an option or
right to purchase shares. Any of the participating AIM Funds or the distributor
may modify or discontinue this privilege at any time.
BY MAIL
If you wish to make an exchange by mail, you must include original signatures of
each registered owner exactly as the shares are registered, the account
registration and account number, the dollar amount or number of shares to be
exchanged and the names of the AIM Funds from which and into which the exchange
is to be made.
BY TELEPHONE
Conditions that apply to exchanges by telephone are the same as redemptions by
telephone, including that the transfer agent must receive exchange requests
during the hours the New York Stock Exchange (NYSE) is open for business;
however, you still will be allowed to exchange by telephone even if you have
changed your address of record within the preceding 30 days.
A- 3 ADV--03/99
<PAGE> 190
PRICING OF SHARES
DETERMINATION OF NET ASSET VALUE
The price of each AIM Fund's shares is the fund's net asset value per share. The
AIM Funds value portfolio securities for which market quotations are readily
available at market value. The AIM Funds value short-term investments maturing
within 60 days at amortized cost, which approximates market value. The AIM Funds
value all other securities and assets at their fair value. Securities and other
assets quoted in foreign currencies are valued in U.S. dollars based on the
prevailing exchange rates on that day. In addition, if, between the time trading
ends on a particular security and the close of the New York Stock Exchange
(NYSE), events occur that materially affect the value of the security, the AIM
Funds may value the security at its fair value as determined in good faith by or
under the supervision of the Board of Trustees of the AIM Fund. The effect of
using fair value pricing is that an AIM Fund's net asset value will be subject
to the judgment of the Board of Trustees instead of being determined by the
market. Because some of the AIM Funds may invest in securities that are
primarily listed on foreign exchanges, the value of those funds' shares may
change on days when you will not be able to purchase or redeem shares.
Each AIM Fund determines the net asset value of its shares as of the close of
the NYSE on each day the NYSE is open for business.
TIMING OF ORDERS
You can purchase, exchange or redeem shares during the hours the NYSE is open
for business. The AIM Funds price purchase, exchange, and redemption orders
calculated at the net asset value after the transfer agent receives an order in
good form. An AIM Fund may postpone the right of redemption only under unusual
circumstances, such as when the NYSE restricts or suspends trading.
TAXES
In general, dividends and distributions you receive are taxable as ordinary
income or long-term capital gains for federal income tax purposes, whether you
reinvest them in additional shares or take them in cash. Distributions are
taxable to you at different rates depending on the length of time the fund holds
its assets. Different rates of tax apply to ordinary income and long-term
capital gain distributions. Every year, you will be sent information showing the
amount of dividends and distributions you received from each AIM Fund during the
prior year will be sent to you.
Any long-term or short-term capital gains realized from redemptions of AIM
Fund shares will be subject to federal income tax. Exchanges of shares for
shares of another AIM Fund are treated as a sale, and any gain realized on the
transaction will generally be subject to federal income tax.
The foreign, state, and local tax consequences of investing in AIM Fund shares
may differ materially from the federal income tax consequences described above.
You should consult your tax advisor before investing.
ADV--03/99 A- 4
<PAGE> 191
[BACK COVER PAGE]
OBTAINING ADDITIONAL INFORMATION
More information may be obtained free of charge upon request. The Statement of
Additional Information (SAI), a current version of which is on file with the
Securities and Exchange Commission (SEC), contains more details about the fund
and is incorporated by reference into the prospectus (is legally a part of this
prospectus). Annual and semiannual reports to shareholders contain additional
information about the fund's investments. The fund's annual report also
discusses the market conditions and investment strategies that significantly
affected the fund's performance during its last fiscal year.
If you have questions about this fund, another fund in The AIM Family of Funds
or your account, or wish to obtain free copies of the fund's current SAI or
annual or semiannual reports, please contact us:
BY MAIL: A I M Distributors, Inc.
11 Greenway Plaza, Suite 100
Houston, TX 77046-1173
BY TELEPHONE: (800) 347-4246
BY E-MAIL: [email protected]
ON THE INTERNET: http://www.aimfunds.com (prospectuses and annual and
semiannual reports only)
You also can obtain copies of the fund's SAI and other information at the SEC's
Public Reference Room in Washington, D.C., on the SEC's website
(http://www.sec.gov), or by sending a letter, including a duplicating fee, to
the SEC's Public Reference Section, Washington, D.C. 20549-6009. Please call the
SEC at 1-800-SEC-0330 for information about the Public Reference Room.
AIM Mid Cap Equity Fund - Advisor Class
SEC 1940 Act file number: 811-2699
<PAGE> 192
The information in this prospectus is not complete and may be changed. We may
not sell these securities until the registration statement filed with the
Securities and Exchange Commission is effective. This prospectus is not an offer
to sell these securities and is not soliciting an offer to buy these securities
in any state where the offer or sale is not permitted.
Subject to Completion dated February 12, 1999
[AIM LOGO APPEARS HERE]
AIM NEW PACIFIC GROWTH FUND
(ADVISOR CLASS)
PROSPECTUS
MAY 3, 1999
AIM New Pacific Growth Fund seeks to provide long-term growth of capital.
This prospectus contains important information. Please read it before investing
and keep it for future reference.
An investment in the fund is not a deposit of a bank and is not insured or
guaranteed by the Federal Deposit Insurance Corporation or any other government
agency. There is a risk that you could lose a portion or all of your money.
AS WITH ALL OTHER MUTUAL FUND SECURITIES, THE SECURITIES AND EXCHANGE
COMMISSION HAS NOT APPROVED OR DISAPPROVED THESE SECURITIES OR DETERMINED
WHETHER THE INFORMATION IN THIS PROSPECTUS IS ADEQUATE OR
ACCURATE. ANYONE WHO TELLS YOU OTHERWISE IS COMMITTING A CRIME.
1
<PAGE> 193
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
<S> <C>
INVESTMENT OBJECTIVE AND STRATEGIES......................................................................3
PRINCIPAL RISKS OF INVESTING IN THE FUND.................................................................3
PERFORMANCE INFORMATION..................................................................................5
ANNUAL TOTAL RETURNS............................................................................5
PERFORMANCE TABLE...............................................................................6
FEE TABLE AND EXPENSE EXAMPLE............................................................................7
FEE TABLE.......................................................................................7
EXPENSE EXAMPLE.................................................................................7
FUND MANAGEMENT..........................................................................................8
THE ADVISOR AND SUBADVISOR......................................................................8
ADVISOR COMPENSATION............................................................................8
PORTFOLIO MANAGERS..............................................................................8
OTHER INFORMATION........................................................................................9
DIVIDENDS AND DISTRIBUTIONS.....................................................................9
FINANCIAL HIGHLIGHTS....................................................................................10
SHAREHOLDER INFORMATION................................................................................A-1
PURCHASING SHARES.............................................................................A-1
REDEEMING SHARES..............................................................................A-2
EXCHANGING SHARES.............................................................................A-3
PRICING OF SHARES.............................................................................A-4
TAXES.........................................................................................A-4
OBTAINING ADDITIONAL INFORMATION...........................................................BACK COVER PAGE
</TABLE>
The AIM Family of Funds--Registered Trademark--, The AIM Family of Funds and
Design (i.e., the AIM logo), AIM and Design, AIM, AIM LINK, AIM Institutional
Funds, aimfunds.com, La Familia AIM de Fondos--Registered Trademark--, La
Familia AIM de Fondos and Design and Invest with Discipline are registered
service marks and AIM Bank Connection is a service mark of A I M Management
Group Inc.
2
<PAGE> 194
INVESTMENT OBJECTIVE AND STRATEGIES
The fund's investment objective is long-term growth of capital.
The fund seeks to achieve its objective by investing, normally, at least 65% of
its total assets in equity securities of issuers domiciled in twelve countries,
other than Japan, located in the Pacific region. These countries are designated
as the fund's primary investment area, and the list of countries may be revised
with the approval of the fund's Board of Trustees. The fund considers a company
to be domiciled in a particular country if it (i) is organized under the laws of
a particular country or has a principal office in a particular country; or (ii)
derives 50% or more of its total revenues from business in that country,
provided that, in the view of the fund's portfolio managers, the value of the
issuers' securities tend to reflect such country's development to a greater
extent than developments elsewhere. The fund will normally invest in the
securities of companies located in at least three different countries.
The fund may invest up to 35% of its total assets in equity securities of
issuers domiciled outside of its primary investment area. The fund may also
invest up to 35% of its total assets in investment-grade debt securities, or
securities deemed by the fund's subadvisor to be of comparable quality. These
debt securities could include U.S. and foreign government securities and
corporate debt securities.
In selecting investments, the fund's portfolio managers seek to identify those
countries and industries where political and economic factors, including
currency movements, are likely to produce above-average growth rates. The fund's
portfolio managers then balance the potential benefits with the risks of
investing in those countries and industries. The fund's portfolio managers
usually sell a particular security when any of those factors materially changes.
[In anticipation of or in response to adverse market conditions or for cash
management purposes, the fund may hold all or a portion of its assets in cash
(U.S. dollars, foreign currencies or multinational currency units), money market
securities, or high-quality debt securities issued by corporations or the U.S.
or a foreign government. As a result, the fund may not achieve its investment
objective.]
[The fund may engage in active and frequent trading of portfolio securities to
achieve its investment objective. If the fund does trade in this way, it may
incur increased transaction costs, which can lower the actual return on your
investment. Active trading may also increase short-term capital gains and
losses, which may affect the taxes you have to pay.]
PRINCIPAL RISKS OF INVESTING IN THE FUND
There is a risk that you could lose all or a portion of your investment in the
fund. The value of your investment in the fund will go up and down with the
prices of the securities in which the fund invests. The price of equity
securities goes up and down in response to many factors, including the
historical and prospective earnings of the issuer of the stock, the value of its
assets, general economic conditions, interest rates, investor perceptions, and
market liquidity.
The value of the fund's shares is particularly vulnerable to factors affecting
Pacific region countries, such as substantial economic or regulatory changes.
Because the fund focuses its investments in Pacific region countries, the value
of your shares may rise and fall more than the value of shares of a fund that
invests more broadly.
The prices of foreign securities may be further affected by other factors,
including:
o Currency exchange rates--The dollar value of the fund's foreign investments
will be affected by changes in the exchange rates between the dollar and
the currencies in which those investments are traded.
3
<PAGE> 195
o Political and economic conditions--The value of the fund's foreign
investments may be adversely affected by political and social instability
in their home countries and by changes in economic or taxation policies in
those countries.
o Regulations--Foreign companies generally are subject to less stringent
regulations, including financial and accounting controls, than are U.S.
companies. As a result, among other things, there generally is less
publicly available information about foreign companies than about U.S.
companies.
o Markets--The securities markets of other countries are smaller than U.S.
securities markets. As a result, many foreign securities may be less liquid
and more volatile than U.S. securities.
[To the extent that the fund invests in securities of issuers in developing
countries, the factors listed above may have a greater effect on the fund. For
example, many developing countries have, in the past, experienced high rates of
inflation or sharply devalued their currencies against the U.S. dollar, thereby
causing the value of investments in companies located in those countries to
decline. Transaction costs are often higher in developing countries and there
may be delays in settlement procedures. In addition, developing countries may
have greater political or economic instability, less regulation and smaller,
less liquid and more volatile markets than countries with more mature
economies.]
[If the seller of a repurchase agreement in which the fund invests defaults on
its obligation or declares bankruptcy, the fund may experience delays in selling
the securities underlying the repurchase agreement. As a result, the fund may
incur losses arising from decline in the value of those securities, reduced
levels of income and expenses of enforcing its rights.]
The fund could be adversely affected if the computer systems used by the fund's
investment advisor and the fund's other service providers do not properly
process and calculate date-related information from and after January 1, 2000.
The fund's investment advisor and independent technology consultants are
working to avoid year 2000-related problems in its systems and to obtain
assurances from other service providers that they are taking similar steps. In
addition, issuers of securities in which the fund invests may be adversely
affected by year 2000-related problems. This could have an impact on the value
of the fund's investments and its share price.
An investment in the fund is not a deposit of a bank and is not insured or
guaranteed by the Federal Deposit Insurance Corporation or any other government
agency.
4
<PAGE> 196
PERFORMANCE INFORMATION
The bar chart and table shown below provide an indication of the risks of
investing in the fund. The fund's past performance is not necessarily an
indication of its future performance.
ANNUAL TOTAL RETURNS
The following bar chart shows changes in the performance of the fund's Advisor
Class shares from year to year.
New Pacific Growth Adv
[GRAPH]
<TABLE>
<CAPTION>
Year Return %
---- --------
<S> <C>
1996 ............................................ 20.56%
1997 ............................................ (44.26)%
1998 ............................................ (18.51)%
</TABLE>
During the period shown in the bar chart, the highest quarterly return was
17.58% (quarter ended 12/31/98) and the lowest quarterly return was (31.57)%
(quarter ended 12/31/97).
5
<PAGE> 197
PERFORMANCE TABLE
The following performance table shows how the fund's average annual total
returns for one year and since inception compared to those of a broad-based
securities market index.
<TABLE>
<CAPTION>
=====================================================================================================
Average Annual Total Returns
(for the periods ended December 31, 1998)
Since Inception
1 Year Inception Date
- -----------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Advisor Class (18.51)% (15.60)% 6/1/95
- -----------------------------------------------------------------------------------------------------
MSCI AC Pacific Free ex-Japan Index(1) (2.07) (9.22)(2) 5/31/95
=====================================================================================================
</TABLE>
(1) The MSCI AC Pacific Free ex-Japan Index is a group of unmanaged securities
from all developed and emerging markets in the Pacific Rim, excluding
Japan, tracked by Morgan Stanley Capital International. A "Free" Index
includes only securities available to non-domestic investors.
(2) The average annual total return given is since the date closest to the
inception date of the Advisor Class.
6
<PAGE> 198
FEE TABLE AND EXPENSE EXAMPLE
FEE TABLE
This table describes the fees and expenses that you may pay if you buy and hold
shares of the fund:
<TABLE>
<CAPTION>
Advisor Class
-------------
<S> <C>
Shareholder Fees (fees paid directly from your investment)
Maximum Sales Charge (Load) Imposed on Purchases
(as a percentage of offering price) None
Maximum Deferred Sales Charge (Load)
(as a percentage of original purchase price
or redemption proceeds, whichever is less) None
Annual Fund Operating Expenses
(expenses that are deducted from fund assets)
Management Fees [0.00%]
Distribution and/or Service (12b-1) Fees None
Other Expenses [0.00]
Total Annual Fund Operating Expenses [0.00]
======
Expense Reimbursement(1) [0.00]
Net Expenses [0.00]
</TABLE>
- -------------------
[(1) The investment advisor has agreed to limit expenses through May 31, 2000.
The waiver may not be terminated.]
EXPENSE EXAMPLE
This example is intended to help you compare the cost of investing in the
Advisor Class of the fund with the cost of investing in other mutual funds.
The example assumes that you invest $10,000 in the fund for the time periods
indicated and then redeem all of your shares at the end of those periods. The
example also assumes that your investment has a 5% return each year and that the
fund's operating expenses remain the same. Although your actual returns and
costs may be higher or lower, based on these assumptions your costs would be:
1 Year 3 Years 5 Years 10 Years
------ ------- ------- --------
Advisor Class $ -- $ -- $ -- $ --
7
<PAGE> 199
FUND MANAGEMENT
THE ADVISOR AND SUBADVISOR
A I M Advisors, Inc. (the advisor) serves as the fund's investment advisor.
INVESCO (NY), Inc. (the subadvisor) an affiliate of the advisor, is the fund's
subadvisor and is responsible for its day-to-day management. The advisor is
located at 11 Greenway Plaza, Suite 100, Houston, Texas 77046-1173. The
subadvisor is located at 1166 Avenue of the Americas, New York, New York 10036.
The advisors supervise all aspects of the fund's operations and provide
investment advisory services to the fund, including obtaining and evaluating
economic, statistical and financial information to formulate and implement
investment programs for the fund.
The advisor has acted as an investment advisor since its organization in 1976
and the subadvisor has acted as an investment advisor since its organization in
________. Today, the advisor, together with its subsidiaries, advises or manages
over 110 investment portfolios, including the fund, encompassing a broad range
of investment objectives.
ADVISOR COMPENSATION
During the fiscal year ended December 31, 1998, the advisor received
compensation of __% of average net assets.
PORTFOLIO MANAGERS
The advisor uses a team approach to investment management. The individual
members of the team who are primarily responsible for the day-to-day management
of the fund's portfolio, [all of whom are officers of the subadvisor,] are
o Anna Tong, Portfolio Manager, who has been responsible for the fund since
1998 and has been associated with the advisor and/or its affiliates since
1985.
o Sammy Lau, Portfolio Manager, who has been responsible for the fund since
1998 and has been associated with the advisor and/or its affiliates since
December 1994. From November 1993 to November 1994, he was an Associate at
J.P. Morgan (Hong Kong).
8
<PAGE> 200
OTHER INFORMATION
DIVIDENDS AND DISTRIBUTIONS
Dividends
The fund generally declares and pays dividends, if any, annually.
Capital Gains Distributions
The fund generally distributes long-term and short-term capital gains (including
any net gains from foreign currency transactions), if any, annually.
9
<PAGE> 201
FINANCIAL HIGHLIGHTS
The financial highlights table is intended to help you understand the fund's
financial performance. Certain information reflects financial results for a
single fund share.
The total returns in the table represent the rate that an investor would have
earned (or lost) on an investment in the fund (assuming reinvestment of all
dividends and distributions).
This information has been audited by PricewaterhouseCoopers LLP, whose report,
along with the fund's financial statements, is included in the fund's annual
report which is available upon request.
<TABLE>
<CAPTION>
June 1,
Advisor Class Year Ended December 31, 1995 to
- ------------- -------------------------------------------------- December 31,
1998 1997(b) 1996 1995
-------------- -------------- -------------- --------------
<S> <C> <C> <C> <C>
Net asset value, beginning of period $xx.xx $xx.xx $xx.xx $xx.xx
- ------------------------------------------------------- -------------- -------------- -------------- --------------
Income from investment operations:
Net investment income (loss) (x.xx) (a) (x.xx) (a) (x.xx) (a) (x.xx)
- ------------------------------------------------------- -------------- -------------- -------------- --------------
Net gains on securities (both realized and unrealized) (x.xx) (x.xx) (x.xx) (x.xx)
- ------------------------------------------------------- -------------- -------------- -------------- --------------
Total from investment operations (x.xx) (x.xx) (x.xx) (x.xx)
======================================================= ============== ============== ============== ==============
Less distributions: (x.xx) (x.xx) (x.xx) (x.xx)
Dividends from net investment income: (x.xx) (x.xx) (x.xx) (x.xx)
- ------------------------------------------------------- -------------- -------------- -------------- --------------
Distributions from capital gains: (x.xx) (x.xx) (x.xx) (x.xx)
- ------------------------------------------------------- -------------- -------------- -------------- --------------
Total distributions (x.xx) (x.xx) (x.xx) (x.xx)
- ------------------------------------------------------- -------------- -------------- -------------- --------------
Net asset value, end of period $xx.xx $xx.xx $xx.xx $xx.xx
======================================================= ============== ============== ============== ==============
Total return(b) (x.xx)% (x.xx)% (x.xx)% (x.xx)%
======================================================= ============== ============== ============== ==============
Ratios/supplemental data:
Net assets, end of period (000s omitted) $xx,xxx $xx,xxx $xx,xxx $xx,xxx
======================================================= ============== ============== ============== ==============
Ratio of expenses to average net assets(c) x.xx% x.xx% x.xx% x.xx%
======================================================= ============== ============== ============== ==============
Ratio of net investment income (loss) to average net (x.xx)%(d) (x.xx)% (x.xx)% (x.xx)%
assets(c)
======================================================= ============== ============== ============== ==============
Portfolio turnover rate xx% (d) xx% xx% xx%
======================================================= ============== ============== ============== ==============
</TABLE>
(a) Calculated using average shares outstanding.
(b) Does not deduct sales charges.
(c) After fee waivers and/or expense reimbursements. The ratios of expenses to
average net assets prior to fee waivers and/or expense reimbursements were
x.xx%, x.xx%, x.xx% and x.xx% for 1998-1995.
(d) After fee waivers and/or expense reimbursements. The ratios of net
investment income (loss) to average net assets
prior to fee waivers and/or expense reimbursements were x.xx%, x.xx%
x.xx% and x.xx% for 1998-1995.
10
<PAGE> 202
Shareholder Information for Advisor Class Shares
- --------------------------------------------------------------------------------
PURCHASING SHARES
MINIMUM INVESTMENTS PER AIM ACCOUNT
The minimum initial investment for Advisor Class shares is $500; and the minimum
investment for purchases of additional Advisor Class shares is $50.
HOW TO PURCHASE SHARES
Shares offered by this prospectus are available for purchase only by certain
investors and are offered at net asset value without the imposition of a
front-end or contingent deferred sales charge or Rule 12b-1 fees. Advisor Class
shares are available through financial consultants (such as financial planners,
trust companies, bank trust departments, and registered investment advisors). In
order to purchase Advisor Class shares of any of the funds advised by the
advisor (the AIM Funds), your financial consultant, on your behalf, must submit
a fully completed new account application form directly to the transfer agent.
You may purchase shares using one of the options below.
<TABLE>
<CAPTION>
PURCHASE OPTIONS
- ----------------------------------------------------------------------------------------------------------
OPENING AN ACCOUNT ADDING TO AN ACCOUNT
- ----------------------------------------------------------------------------------------------------------
<S> <C> <C>
Through a Financial Consultant Contact your financial consultant. Same
By Mail Must be submitted by your financial Mail your check and the remittance
consultant. slip from your confirmation
statement to the transfer agent.
A I M Fund Services, Inc.
P.O. Box 4739
Houston, TX 77210-4739
By Wire Your financial consultant must mail Call the transfer agent to receive
a completed account application to a reference number. Then, use the
the transfer agent. You or your wire instructions at left.
financial consultant may call the
transfer agent at (800) 959-4246 to
receive a reference number. Then,
use the following wire
instructions:
Beneficiary Bank ABA/Routing #:
113000609
Beneficiary Account Number:
00100366807
Beneficiary Account Name: A I M
Fund Services, Inc.
RFB: Fund Name, Reference #
OBI: Your Name, Account #
By AIM Bank Connection(SM) Open your account using one of the Mail completed AIM Bank
methods described above. Connection(SM) form to the transfer
agent. Once the transfer agent has
received the form, call the
transfer agent to place your
purchase order.
- ----------------------------------------------------------------------------------------------------------
</TABLE>
A- 1 ADV--03/99
<PAGE> 203
SPECIAL PLANS
AUTOMATIC DIVIDEND INVESTMENT
All of your dividends and distributions may be paid in cash or invested in
Advisor Class shares of certain AIM Funds. Unless you specify otherwise, your
dividends and distributions will automatically be reinvested in the same AIM
Fund.
You must comply with the following requirements to be eligible to invest your
dividends and distributions in Advisor Class shares of another AIM Fund:
(1) Your account balance (a) in the AIM Fund paying the dividend or distribution
must be at least $5,000; or (b) in the AIM Fund receiving the dividend or
distribution must be at least $500;
(2) Both accounts must have identical registration information; and
(3) You must have completed an authorization form to reinvest dividends and
distributions into another AIM Fund.
PORTFOLIO REBALANCING PROGRAM
If you have at least $5,000 in your account, you may participate in the
Portfolio Rebalancing Program. Under this program, you can designate how the
total value of your holdings of Advisor Class shares of AIM Funds should be
rebalanced, on a percentage basis, between two and ten of your AIM Funds on a
quarterly, semiannual, or annual basis. Your portfolio will be rebalanced
through the exchange of shares in one or more of your AIM Funds for Advisor
Class shares of one or more other AIM Funds in your portfolio. If you wish to
participate in the Program, make changes or cancel the Program, the transfer
agent must receive your request to participate, changes, or cancellation in good
order at least five business days prior to the next rebalancing date, which is
normally the 28th day of the last month of the period you choose. You may
realize taxable gains from these exchanges. We may modify, suspend, or terminate
the program at any time on 60 days' prior written notice.
THE DISTRIBUTOR AND ITS AGENTS RESERVE THE RIGHT AT ANY TIME TO (1) REJECT OR
CANCEL ANY PART OF ANY PURCHASE OR EXCHANGE ORDER; (2) MODIFY ANY TERMS OR
CONDITIONS OF PURCHASE OF SHARES OF ANY AIM FUND; OR (3) WITHDRAW ALL OR ANY
PART OF THE OFFERING MADE BY THIS PROSPECTUS.
REDEEMING SHARES
REDEMPTION FEES
No redemption fee is imposed when shares are redeemed or repurchased; however,
dealers/financial institutions may charge service fees for handling repurchase
transactions.
HOW TO REDEEM SHARES
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
Through a Financial Contact your financial consultant.
Consultant
By Mail Send a written request to the transfer agent. Requests must
include (1) original signatures of all registered owners;
(2) the name of the AIM Fund and your account number; (3) if
the transfer agent does not hold your shares, endorsed share
certificates or share certificates accompanied by an
executed stock power; and (4) signature guarantees, if
necessary (see below). The transfer agent may require that
you provide additional information, such as corporate
resolutions or powers of attorney, if applicable.
By Telephone Call the transfer agent. You will be allowed to redeem by
telephone if (1) the proceeds are to be mailed to the
address on record with us or transferred electronically to a
pre-authorized checking account; (2) the address on record
with us has not been changed within the last 30 days; (3)
you do not hold physical share certificates; (4) you can
provide proper identification information; (5) the proceeds
of the redemption do not exceed $50,000; and (6) you have
not previously declined the telephone redemption privilege.
The transfer agent must receive your call during the hours
the New York Stock Exchange (NYSE) is open for business in
order to effect the redemption at that day's closing price.
</TABLE>
- --------------------------------------------------------------------------------
ADV--03/99 A- 2
<PAGE> 204
TIMING AND METHOD OF PAYMENT
We normally will send out checks within one business day, and in any event no
more than seven days, after we accept your request to redeem. If you redeem
shares recently purchased by check, you will be required to wait up to ten
business days before we will send your redemption proceeds. This delay is
necessary to ensure that the purchase check has cleared.
REDEMPTION BY MAIL
If you mail us a request in good order to redeem your shares, we will mail you a
check in the amount of the redemption proceeds at the address on record with us.
REDEMPTION BY TELEPHONE
If you redeem by telephone, we will mail you a check in the amount of the
redemption proceeds to your address of record (if there has been no change
communicated to the transfer agent within the previous 30 days) or transmit them
electronically to your pre-authorized bank account. We use reasonable procedures
to confirm that instructions communicated by telephone are genuine and are not
liable for telephone instructions that are reasonably believed to be genuine.
SIGNATURE GUARANTEES
We require a signature guarantee when you redeem by mail and
(1) the amount is greater than $50,000;
(2) you request that payment be made to someone other than the name registered
on the account;
(3) you request that payment be sent somewhere other than the bank of record on
the account; or
(4) you request that payment be sent to a new address or an address that changed
in the last 30 days.
The transfer agent will accept a guarantee of your signature by a number of
financial institutions. Call the transfer agent for additional information.
REDEMPTIONS BY THE AIM FUNDS
If your account has been open at least one year, you have not made an additional
purchase in the account during the past six calendar months, and the value of
your account falls below $500 for three consecutive months due to redemptions or
exchanges (excluding retirement accounts), the AIM Funds have the right to
redeem the account after giving you 60 days' prior written notice. You may avoid
having your account redeemed during the notice period by bringing the account
value up to $500.
If an AIM Fund determines that you have provided incorrect information in
opening an account or in the course of conducting subsequent transactions, the
AIM Fund may, in its discretion, redeem the account and distribute the proceeds
to you.
EXCHANGING SHARES
You may, under certain circumstances, exchange Advisor Class shares in one AIM
Fund for Advisor Class shares of another AIM Fund. Before requesting an
exchange, review the prospectus of the AIM Fund you wish to acquire.
EXCHANGE CONDITIONS
The following conditions apply to all exchanges:
- - You must meet the minimum purchase requirements for the AIM Fund into which
you are exchanging;
- - Shares of the AIM Fund you wish to acquire must be qualified for sale in your
state of residence;
- - Exchanges must be made between accounts with identical registration
information;
- - The account you wish to exchange from must have a certified tax identification
number (or the Fund has received an appropriate Form W-8 or W-9);
- - The AIM Fund from which you are exchanging must have received the full amount
of the purchase price for the shares being exchanged;
- - Recently acquired shares must have been held in your account for ten business
days, and all other shares must have been held for at least one day, prior to
the exchange; and
- - If you have physical share certificates, you must return them to the transfer
agent prior to the exchange.
TERMS OF EXCHANGE
Under unusual market conditions, an AIM Fund may delay the issuance of shares
being purchased in an exchange for up to five business days if it determines
that it would be materially disadvantaged by the immediate transfer of exchange
proceeds.
There is no fee for exchanges. The exchange privilege is not an option or
right to purchase shares. Any of the participating AIM Funds or the distributor
may modify or discontinue this privilege at any time.
BY MAIL
If you wish to make an exchange by mail, you must include original signatures of
each registered owner exactly as the shares are registered, the account
registration and account number, the dollar amount or number of shares to be
exchanged and the names of the AIM Funds from which and into which the exchange
is to be made.
BY TELEPHONE
Conditions that apply to exchanges by telephone are the same as redemptions by
telephone, including that the transfer agent must receive exchange requests
during the hours the New York Stock Exchange (NYSE) is open for business;
however, you still will be allowed to exchange by telephone even if you have
changed your address of record within the preceding 30 days.
A- 3 ADV--03/99
<PAGE> 205
PRICING OF SHARES
DETERMINATION OF NET ASSET VALUE
The price of each AIM Fund's shares is the fund's net asset value per share. The
AIM Funds value portfolio securities for which market quotations are readily
available at market value. The AIM Funds value short-term investments maturing
within 60 days at amortized cost, which approximates market value. The AIM Funds
value all other securities and assets at their fair value. Securities and other
assets quoted in foreign currencies are valued in U.S. dollars based on the
prevailing exchange rates on that day. In addition, if, between the time trading
ends on a particular security and the close of the New York Stock Exchange
(NYSE), events occur that materially affect the value of the security, the AIM
Funds may value the security at its fair value as determined in good faith by or
under the supervision of the Board of Trustees of the AIM Fund. The effect of
using fair value pricing is that an AIM Fund's net asset value will be subject
to the judgment of the Board of Trustees instead of being determined by the
market. Because some of the AIM Funds may invest in securities that are
primarily listed on foreign exchanges, the value of those funds' shares may
change on days when you will not be able to purchase or redeem shares.
Each AIM Fund determines the net asset value of its shares as of the close of
the NYSE on each day the NYSE is open for business.
TIMING OF ORDERS
You can purchase, exchange or redeem shares during the hours the NYSE is open
for business. The AIM Funds price purchase, exchange, and redemption orders
calculated at the net asset value after the transfer agent receives an order in
good form. An AIM Fund may postpone the right of redemption only under unusual
circumstances, such as when the NYSE restricts or suspends trading.
TAXES
In general, dividends and distributions you receive are taxable as ordinary
income or long-term capital gains for federal income tax purposes, whether you
reinvest them in additional shares or take them in cash. Distributions are
taxable to you at different rates depending on the length of time the fund holds
its assets. Different rates of tax apply to ordinary income and long-term
capital gain distributions. Every year, you will be sent information showing the
amount of dividends and distributions you received from each AIM Fund during the
prior year will be sent to you.
Any long-term or short-term capital gains realized from redemptions of AIM
Fund shares will be subject to federal income tax. Exchanges of shares for
shares of another AIM Fund are treated as a sale, and any gain realized on the
transaction will generally be subject to federal income tax.
The foreign, state, and local tax consequences of investing in AIM Fund shares
may differ materially from the federal income tax consequences described above.
You should consult your tax advisor before investing.
ADV--03/99 A- 4
<PAGE> 206
[BACK COVER PAGE]
OBTAINING ADDITIONAL INFORMATION
More information may be obtained free of charge upon request. The Statement of
Additional Information (SAI), a current version of which is on file with the
Securities and Exchange Commission (SEC), contains more details about the fund
and is incorporated by reference into the prospectus (is legally a part of this
prospectus). Annual and semiannual reports to shareholders contain additional
information about the fund's investments. The fund's annual report also
discusses the market conditions and investment strategies that significantly
affected the fund's performance during its last fiscal year.
If you have questions about this fund, another fund in The AIM Family of Funds
or your account, or wish to obtain free copies of the fund's current SAI or
annual or semiannual reports, please contact us:
BY MAIL: A I M Distributors, Inc.
11 Greenway Plaza, Suite 100
Houston, TX 77046-1173
BY TELEPHONE: (800) 347-4246
BY E-MAIL: [email protected]
ON THE INTERNET: http://www.aimfunds.com (prospectuses and annual and
semiannual reports only)
You also can obtain copies of the fund's SAI and other information at the SEC's
Public Reference Room in Washington, D.C., on the SEC's website
(http://www.sec.gov), or by sending a letter, including a duplicating fee, to
the SEC's Public Reference Section, Washington, D.C. 20549-6009. Please call the
SEC at 1-800-SEC-0330 for information about the Public Reference Room.
AIM New Pacific Growth Fund - Advisor Class
SEC 1940 Act file number: 811-2699
<PAGE> 207
The information in this prospectus is not complete and may be changed. We may
not sell these securities until the registration statement filed with the
Securities and Exchange Commission is effective. This prospectus is not an offer
to sell these securities and is not soliciting an offer to buy these securities
in any state where the offer or sale is not permitted.
Subject to Completion dated February 12, 1999
[AIM LOGO]
AIM SMALL CAP GROWTH FUND
(ADVISOR CLASS)
PROSPECTUS
MAY 3, 1999
AIM Small Cap Growth Fund seeks to provide long-term growth of capital.
This prospectus contains important information. Please read it before investing
and keep it for future reference.
An investment in the fund is not a deposit of a bank and is not insured or
guaranteed by the Federal Deposit Insurance Corporation or any other government
agency. There is a risk that you could lose a portion or all of your money.
AS WITH ALL OTHER MUTUAL FUND SECURITIES, THE SECURITIES AND EXCHANGE COMMISSION
HAS NOT APPROVED OR DISAPPROVED THESE SECURITIES OR DETERMINED WHETHER THE
INFORMATION IN THIS PROSPECTUS IS ADEQUATE OR ACCURATE. ANYONE WHO
TELLS YOU OTHERWISE IS COMMITTING A CRIME.
1
<PAGE> 208
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
<S> <C> <C>
INVESTMENT OBJECTIVE AND STRATEGIES......................................................................3
PRINCIPAL RISKS OF INVESTING IN THE FUND.................................................................3
PERFORMANCE INFORMATION..................................................................................5
ANNUAL TOTAL RETURNS............................................................................5
PERFORMANCE TABLE...............................................................................6
FEE TABLE AND EXPENSE EXAMPLE............................................................................7
FEE TABLE.......................................................................................7
EXPENSE EXAMPLE.................................................................................7
FUND MANAGEMENT..........................................................................................8
THE ADVISOR.....................................................................................8
ADVISOR COMPENSATION............................................................................8
PORTFOLIO MANAGERS..............................................................................8
OTHER INFORMATION........................................................................................9
DIVIDENDS AND DISTRIBUTIONS.....................................................................9
FINANCIAL HIGHLIGHTS....................................................................................10
SHAREHOLDER INFORMATION................................................................................A-1
PURCHASING SHARES.............................................................................A-1
REDEEMING SHARES..............................................................................A-2
EXCHANGING SHARES.............................................................................A-3
PRICING OF SHARES.............................................................................A-4
TAXES.........................................................................................A-4
OBTAINING ADDITIONAL INFORMATION...........................................................BACK COVER PAGE
</TABLE>
The AIM Family of Funds--Registered Trademark--, The AIM Family of Funds and
Design (i.e., the AIM logo), AIM and Design, AIM, AIM LINK, AIM Institutional
Funds, aimfunds.com, La Familia AIM de Fondos--Registered Trademark--, La
Familia AIM de Fondos and Design and Invest with Discipline are registered
service marks and AIM Bank Connection is a service mark of A I M Management
Group Inc.
2
<PAGE> 209
INVESTMENT OBJECTIVE AND STRATEGIES
The fund's investment objective is long-term growth of capital.
The fund seeks to achieve its objective by investing all of its investable
assets in the Small Cap Portfolio (the portfolio), which in turn normally
invests at least 65% of its total assets in equity securities of U.S. issuers
that have market capitalizations less than that of the largest company in the
Russell 2000--Registered Trademark-- Index.
The portfolio may also invest up to 35% of its total assets in equity securities
of U.S. issuers that have market capitalizations greater than that of the
largest company in the Russell 2000 Index, and in investment-grade
non-convertible debt securities, U.S. government securities and high-quality
money market instruments, all of which are issued by U.S. issuers. The portfolio
may also invest up to 10% of its total assets in securities of foreign issuers
in the form of American Depositary Receipts (ADRs) or similar securities.
In selecting investments, the portfolio managers seek to identify those
companies that have strong earnings momentum or demonstrate other potential for
growth of capital. The portfolio managers anticipate that the portfolio, when
fully invested, will generally be comprised of companies that are currently
experiencing a greater than anticipated increase in earnings. The portfolio
managers allocate investments among fixed income securities based on their views
as to the best values then currently available in the marketplace. The portfolio
managers usually sell a particular security when any of those factors materially
changes.
[In anticipation of or in response to adverse market conditions or for cash
management purposes, the portfolio may hold all or a portion of its assets in
cash, high-quality money market or high-quality domestic debt securities. As a
result, the fund or the portfolio may not achieve its investment objective.]
The portfolio may engage in active and frequent trading of portfolio securities
to achieve its investment objective. If the portfolio does trade in this way, it
may incur increased transaction costs and brokerage commissions, both of which
can lower the actual return on your investment. Active trading may also increase
short-term capital gains and losses, which may affect the taxes you have to pay.
If the fund's Board of Trustees determines that it is in the best interests of
the fund and its shareholders, the fund may redeem its investment in the
portfolio.
PRINCIPAL RISKS OF INVESTING IN THE FUND
There is a risk that you could lose all or a portion of your investment in the
fund. The value of your investment in the fund will go up and down with the
prices of the securities in which the portfolio invests. The price of equity
securities goes up and down in response to many factors, including the
historical and prospective earnings of the issuer of the stock, the value of its
assets, general economic conditions, interest rates, investor perceptions, and
market liquidity. This is especially true with respect to equity securities of
smaller companies, whose prices may go up and down more than equity securities
of larger, more-established companies. Also, since equity securities of smaller
companies may not be traded as often as equity securities of larger, more-
established companies, it may be difficult or impossible for the fund to sell
securities at a desirable price. [Debt securities are particularly vulnerable to
credit risk and interest rate fluctuations. When interest rates rise, bond
prices fall; the longer a bond's duration, the more sensitive it is to this
risk.]
The fund also may invest in securities issued by foreign companies, which have
additional risks, including exchange rate changes, political and economic
upheaval, the relative lack of information about these companies, relatively low
market liquidity and the potential lack of strict financial and accounting
controls and standards.
The fund could be adversely affected if the computer systems used by the fund's
investment advisor and the fund's other service providers do not properly
process and calculate date-related information from and after January 1, 2000.
The fund's investment advisor and independent technology consultants are
working to avoid year 2000-related problems in its systems and to obtain
assurances from other service providers that they are taking similar steps. In
addition, issuers of securities in which the fund invests may be adversely
affected by year 2000-related problems. This could have an impact on the value
of the fund's investments and its share price.
3
<PAGE> 210
An investment in the fund is not a deposit of a bank and is not insured or
guaranteed by the Federal Deposit Insurance Corporation or any other government
agency.
4
<PAGE> 211
PERFORMANCE INFORMATION
The bar chart and table shown below provide an indication of the risks of
investing in the fund. The fund's past performance is not necessarily an
indication of its future performance.
ANNUAL TOTAL RETURNS
The following bar chart shows changes in the performance of the fund's Advisor
Class shares from year to year.
[GRAPH]
Small Cap Growth Adv
<TABLE>
<CAPTION>
YEAR RETURN %
---- --------
<C> <S>
1996 ........................... 14.22
1997 ........................... 16.63
1998 ........................... 23.38
</TABLE>
During the period shown in the bar chart, the highest quarterly return was
30.45% (quarter ended 12/31/98) and the lowest quarterly return was (20.18)%
(quarter ended 9/30/98).
5
<PAGE> 212
PERFORMANCE TABLE
The following performance table shows how the fund's average annual total
returns for one year and since inception compared to those of a broad-based
securities market index.
<TABLE>
<CAPTION>
==========================================================================================
Average Annual Total Returns Since Inception
(for the periods ended December 31, 1998) 1 Year Inception Date
- ------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Advisor Class 23.38% 17.98% 10/18/95
- ------------------------------------------------------------------------------------------
Russell 2000 Index(1) (2.55) 13.32(2) 10/31/95
==========================================================================================
</TABLE>
(1) The Russell 2000 Index is a widely recognized, unmanaged index of common
stocks that measures the performance of the 2,000 smallest companies in the
Russell 3000 Index, which measures the performance of the 3,000 largest
U.S. companies based on total market capitalization.
(2) The average annual total return given is since the date closest to the
inception date of the Advisor Class.
6
<PAGE> 213
FEE TABLE AND EXPENSE EXAMPLE
FEE TABLE
This table describes the fees and expenses that you may pay if you buy and hold
shares of the fund:
<TABLE>
<CAPTION>
Advisor Class
-------------
<S> <C>
Shareholder Fees (fees paid directly from your investment)
Maximum Sales Charge (Load) Imposed on Purchases
(as a percentage of offering price) None
Maximum Deferred Sales Charge (Load)
(as a percentage of original purchase price
or redemption proceeds, whichever is less) None
Annual Fund Operating Expenses
(expenses that are deducted from fund assets)(1) [0.00%]
Management Fees
Distribution and/or Service (12b-1) Fees None
Other Expenses [0.00]
Total Annual Fund Operating Expenses [0.00]
======
Expense Reimbursement(2) [0.00]
Net Expenses [0.00]
</TABLE>
- ------------------
(1) This fee table, and the expense example below, reflects the expenses of
both the fund and the portfolio.
[(2) The investment advisor has agreed to limit expenses through May 31, 2000.
The waiver may not be terminated.]
EXPENSE EXAMPLE
This example is intended to help you compare the cost of investing in the
Advisor Class of the fund with the cost of investing in other mutual funds.
The example assumes that you invest $10,000 in the fund for the time periods
indicated and then redeem all of your shares at the end of those periods. The
example also assumes that your investment has a 5% return each year and that the
fund's operating expenses remain the same. Although your actual returns and
costs may be higher or lower, based on these assumptions your costs would be:
<TABLE>
<CAPTION>
1 Year 3 Years 5 Years 10 Years
------ ------- ------- --------
<S> <C> <C> <C> <C>
Advisor Class $ -- $ -- $ -- $ --
</TABLE>
7
<PAGE> 214
FUND MANAGEMENT
THE ADVISOR
A I M Advisors, Inc. (the advisor) serves as the investment manager and
administrator for the Small Cap Portfolio (the portfolio) and the fund, and is
responsible for their day-to-day management. The advisor is located at 11
Greenway Plaza, Suite 100, Houston, Texas 77046-1173. The advisor supervises all
aspects of the portfolio's and the fund's operations and provides investment
advisory services to the portfolio, including obtaining and evaluating economic,
statistical and financial information to formulate and implement investment
programs for the portfolio.
The advisor has acted as an investment advisor since its organization in 1976.
Today, the advisor, together with its subsidiaries, advises or manages over 110
investment portfolios, including the fund, encompassing a broad range of
investment objectives.
ADVISOR COMPENSATION
During the fiscal year ended December 31, 1998, the advisor received
compensation of _______% of average net assets.
PORTFOLIO MANAGERS
The advisor uses a team approach to investment management. The individual
members of the team who are primarily responsible for the day-to-day management
of the portfolio, [all of whom are officers of A I M Capital Management, Inc., a
wholly owned subsidiary of the advisor,] are
o Robert M. Kippes, Senior Portfolio Manager, who has been responsible
for the fund since 1998 and has been associated with the advisor and/or
its affiliates since 1989.
o Paul J. Rasplicka, Senior Portfolio Manager, who has been responsible
for the fund since 1998 and has been associated with the advisor and/or
its affiliates since 1994.
8
<PAGE> 215
OTHER INFORMATION
DIVIDENDS AND DISTRIBUTIONS
Dividends
The fund generally declares and pays dividends, if any, annually.
Capital Gains Distributions
The fund generally distributes long-term and short-term capital gains (including
any net gains from foreign currency transactions), if any, annually.
9
<PAGE> 216
FINANCIAL HIGHLIGHTS
The financial highlights table is intended to help you understand the fund's
financial performance. Certain information reflects financial results for a
single fund share.
The total returns in the table represent the rate that an investor would have
earned (or lost) on an investment in the fund (assuming reinvestment of all
dividends and distributions).
This information has been audited by PricewaterhouseCoopers LLP, whose report,
along with the fund's financial statements, is included in the fund's annual
report which is available upon request.
<TABLE>
<CAPTION>
October 18,
1995 to
Advisor Class Year Ended December 31, December 31,
- ------------- ------------------------------------------ ---------
1998 1997(b) 1996 1995
------------ ------------ ------------ ---------
<S> <C> <C> <C> <C>
Net asset value, beginning of period $ xx.xx $ xx.xx $ xx.xx $ xx.xx
- -------------------------------------------------------- -------- -------- -------- --------
Income from investment operations:
Net investment income (loss) (x.xx)(a) (x.xx)(a) (x.xx)(a) (x.xx)
- -------------------------------------------------------- -------- -------- -------- --------
Net gains on securities (both realized and unrealized) (x.xx) (x.xx) (x.xx) (x.xx)
- -------------------------------------------------------- -------- -------- -------- --------
Total from investment operations (x.xx) (x.xx) (x.xx) (x.xx)
======================================================== ======== ======== ======== ========
Less distributions: (x.xx) (x.xx) (x.xx) (x.xx)
Dividends from net investment income: (x.xx) (x.xx) (x.xx) (x.xx)
- -------------------------------------------------------- -------- -------- -------- --------
Distributions from capital gains: (x.xx) (x.xx) (x.xx) (x.xx)
- -------------------------------------------------------- -------- -------- -------- --------
Total distributions (x.xx) (x.xx) (x.xx) (x.xx)
- -------------------------------------------------------- -------- -------- -------- --------
Net asset value, end of period $ xx.xx $ xx.xx $ xx.xx $ xx.xx
======================================================== ======== ======== ======== ========
Total return (b) (x.xx)% (x.xx)% (x.xx)% (x.xx)%
======================================================== ======== ======== ======== ========
Ratios/supplemental data:
Net assets, end of period (000s omitted) $ xx,xxx $ xx,xxx $ xx,xxx $ xx,xxx
======================================================== ======== ======== ======== ========
Ratio of expenses to average net assets (c) x.xx% x.xx% x.xx% x.xx%
======================================================== ======== ======== ======== ========
Ratio of net investment income (loss) to average net
assets (c) (x.xx)%(d) (x.xx)% (x.xx)% (x.xx)%
======================================================== ======== ======== ======== ========
Portfolio turnover rate xx%(d) xx% xx% xx%
======================================================== ======== ======== ======== ========
</TABLE>
(a) Calculated using average shares outstanding.
(b) Does not deduct sales charges.
(c) After fee waivers and/or expense reimbursements. The ratios of expenses to
average net assets prior to fee waivers and/or expense reimbursements were
x.xx%, x.xx%, x.xx% and x.xx% for 1998-1995.
(d) After fee waivers and/or expense reimbursements. The ratios of net
investment income (loss) to average net assets prior to fee waivers and/or
expense reimbursements were x.xx%, x.xx% x.xx% and x.xx% for 1998-1995.
10
<PAGE> 217
Shareholder Information for Advisor Class Shares
- --------------------------------------------------------------------------------
PURCHASING SHARES
MINIMUM INVESTMENTS PER AIM ACCOUNT
The minimum initial investment for Advisor Class shares is $500; and the minimum
investment for purchases of additional Advisor Class shares is $50.
HOW TO PURCHASE SHARES
Shares offered by this prospectus are available for purchase only by certain
investors and are offered at net asset value without the imposition of a
front-end or contingent deferred sales charge or Rule 12b-1 fees. Advisor Class
shares are available through financial consultants (such as financial planners,
trust companies, bank trust departments, and registered investment advisors). In
order to purchase Advisor Class shares of any of the funds advised by the
advisor (the AIM Funds), your financial consultant, on your behalf, must submit
a fully completed new account application form directly to the transfer agent.
You may purchase shares using one of the options below.
<TABLE>
<CAPTION>
PURCHASE OPTIONS
- ----------------------------------------------------------------------------------------------------------
OPENING AN ACCOUNT ADDING TO AN ACCOUNT
- ----------------------------------------------------------------------------------------------------------
<S> <C> <C>
Through a Financial Consultant Contact your financial consultant. Same
By Mail Must be submitted by your financial Mail your check and the remittance
consultant. slip from your confirmation
statement to the transfer agent.
A I M Fund Services, Inc.
P.O. Box 4739
Houston, TX 77210-4739
By Wire Your financial consultant must mail Call the transfer agent to receive
a completed account application to a reference number. Then, use the
the transfer agent. You or your wire instructions at left.
financial consultant may call the
transfer agent at (800) 959-4246 to
receive a reference number. Then,
use the following wire
instructions:
Beneficiary Bank ABA/Routing #:
113000609
Beneficiary Account Number:
00100366807
Beneficiary Account Name: A I M
Fund Services, Inc.
RFB: Fund Name, Reference #
OBI: Your Name, Account #
By AIM Bank Connection(SM) Open your account using one of the Mail completed AIM Bank
methods described above. Connection(SM) form to the transfer
agent. Once the transfer agent has
received the form, call the
transfer agent to place your
purchase order.
- ----------------------------------------------------------------------------------------------------------
</TABLE>
A- 1 ADV--03/99
<PAGE> 218
SPECIAL PLANS
AUTOMATIC DIVIDEND INVESTMENT
All of your dividends and distributions may be paid in cash or invested in
Advisor Class shares of certain AIM Funds. Unless you specify otherwise, your
dividends and distributions will automatically be reinvested in the same AIM
Fund.
You must comply with the following requirements to be eligible to invest your
dividends and distributions in Advisor Class shares of another AIM Fund:
(1) Your account balance (a) in the AIM Fund paying the dividend or distribution
must be at least $5,000; or (b) in the AIM Fund receiving the dividend or
distribution must be at least $500;
(2) Both accounts must have identical registration information; and
(3) You must have completed an authorization form to reinvest dividends and
distributions into another AIM Fund.
PORTFOLIO REBALANCING PROGRAM
If you have at least $5,000 in your account, you may participate in the
Portfolio Rebalancing Program. Under this program, you can designate how the
total value of your holdings of Advisor Class shares of AIM Funds should be
rebalanced, on a percentage basis, between two and ten of your AIM Funds on a
quarterly, semiannual, or annual basis. Your portfolio will be rebalanced
through the exchange of shares in one or more of your AIM Funds for Advisor
Class shares of one or more other AIM Funds in your portfolio. If you wish to
participate in the Program, make changes or cancel the Program, the transfer
agent must receive your request to participate, changes, or cancellation in good
order at least five business days prior to the next rebalancing date, which is
normally the 28th day of the last month of the period you choose. You may
realize taxable gains from these exchanges. We may modify, suspend, or terminate
the program at any time on 60 days' prior written notice.
THE DISTRIBUTOR AND ITS AGENTS RESERVE THE RIGHT AT ANY TIME TO (1) REJECT OR
CANCEL ANY PART OF ANY PURCHASE OR EXCHANGE ORDER; (2) MODIFY ANY TERMS OR
CONDITIONS OF PURCHASE OF SHARES OF ANY AIM FUND; OR (3) WITHDRAW ALL OR ANY
PART OF THE OFFERING MADE BY THIS PROSPECTUS.
REDEEMING SHARES
REDEMPTION FEES
No redemption fee is imposed when shares are redeemed or repurchased; however,
dealers/financial institutions may charge service fees for handling repurchase
transactions.
HOW TO REDEEM SHARES
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
Through a Financial Contact your financial consultant.
Consultant
By Mail Send a written request to the transfer agent. Requests must
include (1) original signatures of all registered owners;
(2) the name of the AIM Fund and your account number; (3) if
the transfer agent does not hold your shares, endorsed share
certificates or share certificates accompanied by an
executed stock power; and (4) signature guarantees, if
necessary (see below). The transfer agent may require that
you provide additional information, such as corporate
resolutions or powers of attorney, if applicable.
By Telephone Call the transfer agent. You will be allowed to redeem by
telephone if (1) the proceeds are to be mailed to the
address on record with us or transferred electronically to a
pre-authorized checking account; (2) the address on record
with us has not been changed within the last 30 days; (3)
you do not hold physical share certificates; (4) you can
provide proper identification information; (5) the proceeds
of the redemption do not exceed $50,000; and (6) you have
not previously declined the telephone redemption privilege.
The transfer agent must receive your call during the hours
the New York Stock Exchange (NYSE) is open for business in
order to effect the redemption at that day's closing price.
</TABLE>
- --------------------------------------------------------------------------------
ADV--03/99 A- 2
<PAGE> 219
TIMING AND METHOD OF PAYMENT
We normally will send out checks within one business day, and in any event no
more than seven days, after we accept your request to redeem. If you redeem
shares recently purchased by check, you will be required to wait up to ten
business days before we will send your redemption proceeds. This delay is
necessary to ensure that the purchase check has cleared.
REDEMPTION BY MAIL
If you mail us a request in good order to redeem your shares, we will mail you a
check in the amount of the redemption proceeds at the address on record with us.
REDEMPTION BY TELEPHONE
If you redeem by telephone, we will mail you a check in the amount of the
redemption proceeds to your address of record (if there has been no change
communicated to the transfer agent within the previous 30 days) or transmit them
electronically to your pre-authorized bank account. We use reasonable procedures
to confirm that instructions communicated by telephone are genuine and are not
liable for telephone instructions that are reasonably believed to be genuine.
SIGNATURE GUARANTEES
We require a signature guarantee when you redeem by mail and
(1) the amount is greater than $50,000;
(2) you request that payment be made to someone other than the name registered
on the account;
(3) you request that payment be sent somewhere other than the bank of record on
the account; or
(4) you request that payment be sent to a new address or an address that changed
in the last 30 days.
The transfer agent will accept a guarantee of your signature by a number of
financial institutions. Call the transfer agent for additional information.
REDEMPTIONS BY THE AIM FUNDS
If your account has been open at least one year, you have not made an additional
purchase in the account during the past six calendar months, and the value of
your account falls below $500 for three consecutive months due to redemptions or
exchanges (excluding retirement accounts), the AIM Funds have the right to
redeem the account after giving you 60 days' prior written notice. You may avoid
having your account redeemed during the notice period by bringing the account
value up to $500.
If an AIM Fund determines that you have provided incorrect information in
opening an account or in the course of conducting subsequent transactions, the
AIM Fund may, in its discretion, redeem the account and distribute the proceeds
to you.
EXCHANGING SHARES
You may, under certain circumstances, exchange Advisor Class shares in one AIM
Fund for Advisor Class shares of another AIM Fund. Before requesting an
exchange, review the prospectus of the AIM Fund you wish to acquire.
EXCHANGE CONDITIONS
The following conditions apply to all exchanges:
- - You must meet the minimum purchase requirements for the AIM Fund into which
you are exchanging;
- - Shares of the AIM Fund you wish to acquire must be qualified for sale in your
state of residence;
- - Exchanges must be made between accounts with identical registration
information;
- - The account you wish to exchange from must have a certified tax identification
number (or the Fund has received an appropriate Form W-8 or W-9);
- - The AIM Fund from which you are exchanging must have received the full amount
of the purchase price for the shares being exchanged;
- - Recently acquired shares must have been held in your account for ten business
days, and all other shares must have been held for at least one day, prior to
the exchange; and
- - If you have physical share certificates, you must return them to the transfer
agent prior to the exchange.
TERMS OF EXCHANGE
Under unusual market conditions, an AIM Fund may delay the issuance of shares
being purchased in an exchange for up to five business days if it determines
that it would be materially disadvantaged by the immediate transfer of exchange
proceeds.
There is no fee for exchanges. The exchange privilege is not an option or
right to purchase shares. Any of the participating AIM Funds or the distributor
may modify or discontinue this privilege at any time.
BY MAIL
If you wish to make an exchange by mail, you must include original signatures of
each registered owner exactly as the shares are registered, the account
registration and account number, the dollar amount or number of shares to be
exchanged and the names of the AIM Funds from which and into which the exchange
is to be made.
BY TELEPHONE
Conditions that apply to exchanges by telephone are the same as redemptions by
telephone, including that the transfer agent must receive exchange requests
during the hours the New York Stock Exchange (NYSE) is open for business;
however, you still will be allowed to exchange by telephone even if you have
changed your address of record within the preceding 30 days.
A- 3 ADV--03/99
<PAGE> 220
PRICING OF SHARES
DETERMINATION OF NET ASSET VALUE
The price of each AIM Fund's shares is the fund's net asset value per share. The
AIM Funds value portfolio securities for which market quotations are readily
available at market value. The AIM Funds value short-term investments maturing
within 60 days at amortized cost, which approximates market value. The AIM Funds
value all other securities and assets at their fair value. Securities and other
assets quoted in foreign currencies are valued in U.S. dollars based on the
prevailing exchange rates on that day. In addition, if, between the time trading
ends on a particular security and the close of the New York Stock Exchange
(NYSE), events occur that materially affect the value of the security, the AIM
Funds may value the security at its fair value as determined in good faith by or
under the supervision of the Board of Trustees of the AIM Fund. The effect of
using fair value pricing is that an AIM Fund's net asset value will be subject
to the judgment of the Board of Trustees instead of being determined by the
market. Because some of the AIM Funds may invest in securities that are
primarily listed on foreign exchanges, the value of those funds' shares may
change on days when you will not be able to purchase or redeem shares.
Each AIM Fund determines the net asset value of its shares as of the close of
the NYSE on each day the NYSE is open for business.
TIMING OF ORDERS
You can purchase, exchange or redeem shares during the hours the NYSE is open
for business. The AIM Funds price purchase, exchange, and redemption orders
calculated at the net asset value after the transfer agent receives an order in
good form. An AIM Fund may postpone the right of redemption only under unusual
circumstances, such as when the NYSE restricts or suspends trading.
TAXES
In general, dividends and distributions you receive are taxable as ordinary
income or long-term capital gains for federal income tax purposes, whether you
reinvest them in additional shares or take them in cash. Distributions are
taxable to you at different rates depending on the length of time the fund holds
its assets. Different rates of tax apply to ordinary income and long-term
capital gain distributions. Every year, you will be sent information showing the
amount of dividends and distributions you received from each AIM Fund during the
prior year will be sent to you.
Any long-term or short-term capital gains realized from redemptions of AIM
Fund shares will be subject to federal income tax. Exchanges of shares for
shares of another AIM Fund are treated as a sale, and any gain realized on the
transaction will generally be subject to federal income tax.
The foreign, state, and local tax consequences of investing in AIM Fund shares
may differ materially from the federal income tax consequences described above.
You should consult your tax advisor before investing.
ADV--03/99 A- 4
<PAGE> 221
[BACK COVER PAGE]
OBTAINING ADDITIONAL INFORMATION
More information may be obtained free of charge upon request. The Statement of
Additional Information (SAI), a current version of which is on file with the
Securities and Exchange Commission (SEC), contains more details about the fund
and is incorporated by reference into the prospectus (is legally a part of this
prospectus). Annual and semiannual reports to shareholders contain additional
information about the fund's investments. The fund's annual report also
discusses the market conditions and investment strategies that significantly
affected the fund's performance during its last fiscal year.
If you have questions about this fund, another fund in The AIM Family of Funds
or your account, or wish to obtain free copies of the fund's current SAI or
annual or semiannual reports, please contact us:
BY MAIL: A I M Distributors, Inc.
11 Greenway Plaza, Suite 100
Houston, TX 77046-1173
BY TELEPHONE: (800) 347-4246
BY E-MAIL: [email protected]
ON THE INTERNET: http://www.aimfunds.com (prospectuses and annual and
semiannual reports only)
You also can obtain copies of the fund's SAI and other information at the SEC's
Public Reference Room in Washington, D.C., on the SEC's website
(http://www.sec.gov), or by sending a letter, including a duplicating fee, to
the SEC's Public Reference Section, Washington, D.C. 20549-6009. Please call the
SEC at 1-800-SEC-0330 for information about the Public Reference Room.
AIM Small Cap Growth Fund - Advisor Class
SEC 1940 Act file number: 811-2699
<PAGE> 222
STATEMENT OF
ADDITIONAL INFORMATION
CLASS A, CLASS B AND CLASS C SHARES OF
AIM EUROPE GROWTH FUND
AIM JAPAN GROWTH FUND
AIM MID CAP EQUITY FUND
AIM NEW PACIFIC GROWTH FUND
(SERIES PORTFOLIOS OF
AIM GROWTH SERIES)
11 GREENWAY PLAZA
SUITE 100
HOUSTON, TX 77047-1173
(713) 626-1919
---------------------
THIS STATEMENT OF ADDITIONAL INFORMATION IS NOT A PROSPECTUS AND
IT SHOULD BE READ IN CONJUNCTION WITH A PROSPECTUS OF THE
ABOVE-NAMED FUNDS, A COPY OF WHICH MAY BE OBTAINED FREE
OF CHARGE FROM AUTHORIZED DEALERS OR BY WRITING
A I M DISTRIBUTORS, INC.,
P.O. BOX 4739, HOUSTON, TX 77210-4739
OR BY CALLING (800) 347-4246.
---------------------
STATEMENT OF ADDITIONAL INFORMATION DATED MAY 3, 1999
RELATING TO THE AIM EUROPE GROWTH FUND PROSPECTUS, THE AIM JAPAN GROWTH FUND,
THE AIM MID CAP EQUITY FUND PROSPECTUS AND THE AIM NEW PACIFIC GROWTH FUND
PROSPECTUS, PROSPECTUS EACH DATED MAY 3, 1999
<PAGE> 223
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
<S> <C>
INTRODUCTION................................................ 4
GENERAL INFORMATION ABOUT THE FUNDS......................... 4
The Trust and Its Shares.................................. 4
INVESTMENT POLICIES......................................... 5
Selection of Investments.................................. 5
Investments in Other Investment Companies................. 6
Samurai and Yankee Bonds.................................. 6
Depositary Receipts....................................... 6
Warrants or Rights........................................ 7
Lending of Portfolio Securities........................... 7
Commercial Bank Obligations............................... 7
Privatizations............................................ 8
Repurchase Agreements..................................... 8
Borrowing, Reverse Repurchase Agreements and "Roll"
Transactions........................................... 8
When-Issued or Forward Commitment Securities.............. 9
Temporary Defensive Strategies............................ 9
OPTIONS, FUTURES AND CURRENCY STRATEGIES.................... 9
Special Risks of Options, Futures and Currency
Strategies............................................. 9
Writing Call Options...................................... 10
Writing Put Options....................................... 11
Purchasing Put Options.................................... 11
Purchasing Call Options................................... 11
Index Options............................................. 12
Interest Rate, Currency and Stock Index Futures
Contracts.............................................. 13
Options on Futures Contracts.............................. 15
Limitations on Use of Futures, Options on Futures and
Certain Options on Currencies.......................... 15
Forward Contracts......................................... 16
Foreign Currency Strategies -- Special Considerations..... 16
Cover..................................................... 17
RISK FACTORS................................................ 17
Concentration............................................. 17
Illiquid Securities....................................... 17
Foreign Securities........................................ 18
Debt Securities........................................... 23
Equity Securities......................................... 23
INVESTMENT LIMITATIONS...................................... 23
EXECUTION OF PORTFOLIO TRANSACTIONS......................... 25
Portfolio Trading and Turnover............................ 26
MANAGEMENT.................................................. 27
Trustees and Executive Officers........................... 27
Investment Management and Administration Services......... 29
Expenses of the Funds..................................... 29
THE DISTRIBUTION PLANS...................................... 30
The Class A and C Plan.................................... 30
The Class B Plan.......................................... 30
Both Plans................................................ 30
</TABLE>
2
<PAGE> 224
<TABLE>
<CAPTION>
PAGE
<S> <C>
THE DISTRIBUTOR............................................. 33
Sales Charges and Dealer Concessions...................... 34
Reductions in Initial Sales Charges....................... 37
Contingent Deferred Sales Charge Exceptions............... 39
NET ASSET VALUE DETERMINATION............................... 40
HOW TO PURCHASE AND REDEEM SHARES........................... 41
Backup Withholding........................................ 42
QUALIFYING FOR A REDUCED FRONT-END SALES CHARGE............. 43
PROGRAMS AND SERVICES FOR SHAREHOLDERS...................... 44
DIVIDEND ORDER.............................................. 44
TAXES....................................................... 44
General................................................... 44
Foreign Taxes............................................. 44
Passive Foreign Investment Companies...................... 45
Non-U.S. Shareholders..................................... 45
Options, Futures and Foreign Currency Transactions........ 45
SHAREHOLDER INFORMATION..................................... 46
MISCELLANEOUS INFORMATION................................... 48
Custodian................................................. 48
Transfer Agency and Accounting Agency Services............ 48
Independent Accountants................................... 49
Legal Matters............................................. 49
Shareholder Liability..................................... 49
Names..................................................... 49
Control Persons and Principal Holders of Securities....... 49
INVESTMENT RESULTS.......................................... 51
Total Return Quotations................................... 51
Performance Information................................... 54
APPENDIX.................................................... 56
Description of Bond Ratings............................... 56
Description of Commercial Paper Ratings................... 57
Absence of Rating......................................... 57
FINANCIAL STATEMENTS........................................ FS
</TABLE>
3
<PAGE> 225
INTRODUCTION
This Statement of Additional Information relates to the Class A, Class B and
Class C shares of AIM New Pacific Growth Fund ("Pacific Fund"), AIM Europe
Growth Fund ("Europe Fund"), AIM Mid Cap Equity Fund, formerly AIM Mid Cap
Growth Fund, ("Mid Cap Fund") and AIM Japan Growth Fund ("Japan Fund")
(individually, a "Fund," and collectively, the "Funds"). Each Fund is a
diversified series of AIM Growth Series (the "Trust"), a registered open-end
management investment company.
A I M Advisors, Inc. ("AIM") serves as the investment manager of and
administrator for Pacific Fund, Europe Fund and Japan Fund. INVESCO (NY), Inc.
("INVESCO NY") serves as the investment sub-advisor of Pacific Fund and Japan
Fund. INVESCO Asset Management Ltd. ("INVESCO AML") serves as the investment
sub-advisor of Europe Fund. INVESCO NY and INVESCO AML may be referred to
collectively as the "Sub-advisors."
The Trust is a series mutual fund. The rules and regulations of the Securities
and Exchange Commission (the "SEC") require all mutual funds to furnish
prospective investors certain information concerning the activities of the fund
being considered for investment. This information for Pacific Fund is included
in a separate Prospectus dated May 3, 1999, for Europe Fund is included in a
separate Prospectus dated May 3, 1999, for Mid Cap Fund is included in a
separate Prospectus dated May 3, 1999, and for Japan Fund is included in a
separate Prospectus dated May 3, 1999. Additional copies of the Prospectuses and
this Statement of Additional Information may be obtained without charge by
writing the principal distributor of the Funds' shares, A I M Distributors, Inc.
("AIM Distributors"), P.O. Box 4739, Houston, TX 77210-4739 or by calling (800)
347-4246. Investors must receive a Prospectus before they invest.
This Statement of Additional Information is intended to furnish prospective
investors with additional information concerning the Funds. Some of the
information required to be in this Statement of Additional Information is also
included in the Prospectus; and, in order to avoid repetition, reference will be
made to sections of the Prospectus. Additionally, the Prospectus and this
Statement of Additional Information omit certain information contained in the
Registration Statement filed with the SEC. Copies of the Registration Statement,
including items omitted from the Prospectus and this Statement of Additional
Information, may be obtained from the SEC by paying the charges prescribed under
its rules and regulations.
GENERAL INFORMATION ABOUT THE FUNDS
THE TRUST AND ITS SHARES
The Trust previously operated under the name G.T. Global Growth Series, which
was organized as a Massachusetts business trust on February 19, 1985. The Trust
was reorganized on May 29, 1998 as a Delaware business trust, and is registered
with the SEC as a diversified open-end series management investment company. The
Trust currently consists of the following portfolios; each of the six Funds, AIM
Small Cap Growth Fund, formerly known as AIM Small Cap Equity Fund, and AIM
Basic Value Fund, formerly known as AIM America Value Fund. Each of these funds
has four separate classes: Class A, Class B, Class C and Advisor Class shares.
All historical financial and other information contained in this Statement of
Additional Information for periods prior to May 29, 1998, is that of the series
of G.T. Global Growth Series.
This Statement of Additional Information relates solely to the Class A, B, and
C shares of the Funds.
The term "majority of the outstanding shares" of the Trust, a particular Fund
or a particular class of a Fund means, respectively, the vote of the lesser of
(a) 67% or more of the shares of the Trust, such Fund or such class present at a
meeting of the Trust's shareholders, if the holders of more than 50% of the
outstanding shares of the Trust, such Fund or such class are present or
represented by proxy, or (b) more than 50% of the outstanding shares of the
Trust, such Fund or such class.
Class A, Class B, Class C and Advisor Class shares of each Fund have equal
rights and privileges. Each share of a particular class is entitled to one vote,
to participate equally in dividends and distributions declared by the Trust's
Board of Trustees with respect to the class of such Fund and, upon liquidation
of the Fund, to participate proportionately in the net assets of the Fund
allocable to such class remaining after satisfaction of outstanding liabilities
of the Fund allocable to such class. Fund shares are fully paid, non-assessable
and fully transferable when issued and have no preemptive rights and have such
conversion and exchange rights as set forth in the Prospectus and this Statement
of Additional Information. Fractional shares have proportionately the same
rights, including voting rights, as are provided for a full share.
Shareholders of the Funds do not have cumulative voting rights, and therefore
the holders of more than 50% of the outstanding shares of all Funds voting
together for election of trustees may elect all of the members of the Board of
Trustees of the Trust. In such event, the remaining holders cannot elect any
trustees of the Trust.
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INVESTMENT POLICIES
In addition to the primary investment policies set forth in the Prospectuses,
each Fund may engage in other types of investments, as described below.
Pacific Fund, Europe Fund, and Japan Fund each may invest up to 35% of its
total assets in the equity securities of issuers domiciled outside of its
primary investment areas (Japan for Japan Fund). Such investments may include:
(a) securities of issuers in countries that are not located in the primary
investment area but are linked by tradition, economic markets, cultural
similarities or geography to the countries in such primary investment area; and
(b) securities of issuers located elsewhere in the world that have operations in
the primary investment area or that stand to benefit from political and economic
events in the primary investment area.
For purposes of the Prospectus and this Statement of Additional Information,
an issuer typically is considered to be domiciled in a particular country if it
is (a) organized under the laws of, or has its principal office in, a particular
country or (b) normally derives 50% or more of its total revenues from business
in that country, provided that, in the view of AIM and/or the Sub-advisors, the
value of such issuer's securities tends to reflect such country's development to
a greater extent than developments elsewhere. However, these are not absolute
requirements, and certain companies incorporated in a particular country and
considered by AIM and/or the Sub-advisors to be located in that country may have
substantial foreign operations or subsidiaries and/or export sales exceeding in
size the assets or sales in that country.
Pacific Fund, Europe Fund, and Japan Fund each may invest up to 35% of its
total assets in debt securities, including U.S. and foreign government
securities and corporate debt securities, Samurai and Yankee bonds, Eurobonds
and Depositary Receipts. The issuers of such debt securities may or may not be
domiciled in the primary investment area of a Fund. Each Fund will limit its
purchases of debt securities to investment grade obligations. "Investment grade"
debt refers to those securities rated within one of the four highest ratings
categories by Moody's Investors Service, Inc. ("Moody's") or by Standard &
Poor's, a division of The McGraw-Hill Companies, Inc. ("S&P"), or , if not
similarly rated by any other nationally recognized statistical rating
organization ("NRSRO"), deemed by AIM and/or the Sub-advisors to be of
equivalent quality.
SELECTION OF INVESTMENTS
Because the development of the world's economies and stock markets is rapidly
evolving, from time to time the Board of Trustees may add or delete countries
from a Fund's primary investment area as set forth in the Fund's Prospectus.
In determining the appropriate distribution of investments among various
countries and geographic regions for the Funds, AIM and/or the Sub-advisors
ordinarily consider the following factors: prospects for relative economic
growth between the different countries in which each Fund may invest; expected
levels of inflation; government policies influencing business conditions; the
outlook for currency relationships; and the range of the individual investment
opportunities available to international investors.
AIM and/or the Sub-advisors allocate investments among fixed income securities
of particular issuers on the basis of its views as to the best values then
currently available in the marketplace. Such values are a function of yield,
maturity, issue classification and quality characteristics, coupled with
expectations regarding the economy, movements in the general level and term of
interest rates, currency values, political developments, and variations in the
supply of funds available for investment in the world bond market relative to
the demands placed upon it. If market interest rates decline, fixed income
securities generally appreciate in value and vice versa. Fixed income securities
denominated in currencies other than the U.S. dollar or in multinational
currency units are evaluated on the strength of the particular currency against
the U.S. dollar as well as on the current and expected levels of interest rates
in the country or countries. In addition to the foregoing, a Fund may seek to
take advantage of differences in relative values of fixed income securities
among various countries.
In analyzing companies for investment by each Fund, AIM and/or the
Sub-advisors ordinarily look for one or more of the following characteristics:
an above-average earnings growth per share; high return on invested capital; a
healthy balance sheet; sound financial and accounting policies and overall
financial strength; strong competitive advantages; effective research and
product development and marketing; efficient service; pricing flexibility;
strength of management; and general operating characteristics which will enable
the companies to compete successfully in their respective marketplaces. In
certain countries, governmental restrictions and other limitations on investment
may affect the maximum percentage of equity ownership in any one company by a
Fund or the Funds in the aggregate. In addition, in some instances only special
classes of securities may be purchased by foreigners and the market prices,
liquidity and rights with respect to those securities may vary from shares owned
by nationals.
As of June 30, 1998, the market capitalizations of companies comprising the
Russell Mid Cap Index ranged from approximately $1.4 to $10.3 billion. Market
capitalization means the total market value of a company's outstanding
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common stock. There is no necessary correlation between market capitalization
and the financial attributes (such as level of assets, revenues or income) often
used to measure a company's size.
Equity securities in which the Mid Cap Fund may invest include common stocks,
preferred stocks, convertible debt securities and warrants to acquire such
securities. The Fund may also invest up to 35% of its total assets in the equity
securities of (a) issuers domiciled in the United States that, at the time of
purchase, have market capitalizations outside the range of market
capitalizations of companies that are included in the Russell Mid Cap Index; and
(b) issuers domiciled outside the United States, including (i) issuers linked by
tradition, economic markets, cultural similarities or geography to the United
States; and (ii) issuers located elsewhere in the world that have operations in
the United States or that stand to benefit from political or economic events in
the United States. In addition, the Fund may invest up to 35% of its total
assets in investment grade debt securities, including U.S. and foreign
government securities and corporate debt securities, Samurai and Yankee bonds,
Euro bonds and Depositary Receipts. The issuers of such debt securities may or
may not be domiciled in the United States.
At this time, AIM and/or the Sub-advisors are not aware of the existence of
any investment or exchange control regulations that might substantially impair
the operations of the Funds as described in the Prospectus and this Statement of
Additional Information. Although restrictions may in the future make it
undesirable to invest in certain countries, AIM and/or the Sub-advisors do not
believe that any current repatriation restrictions would affect its decisions to
invest in the countries eligible for investment by any Fund. It should be noted,
however, that this situation could change at any time.
INVESTMENTS IN OTHER INVESTMENT COMPANIES
With respect to certain countries, investments by a Fund presently may be made
only by acquiring shares of other investment companies (including investment
vehicles or companies advised by AIM and/or the Sub-advisors or their affiliates
("Affiliated Funds")) with local governmental approval to invest in those
countries. At such time as direct investment in these countries is allowed, the
Funds anticipate investing directly in these markets. The Funds may also invest
in the securities of closed-end investment companies within the limits of the
Investment Company Act of 1940, as amended (the "1940 Act"). These limitations
currently provide that, in part, each Fund may purchase shares of a closed-end
investment company unless: (a) such a purchase would cause a Fund to own more
than 3% of the total outstanding voting stock of the investment company or (b)
such a purchase would cause a Fund to have more than 5% of its assets invested
in the investment company or more than 10% of its assets invested in an
aggregate of all such investment companies. Investment in investment companies
may involve the payment of substantial premiums above the value of such
companies' portfolio securities. The Funds do not intend to invest in such
vehicles or funds unless AIM and/or the Sub-advisors determine that the
potential benefits of such investments justify the payment of any applicable
premiums. As a shareholder in an investment company, the Fund would bear its
ratable share of that investment company's expenses, including its advisory and
administration fees. The return on such securities will be reduced by operating
expenses of such companies including payments to the investment managers of
those investment companies. At the same time, the Fund would continue to pay its
own management fees and other expenses. With respect to investments in
Affiliated Funds, AIM and/or the Sub-advisors waive their advisory fee to the
extent that such fees are based on assets of a Fund invested in Affiliated
Funds.
SAMURAI AND YANKEE BONDS
The International Fund, the Japan Fund, the Pacific Fund and the Worldwide
Fund may invest in yen-denominated bonds sold in Japan by non-Japanese issuers
("Samurai bonds"), and the Worldwide Fund and the Mid Cap Fund may invest in
dollar-denominated bonds sold in the United States by non-U.S. issuers ("Yankee
bonds"). As compared with bonds issued in their countries of domicile, such bond
issues normally carry a higher interest rate but are less actively traded. It is
the policy of each Fund to invest in Samurai or Yankee bond issues only after
taking into account considerations of quality and liquidity, as well as yield.
These bonds are issued by governments that are members of the Organization for
Economic Cooperation and Development or have AAA ratings. None of the Funds has
invested in Samurai or Yankee bonds since 1982.
DEPOSITARY RECEIPTS
Each Fund may hold securities of foreign issuers in the form of American
Depositary Receipts ("ADRs"), American Depositary Shares ("ADSs"), Global
Depositary Receipts ("GDRs") and European Depositary Receipts ("EDRs") or other
securities convertible into securities of eligible European or Far Eastern
issuers. These securities may not necessarily be denominated in the same
currency as the securities for which they may be exchanged. ADRs and ADSs
typically are issued by an American bank or trust company and evidence ownership
of underlying securities issued by a foreign corporation. EDRs, which are
sometimes referred to as Continental Depositary Receipts ("CDRs"), are issued in
Europe
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typically by foreign banks and trust companies and evidence ownership of either
foreign or domestic securities. GDRs are similar to EDRs and are designed for
use in several international financial markets. Generally, ADRs and ADSs in
registered form are designed for use in United States securities markets and
EDRs in bearer form are designed for use in European securities markets. For
purposes of a Fund's investment policies, its investments in ADRs, ADSs, GDRs
and EDRs will be deemed to be investments in the equity securities representing
securities of foreign issuers into which they may be converted.
ADR facilities may be established as either "unsponsored" or "sponsored."
While ADRs issued under these two types of facilities are in some respects
similar, there are distinctions between them relating to the rights and
obligations of ADR holders and the practices of market participants. A
depository may establish an unsponsored facility without participation by (or
even necessarily the acquiescence of) the issuer of the deposited securities,
although typically the depository requests a letter of non-objection from such
issuer prior to the establishment of the facility. Holders of unsponsored ADRs
generally bear all the costs of such facilities. The depository usually charges
fees upon the deposit and withdrawal of the deposited securities, the conversion
of dividends into U.S. dollars, the disposition of non-cash distributions and
the performance of other services. The depository of an unsponsored facility
frequently is under no obligation to distribute shareholder communications
received from the issuer of the deposited securities or to pass through voting
rights to ADR holders with respect to the deposited securities. Sponsored ADR
facilities are created in generally the same manner as unsponsored facilities,
except that the issuer of the deposited securities enters into a deposit
agreement with the depository. The deposit agreement sets out the rights and
responsibilities of the issuer, the depository and the ADR holders. With
sponsored facilities, the issuer of the deposited securities generally will bear
some of the costs relating to the facility (such as dividend payment fees of the
depository), although ADR holders continue to bear certain other costs (such as
deposit and withdrawal fees). Under the terms of most sponsored arrangements,
depositories agree to distribute notices of shareholder meetings and voting
instructions, and to provide shareholder communications and other information to
the ADR holders at the request of the issuer of the deposited securities. The
Funds may invest in both sponsored and unsponsored ADRs.
WARRANTS OR RIGHTS
Warrants or rights may be acquired by a Fund in connection with other
securities or separately and provide the Fund with the right to purchase at a
later date other securities of the issuer. Warrants are securities permitting,
but not obligating, their holder to subscribe for other securities or
commodities. Warrants do not carry with them the right to dividends or voting
rights with respect to the securities that they entitle their holder to
purchase, and they do not represent any rights in the assets of the issuer. As a
result, warrants may be considered more speculative than certain other types of
investments. In addition, the value of a warrant does not necessarily change
with the value of the underlying securities and a warrant ceases to have value
if it is not exercised prior to its expiration date.
LENDING OF PORTFOLIO SECURITIES
For the purpose of realizing additional income, each Fund may make secured
loans of its portfolio securities amounting to not more than 30% of its total
assets. Securities loans are made to broker/dealers or institutional investors
pursuant to agreements requiring that the loans continuously be secured by
collateral at least equal at all times to the value of the securities lent, plus
any accrued interest, "marked to market" on a daily basis. The Funds may pay
reasonable administrative and custodial fees in connection with the loans of
their securities. While the securities loans are outstanding, the Funds will
continue to receive the equivalent of the interest or dividends paid by the
issuer on the securities, as well as interest on the investment of the
collateral or a fee from the borrower. Each Fund will have a right to call each
loan at any time and obtain the securities within the stated settlement period.
The Funds will not have the right to vote equity securities while they are being
lent, but may call in a loan in anticipation of any important vote. Loans only
will be made to firms deemed by AIM and/or the Sub-advisors to be of good
standing and will not be made unless, in the judgment of AIM and/or the
Sub-advisors, the consideration to be earned from such loans would justify the
risk.
COMMERCIAL BANK OBLIGATIONS
For the purposes of each Fund's investment policies with respect to bank
obligations, obligations of foreign branches of U.S. banks and of foreign banks
are obligations of the issuing bank and may be general obligations of the parent
bank. Such obligations, however, may be limited by the terms of a specific
obligation and by government regulation. As with investment in non-U.S.
securities in general, investments in the obligations of foreign branches of
U.S. banks and of foreign banks may subject the Funds to investment risks that
are different in some respects from those of investments in obligations of
domestic issuers. Although a Fund typically will acquire obligations issued and
supported by the credit of U.S. or foreign banks having total assets at the time
of purchase of $1 billion or more, this $1 billion figure is not an
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investment policy or restriction of any Fund. For the purposes of calculation
with respect to the $1 billion figure, the assets of a bank will be deemed to
include the assets of its U.S. and non-U.S. branches.
PRIVATIZATIONS
The governments of some foreign countries have been engaged in programs of
selling part or all of their stakes in government owned or controlled
enterprises ("privatizations"). AIM and/or the Sub-advisors believes that
privatizations may offer opportunities for significant capital appreciation and
intends to invest in privatizations in appropriate circumstances. In certain
foreign countries, the ability of foreign entities to participate in
privatizations may be limited by local law, or the terms on which a Fund may be
permitted to participate may be less advantageous than those for local
investors. There can be no assurance that foreign governments will continue to
sell companies currently owned or controlled by them or that privatization
programs will be successful.
REPURCHASE AGREEMENTS
A repurchase agreement is a transaction in which a Fund purchases a security
from a bank or recognized securities dealer and simultaneously commits to resell
that security to the bank or dealer at an agreed-upon price, date and market
rate of interest unrelated to the coupon rate or maturity of the purchased
security. Although repurchase agreements carry certain risks not associated with
direct investments in securities, including possible decline in the market value
of the underlying securities and delays and costs to the Fund if the other party
to the repurchase agreement becomes bankrupt, the Funds intend to enter into
repurchase agreements only with banks and dealers believed by AIM and/or the
Sub-advisors to present minimal credit risks in accordance with guidelines
approved by the Trust's Board of Trustees (the "Board"). AIM and/or the
Sub-advisors reviews and monitors the creditworthiness of such institutions
under the Board's general supervision.
A Fund will invest only in repurchase agreements collateralized at all times
in an amount at least equal to the repurchase price plus accrued interest. To
the extent that the proceeds from any sale of such collateral upon a default in
the obligation to repurchase were less than the repurchase price, the Fund would
suffer a loss. If the financial institution which is party to the repurchase
agreement petitions for bankruptcy or otherwise becomes subject to bankruptcy or
other liquidation proceedings, there may be restrictions on the Fund's ability
to sell the collateral and the Fund could suffer a loss. However, with respect
to financial institutions whose bankruptcy or liquidation proceedings are
subject to the U.S. Bankruptcy Code, each Fund intends to comply with provisions
under the U.S. Bankruptcy Code that would allow it immediately to resell the
collateral. A Fund will not enter into a repurchase agreement with a maturity of
more than seven days if, as a result, more than 15% of the value of its net
assets would be invested in such repurchase agreements and other illiquid
investments.
BORROWING, REVERSE REPURCHASE AGREEMENTS AND "ROLL" TRANSACTIONS
Each Fund's borrowings will not exceed 33 1/3% of its total assets, i.e., each
Fund's total assets at all times will equal at least 300% of the amount of
outstanding borrowings. If market fluctuations in the value of a Fund's
portfolio holdings or other factors cause the ratio of the Fund's total assets
to outstanding borrowings to fall below 300%, within three days (excluding
Sundays and holidays) of such event the Fund 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 Fund also may borrow up to
5% of its total assets for temporary or emergency purposes other than to meet
redemptions. Any borrowing by a Fund may cause greater fluctuation in the value
of its shares than would be the case if the Fund did not borrow.
Each Fund's fundamental investment limitations permit the Fund to borrow money
for leveraging purposes. Each Fund, however, currently is prohibited, pursuant
to a non-fundamental investment policy, from borrowing money in order to
purchase securities. Nevertheless, this policy may be changed in the future by
the Trust's Board of Trustees. If a Fund employs leverage in the future, it
would be subject to certain additional risks. Use of leverage creates an
opportunity for greater growth of capital but would exaggerate any increases or
decreases in a Fund's net asset value. When the income and gains on securities
purchased with the proceeds of borrowings exceed the costs of such borrowings, a
Fund's earnings or net asset value will increase faster than otherwise would be
the case; conversely, if such income and gains fail to exceed such costs, a
Fund's earnings or net asset value would decline faster than would otherwise be
the case.
Each Fund may enter into reverse repurchase agreements. A reverse repurchase
agreement is a borrowing transaction in which the Fund transfers possession of a
security to another party, such as a bank or broker/dealer in return for cash,
and agrees to repurchase the security in the future at an agreed upon price,
which includes an interest component. Each Fund also may engage in "roll"
borrowing transactions which involve its sale of Government National Mortgage
Association certificates or other securities together with a commitment (for
which the Fund may receive a fee) to purchase similar,
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but not identical, securities at a future date. A Fund will segregate with a
custodian liquid assets in an amount sufficient to cover its obligations under
"roll" transactions and reverse repurchase agreements with broker/dealers. No
segregation is required for reverse repurchase agreements with banks.
WHEN-ISSUED OR FORWARD COMMITMENT SECURITIES
A Fund may purchase debt securities on a "when-issued" basis and may purchase
or sell such securities on a "forward commitment" basis in order to hedge
against anticipated changes in interest rates and prices. The price, which
generally is expressed in yield terms, is fixed at the time the commitment is
made, but delivery and payment for the securities take place at a later date.
When-issued securities and forward commitments may be sold prior to the
settlement date, but a Fund will purchase or sell when-issued securities or
enter into forward commitments only with the intention of actually receiving or
delivering the securities, as the case may be. No income accrues on securities
that have been purchased pursuant to a forward commitment or on a when-issued
basis prior to delivery to a Fund. If a Fund disposes of the right to acquire a
when-issued security prior to its acquisition or disposes of its right to
deliver or receive against a forward commitment, it may incur a gain or loss. At
the time a Fund enters into a transaction on a when-issued or forward commitment
basis, it will segregate cash or liquid securities equal to the value of the
when-issued or forward commitment securities with its custodian and will mark to
market daily such assets. There is a risk that the securities may not be
delivered and that a Fund may incur a loss.
TEMPORARY DEFENSIVE STRATEGIES
Money market instruments in which the Funds 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 the
Sub-advisors to be of comparable quality.
OPTIONS, FUTURES AND CURRENCY STRATEGIES
SPECIAL RISKS OF OPTIONS, FUTURES AND CURRENCY STRATEGIES
The use of options, futures contracts and forward currency contracts ("Forward
Contracts") involves special considerations and risks, as described below. Risks
pertaining to particular instruments are described in the sections that follow.
(1) Successful use of most of these instruments depends upon AIM
and/or the Sub-advisors' ability to predict movements of the overall
securities and currency markets, which requires different skills than
predicting changes in the prices of individual securities. While AIM and/or
the Sub-advisors are experienced in the use of these instruments, there can
be no assurance that any particular strategy adopted will succeed.
(2) There might be imperfect correlation, or even no correlation,
between price movements of an instrument and price movements of the
investments being hedged. For example, if the value of an instrument used
in a short hedge increased by less than the decline in value of the hedged
investment, the hedge would not be fully successful. Such a lack of
correlation might occur due to factors unrelated to the value of the
investments being hedged, such as speculative or other pressures on the
markets in which the hedging instrument is traded. The effectiveness of
hedges using hedging instruments on indices will depend on the degree of
correlation between price movements in the index and price movements in the
investments being hedged.
(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. For example, if a Fund
entered into a short hedge because AIM and/or the Sub-advisors projected a
decline in the price of a security in the Fund's portfolio, and the price
of that security increased instead, the gain from that increase might be
wholly or partially offset by a decline in the price of the hedging
instrument. Moreover, if the price of the hedging instrument declined by
more than the increase in the price of the security, the Fund could suffer
a loss. In either such case, the Fund would have been in a better position
had it not hedged at all.
(4) There is no assurance that a liquid secondary market will exist
for any particular option, futures contract or option thereon at any
particular time.
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(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 (i.e.,
instruments other than purchased options). If the 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. The Fund's ability to close out a
position in an instrument prior to expiration or maturity depends on the
existence of a liquid secondary market or, in the absence of such a market,
the ability and willingness of the other party to the transaction ("contra
party") to enter into a transaction closing out the position. Therefore,
there is no assurance that any position can be closed out at a time and
price that is favorable to the Fund.
WRITING CALL OPTIONS
A Fund may write (sell) call options on securities, indices and currencies.
Call options generally will be written on securities and currencies that, in the
opinion of AIM and/or the Sub-advisors, are not expected to make any major price
moves in the near future but that, over the long term, are deemed to be
attractive investments for the Fund.
A call option gives the holder (buyer) the right to purchase a security or
currency 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 the writer of a call option continues, he may be assigned an
exercise notice, requiring him to deliver the underlying security or currency
against payment of the exercise price. This obligation terminates upon the
expiration of the call option, or such earlier time at which the writer effects
a closing purchase transaction by purchasing an option identical to that
previously sold.
Portfolio securities or currencies on which call options may be written will
be purchased solely on the basis of investment considerations consistent with
each Fund's investment objectives. 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 or currency above the exercise price, and retains the
risk of loss should the price of the security or currency decline. Unlike one
who owns securities or currencies not subject to an option, a Fund has no
control over when it may be required to sell the underlying securities 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, the Fund
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 or currency
during the option period. If the call option is exercised, the Fund will realize
a gain or loss from the sale of the underlying security or currency, which will
be increased or offset by the premium received. The Fund does not consider a
security or currency covered by a call option to be "pledged" as that term is
used in the Fund's policy that limits the pledging or mortgaging of its assets.
Writing call options can serve as a limited short hedge because declines in
the value of the hedged investment would be offset to the extent of the premium
received for writing the option. However, if the security or currency
appreciates to a price higher than the exercise price of the call option, it can
be expected that the option will be exercised and a Fund will be obligated to
sell the security or currency at less than its market value.
The premium that a Fund receives for writing a call option is deemed to
constitute the market value of an option. The premium a Fund will receive from
writing a call option will reflect, among other things, the current market price
of the underlying investment, the relationship of the exercise price to such
market price, the historical price volatility of the underlying investment and
the length of the option period. In determining whether a particular call option
should be written, AIM and/or the Sub-advisors will consider the reasonableness
of the anticipated premium and the likelihood that a liquid secondary market
will exist for those options.
Closing transactions will be effected in order to realize a profit on an
outstanding call option, to prevent an underlying security or currency from
being called, or to permit the sale of the underlying security or currency.
Furthermore, effecting a closing transaction will permit the Fund to write
another call option on the underlying security or currency with either a
different exercise price or expiration date or both.
The Funds will pay transaction costs in connection with the writing of options
and in entering into closing purchase contracts. Transaction costs relating to
options activity normally are higher than those applicable to purchases and
sales of portfolio securities.
The exercise price of the options may be below, equal to or above the current
market values of the underlying securities, indices or currencies at the time
the options are written. From time to time, a Fund may purchase an underlying
security or currency for delivery in accordance with the exercise of an option,
rather than delivering such security or currency from its portfolio. In such
cases, additional costs will be incurred.
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A Fund will realize a profit or loss from a closing purchase transaction if
the cost of the transaction is less or more, respectively, than the premium
received from writing the option. Because increases in the market price of a
call option generally will reflect increases in the market price of the
underlying security or currency, any loss resulting from the repurchase of a
call option is likely to be offset in whole or in part by appreciation of the
underlying security or currency owned by the Fund.
WRITING PUT OPTIONS
The Funds may write put options on securities, indices and currencies. A put
option gives the purchaser of the option the right to sell, and the writer
(seller) the obligation to buy, the underlying security or currency at the
exercise price at any time until (American style) or on (European style) the
expiration date. The operation of put options in other respects, including their
related risks and rewards, is substantially identical to that of call options.
A Fund generally would write put options in circumstances where AIM and/or the
Sub-advisors wishes to purchase the underlying security or currency for the
Fund's portfolio at a price lower than the current market price of the security
or currency. In such event, the 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. Since the Fund also would receive interest on debt
securities or currencies maintained to cover the exercise price of the option,
this technique could be used to enhance current return during periods of market
uncertainty. The risk in such a transaction would be that the market price of
the underlying security or currency would decline below the exercise price, less
the premium received.
Writing put options can serve as a limited long hedge because increases in the
value of the hedged investment would be offset to the extent of the premium
received for writing the option. However, if the security or currency
depreciates to a price lower than the exercise price of the put option, it can
be expected that the put option will be exercised and a Fund will be obligated
to purchase the security or currency at greater than its market value.
PURCHASING PUT OPTIONS
Each Fund may purchase put options on securities, indices and currencies. As
the holder of a put option, a Fund would have the right to sell the underlying
security 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 option, exercise such option or permit such
option to expire.
A Fund may purchase a put option on an underlying security or currency
("protective put") owned by the Fund in order to protect against an anticipated
decline in the value of the security or currency. Such hedge protection is
provided only during the life of the put option when the Fund, as the holder of
the put option, is able to sell the underlying security or currency at the put
exercise price regardless of any decline in the underlying security's market
price or currency's exchange value. The premium paid for the put option and any
transaction costs would reduce any profit otherwise available for distribution
when the security or currency eventually is sold.
A Fund also may purchase put options at a time when the Fund does not own the
underlying security or currency. By purchasing put options on a security or
currency it does not own, a Fund seeks to benefit from a decline in the market
price of the underlying security or currency. If the put option is not sold when
it has remaining value, and if the market price of the underlying security or
currency remains equal to or greater than the exercise price during the life of
the put option, the Fund will lose its entire investment in the put option. In
order for the purchase of a put option to be profitable, the market price of the
underlying security or currency must decline sufficiently below the exercise
price to cover the premium and transaction costs, unless the put option is sold
in a closing sale transaction.
PURCHASING CALL OPTIONS
Each Fund may purchase call options on securities, indices and currencies. As
the holder of a call option, a Fund would have the right to purchase the
underlying security 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 option, exercise such option
or permit such option to expire.
Call options may be purchased by a Fund for the purpose of acquiring the
underlying security or currency for its portfolio. Utilized in this fashion, the
purchase of call options would enable a Fund to acquire the security or currency
at the exercise price of the call option plus the premium paid. At times, the
net cost of acquiring the security or currency in this manner may be less than
the cost of acquiring the security or currency directly. This technique also may
be useful to the Funds in purchasing a large block of securities that would be
more difficult to acquire by direct market purchases. As long as it holds such a
call option, rather than the underlying security or currency itself, a Fund is
partially protected from
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any unexpected decline in the market price of the underlying security 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 Fund also may purchase call options on underlying securities or
currencies it owns to avoid realizing losses that would result in a reduction of
its current return. For example, where a Fund has written a call option on an
underlying security or currency having a current market value below the price at
which it purchased the security or currency, an increase in the market price
could result in the exercise of the call option written by the Fund and the
realization of a loss on the underlying security or currency. Accordingly, the
Fund could purchase a call option on the same underlying security or currency,
which could be exercised to fulfill the Fund's delivery obligations under its
written call (if it is exercised). This strategy could allow the Fund to avoid
selling the portfolio security or currency at a time when it has an unrealized
loss; however, the Fund would have to pay a premium to purchase the call option
plus transaction costs.
Aggregate premiums paid for put and call options will not exceed 5% of such
Fund's total assets at the time of purchase.
Each Fund may attempt to accomplish objectives similar to those involved in
using Forward Contracts by purchasing put or call options on currencies. A put
option gives a Fund as purchaser the right (but not the obligation) to sell a
specified amount of currency at the exercise price at any time until (American
style) or on (European style) the expiration date of the option. A call option
gives a Fund as purchaser the right (but not the obligation) to purchase a
specified amount of currency at the exercise price at any time until (American
style) or on (European style) the expiration date of the option. A Fund might
purchase a currency put option, for example, to protect itself against a decline
in the dollar value of a currency in which it holds or anticipates holding
securities. If the currency's value should decline against the dollar, the loss
in currency value should be offset, in whole or in part, by an increase in the
value of the put. If the value of the currency instead should rise against the
dollar, any gain to the Fund would be reduced by the premium it had paid for the
put option. A currency call option might be purchased, for example, in
anticipation of, or to protect against, a rise in the value against the dollar
of a currency in which the Fund anticipates purchasing securities.
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 AIM and/or the Sub-advisors
believe 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.
The staff of the SEC considers purchased OTC options 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
the Fund. The assets used as cover for OTC options written by a 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.
A Fund's ability to establish and close out positions in exchange-listed
options depends on the existence of a liquid market. A Fund intends to purchase
or write only those exchange-listed options for which there appears to be a
liquid secondary market. However, there can be no assurance that such a market
will exist at any particular time. Closing transactions can be made for OTC
options only by negotiating directly with the contra party or by a transaction
in the secondary market if any such market exists. Although a Fund will enter
into OTC options only with contra parties that are expected to be capable of
entering into closing transactions with the Fund, 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 contra party, the
Fund might be unable to close out an OTC option position at any time prior to
its expiration.
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. When a Fund writes a
call on an index, it receives a premium and agrees that, prior to the expiration
date, the purchaser of the call, upon exercise of the call, will receive from
the Fund an amount of cash if the closing level of the index upon
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which the call is based is greater than the exercise price of the call. The
amount of cash is equal to the difference between the closing price of the index
and the exercise price of the call times a specified multiple (the
"multiplier"), which determines the total dollar value for each point of such
difference. When a Fund buys a call on an index, it pays a premium and has the
same rights as to such calls as are indicated above. When a Fund buys a put on
an index, it pays a premium and has the right, prior to the expiration date, to
require the seller of the put, upon the Fund's exercise of the put, to deliver
to the Fund an amount of cash if the closing level of the index upon which the
put is based is less than the exercise price of the put, which amount of cash is
determined by the multiplier, as described above for calls. When a Fund writes a
put on an index, it receives a premium and the purchaser has the right, prior to
the expiration date, to require the Fund to deliver to it an amount of cash
equal to the difference between the closing level of the index and the exercise
price times the multiplier, if the closing level is less than the exercise
price.
The risks of investment in index options may be greater than options on
securities. Because index options are settled in cash, when a Fund writes a call
on an index it cannot provide in advance for its potential settlement
obligations by acquiring and holding the underlying securities. A Fund can
offset some of the risk of writing a call index option position by holding a
diversified portfolio of securities similar to those on which the underlying
index is based. However, a Fund cannot, as a practical matter, acquire 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 vary from the
value of the index.
Even if a Fund could assemble a securities portfolio that exactly reproduced
the composition of the underlying index, it still would not be fully covered
from a risk standpoint because of the "timing risk" inherent in writing index
options. When an index option is exercised, the amount of cash that the holder
is entitled to receive is determined by the difference between the exercise
price and the closing index level on the date when the option is exercised. As
with other kinds of options, the Fund, as the call writer, will not know that it
has been assigned until the next business day at the earliest. The time lag
between exercise and notice of assignment poses no risk for the writer of a
covered call on a specific underlying security, such as common stock, because
there the writer's obligation is to deliver the underlying security, not to pay
its value as of a fixed time in the past. So long as the writer already owns the
underlying security, it can satisfy its settlement obligations by simply
delivering it, and the risk that its value may have declined since the exercise
date is borne by the exercising holder. In contrast, even if the writer of an
index call holds securities that exactly match the composition of the underlying
index, it will not be able to satisfy its assignment obligations by delivering
those securities against payment of the exercise price. Instead, it will be
required to pay cash in an amount based on the closing index value on the
exercise date; and by the time it learns that it has been assigned, the index
may have declined, with a corresponding decline in the value of its securities
portfolio. This "timing risk" is an inherent limitation on the ability of index
call writers to cover their risk exposure by holding securities positions.
If a Fund purchases an index option and exercises it before the closing index
value for that day is available, it runs the risk that the level of the
underlying index may subsequently change. If such a change causes the exercised
option to fall out-of-the-money, the Fund will be required to pay the difference
between the closing index value and the exercise price of the option (times the
applicable multiplier) to the assigned writer.
INTEREST RATE, CURRENCY AND STOCK INDEX FUTURES CONTRACTS
A Fund may enter into interest rate, currency or stock index futures contracts
("Futures" or "Futures Contracts") as a hedge against changes in prevailing
levels of interest rates, currency exchange rates or stock price levels in order
to establish more definitely the effective return on securities or currencies
held or intended to be acquired by the Fund. The Funds' hedging may include
sales of Futures as an offset against the effect of expected increases in
interest rates, or decreases in currency exchange rates and stock prices, and
purchases of Futures as an offset against the effect of expected declines in
interest rates, or increases in currency exchange rates or stock prices.
The Funds only will enter into Futures Contracts that are traded 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 by the Commodity Futures Trading
Commission ("CFTC"). Futures are exchanged in London at the London International
Financial Futures Exchange.
Although techniques other than sales and purchases of Futures Contracts could
be used to reduce the Funds' exposure to interest rate and currency exchange
rate fluctuations, the Funds may be able to hedge its exposure more effectively
and at a lower cost through using Futures Contracts.
A Futures Contract provides for the future sale by one party and purchase by
another party of a specified amount of a specific financial instrument (security
or currency) for a specified price at a designated date, time and place. A stock
index Futures Contract 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 at
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which the Futures Contract is originally struck; 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 Futures Contract is outstanding.
Although Futures Contracts typically require future delivery of and payment
for financial instruments or currencies, Futures Contracts usually are closed
out before the delivery date. Closing out an open Futures Contract sale or
purchase is effected by entering into an offsetting Futures Contract purchase or
sale, respectively, for the same aggregate amount of the identical financial
instrument or currency and the same delivery date. If the offsetting purchase
price is less than the original sale price, the Fund realizes a gain; if it is
more, the Fund realizes a loss. Conversely, if the offsetting sale price is more
than the original purchase price, the Fund realizes a gain; if it is less, the
Fund realizes a loss. The transaction costs also must be included in these
calculations. There can be no assurance, however, that the Funds will be able to
enter into an offsetting transaction with respect to a particular Futures
Contract at a particular time. If a Fund is not able to enter into an offsetting
transaction, the Fund will continue to be required to maintain the margin
deposits on the Futures Contract.
As an example of an offsetting transaction, the contractual obligations
arising from the sale of one Futures Contract of September Deutschemarks on an
exchange may be fulfilled at any time before delivery under the Futures Contract
is required (i.e., on a specified date in September, the "delivery month") by
the purchase of another Futures Contract of September Deutschemarks on the same
exchange. In such instance, the difference between the price at which the
Futures Contract was sold and the price paid for the offsetting purchase, after
allowance for transaction costs, represents the profit or loss to the Fund.
The Funds' Futures transactions will be entered into for hedging purposes
only; that is, Futures Contracts will be sold to protect against a decline in
the price of securities or currencies that a Fund owns, or Futures Contracts
will be purchased to protect a 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 Contracts is the amount of funds that must be
deposited by a Fund in order to initiate Futures trading and to maintain the
Fund's open positions in Futures Contracts. A margin deposit made when the
Futures Contract is entered into ("initial margin") is intended to ensure the
Fund's performance under the Futures Contract. The margin required for a
particular Futures Contract is set by the exchange on which the Futures Contract
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 the 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 Contract more or less valuable, a process
known as marking-to-market.
Risks of Using Futures Contracts. The prices of Futures Contracts are volatile
and are influenced by, among other things, actual and anticipated changes in
interest and currency rates, which in turn are affected by fiscal and monetary
policies and national and international political and economic events.
There is a risk of imperfect correlation between changes in prices of Futures
Contracts and prices of the securities or currencies in the Fund's portfolio
being hedged. The degree of imperfection of correlation depends upon
circumstances such as: variations in speculative market demand for Futures and
for securities or currencies, including technical influences in Futures trading;
and differences between the financial instruments being hedged and the
instruments underlying the standard Futures Contracts available for trading. A
decision of whether, when and how to hedge involves skill and judgment, and even
a well-conceived hedge may be unsuccessful to some degree because of unexpected
market behavior or interest or currency rate trends.
Because of the low margin deposits required, Futures trading involves an
extremely high degree of leverage. As a result, a relatively small price
movement in a Futures Contract may result in immediate and substantial loss, as
well as gain, to the investor. For example, if at the time of purchase, 10% of
the value of the Futures Contract is deposited as margin, a subsequent 10%
decrease in the value of the Futures Contract would result in a total loss of
the margin deposit, before any deduction for the transaction costs, if the
account were then closed out. A 15% decrease would result in a loss equal to
150% of the original margin deposit, if the Futures Contract were closed out.
Thus, a purchase or sale of a Futures Contract may result in losses in excess of
the amount invested in the Futures Contract.
Most U.S. Futures exchanges limit the amount of fluctuation permitted in
Futures Contract and option on Futures Contract prices during a single trading
day. The daily limit establishes the maximum amount that the price of a Futures
Contract or option may vary either up or down from the previous day's settlement
price at the end of a trading session. Once the daily limit has been reached in
a particular type of Futures Contract or option, no trades may be made on that
day at a price beyond that limit. The daily limit governs only price movement
during a particular trading day and therefore
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does not limit potential losses, because the limit may prevent the liquidation
of unfavorable positions. Futures Contract and option prices occasionally have
moved to the daily limit for several consecutive trading days with little or no
trading, thereby preventing prompt liquidation of positions and subjecting some
traders to substantial losses.
If a Fund were unable to liquidate a Futures or option on 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.
Certain characteristics of the Futures market might increase the risk that
movements in the prices of Futures Contracts or options on Futures might not
correlate perfectly with movements in the prices of the investments being
hedged. For example, all participants in the Futures and options on Futures
markets are subject to daily variation margin calls and might be compelled to
liquidate Futures or options on Futures positions whose prices are moving
unfavorably to avoid being subject to further calls. These liquidations could
increase price volatility of the instruments and distort the normal price
relationship between the Futures or options and the investments being hedged.
Also, because initial margin deposit requirements in the Futures market are less
onerous than margin requirements in the securities markets, there might be
increased participation by speculators in the Futures markets. This
participation also might cause temporary price distortions. In addition,
activities of large traders in both the Futures and securities markets involving
arbitrage, "program trading" and other investment strategies might result in
temporary price distortions.
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,
which represents the amount by which the market price of the Futures Contract,
at exercise, exceeds (in the case of a call) or is less than (in the case of a
put) the exercise price of the option on the Futures Contract. If an option is
exercised on the last trading day prior to the expiration date of the option,
the settlement will be made entirely in cash equal to the difference between the
exercise price of the option and the closing level of the securities, currencies
or index upon which the Futures Contract is based on the expiration date.
Purchasers of options who fail to exercise their options prior to the exercise
date suffer a loss of the premium paid.
The purchase of call options on Futures can serve as a long hedge, and the
purchase of put options on Futures can serve as a short hedge. Writing call
options on Futures can serve as a limited short hedge, and writing put options
on Futures can serve as a limited long hedge, using a strategy similar to that
used for writing options on securities, foreign currencies or indices.
If a Fund writes an option on a Futures Contract, it will be required to
deposit initial and variation margin pursuant to requirements similar to those
applicable to Futures Contracts. Premiums received from the writing of an option
on a Futures Contract are included in the initial margin deposit.
A Fund may seek to close out an option position by selling an option covering
the same Futures Contract and having the same exercise price and expiration
date. The ability to establish and close out positions on such options is
subject to the maintenance of a liquid secondary market.
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 liquidation value of the Fund's portfolio, after taking into
account unrealized profits and unrealized losses on any contracts the Fund has
entered into. In general, a call option on a Futures Contract is "in-the-money"
if the value of the underlying Futures Contract exceeds the strike, i.e.,
exercise, price of the call; a put option on a Futures Contract is
"in-the-money" if the value of the underlying Futures Contract is exceeded by
the strike price of the put. This guideline may be modified by the Trust's Board
of Trustees without a shareholder vote. This limitation does not limit the
percentage of a Fund's assets at risk to 5%.
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FORWARD CONTRACTS
A Forward Contract is an obligation, generally 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 may
either 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.
A Fund engages in forward currency transactions in anticipation of or to
protect itself against fluctuations in exchange rates. A Fund might sell a
particular foreign currency forward, for example, when it holds bonds
denominated in a foreign currency but anticipates, and seeks to be protected
against, a decline in the currency against the U.S. dollar. Similarly, a Fund
might sell the U.S. dollar forward when it holds bonds denominated in U.S.
dollars but anticipates, and seeks to be protected against, a decline in the
U.S. dollar relative to other currencies. Further, a Fund might purchase a
currency forward to "lock in" the price of securities denominated in that
currency that it anticipates purchasing.
Forward Contracts are traded in the interbank market conducted directly
between currency traders (usually large commercial banks) and their customers. A
Forward Contract generally has no deposit requirement, and no commissions are
charged at any stage for trades. Each Fund will enter into such Forward
Contracts with major U.S. or foreign banks and securities or currency dealers in
accordance with guidelines approved by the Trust's Board of Trustees.
Each Fund may enter into Forward Contracts either with respect to specific
transactions or with respect to the overall investments of the Fund. The precise
matching of the Forward Contract amounts and the value of specific securities
generally will not be possible because the future value of such securities in
foreign currencies will change as a consequence of market movements in the value
of those securities between the date the Forward Contract is entered into and
the date it matures. Accordingly, it may be necessary for a Fund to purchase
additional foreign currency on the spot (i.e., cash) market (and bear the
expense of such purchase) if the market value of the security is less than the
amount of foreign currency the Fund is obligated to deliver and if a decision is
made to sell the security and make delivery of the foreign currency. Conversely,
it may be necessary to sell on the spot market some of the foreign currency the
Fund is obligated to deliver. The projection of short-term currency market
movements is extremely difficult, and the successful execution of a short-term
hedging strategy is highly uncertain. Forward Contracts involve the risk that
anticipated currency movements will not be predicted accurately, causing a Fund
to sustain losses on these contracts and transaction costs.
At or before the maturity of a Forward Contract requiring a Fund to sell a
currency, the Fund either may sell a portfolio security and use the sale
proceeds to make delivery of the currency or retain the security and offset its
contractual obligation to deliver the currency by purchasing a second contract
pursuant to which the Fund will obtain, on the maturity date, the same amount of
the currency that it is obligated to deliver. Similarly, a Fund may close out a
Forward Contract requiring it to purchase a specified currency by entering into
a second contract, if its contra party agrees, entitling it to sell the same
amount of the same currency on the maturity date of the first contract. The Fund
would realize a gain or loss as a result of entering into such an offsetting
Forward Contract under either circumstance to the extent the exchange rate or
rates between the currencies involved moved between the execution dates of the
first contract and the offsetting contract.
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 usually are 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 Contracts 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.
FOREIGN CURRENCY STRATEGIES -- SPECIAL CONSIDERATIONS
A Fund may use options on foreign currencies, Futures on foreign currencies,
options on Futures on foreign currencies and Forward Contracts to hedge against
movements in the values of the foreign currencies in which the Fund's securities
are denominated. Such currency hedges can protect against price movements in a
security that a Fund owns or intends to acquire that are attributable to changes
in the value of the currency in which it is denominated. Such hedges do not,
however, protect against price movements in the securities that are attributable
to other causes.
A Fund might seek to hedge against changes in the value of a particular
currency when no Futures Contract, Forward Contract or option involving that
currency is available or one of such contracts is more expensive than certain
other contracts. In such cases, the Fund may hedge against price movements in
that currency by entering into a contract on another currency or basket or
currencies, the values of which AIM and/or the Sub-advisors believe will have a
positive correlation to the value of the currency being hedged. The risk that
movements in the price of the contract will not correlate perfectly with
movements in the price of the currency being hedged is magnified when this
strategy is used.
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The value of Futures Contracts, options on Futures Contracts, Forward
Contracts and options on foreign currencies depends on the value of the
underlying currency relative to the U.S. dollar. Because foreign currency
transactions occurring in the interbank market might involve substantially
larger amounts than those involved in the use of Futures Contracts, Forward
Contracts or options, a Fund could be disadvantaged by dealing in the odd lot
market (generally consisting of transactions of less than $1 million) for the
underlying foreign currencies at prices that are less favorable than for round
lots.
There is no systematic reporting of last sale information for foreign
currencies or any regulatory requirements that quotations available through
dealers or other market sources be firm or revised on a timely basis. Quotation
information generally is representative of very large transactions in the
interbank market and thus might not reflect odd-lot transactions where rates
might be less favorable. The interbank market in foreign currencies is a global,
round-the-clock market. To the extent the U.S. options or Futures markets are
closed while the markets for the underlying currencies remain open, significant
price and rate movements might take place in the underlying markets that cannot
be reflected in the markets for the Futures contracts or options until they
reopen.
Settlement of Futures Contracts, Forward Contracts and options involving
foreign currencies might be required to take place within the country issuing
the underlying currency. Thus, a Fund might be required to accept or make
delivery of the underlying foreign currency in accordance with any U.S. or
foreign regulations regarding the maintenance of foreign banking arrangements by
U.S. residents and might be required to pay any fees, taxes and charges
associated with such delivery assessed in the issuing country.
COVER
Transactions using Forward Contracts, Futures Contracts and options (other
than options purchased by a Fund) expose the 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, receivables and
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.
Assets used as cover or held in a segregated account 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.
RISK FACTORS
CONCENTRATION
Mid Cap Fund, Pacific Fund, Europe Fund, and Japan Fund invest a significant
portion of their assets in a particular region of the world. As a result, each
Fund may be subject to greater risks and may experience greater volatility than
a fund that is more broadly diversified geographically.
ILLIQUID SECURITIES
A Fund may invest up to 15% of its net assets in illiquid securities.
Securities may be considered illiquid if a Fund cannot reasonably expect within
seven days to sell the securities for approximately the amount at which the Fund
values such securities. See "Investment Limitations." The sale of illiquid
securities, if they can be sold at all, generally will require more time and
result in higher brokerage charges or dealer discounts and other selling
expenses than the sale of liquid securities such as securities eligible for
trading on U.S. securities exchanges or in the OTC markets. Moreover, restricted
securities, which may be illiquid for purposes of this limitation, often sell,
if at all, at a price lower than similar securities that are not subject to
restrictions on resale.
Illiquid securities include those that are subject to restrictions contained
in the securities laws of other countries. However, securities that are freely
marketable in the country where they are principally traded, but would not be
freely marketable in the United States, will not be considered illiquid. Where
registration is required, a Fund may be obligated to pay all or part of the
registration expenses and a considerable period may elapse between the time of
the decision to sell and the time the Fund may be permitted to sell a security
under an effective registration statement. If, during such a period, adverse
market conditions were to develop, the Fund might obtain a less favorable price
than prevailed when it decided to sell.
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Not all restricted securities are illiquid. In recent years a large
institutional market has developed for certain securities that are not
registered under the Securities Act of 1933, as amended (the "1933 Act"),
including private placements, repurchase agreements, commercial paper, foreign
securities and corporate bonds and notes. These instruments are often restricted
securities because the securities are sold in transactions not requiring
registration. Institutional investors generally will not seek to sell these
instruments to the general public, but instead will often depend either on an
efficient institutional market in which such unregistered securities can be
readily resold or on an issuer's ability to honor a demand for repayment.
Therefore, the fact that there are contractual or legal restrictions on resale
to the general public or certain institutions is not dispositive of the
liquidity of such investments.
Rule 144A under the 1933 Act establishes a "safe harbor" from the registration
requirements of the 1933 Act for resales of certain securities to qualified
institutional buyers. Institutional markets for restricted securities have
developed as a result of Rule 144A, providing both readily ascertainable values
for restricted securities and the ability to liquidate an investment to satisfy
share redemption orders. Such markets include automated systems for the trading,
clearance and settlement of unregistered securities of domestic and foreign
issuers, such as the PORTAL System sponsored by the National Association of
Securities Dealers, Inc. An insufficient number of qualified institutional
buyers interested in purchasing Rule 144A-eligible restricted securities held by
a Fund, however, could affect adversely the marketability of such portfolio
securities and the Fund might be unable to dispose of such securities promptly
or at favorable prices.
With respect to liquidity determinations generally, the Trust's Board of
Trustees has the ultimate responsibility for determining whether specific
securities, including restricted securities eligible for resale to qualified
institutional buyers pursuant to Rule 144A under the 1933 Act, are liquid or
illiquid. The Trust's Board has delegated the function of making day-to-day
determinations of liquidity to AIM and/or the Sub-advisors in accordance with
procedures approved by the Board. AIM and/or the Sub-advisors take into account
a number of factors in reaching liquidity decisions, including: (i) the
frequency of trading in the security; (ii) the number of dealers who make quotes
for the security; (iii) the number of dealers who have undertaken to make a
market in the security; (iv) the number of other potential purchasers; and (v)
the nature of the security and how trading is effected (e.g., the time needed to
sell the security, how offers are solicited, and the mechanics of transfer.) AIM
and/or the Sub-advisors monitor the liquidity of securities in each Fund's
portfolio and periodically reports such determinations to the Trust's Board of
Trustees. If the liquidity percentage restriction of a Fund is satisfied at the
time of investment, a later increase in the percentage of illiquid securities
held by the Fund resulting from a change in market value or assets will not
constitute a violation of that restriction. If as a result of a change in market
value or assets, the percentage of illiquid securities held by the Fund
increases above the applicable limit, AIM and/or the Sub-advisors will take
appropriate steps to bring the aggregate amount of illiquid assets back within
the prescribed limitations as soon as reasonably practicable, taking into
account the effect of any disposition on the Fund.
FOREIGN SECURITIES
Political, Social and Economic Risks. Investing in securities of non-U.S.
companies may entail additional risks due to the potential political, social and
economic instability of certain countries and the risks of expropriation,
nationalization, confiscation or the imposition of restrictions on foreign
investment, convertibility of currencies into U.S. dollars and on repatriation
of capital invested. In the event of such expropriation, nationalization,
confiscatory taxation, or other confiscation by any country, a Fund could lose
its entire investment in any such country.
Religious, Political and Ethnic Instability. Certain countries in which a Fund
may invest may have groups that advocate radical religious or revolutionary
philosophies or support ethnic independence. Any disturbance on the part of such
individuals could carry the potential for widespread destruction or confiscation
of property owned by individuals and entities foreign to such country and could
cause the loss of the Fund's investment in those countries. Instability may also
result from, among other things: (i) authoritarian governments or military
involvement in political and economic decision-making, including changes in
government through extra-constitutional means; (ii) popular unrest associated
with demands for improved political, economic and social conditions; and (iii)
hostile relations with neighboring or other countries. Such political, social
and economic instability could disrupt the principal financial markets in which
a Fund invests and adversely affect the value of its assets.
Foreign Investment Restrictions. Certain countries prohibit or impose
substantial restrictions on investments in their capital markets, particularly
their equity markets, by foreign entities such as a Fund. These restrictions or
controls may at times limit or preclude investment in certain securities and may
increase the cost and expenses of the Fund. For example, certain countries
require prior governmental approval before investments by foreign persons may be
made, or may limit the amount of investment by foreign persons in a particular
company, or limit the investment by foreign persons to only a specific class of
securities of a company that may have less advantageous terms than securities of
the company available for purchase by nationals. Moreover, the national policies
of certain countries may restrict investment opportunities in issuers or
industries deemed sensitive to national interests. In addition, some countries
require governmental approval for
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the repatriation of investment income, capital or the proceeds of securities
sales by foreign investors. In addition, if there is a deterioration in a
country's balance of payments or for other reasons, a country may impose
restrictions on foreign capital remittances abroad. A Fund could be adversely
affected by delays in, or a refusal to grant, any required governmental approval
for repatriation, as well as by the application to it of other restrictions on
investments.
Non-Uniform Corporate Disclosure Standards and Governmental Regulation.
Foreign companies are subject to accounting, auditing and financial standards
and requirements that differ, in some cases significantly, from those applicable
to U.S. companies. In particular, the assets, liabilities and profits appearing
on the financial statements of such a company may not reflect its financial
position or results of operations in the way they would be reflected had such
financial statements been prepared in accordance with U.S. generally accepted
accounting principles. Most of the foreign securities held by a Fund (other than
the Mid Cap Fund) will not be registered with the SEC or regulators of any
foreign country, nor will the issuers thereof be subject to the SEC's reporting
requirements. Thus, there will be less available information concerning most
foreign issuers of securities held by a Fund than is available concerning U.S.
issuers. In instances where the financial statements of an issuer are not deemed
to reflect accurately the financial situation of the issuer, AIM and/or the
Sub-advisors will take appropriate steps to evaluate the proposed investment,
which may include on-site inspection of the issuer, interviews with its
management and consultations with accountants, bankers and other specialists.
There is substantially less publicly available information about foreign
companies than there are reports and ratings published about U.S. companies and
the U.S. government. In addition, where public information is available, it may
be less reliable than such information regarding U.S. issuers. Issuers of
securities in foreign jurisdictions are generally not subject to the same degree
of regulation as are U.S. issuers with respect to such matters as restrictions
on market manipulation, insider trading rules, shareholder proxy requirements
and timely disclosure of information.
Currency Fluctuations. Because each Fund, other than the Mid Cap Fund, under
normal circumstances will invest a substantial portion of its total assets in
the securities of foreign issuers that are denominated in foreign currencies,
the strength or weakness of the U.S. dollar against such foreign currencies will
account for a significant part of the Fund's investment performance. A decline
in the value of any particular currency against the U.S. dollar will cause a
decline in the U.S. dollar value of a Fund's holdings of securities and cash
denominated in such currency and, therefore, will cause an overall decline in
the Fund's net asset value and any net investment income and capital gains
derived from such securities to be distributed in U.S. dollars to shareholders
of the Fund. Moreover, if the value of the foreign currencies in which a Fund
receives its income declines relative to the U.S. dollar between the receipt of
the income and the making of Fund distributions, it may be required to liquidate
securities in order to make distributions if it has insufficient cash in U.S.
dollars to meet distribution requirements.
The rate of exchange between the U.S. dollar and other currencies is
determined by several factors, including the supply and demand for particular
currencies, central bank efforts to support particular currencies, the relative
movement of interest rates and the pace of business activity in the other
countries and the United States, and other economic and financial conditions
affecting the world economy.
Although each Fund values its assets daily in terms of U.S. dollars, they do
not intend to convert their holdings of foreign currencies into U.S. dollars on
a daily basis. Each Fund will do so, from time to time, and investors should be
aware of the costs of currency conversion. Although foreign exchange dealers do
not charge a fee for conversion, they do realize a profit based on the
difference ("spread") between the prices at which they buy and sell various
currencies. Thus, a dealer may offer to sell a foreign currency to a Fund at one
rate, while offering a lesser rate of exchange should a Fund desire to sell that
currency to the dealer.
Adverse Market Characteristics. Securities of many foreign issuers may be less
liquid and their prices more volatile than securities of comparable U.S.
issuers. In addition, foreign securities markets and brokers generally are
subject to less governmental supervision and regulation than in the United
States, and foreign securities exchange transactions usually are subject to
fixed commissions, which generally are higher than negotiated commissions on
U.S. transactions. In addition, foreign securities exchange transactions may be
subject to difficulties associated with the settlement of such transactions.
Delays in settlement could result in temporary periods when assets of a Fund are
uninvested and no return is earned thereon. The inability of a Fund to make
intended security purchases due to settlement problems could cause the Fund to
miss attractive investment opportunities. Inability to dispose of a portfolio
security due to settlement problems either could result in losses to a Fund due
to subsequent declines in value of the portfolio security or, if a Fund has
entered into a contract to sell the security, could result in possible liability
to the purchaser. AIM and/or the Sub-advisors will consider such difficulties
when determining the allocation of each Fund's assets, although AIM and/or the
Sub-advisors do not believe that such difficulties will have a material adverse
effect on the Funds' portfolio trading activities.
The Funds may use foreign custodians, which may involve risks in addition to
those related to the use of U.S. custodians. Such risks include uncertainties
relating to: (i) determining and monitoring the financial strength,
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reputation and standing of the foreign custodian; (ii) maintaining appropriate
safeguards to protect the Funds' investments and (iii) obtaining and enforcing
judgments against such custodians.
The risk also exists that an emergency situation may arise in one or more
foreign markets as a result of which trading of securities may cease or may be
substantially curtailed and prices for [the Fund's] portfolio securities in such
markets may not be readily available. Section 22(e) of the 1940 Act permits a
registered investment company to suspend redemption of its shares for any period
during which an emergency exists, as determined by the SEC. Accordingly, when
[the Fund] believes that appropriate circumstances warrant, it will promptly
apply to the SEC for a determination that an emergency exists within the meaning
of Section 22(e). During the period commencing from [the Fund's] identification
of such conditions until the date of SEC action, the portfolio securities of
[the Fund] in the affected markets will be valued at fair value as determined in
good faith by or under the direction of the Trust's Board of Trustees.
Withholding Taxes. A Fund's net investment income from foreign issuers may be
subject to non-U.S. withholding taxes by the foreign issuer's country, thereby
reducing the Fund's net investment income or delaying the receipt of income
where those taxes may be recaptured. See "Taxes herein."
Concentration. To the extent a Fund invests a significant portion of its
assets in securities of issuers located in a particular country or region of the
world, it may be subject to greater risks and may experience greater volatility
than a fund that is more broadly diversified geographically.
Special Considerations Affecting Western European Countries. The countries
that are members of the European Economic Community ("Common Market") (Austria,
Belgium, Denmark, Finland, France, Germany, Greece, Ireland, Italy, Luxembourg,
Netherlands, Portugal, Spain, Sweden and the United Kingdom) eliminated certain
import tariffs and quotas and other trade barriers with respect to one another
over the past several years. AIM and/or the Sub-advisors believe that this
deregulation should improve the prospects for economic growth in many Western
European countries. Among other things, the deregulation could enable companies
domiciled in one country to avail themselves of lower labor costs existing in
other countries. In addition, this deregulation could benefit companies
domiciled in one country by opening additional markets for their goods and
services in other countries. Since, however, it is not clear what the exact form
or effect of these Common Market reforms will be on business in Western Europe,
it is impossible to predict the long-term impact of the implementation of these
programs on the securities owned by a Fund.
Special Considerations Affecting Russia and Eastern European
Countries. Investing in Russia and Eastern European countries involves a high
degree of risk and special considerations not typically associated with
investing in the U.S. securities markets and should be considered highly
speculative. Such risks include: (1) delays in settling portfolio transactions
and risk of loss arising out of the system of share registration and custody;
(2) the risk that it may be impossible or more difficult than in other countries
to obtain and/or enforce a judgment; (3) pervasiveness of corruption and crime
in the economic system; (4) currency exchange rate volatility and the lack of
available currency hedging instruments; (5) higher rates of inflation (including
the risk of social unrest associated with periods of hyper-inflation) and high
unemployment; (6) controls on foreign investment and local practices disfavoring
foreign investors and limitations on repatriation of invested capital, profits
and dividends and on a Fund's ability to exchange local currencies for U.S.
dollars; (7) political instability and social unrest and violence; (8) the risk
that the governments of Russia and Eastern European countries may decide not to
continue to support the economic reform programs implemented recently and may
follow radically different political and/or economic policies to the detriment
of investors, including non-market-oriented policies such as the support of
certain industries at the expense of other sectors or investors, or a return to
the centrally planned economy that existed when such countries had a communist
form of government; (9) the financial condition of companies in these countries,
including large amounts of inter-company debt that may create a payments crisis
on a national scale; (10) dependency on exports and the corresponding importance
of international trade; (11) the risk that the tax system in these countries
will not be reformed to prevent inconsistent, retroactive and/or exorbitant
taxation; and (12) the underdeveloped nature of the securities markets.
Special Considerations Affecting Pacific Region Countries. Many Pacific region
countries may be subject to a greater degree of social, political and economic
instability than is the case in the United States. Such instability may result
from, among other things, the following: (i) authoritarian governments or
military involvement in political and economic decision making, and changes in
government through extra-constitutional means; (ii) popular unrest associated
with demands for improved political, economic and social conditions; (iii)
internal insurgencies; (iv) hostile relations with neighboring countries; and
(v) ethnic, religious and racial disaffection. Such social, political and
economic instability could significantly disrupt the principal financial markets
in which a Fund invests and adversely affect the value of a Fund's assets. In
addition, there may be the possibility of asset expropriations or future
confiscatory levels of taxation affecting the Funds.
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In China, India, Indonesia, Malaysia, the Philippines, Singapore, South Korea
and Thailand, government regulation or a company's charter may limit the maximum
foreign aggregate ownership of equity in the company. South Korea generally
prohibits foreign investment in won-denominated debt securities, and Sri Lanka
prohibits foreign investment in government debt securities. South Korea
prohibits foreign investment in specified telecommunications companies, and the
Philippines prohibits foreign investment in mass media companies and companies
providing certain professional services. In the Philippines, a Fund may
generally invest in "B" shares of Philippine issuers engaged in partly
nationalized business activities, the market prices, liquidity and rights of
which may vary from shares owned by nationals. Similarly, in China, a Fund may
only invest in "B" shares of securities traded on The Shanghai Securities
Exchange and The Shenzhen Stock Exchange, currently the two officially
recognized securities exchanges in China. "B" shares traded on The Shanghai
Securities Exchange are settled in U.S. dollars, and those traded on The
Shenzhen Stock Exchange are generally settled in Hong Kong dollars. Certain
countries, such as India, face serious exchange constraints.
If, because of restrictions on repatriation or conversion of funds, a Fund
were unable to timely distribute substantially all of its net investment income
and net capital gains, the Fund could be subject to federal income and excise
taxes that would not otherwise be incurred and could cease to qualify for the
favorable tax treatment afforded to regulated investment companies ("RICs")
under the Internal Revenue Code of 1986, as amended (the "Code"). In such case,
it would become subject to federal income tax on all of its income and net
gains.
Several Pacific region countries have or in the past have had hostile
relationships with neighboring nations or have experienced internal insurgency.
Thailand has experienced border conflicts with Laos and Cambodia, and India is
engaged in border disputes with several of its neighbors, including China and
Pakistan. An uneasy truce exists between North Korea and South Korea, and the
recurrence of hostilities remains possible. Reunification of North Korea and
South Korea could have a detrimental effect on the economy of South Korea. Also,
China continues to claim sovereignty over Taiwan and recently has conducted
military maneuvers near Taiwan.
The economies of most Pacific region countries are heavily dependent upon
international trade and are accordingly affected by protective trade barriers
and the economic conditions of their trading partners, principally the United
States, Japan, China and the European Community. The enactment by the United
States or other principal trading partners of protectionist trade legislation,
reduction of foreign investment in the local economies and general declines in
the international securities markets could have a significant adverse effect
upon the securities markets of Pacific region countries. In addition, the
economies of some of the Asia Pacific region countries, Australia and Indonesia,
for example, are vulnerable to weakness in world prices for their commodity
exports, including crude oil.
Few of the Pacific region countries have Western-style or fully democratic
governments. Some governments in the region are authoritarian in nature and
influenced by security forces. For example, during the course of the last 25
years, governments in the region have been installed or removed as a result of
military coups, while others have periodically demonstrated repressive police
state characteristics. In several Pacific region countries, the leadership
ability of the government has suffered as a result of recent corruption
scandals. Disparities of wealth, among other factors, have also led to social
unrest in some of the Asia Pacific region countries, accompanied, in certain
cases, by violence and labor unrest. Ethnic, religious and racial disaffection,
as evidenced in India, Pakistan, and Sri Lanka, for example, have created
social, economic and political problems. Such problems also have occurred in
other regions.
Starting in mid-1997, some Pacific region countries began to experience
currency devaluations that resulted in high interest rate levels and sharp
reductions in economic activity. While the currency crisis diminished prospects
for short-term corporate earnings growth, AIM and/or the Sub-advisors believe
that high interest rate levels may force governments and corporations to
restructure the financial sector in a manner that may facilitate a return to
high levels of long-term economic activity.
China assumed sovereignty over Hong Kong in July 1997. Although China has
committed by treaty to preserve the economic and social freedoms enjoyed in Hong
Kong for fifty years, the continuation of the current form of the economic
system in Hong Kong will depend on the actions of the government of China. In
addition, such assumption of sovereignty has increased sensitivity in Hong Kong
to political developments and statements by public figures in China. Business
confidence in Hong Kong, therefore, can be significantly affected by such
developments and statements, which in turn can affect markets and business
performance. Investments in Hong Kong may be subject to expropriation,
nationalization or confiscation, in which case a Fund could lose its entire
investment in Hong Kong.
In addition, there is continuing risk that the Hong Kong dollar will be
devalued and a risk of possible loss of investor confidence in the Hong Kong
markets and dollar. However, factors exist that are likely to mitigate this
risk. First, China has stated its intention to implement a "one country, two
systems" policy, which would preserve monetary sovereignty and leave control in
the hands of the Hong Kong Monetary Authority ("HKMA").
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Second, fixed rate parity with the U.S. dollar is seen as critical to
maintaining investors' confidence in the transition to Chinese rule and,
therefore, it is anticipated that, if international investors lose confidence in
Hong Kong dollar assets, the HKMA would take steps to support the currency,
though the taking of such steps cannot be assured. Third, Hong Kong's and
China's sizable combined foreign exchange reserve may be used to support the
value of the Hong Kong dollar, provided that China does not appropriate such
reserves for other uses, which is not anticipated but cannot be assured.
Finally, China would be likely to experience significant adverse political and
economic consequences if confidence in the Hong Kong dollar and the territory
assets were to be endangered.
Special Considerations Affecting Japan. Japan's economic growth has declined
significantly since 1990. The general government position has deteriorated as
the result of weakening economic growth and stimulative measures taken to
support economic activity and to restore financial stability. Although the
decline in interest rates and fiscal stimulation packages have helped to contain
recessionary forces, uncertainties remain. Japan is also heavily dependent upon
international trade, so its economy is especially sensitive to trade barriers
and disputes.
The common stocks of many Japanese companies trade at high price-earnings
ratios, which may be attributable in part to inefficiencies associated with
Japanese corporate operations. Differences in accounting methods make it
difficult to compare the earnings of Japanese companies with those of companies
in other countries, especially the United States. In general, however, reported
net income in Japan is understated relative to U.S. accounting standards and
this is one reason why price-earnings ratios of the stocks of Japanese companies
have tended historically to be higher than those for U.S. stocks. In addition,
Japanese companies have tended to have higher growth rates than U.S. companies,
and Japanese interest rates have generally been lower than in the United States,
both of which factors tend to result in lower discount rates and higher
price-earnings ratios in Japan than in the United States.
The Japanese securities markets are less regulated than those in the United
States. Evidence has emerged from time to time of distortion of market prices to
serve political or other purposes. Shareholders' rights are also not always
equally enforced.
In addition, Japan's banking industry is undergoing problems related to bad
loans and declining values in real estate.
Special Considerations Affecting Latin American Countries. Most Latin American
countries have experienced substantial, and in some periods extremely high,
rates of inflation for many years. Inflation and rapid fluctuations in inflation
rates have had and may continue to have very negative effects on the economies
and securities markets of certain Latin American countries. Certain Latin
American countries are also among the largest debtors to commercial banks and
foreign governments. At times certain Latin American countries have declared
moratoria on the payment of principal and/or interest on external debt. In
addition, certain Latin American securities markets have experienced high
volatility in recent years.
Latin American countries may also close certain sectors of their economies to
equity investments by foreigners. Further due to the absence of securities
markets and publicly owned corporations and due to restrictions on direct
investment by foreign entities, investments may only be made in certain Latin
American countries solely or primarily through governmentally approved
investment vehicles or companies.
Certain Latin American countries may have managed currencies that are
maintained at artificial levels to the U.S. dollar rather than at levels
determined by the market. This type of system can lead to sudden and large
adjustments in the currency which, in turn, can have a disruptive and negative
effect on foreign investors. For example, in late 1994, the value of the Mexican
peso lost more than one-third of its value relative to the U.S. dollar.
Special Considerations Affecting Emerging Markets. Because of the special
risks associated with investing in emerging markets, an investment in a Fund
should be considered speculative. Investors are strongly advised to consider
carefully the special risks involved in emerging markets, which are in addition
to the usual risks of investing in developed foreign markets around the world.
Investing in the securities of companies in emerging markets may entail special
risks relating to potential political and economic instability and the risks of
expropriation, nationalization, confiscation or the imposition of restrictions
on foreign investment, convertibility into U.S. dollars and on repatriation of
capital invested. In the event of such expropriation, nationalization or other
confiscation by any country, a Fund could lose its entire investment in any such
country.
Economies in emerging markets generally are dependent heavily upon
international trade and, accordingly, have been and may continue to be affected
adversely by trade barriers, exchange controls, managed adjustments in relative
currency values and other protectionist measures imposed or negotiated by the
countries with which they trade. These economies also have been and may continue
to be affected adversely by economic conditions in the countries in which they
trade.
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Emerging securities markets are substantially smaller, less developed, less
liquid and more volatile than the major securities markets. The limited size of
emerging securities markets and limited trading value in issuers compared to the
volume of trading in U.S. securities could cause prices to be erratic for
reasons apart from factors that affect the quality of the securities. For
example, limited market size may cause prices to be unduly influenced by traders
who control large positions. Adverse publicity and investors' perceptions,
whether or not based on fundamental analysis, may decrease the value and
liquidity of portfolio securities, especially in these markets. In addition,
securities traded in certain emerging markets may be subject to risks due to the
inexperience of financial intermediaries, a lack of modern technology, the lack
of a sufficient capital base to expand business operations, and the possibility
of permanent or temporary termination of trading.
Settlement mechanisms in emerging securities markets may be less efficient and
reliable than in more developed markets. In such emerging markets there may be
share registration and delivery delays or failures.
Many emerging market countries have experienced substantial, and in some
periods extremely high, rates of inflation for many years. Inflation and rapid
fluctuations in inflation rates and corresponding currency devaluations have had
and may continue to have negative effects on the economies and securities
markets of certain emerging market countries.
DEBT SECURITIES
The value of debt securities held by a Fund will fluctuate with changes in the
perceived creditworthiness of the issuers of such securities and interest rates.
Each Fund is permitted to purchase investment grade debt securities. In
selecting debt securities for investment, AIM and/or the Sub-advisors review and
monitor the creditworthiness of each issuer and issue and analyzes interest rate
trends and specific developments that may affect individual issuers, in addition
to relying on ratings assigned by S&P, Moody's or another nationally recognized
statistical rating organization ("NRSRO") as indicators of quality. Debt
securities rated Baa by Moody's or BBB by S&P are investment grade, although
Moody's considers securities rated Baa to have speculative characteristics.
Changes in economic conditions or other circumstances are more likely to lead to
a weakened capacity for such securities to make principal and interest payments
than is the case for higher grade debt securities. Each Fund is also permitted
to purchase debt securities that are not rated by S&P, Moody's or another NRSRO,
but that AIM and/or the Sub-advisors determine to be of comparable quality to
that of rated securities in which the Fund may invest. Such securities are
included in the computation of any percentage limitations applicable to the
comparable rated securities.
Ratings of debt securities represent the rating agencies' opinions regarding
their quality, are not a guarantee of quality and may be reduced after a Fund
has acquired the security. AIM and/or the Sub-advisors will consider such an
event in determining whether a Fund should continue to hold the security but is
not required to dispose of it. Credit ratings attempt to evaluate the safety of
principal and interest payments and do not reflect an assessment of the
volatility of the security's market value or the liquidity of an investment in
the security. Also, NRSROs may fail to make timely changes in credit ratings in
response to subsequent events, so that an issuer's current financial condition
may be better or worse than the rating indicates. For a description of Moody's
and S&P ratings, see "Appendix" herein.
EQUITY SECURITIES
Equity securities, particularly common stocks, generally represent the most
junior position in an issuer's capital structure and entitle holders to an
interest in the assets of an issuer, if any, remaining after all more senior
claims have been satisfied.
INVESTMENT LIMITATIONS
Each Fund has adopted the following investment limitations as fundamental
policies that may not be changed without approval by the affirmative vote of a
majority of the outstanding shares of the Fund. No Fund may:
(1) Purchase or sell real estate, except that investments in
securities of issuers that invest in real estate and investments in
mortgage-backed securities, mortgage participations or other instruments
supported by interests in real estate are not subject to this limitation,
and except that the Fund may exercise rights under agreements relating to
such securities, including the right to enforce security interests and to
hold real estate acquired by reason of such enforcement until that real
estate can be liquidated in an orderly manner;
(2) Purchase or sell physical commodities, but the Fund may purchase,
sell or enter into financial options and futures, forward and spot currency
contracts, swap transactions and other financial contracts or derivative
instruments;
23
<PAGE> 245
(3) Issue senior securities or borrow money, except as permitted under
the 1940 Act and then not in excess of 33 1/3% of the Fund's total assets
(including the amount borrowed but reduced by any liabilities not
constituting borrowings) at the time of the borrowing, except that the Fund
may borrow up to an additional 5% of its total assets (not including the
amount borrowed) for temporary or emergency purposes;
(4) Make loans, except through loans of portfolio securities or
through repurchase agreements, provided that for purposes of this
limitation, the acquisition of bonds, debentures, other debt securities or
instruments, or participations or other interests therein and investments
in government obligations, commercial paper, certificates of deposit,
bankers' acceptances or similar instruments will not be considered the
making of a loan;
(5) Purchase securities of any one issuer if, as a result, more than
5% of the Fund's total assets would be invested in securities of that
issuer or the Fund would own or hold more than 10% of the outstanding
voting securities of that issuer, except that up to 25% of the Fund's total
assets may be invested without regard to this limitation, and except that
this limitation does not apply to securities issued or guaranteed by the
U.S. government, its agencies or instrumentalities or to securities issued
by other investment companies;
(6) Engage in the business of underwriting securities of other
issuers, except to the extent that the Fund might be considered an
underwriter under the federal securities laws in connection with its
disposition of portfolio securities; or
(7) Purchase any security if, as a result of that purchase, 25% or
more of the Fund's total assets would be invested in securities of issuers
having their principal business activities in the same industry, except
that this limitation does not apply to securities issued or guaranteed by
the U.S. government, its agencies or instrumentalities.
Notwithstanding any other investment policy of the Fund, the Fund may invest
all of its investable assets (cash, securities and receivables related to
securities) in an open-end management investment company having substantially
the same investment objective, policies and limitations as the Fund.
For purposes of the concentration policy contained in limitation (7) above,
each Fund intends to comply with the SEC staff position that securities issued
or guaranteed as to principal and interest by any single foreign government or
any supranational organization are considered to be securities of issuers in the
same industry.
The following investment limitations of each Fund are not fundamental policies
and may be changed by vote of the Trust's Board of Trustees without shareholder
approval. Each Fund may not:
(1) Invest more than 15% of its net assets in illiquid securities, a
term which means securities that cannot be disposed of within seven days in
the normal course of business at approximately the amount at which the Fund
has valued the securities and includes, among other things, repurchase
agreements maturing in more than seven days;
(2) Borrow money except for temporary or emergency purposes (not for
leveraging) in excess of 33 1/3% of the value of the Fund's total assets;
(3) Enter into a futures contract, an option on a futures contract or
an option on foreign currency traded on a CFTC-regulated exchange, in each
case other than for bona fide hedging purposes (as defined by the CFTC), if
the aggregate initial margin and premiums required to establish all of
these positions (excluding the amount by which options are "in-the-money")
exceeds 5% of the liquidation value of the Fund's portfolio, after taking
into account unrealized profits and unrealized losses on any contracts the
Fund has entered into;
(4) Purchase securities on margin, provided that the Fund may obtain
short-term credits as may be necessary for the clearance of purchases and
sales of securities, and further provided that the Fund may make margin
deposits in connection with its use of financial options and futures,
forward and spot currency contracts, swap transactions and other financial
contracts or derivative instruments; or
(5) Mortgage, pledge, or hypothecate any of its assets, provided that
this shall not apply to the transfer of securities in connection with any
permissible borrowing or to collateral arrangements in connection with
permissible activities.
If a percentage restriction on investment or utilization of assets in an
investment policy or limitation is adhered to at the time an investment is made,
a later change in percentage ownership of a security or kind of securities
resulting from changing market values or a similar type of event will not be
considered a violation of a Fund's investment policies or restrictions. A Fund
may exchange securities, exercise conversion or subscription rights, warrants,
or other rights to purchase common stock or other equity securities and may
hold, except to the extent limited by the 1940 Act, any such securities so
acquired without regard to the Fund's investment policies and restrictions. The
original cost of the securities
24
<PAGE> 246
so acquired will be included in any subsequent determination of a Fund's
compliance with the investment percentage limitations referred to above and in
the Prospectus.
Investors should refer to each Fund's prospectus for further information with
respect to that particular Fund's investment objective, which may not be changed
without the approval of its shareholders, and other investment policies,
techniques and limitations, which may be changed without shareholder approval.
EXECUTION OF PORTFOLIO TRANSACTIONS
Subject to policies established by the Trust's Board of Trustees, AIM and/or
the Sub-advisors are responsible for the execution of the Funds' portfolio
transactions and the selection of brokers/dealers who execute such transactions
on behalf of the Funds. In executing transactions, AIM and/or the Sub-advisors
seek the best net results for each Fund, taking into account such factors as the
price (including the applicable brokerage commission or dealer spread), size of
the order, difficulty of execution and operational facilities of the firm
involved. Although AIM and/or the Sub-advisors generally seek reasonably
competitive commission rates and spreads, payment of the lowest commission or
spread is not necessarily consistent with the best net results. While the Funds
may engage in soft dollar arrangements for research services, as described
below, the Funds have no obligation to deal with any broker/dealer or group of
broker/dealers in the execution of portfolio transactions.
Consistent with the interests of the Funds, AIM and/or the Sub-advisors may
select brokers to execute the Funds' portfolio transactions on the basis of the
research services they provide to AIM and/or the Sub-advisors for its use in
managing the Funds and its other advisory accounts. Such services may include
furnishing analysis, reports and information concerning issuers, industries,
securities, geographic regions, economic factors and trends, portfolio strategy,
and performance of accounts; and effecting securities transactions and
performing functions incidental thereto (such as clearance and settlement).
Research and brokerage services received from such broker are in addition to,
and not in lieu of, the services required to be performed by AIM and/or the
Sub-advisors under the applicable investment management and administration
contract. A commission paid to such broker may be higher than that which another
qualified broker would have charged for effecting the same transaction, provided
that AIM and/or the Sub-advisors determine in good faith that such commission is
reasonable in terms either of that particular transaction or the overall
responsibility of AIM and/or the Sub-advisors to the Funds and its other clients
and that the total commissions paid by each Fund will be reasonable in relation
to the benefits received by the Funds over the long term. Research services may
also be received from dealers who execute Fund transactions in OTC markets.
The AIM and/or the Sub-advisors may allocate brokerage transactions to
broker/dealers who have entered into arrangements under which the broker/dealer
allocates a portion of the commissions paid by the Fund toward payment of its
expenses, such as transfer agent and custodian fees.
Investment decisions for each Fund and for other investment accounts managed
by AIM and/or the Sub-advisors are made independently of each other in light of
differing conditions. However, the same investment decision occasionally may be
made for two or more of such accounts, including one or more Funds. In such
cases, simultaneous transactions may occur. Purchases or sales are then
allocated as to price or amount in a manner deemed fair and equitable to all
accounts involved. While in some cases this practice could have a detrimental
effect upon the price or value of the security as far as a Fund is concerned, in
other cases AIM and/or the Sub-advisors believe that coordination and the
ability to participate in volume transactions will be beneficial to the Funds.
Under a policy adopted by the Trust's Board of Trustees, and subject to the
policy of obtaining the best net results, AIM and/or the Sub-advisors may
consider a broker/dealer's sale of the shares of the Funds and the other funds
for which AIM or the Sub-advisors serves as investment manager and/or
administrator in selecting broker/dealers for the execution of portfolio
transactions. This policy does not imply a commitment to execute portfolio
transactions through all broker/dealers that sell shares of the Funds and such
other funds.
Each Fund contemplates purchasing most foreign equity securities in OTC
markets or stock exchanges located in the countries in which the respective
principal offices of the issuers of the various securities are located, if that
is the best available market. The fixed commissions paid in connection with most
such foreign stock transactions generally are higher than negotiated commissions
on U.S. transactions. There generally is less government supervision and
regulation of foreign stock exchanges and brokers than in the United States.
Foreign security settlements may in some instances be subject to delays and
related administrative uncertainties.
Foreign equity securities may be held by a Fund in the form of ADRs, ADSs,
EDRs, GDRs, CDRs or securities convertible into foreign equity securities. ADRs,
ADSs, EDRs, GDRs and CDRs may be listed on stock exchanges, or traded in the OTC
markets in the United States or Europe, as the case may be. ADRs, like other
securities traded in the United States, will be
25
<PAGE> 247
subject to negotiated commission rates. The foreign and domestic debt securities
and money market instruments in which the Funds may invest are generally traded
in the OTC markets.
Each Fund contemplates that, consistent with the policy of obtaining the best
net results, brokerage transactions may be conducted through certain companies
that are affiliated with AIM or [either of] the Sub-advisors. The Trust's Board
of Trustees has adopted procedures in conformity with Rule 17e-1 under the 1940
Act to ensure that all brokerage commissions paid to such affiliates are
reasonable and fair in the context of the market in which they are operating.
Any such transactions will be effected and related compensation paid only in
accordance with applicable SEC regulations.
The Funds may engage in certain principal and agency transactions with banks
and their affiliates that own 5% or more of the outstanding voting securities of
a Fund, provided the conditions of an exemptive order received by the Funds from
the SEC are met. In addition, a Fund may purchase or sell a security from or to
another AIM Fund provided the Funds follow procedures adopted by the 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.
For the fiscal year ended December 31, 1997, no payments were made to
affiliated brokers.
[For the fiscal year ended December 31, 1998, no payments were made to
affiliated brokers.]
Aggregate brokerage commissions paid by the Funds for their three most recent
fiscal years were:
<TABLE>
<CAPTION>
FUND 1998 1997 1996
- ---- ---------- ---------- ----------
<S> <C> <C> <C>
Europe Fund....................................... $ $2,217,385 $2,711,139
Japan Fund........................................ $ $ 218,841 $ 253,623
Mid Cap Fund...................................... $ $2,193,539 $2,760,768
Pacific Fund...................................... $ $2,767,789 $5,151,533
</TABLE>
PORTFOLIO TRADING AND TURNOVER
Although the Funds generally do not intend to trade for short-term profits,
the securities held by a Fund will be sold whenever AIM and/or the Sub-advisors
believe it is appropriate to do so, without regard to the length of time a
particular security may have been held. Portfolio turnover rate is calculated by
dividing the lesser of sales or purchases of portfolio securities by each Fund's
average month-end portfolio sales, excluding short-term investments. The
portfolio turnover rate will not be a limiting factor when AIM and/or the
Sub-advisors deem portfolio changes appropriate. Higher portfolio turnover
involves correspondingly greater brokerage commissions and other transaction
costs that a Fund will bear directly and may result in the realization of net
capital gains that are taxable when distributed to the Fund's shareholders. The
portfolio turnover rates for the fiscal years ended December 31, 1998 and 1997
were as follows:
<TABLE>
<CAPTION>
FUND 1998 1997
- ---- ---- ----
<S> <C> <C>
Europe Fund................................................. % 107%
Japan Fund.................................................. % 58%
Mid Cap Fund................................................ % 190%
Pacific Fund................................................ % 80%
</TABLE>
26
<PAGE> 248
MANAGEMENT
The Trust's Board of Trustees has overall responsibility for the operation of
the Funds. The Board of Trustees has approved all significant agreements between
the Trust and persons or companies furnishing services to the Funds including
the investment management and administration agreement with AIM, the investment
sub-advisory agreement between AIM and the Sub-advisors, the agreements with AIM
Distributors regarding distribution of the Funds' shares, the custody agreement
and the transfer agency agreement. The day-to-day operations of the Funds are
delegated to the officers of the Trust, subject always to the investment
objectives and policies of the Funds and to the general supervision of the
Trust's Board.
TRUSTEES AND EXECUTIVE OFFICERS
The Trust's Trustees and Executive Officers are listed below. Unless otherwise
indicated, the address of each Executive Officer is 11 Greenway Plaza, Suite
100, Houston, Texas 77046.
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------
NAME, ADDRESS AND AGE POSITIONS HELD WITH REGISTRANT PRINCIPAL OCCUPATION DURING PAST 5 YEARS
- ------------------------------------------------------------------------------------------------------
<S> <C> <C>
*ROBERT H. GRAHAM (52) Trustee, Chairman of the Board Director, President and Chief Executive
and President Officer, A I M Management Group Inc.;
Director and President, A I M Advisors,
Inc.; Director and Senior Vice
President, A I M Capital Management,
Inc., A I M Distributors, Inc., A I M
Fund Services, Inc. and Fund Management
Company; and Director, AMVESCAP, PLC.
- ------------------------------------------------------------------------------------------------------
C. DEREK ANDERSON (57) Trustee President, Plantagenet Capital
220 Sansome Street Management, LLC (an investment
Suite 400 partnership); Chief Executive Officer,
San Francisco, CA 94104 Plantagenet Holdings, Ltd. (an
investment banking firm); Director,
Anderson Capital Management, Inc. since
1988; Director, PremiumWear, Inc.
(formerly Munsingwear, Inc.) (a casual
apparel company); Director, "R" Homes,
Inc. and various other companies; and
Trustee, each of the other investment
companies registered under the 1940 Act
that is sub-advised or sub-administered
by the Sub-advisors.
- ------------------------------------------------------------------------------------------------------
FRANK S. BAYLEY (59) Trustee Partner law firm of Baker & McKenzie;
Two Embarcadero Center Director and Chairman, C.D. Stimson
Suite 2400 Company (a private investment company);
San Francisco, CA 94111 and Trustee, each of the other
investment companies registered under
the 1940 Act that is sub-advised or
sub-administered by the Sub-advisors.
- ------------------------------------------------------------------------------------------------------
ARTHUR C. PATTERSON (55) Trustee Managing Partner, Accel Partners (a
428 University Avenue venture capital firm); Director, Viasoft
Palo Alto, CA 94301 and PageMart, Inc. (both public software
companies) and several other privately
held software and communications
companies; and Trustee, each of the
other investment companies registered
under the 1940 Act that is sub-advised
or sub-administered by the Sub-advisors.
- ------------------------------------------------------------------------------------------------------
RUTH H. QUIGLEY (64) Trustee Private investor; President, Quigley
1055 California Street Friedlander & Co., Inc. (a financial
San Francisco, CA 94108 advisory services firm) from 1984 to
1986; and Trustee, each of the other
investment companies registered under
the 1940 Act that is sub-advised or
sub-administered by the Sub-advisors.
- ------------------------------------------------------------------------------------------------------
</TABLE>
- ---------------
<TABLE>
<S> <C> <C>
* A trustee who is an "interested person" of the Trust and A I M Advisors, Inc. as defined in the
1940 Act.
</TABLE>
27
<PAGE> 249
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------
NAME, ADDRESS AND AGE POSITIONS HELD WITH REGISTRANT PRINCIPAL OCCUPATION DURING PAST 5 YEARS
- ------------------------------------------------------------------------------------------------------
<S> <C> <C>
+JOHN J. ARTHUR (53) Vice President Director and Senior Vice President,
Vice President A I M Advisors, Inc.; Vice President and
Treasurer, A I M Management Group Inc.
- ------------------------------------------------------------------------------------------------------
KENNETH W. CHANCEY (53) Vice President and Principal Senior Vice President -- Mutual Fund
50 California Street Accounting Officer Accounting, INVESCO (NY), Inc. since
San Francisco, CA 94111 1997; Vice President -- Mutual Fund
Accounting, INVESCO (NY), Inc. from 1992
to 1997.
- ------------------------------------------------------------------------------------------------------
MELVILLE B. COX (54) 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.
- ------------------------------------------------------------------------------------------------------
GARY T. CRUM (50) Vice President Director and President, A I M Capital
Management, Inc.; Director and Senior
Vice President, A I M Management Group
Inc. and A I M Advisors, Inc.; and
Director, A I M Distributors, Inc. and
AMVESCAP PLC.
- ------------------------------------------------------------------------------------------------------
SAMUEL D. SIRKO (39) Vice President and Secretary Vice President, Assistant General
Counsel and Assistant Secretary, A I M
Advisors, Inc.; and Assistant General
Counsel and Assistant Secretary, A I M
Management Group Inc., A I M Capital
Management, Inc., A I M Distributors,
Inc., A I M Fund Services, Inc., and
Fund Management Company.
- ------------------------------------------------------------------------------------------------------
+CAROL F. RELIHAN (43) 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.
- ------------------------------------------------------------------------------------------------------
DANA R. SUTTON (39) Vice President and Assistant Vice President and Fund Controller,
Treasurer A I M Advisors, Inc.; and Assistant Vice
President and Assistant Treasurer, Fund
Management Company.
- ------------------------------------------------------------------------------------------------------
</TABLE>
- ---------------
+ Mr. Arthur and Ms. Relihan are married to each other.
The Board of Trustees has a Nominating and Audit Committee, comprised of Miss
Quigley and Messrs. Anderson, Bayley and Patterson, which is responsible for
nominating persons to serve as Trustees, reviewing audits of the Trust and the
Funds and recommending firms to serve as independent auditors of the Trust. All
of the Trust's Trustees also serve as directors or trustees of some or all of
the other investment companies managed, administered or advised by AIM. All of
the Trust's Executive Officers hold similar offices with some or all of the
other investment companies managed, administered or advised by AIM. Each Trustee
who is not a director, officer or employee of AIM and/or the Sub-advisors or any
affiliated company is paid aggregate fees of $5,000 a year plus $300 per Fund
for each meeting of the Board attended by the Trustee, and reimbursed travel and
other expenses incurred in connection with attendance at such meetings. Other
Trustees and Officers receive no compensation or expense reimbursements from the
Trust. For the fiscal year ended December 31, 1998, the Trust paid Mr. Anderson,
Mr. Bayley, Mr. Patterson and Miss Quigley, who are not directors, officers or
employees of AIM and/or the Sub-advisors or any affiliated company, total
compensation of $ , $ , $ and $ ,
respectively, for their services as Trustees. For the year ended December 31,
1998, Mr. Anderson, Mr. Bayley, Mr. Patterson and Miss Quigley, who are not
directors, officers or employees of AIM and/or the Sub-advisors or any other
affiliated company, received total compensation of $ , $ ,
28
<PAGE> 250
$ and $ , respectively, from the investment companies managed
or administered by AIM and sub-advised or sub-administered by the Sub-advisors
for which he or she serves as a Trustee. Fees and expenses disbursed to the
Trustees contained no accrued or payable pension or retirement benefits. [As of
April , 1999, the Officers and Trustees and their families as a group owned in
the aggregate beneficially or of record less than 1% of the outstanding shares
of any Fund.]
INVESTMENT MANAGEMENT AND ADMINISTRATION SERVICES
AIM serves as the investment manager and administrator to each Fund under an
investment management and administration contract ("Management Contract")
between the Trust and AIM. INVESCO NY serves as the sub-advisor to Pacific Fund
and Japan Fund under a sub-advisory Contract between AIM and INVESCO NY
("Sub-Management Contract"). INVESCO AML serves as the sub-advisor to Europe
Fund under a sub-advisory contract between AIM and INVESCO AML ("Sub-Management
Contract"). Both Sub-Management Contracts together with the Management Contract
may be referred to hereafter as the "Management Contracts." As investment
managers and administrators, AIM and/or the Sub-advisors make all investment
decisions for each Fund and administer each Fund's affairs. Among other things,
AIM and/or the Sub-advisors furnish the services and pay the compensation and
travel expenses of persons who perform the executive, administrative, clerical
and bookkeeping functions of the Trust and the Funds and provide suitable office
space and necessary small office equipment and utilities.
The Management Contracts may be renewed for additional one-year terms with
respect to each Fund, provided that any such renewal has been specifically
approved at least annually by: (i) the Board of Trustees or the vote of a
majority of the Fund's outstanding voting securities (as defined in the 1940
Act), and (ii) a majority of Trustees who are not parties to the Management
Contracts or "interested persons" of any such party (as defined in the 1940
Act), cast in person at a meeting called for the specific purpose of voting on
such approval. With respect to any Fund, either the Trust or each of AIM or the
Sub-advisors may terminate the Management Contracts without penalty upon sixty
days' written notice to the other party. The Management Contracts terminate
automatically in the event of their assignment (as defined in the 1940 Act).
The amounts of investment management and administration fees paid by each Fund
to INVESCO NY during the Funds' three most recent fiscal years were as follows:
<TABLE>
<CAPTION>
FUND 1998 1997 1996
---- ---------- ---------- ----------
<S> <C> <C> <C>
Europe Fund....................................... * $5,228,246 $5,416,280
Japan Fund........................................ $1,017,788 $1,367,702
Mid Cap Fund...................................... $3,999,732 $4,982,969
Pacific Fund...................................... $3,736,264 $5,260,774
</TABLE>
* From 1/1/98 through 12/13/98
The amount of investment management fees paid to INVESCO AML from December 14,
1998 through December 31, 1998 for Europe Fund was $ .
EXPENSES OF THE FUNDS
Each Fund pays all expenses not assumed by AIM, the Sub-advisors, AIM
Distributors and other agents. These expenses include, in addition to the
advisory, distribution, transfer agency, pricing and accounting agency and
brokerage fees discussed above, legal and audit expenses, custodian fees,
trustees' fees, organizational fees, fidelity bond and other insurance premiums,
taxes, extraordinary expenses and expenses of reports and prospectuses sent to
existing investors. Certain of these expenses, such as custodial fees and
brokerage fees, generally are higher for non-U.S. securities. The allocation of
general Trust expenses, and expenses shared by the Funds with one another, are
made on a basis deemed fair and equitable, which may be based on the relative
net assets of the Funds or the nature of the services performed and relative
applicability to each Fund. Expenditures, including costs incurred in connection
with the purchase or sale of portfolio securities, that are capitalized in
accordance with generally accepted accounting principles applicable to
investment companies, are accounted for as capital items and not as expenses.
The ratio of each Fund's expenses to its relative net assets can be expected to
be higher than the expense ratios of funds investing solely in domestic
securities, since the cost of maintaining the custody of foreign securities and
the rate of investment management fees paid by each Fund generally are higher
than the comparable expenses of such other funds.
29
<PAGE> 251
THE DISTRIBUTION PLANS
THE CLASS A AND C PLAN
The Trust has adopted a Master Distribution Plan pursuant to Rule 12b-1 under
the 1940 Act relating to the Class A and Class C shares of the Funds (the "Class
A and C Plan"). The Class A and C Plan provides that the Class A shares pay
0.35% per annum of their 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 Class A shares. Under the Class A and C Plan,
Class C shares of Pacific Fund, Europe Fund, Mid Cap Fund and Japan Fund pay
compensation to AIM Distributors at an annual rate of 1.00% of the average daily
net assets attributable to Class C shares. The Class A and C Plan is designed to
compensate AIM Distributors, on a quarterly basis, for certain promotional and
other sales-related costs, and to implement a dealer incentive program which
provides for periodic payments to selected dealers who furnish continuing
personal shareholder services to their customers who purchase and own Class A or
Class C shares of a Fund. Payments can also be directed by AIM Distributors to
selected institutions who have entered into service agreements with respect to
Class A and Class C shares of each Fund and who provide continuing personal
services to their customers who own Class A and Class C shares of the Funds. The
service fees payable to selected institutions are calculated at the annual rate
of 0.25% of the average daily net asset value of those Fund shares that are held
in such institution's customers' accounts which were purchased on or after a
prescribed date set forth in the Plan. Activities appropriate for financing
under the Class A Plan include, but are not limited to, the following: printing
of prospectuses and statements of additional information and reports for other
than existing shareholders; overhead; preparation and distribution of
advertising material and sales literature; expenses of organizing and conducting
sales seminars; supplemental payments to dealers and other institutions such as
asset-based sales charges or as payments of service fees under shareholder
service arrangements; and costs of administering the Class A and C Plan.
Of the aggregate amount payable under the Class A and C Plan, payments to
dealers and other financial institutions that provide continuing personal
shareholder services to their customers who purchase and own shares of the Fund,
in amounts of up to 0.25% of the average daily net assets of the Fund
attributable to the customers of such dealers or financial institutions are
characterized as a service fee, and payments to dealers and other financial
institutions in excess of such amount and payments to AIM Distributors would be
characterized as an asset-based sales charge pursuant to the Class A and C Plan.
Payments pursuant to the Plans are subject to any applicable limitations imposed
by rules of the National Association of Securities Dealers, Inc.
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 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. 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. AIM Distributors may transfer and sell its
rights to payments under the Class B Plan in order to finance distribution
expenditures in respect of Class B shares.
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
the 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
30
<PAGE> 252
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 the Funds; 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 the Funds reasonably may request, to the extent
permitted by applicable statute, rule or regulation. Similar agreements may be
permitted under the Plans for institutions which provide recordkeeping for and
administrative services to 401(k) plans.
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.
Under a Shareholder Service Agreement, each Fund agrees to pay periodically
fees to selected dealers and other institutions who render the foregoing
services to their customers. The fees payable under a Shareholder Service
Agreement generally will be calculated at the end of each payment period for
each business day of 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.
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.
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.
Prior to June 1, 1998, the Trust had adopted a different Rule 12b-1 plan, that
operated as a "reimbursement-type" plan (the "Prior Plan"). The information
provided below relates to payments made under the Prior Plan, which provided for
payments to GT Global Inc., the distributor of the Funds at the time the Prior
Plan was in effect.
For the fiscal year ended December 31, 1998, each Fund paid the following
amounts under the Prior Plan:
<TABLE>
<CAPTION>
% OF CLASS
AVERAGE DAILY
NET ASSETS
-----------------
CLASS A CLASS B CLASS A CLASS B
---------- ---------- ------- -------
<S> <C> <C> <C> <C>
Europe Fund.......................................... $ $ 0.35% 1.00%
Japan Fund........................................... $ $ 0.35% 1.00%
Mid Cap Fund......................................... $ $ 0.35% 1.00%
Pacific Fund......................................... $ $ 0.35% 1.00%
</TABLE>
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<PAGE> 253
For the fiscal year ended December 31, 1998, each Fund paid the following
amounts under the current Plan:
<TABLE>
<CAPTION>
% OF CLASS
AVERAGE DAILY
NET ASSETS
-----------------
CLASS A CLASS B CLASS A CLASS B
---------- ---------- ------- -------
<S> <C> <C> <C> <C>
Europe Fund.......................................... $ $ 0.35% 1.00%
Japan Fund........................................... $ $ 0.35% 1.00%
Mid Cap Fund......................................... $ $ 0.35% 1.00%
Pacific Fund......................................... $ $ 0.35% 1.00%
</TABLE>
Actual fees by category paid by each Fund with regard to the Class A shares
during the year ended December 31, 1998 follows:
<TABLE>
<CAPTION>
EUROPE JAPAN MID CAP PACIFIC
FUND FUND FUND FUND
---------- -------- -------- --------
<S> <C> <C> <C> <C>
CLASS A
Advertising..................................... $ $ $ $
Printing and mailing prospectuses, semi-annual
reports and annual reports (other than to
current shareholders)........................
Seminars........................................
Compensation to Underwriters to partially offset
other marketing expenses..................... 0 0 0
Compensation to Dealers including finder's
fees.........................................
Compensation to Sales Personnel................. 0 0 0 0
Annual Report Total.............................
</TABLE>
Actual fees by category paid by each Fund with regard to the Class B shares
during the year ended December 31, 1998 as follows:
<TABLE>
<CAPTION>
EUROPE JAPAN MID CAP PACIFIC
FUND FUND FUND FUND
-------- -------- ---------- --------
<S> <C> <C> <C> <C>
CLASS B
Advertising....................................... $ $ $ $
Printing and mailing prospectuses, semi-annual
reports and annual reports (other than to
current shareholders)..........................
Seminars..........................................
Compensation to Underwriters to partially offset
other marketing expenses.......................
Compensation to Dealers...........................
Compensation to Sales Personnel................... 0 0 0 0
Annual Report Totals..............................
</TABLE>
The Plans require AIM Distributors to provide the Board of Trustees at least
quarterly with a written report of the amounts expended pursuant to the Plans
and the purposes for which such expenditures were made. The Board of Trustees
reviews these reports in connection with their decisions with respect to the
Plans.
As required by Rule 12b-1, the Plans and related forms of Shareholder Service
Agreements were approved by the Board of Trustees, including a majority of the
directors who are not "interested persons" (as defined in the 1940 Act) of the
Trust and who have no direct or indirect financial interest in the operation of
the Plans or in any agreements related to the Plans ("Qualified Trustees"). In
approving the Plans in accordance with the requirements of Rule 12b-1, the
Trustees considered various factors and determined that there is a reasonable
likelihood that the Plans would benefit each class of each Fund and their
respective shareholders.
The Plans do not obligate the Funds to reimburse AIM Distributors for the
actual expenses AIM Distributors may incur in fulfilling its obligations under
the Plans. Thus, even if AIM Distributors' actual expenses exceed the fee
payable to AIM Distributors thereunder at any given time, the Funds will not be
obligated to pay more than that fee. If AIM Distributors' expenses are less than
the fee it receives, AIM Distributors will retain the full amount of the fee.
32
<PAGE> 254
Unless terminated earlier in accordance with their terms, the Plans continue
in effect until May 29, 1999 and each year thereafter, as long as such
continuance is specifically approved at least annually by the Board of Trustees,
including a majority of the Qualified Trustees.
The Plans may be terminated by the vote of a majority of the Qualified
Trustees, or, with respect to a particular class, by the vote of a majority of
the outstanding voting securities of that class.
Any change in the Plans that would increase materially the distribution
expenses paid by the applicable class requires shareholder approval; otherwise,
it may be amended by the Trustees, including a majority of the Qualified
Trustees, by votes cast in person at a meeting called for the purpose of voting
upon such amendment. As long as the Plans are in effect, the selection or
nomination of the Qualified Trustees is committed to the discretion of the
Qualified Trustees. In the event the Class A and C Plan is amended in a manner
which the Board of Trustees determines would materially increase the charges
paid under the Class A and C Plan, the Class B shares of the Funds will no
longer convert into Class A shares of the same Fund unless the Class B shares,
voting separately, approve such amendment. If the Class B shareholders do not
approve such amendment, the Board of Trustees will (i) create a new class of
shares of the 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, on the one hand, and
the Class B Plan, on the other hand, are: (i) the Class A and C Plan allows
payment to AIM Distributors or to dealers or financial institutions of up to
0.35% of average daily net assets of the Class A shares of each Fund, as
compared to 1.00% of such assets of each Fund's Class B shares; (ii) the Class B
Plan obligates the Class B shares to continue to make payments to AIM
Distributors following termination of the Class B shares Distribution Agreement
with respect to Class B shares sold by or attributable to the distribution
efforts of AIM Distributors and its predecessor, GT Global, Inc. unless there
has been a complete termination of the Class B Plan (as defined in such Plan)
and (iii) the Class B Plan expressly authorizes AIM Distributors to assign,
transfer or pledge its rights to payments pursuant to the Class B Plan.
THE DISTRIBUTOR
The Trust has entered into distribution arrangements with AIM Distributors,
P.O. Box 4739, Houston, Texas 77210-4739, a registered broker-dealer and a
wholly owned subsidiary of AIM, to act as the distributor of Class A, Class B
and Class C shares of the Funds. Certain Trustees and officers of the Trust are
affiliated with AIM Distributors. A Master Distribution Agreement with AIM
Distributors relating to the Class B shares of the Funds was approved by the
Board of Trustees on May 7, 1998 and a Master Distribution Agreement with AIM
Distributors relating to the Class A shares and Class C shares was approved by
the Board of Trustees on [December , 1998]. Both such Master Distribution
Agreements are hereinafter collectively referred to as the "Distribution
Agreements."
The Distribution Agreements provide AIM Distributors with the exclusive right
to distribute shares of the Funds directly and through institutions with whom
AIM Distributors has entered into selected dealer agreements. Under the
Distribution Agreement for the Class B shares, AIM Distributors sells Class B
shares of the Funds at net asset value subject to a contingent deferred sales
charge established by AIM Distributors. AIM Distributors is authorized to
advance to institutions through whom Class B shares are sold a sales commission
under schedules established by AIM Distributors. The Distribution Agreement for
the Class B shares provides that AIM Distributors (or its assignee or
transferee) will receive 0.75% (of the total 1.00% payable under the
distribution plan applicable to Class B shares) of each Fund's average daily net
assets attributable to Class B shares attributable to the sales efforts of AIM
Distributors.
The Distribution Agreements provide that AIM Distributors will bear the
expenses of printing from the final proof and distributing 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 Fund), and any promotional or sales
literature used by AIM Distributors or furnished by AIM Distributors to dealers
in connection with the public offering of the Fund's shares, including expenses
of advertising in connection with such public offerings. AIM Distributors has
not undertaken to sell any specified number of shares of any classes of the
Funds.
AIM Distributors expects to pay sales commissions from its own resources to
dealers and institutions who sell Class B shares of the Funds 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
33
<PAGE> 255
(0.75%) is intended in part to permit AIM Distributors to recoup a portion of
such sales commissions plus financing costs. AIM Distributors anticipates that
it will require a number of years to recoup from Class B Plan payments the sales
commissions paid to dealers and institutions in connection with sales of Class B
shares. In the future, if multiple distributors serve 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 and its predecessor; provided,
however, that a complete termination of the Class B Plan (as defined in such
Plan) would terminate all payments by the Fund of asset based distribution fees
and service fees to AIM Distributors. Termination of the Class B Plan or
Distribution Agreement does not affect the obligation of Class B shareholders to
pay contingent deferred sales charges.
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 GT Global,
Inc., the Trust's former distributor prior to June 1, 1998, for the fiscal year
ended December 31, 1998.
<TABLE>
<CAPTION>
1998 1997
------------------- -------------------
SALES AMOUNT SALES AMOUNT
CHARGES RETAINED CHARGES RETAINED
-------- -------- -------- --------
<S> <C> <C> <C> <C>
Europe Fund................................... $ 70,428 $ 4,461
Japan Fund.................................... $ 62,977 $23,200
Mid Cap Fund.................................. $170,104 $38,700
Pacific Fund.................................. $145,896 $21,605
</TABLE>
The following chart reflects the contingent deferred sales charges paid by
Class A and Class B shareholders for the fiscal year ended December 31, 1998,
1997 and 1996 for Class A and Class B shares:
<TABLE>
<CAPTION>
1998 1997 1996
---------- ---------- ----------
<S> <C> <C> <C>
Europe Fund....................................... $ $ 516,795 $ 382,130
Japan Fund........................................ $ 284,394 $ 349,093
Mid Cap Fund...................................... $2,340,777 $1,941,095
Pacific Fund...................................... $ 936,835 $ 665,740
</TABLE>
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 Advisor
MultiFlex 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 European Development Fund, AIM Europe Growth Fund,
AIM Global Utilities Fund, AIM Global Growth & Income Fund, AIM International
Equity Fund, AIM Japan Growth Fund, AIM Large Cap Growth
34
<PAGE> 256
Fund, AIM Mid Cap Equity 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
OFFERING AMOUNT OFFERING
AMOUNT OF INVESTMENT IN SINGLE TRANSACTION 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>
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 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 Fund, AIM Municipal Bond Fund, AIM Strategic
Income Fund and AIM Tax-Exempt Bond Fund of Connecticut.
<TABLE>
<CAPTION>
DEALER
CONCESSION
INVESTOR'S SALES CHARGE ----------
--------------------------- AS A
AS A AS A PERCENTAGE
PERCENTAGE PERCENTAGE OF THE
OF THE PUBLIC OF THE NET PUBLIC
OFFERING AMOUNT OFFERING
AMOUNT OF INVESTMENT IN 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
OFFERING AMOUNT OFFERING
AMOUNT OF INVESTMENT IN 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; however, AIM
Distributors may pay a dealer concession and/or advance a service fee on such
transactions as set forth below.
35
<PAGE> 257
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. In some instances, these incentives may
be offered only to certain dealers who have sold or may sell significant amounts
of shares. At the option of the dealer, such incentives may take the form of
payment for travel expenses, including lodging, incurred in connection with
trips taken by qualifying registered representatives and their families to
places within or outside the United States. The total amount of such additional
bonus payments or other consideration shall not exceed 0.25% of the public
offering price of the shares sold. Any such bonus or incentive programs will not
change the price paid by investors for the purchase of the applicable AIM Fund's
shares or the amount that any particular AIM Fund will receive as proceeds from
such sales. Dealers may not use sales of the AIM Funds' shares to qualify for
any incentives to the extent that such incentives may be prohibited by the laws
of any state.
AIM Distributors may make payments to dealers and institutions who are dealers
of record for purchases of $1 million or more of Class A shares (or shares which
normally involve payment of initial sales charges), which are sold at net asset
value and are subject to a contingent deferred sales charge, for all AIM Funds
other than Class A shares of each of AIM Limited Maturity Treasury Fund and AIM
Tax-Free Intermediate Fund as follows: 1% of the first $2 million of such
purchases, plus 0.80% of the next $1 million of such purchases, plus 0.50% of
the next $17 million of such purchases, plus 0.25% of amounts in excess of $20
million of such purchases. AIM Distributors may make payments to dealers and
institutions who are dealers of record for purchases of $1 million or more of
Class A shares (or shares which normally involve payment of initial sales
charges), and which are sold at net asset value and are not subject to a
contingent deferred sales charge, in an amount up to 0.10% of such purchases of
Class A shares of AIM Limited Maturity Treasury Fund, and in an amount up to
0.25% of such purchases of Class A shares of AIM Tax-Free Intermediate Fund.
AIM Distributors may pay sales commissions to dealers and institutions who
sell Class B shares of the AIM Funds at the time of such sales. Payments with
respect to Class B shares will equal 4.00% of the purchase price of the Class B
shares sold by the dealer or institution, and will consist of a sales commission
equal to 3.75% of the purchase price of the Class B shares sold plus an advance
of the first year service fee of 0.25% with respect to such shares. The portion
of the payments to AIM Distributors under the Class B Plan which constitutes an
asset-based sales charge (0.75%) is intended in part to permit AIM Distributors
to recoup a portion of such sales commissions plus financing costs.
AIM Distributors may pay sales commissions to dealers and institutions who
sell Class C shares of the AIM Funds at the time of such sales. Payments with
respect to Class C shares will equal 1.00% of the purchase price of the Class C
shares sold by the dealer or institution, and will consist of a sales commission
of 0.75% of the purchase price of the Class C shares sold plus an advance of the
first year service fee of 0.25% with respect to such shares. AIM Distributors
will retain all payments received by it relating to Class C shares for the first
year after they are purchased. The portion of the payments to AIM Distributors
under the Class A and C Plan attributable to Class C shares which constitutes an
asset-based sales charge (0.75%) is intended in part to permit AIM Distributors
to recoup a portion of on-going sales commissions to dealers plus financing
costs, if any. After the first full year, AIM Distributors will make such
payments quarterly to dealers and institutions based on the average net asset
value of Class C shares which are attributable to shareholders for whom the
dealers and institutions are designated as dealers of record. These commissions
are not paid on sales to investors exempt from the CDSC, including shareholders
of record 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.
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.
36
<PAGE> 258
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:
- 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);
- 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;
- 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;
- 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
- any other organized group of persons, whether incorporated or not, provided
the organization has been in existence for at least six months and has some
purpose other than the purchase at a discount of redeemable securities of a
registered investment company.
Investors or dealers seeking to qualify orders for a reduced initial sales
charge must identify such orders and, if necessary, support their qualification
for the reduced charge. AIM Distributors reserves the right to determine whether
any purchaser is entitled, by virtue of the foregoing definition, to the reduced
sales charge. No person or entity may distribute shares of the AIM Funds without
payment of the applicable sales charge other than to persons or entities who
qualify for a reduction in the sales charge as provided herein.
1. Letters of Intent. A purchaser, as previously defined, may pay reduced
initial sales charges by completing the appropriate section of the account
application and by fulfilling a Letter of Intent ("LOI"). The LOI Privilege is
also available to holders of the Connecticut General Guaranteed Account,
established for tax qualified group annuities, for contracts purchased on or
before June 30, 1992. The LOI confirms such purchaser's intention as to the
total investment to be made in shares of the AIM Funds (except for (i) Class A
shares of AIM Tax-Exempt Cash Fund, and AIM Cash Reserve Shares of AIM Money
Market Fund and (ii) Class B and Class C shares of the AIM Funds) 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
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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) 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 and (ii) Class B and Class C shares of the AIM
Funds) owned by such purchaser, calculated at their then current public offering
price. If a purchaser so qualifies for a reduced sales charge, the reduced sales
charge applies to the total amount of money then being invested by such
purchaser and not just to the portion that exceeds the breakpoint above which a
reduced sales charge applies. For example, if a purchaser already owns
qualifying shares of any AIM Fund with a value of $20,000 and wishes to invest
an additional $20,000 in a fund, with a maximum initial sales charge of 5.50%,
the reduced initial sales charge of 5.25% will apply to the full $20,000
purchase and not just to the $15,000 in excess of the $25,000 breakpoint. To
qualify for obtaining the discount applicable to a particular purchase, the
purchaser or his dealer must furnish AFS with a list of the account numbers and
the names in which such accounts of the purchaser are registered at the time the
purchase is made.
Purchases At Net Asset Value. Purchases of shares of any of the AIM Funds at
net asset value (without payment of an initial sales charge) may be made in
connection with: (a) the reinvestment of dividends and distributions from a
fund; (b) exchanges of shares of certain other 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:
- A I M Management Group Inc. ("AIM Management") and its affiliates, or
their clients;
- Any current or retired officer, director or employee (and members of their
immediate family) of AIM Management, its affiliates or The AIM Family of
Funds(R), and any foundation, trust or employee benefit plan established
exclusively for the benefit of, or by, such persons;
- 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, Inc. and any deferred compensation plan for
directors of investment companies sponsored by CIGNA Investments, Inc. or
its affiliates;
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- 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;
- Purchases through approved fee-based programs;
- Employee benefit plans designated as qualified purchasers as defined above,
provided the initial investment in the Fund(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;
- 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;
- 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.
- 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;
- 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;
- Shareholders of the GT Global funds as of April 30, 1987 who since that date
continually have owned shares of one or more of these funds; and
- Certain former AMA Investment Advisers' shareholders who became shareholders
of the AIM Global Health Care Fund in October 1989, and who have
continuously held shares in the GT Global funds since that time.
As used above, immediate family includes an individual and his or her spouse,
children, parents and parents of spouse.
CONTINGENT DEFERRED SALES CHARGE EXCEPTIONS
CDSCs will not apply to the following:
- Additional purchases of Class C shares of AIM Advisor Flex Fund, AIM Advisor
International Value Fund, AIM Advisor Large Cap Value Fund, AIM Advisor
MultiFlex Fund and AIM Advisor Real Estate Fund by shareholders of record on
April 30, 1995, of these Funds, except that shareholders whose
broker-dealers maintain a single omnibus account with AFS on behalf of those
shareholders, perform sub-accounting functions with respect to those
shareholders, and are unable to segregate shareholders of record prior to
April 30, 1995, from shareholders whose accounts were opened after that date
will be subject to a CDSC on all purchases made after March 1, 1996;
- 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;
- 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;
- 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;
- Liquidation by the Fund when the account value falls below the minimum
required account size of $500;
- Investment account(s) of AIM; and
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- Class C shares where the investors dealer or record notifies the distributor
prior to the time of investment that the dealer waives the payment otherwise
payable to him.
Upon the redemption of shares in Categories I and II purchased in amounts of
$1 million or more, no CDSC will be applied in the following situations:
- Shares held more than 18 months;
- 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
participants aggregate investment in the AIM Funds, and not on the aggregate
investment made by the plan or on the number of eligible employees;
- Private foundations or endowment funds;
- Redemption of shares by the investor where the investors dealer waives the
amounts otherwise payable to it by the distributor and notifies the
distributor prior to the time of investment; and
- Shares acquired by exchange from Class A shares in Categories I and II
unless the shares acquired by exchange are redeemed within 18 months of the
original purchase of the Class A shares.
NET ASSET VALUE DETERMINATION
The net asset value per share of each Fund is normally determined daily as of
the close of trading of the New York Stock Exchange ("NYSE") (generally 4:00
p.m. Eastern time) on each business day of the Fund. In the event the NYSE
closes early (i.e., before 4:00 p.m. Eastern time) on a particular day, the net
asset value of a Fund is determined as of the close of the NYSE on such day. Net
asset value per share is determined by dividing the value of each 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 each 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 mean between the closing bid and
asked prices on that day. Each security traded in the over-the-counter market
(but not including securities reported on the NASDAQ National Market System) is
valued at the mean between the last bid and asked prices based upon quotes
furnished by market makers for such securities. 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 mean between the closing bid and asked
prices on that day. Debt securities 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, 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 or amortized cost. For purposes of
determining net asset value per share, futures and options contracts generally
will be valued 15 minutes after the close of trading of the NYSE.
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 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 of the Fund.
Fund securities primarily traded in foreign markets may be traded in such
markets on days which are not business days of the Funds. Because the net asset
value per share of each Fund is determined only on business days of the Fund,
the net
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asset value per share of a fund may be significantly affected on days when an
investor cannot exchange or redeem shares of a Fund.
HOW TO PURCHASE AND REDEEM SHARES
A complete description of the manner in which shares of the Funds may be
purchased appears in the Funds' Prospectuses under the heading "Shareholder
Information -- Purchasing Shares."
The sales charge normally deducted on purchases of Class A shares 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 set forth in the Funds' Prospectuses.
[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 AIM 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
AIM 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.]
[Class B shares purchased before June 1, 1998 are subject to the following
waivers from the contingent deferred sales charge otherwise due upon redemption
in addition to the waivers provided for redemptions of currently issued Class B
shares as described in the Prospectus: (1) total or partial redemptions
resulting from a distribution following retirement in the case of a
tax-qualified employer-sponsored retirement; (2) minimum required distributions
made in connection with an IRA, Keogh Plan or custodial account under Section
403(b) of the Code or other retirement plan following attainment of age 70 1/2;
(3) redemptions pursuant to distributions from a tax-qualified
employer-sponsored retirement plan, which is invested in AIM 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
AIM 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.]
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[For purposes of a Letter of Intent entered into prior to June 1, 1998, any
registered investment advisor, trust company or bank trust department which
exercises investment discretion and which intends within thirteen months to
invest $500,000 or more can be treated as a single purchaser, provided further
that such entity places all purchases and redemption orders. Such entities
should be prepared to establish their qualifications for such treatment.]
Complete information concerning the method of exchanging shares of the Funds
for shares of the other AIM Funds is set forth in the Prospectuses under the
heading "Exchange Privilege."
Information concerning redemption of the Funds' shares is set forth in the
Prospectuses under the heading "How to Redeem Shares." Shares of the AIM Funds
may be redeemed directly through AIM Distributors or through any dealer who had
entered into an agreement with AIM Distributors. AIM intends to redeem all
shares of the Funds in cash. In addition to the Funds' obligation to redeem
shares, AIM Distributors may also repurchase shares as an accommodation to
shareholders. To effect a repurchase, those dealers who have executed Selected
Dealer Agreements with AIM Distributors must phone orders to the order desk of
the Funds at (800) 959-4246 and guarantee delivery of all required documents in
good order. A repurchase is effected at the net asset value per share of the
applicable Fund next determined after the repurchase order is received. Such an
arrangement is subject to timely receipt by A I M Fund Services, Inc. ("AFS") of
all required documents in good order. If such documents are not received within
a reasonable time after the order is placed, the order is subject to
cancellation. While there is no charge imposed by 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.
The right of redemption may be suspended or the date of payment postponed when
(a) trading on the 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.
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 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 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
reportable interest, dividend, broker or barter exchange accounts opened
after 1983, or broker accounts considered inactive during 1983.
Except as explained in (5) above, other reportable payments are subject to
backup withholding only if (1) or (2) 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:
- a corporation
- an organization exempt from tax under Section 501(a), an individual
retirement plan (IRA), or a custodial account under Section 403(b)(7)
- the United States or any of its agencies or instrumentalities
- a state, the District of Columbia, a possession of the United States, or any
of their political subdivisions or instrumentalities
- a foreign government or any of its political subdivisions, agencies or
instrumentalities
- an international organization or any of its agencies or instrumentalities
- a foreign central bank of issue
- a dealer in securities or commodities required to register in the U.S. or a
possession of the U.S.
- a futures commission merchant registered with the Commodity Futures Trading
Commission
- a real estate investment trust
- an entity registered at all times during the tax year under the 1940 Act
- a common trust fund operated by a bank under Section 584(a)
- a financial institution
- 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
- 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 distributions. Under applicable treaty law,
residents of treaty countries may qualify for a reduced rate of withholding or a
withholding exemption.
QUALIFYING FOR A REDUCED FRONT-END SALES CHARGE
As described in the Prospectus, the front-end sales charge for Class A shares
is calculated by multiplying an investor's total investment by the applicable
sales charge rate. The applicable rate varies with the amount invested. The
Funds offer programs such as Right of Accumulation and Letter of Intent, which
are described in the Prospectuses, and are designed to permit investors to
aggregate purchases of different funds, or separate purchases over time, in
order to qualify for a lower sales charge rate. See "Terms and Conditions of
Purchase of the AIM Funds -- Reductions in Initial Sales Charges" in the
Prospectuses.
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PROGRAMS AND SERVICES FOR SHAREHOLDERS
The Funds provide certain services for shareholders and certain investment or
redemption programs. See "Exchange Privilege" and "How to Redeem Shares" in the
Prospectuses. All inquiries concerning these programs should be made directly to
A I M Fund Services, Inc., P.O. Box 4739, Houston, Texas 77210-4739, toll free
at (800)959-4246.
DIVIDEND ORDER
Dividends may be paid to someone other than the registered owner, or sent to
an address other than the address of record. (Please note that signature
guarantees are required to effect this option.) An investor also may direct that
his or her dividends be invested in one of the other AIM Funds and there is no
sales charge for these investments; initial investment minimums apply. See
"Dividends, Distributions and Tax Matters -- Dividends and Distributions" in the
Prospectus. To affect this option, please contact your authorized dealer. For
more information concerning AIM Funds other than the Funds, please obtain a
current prospectus by contacting your authorized dealer, by writing to A I M
Fund Services, Inc., P.O. Box 4739, Houston, Texas 77210-4739, or by calling
toll free (800) 959-4246.
TAXES
GENERAL
Each Fund is treated as a separate corporation for federal income tax
purposes. To continue to qualify for treatment as a RIC under the Code, each
Fund must distribute to its shareholders for each taxable year at least 90% of
its investment company taxable income (consisting generally of net investment
income, net short-term capital gain and net gains from certain foreign currency
transactions) ("Distribution Requirement") and must meet several additional
requirements. With respect to each Fund, these requirements include the
following: (1) the Fund must derive at least 90% of its gross income each
taxable year from dividends, interest, payments with respect to securities loans
and gains from the sale or other disposition of securities or foreign
currencies, or other income (including gains from options, Futures or Forward
Contracts) derived with respect to its business of investing in securities or
those currencies ("Income Requirement"); and (2) the Diversification
Requirements.
Dividends and other distributions declared by a Fund in, and payable to
shareholders of record as of a date in, October, November or December of any
year will be deemed to have been paid by the Fund and received by the
shareholders on December 31 of that year if the distributions are paid by the
Fund during the following January. Accordingly, those distributions will be
taxed to shareholders for the year in which that December 31 falls.
If Fund shares are sold at a loss after being held for six months or less, the
loss will be treated as long-term, instead of short-term, capital loss to the
extent of any capital gain distributions received on those shares. Investors
also should be aware that if shares are purchased shortly before the record date
for any dividend or other distribution, the shareholder will pay full price for
the shares and receive some portion of the price back as a taxable distribution.
Each Fund will be subject to a nondeductible 4% excise tax ("Excise Tax") to
the extent it fails to distribute by the end of any calendar year substantially
all of its ordinary income for that year and capital gain net income for the
one-year period ending on October 31 of that year, plus certain other amounts.
FOREIGN TAXES
Dividends and interest received by a Fund, and gains realized thereby, may be
subject to income, withholding or other taxes imposed by foreign countries and
U.S. possessions ("foreign taxes") that would reduce the yield and/or total
return on its securities. Tax conventions between certain countries and the
United States may reduce or eliminate foreign taxes, however, and many foreign
countries do not impose taxes on capital gains in respect of investments by
foreign investors. If more than 50% of the value of a Fund's total assets at the
close of its taxable year consists of securities of foreign corporations, the
Fund will be eligible to, and may, file an election with the Internal Revenue
Service that will enable its shareholders, in effect, to receive the benefit of
the foreign tax credit with respect to any foreign taxes paid by it. Pursuant to
the election, a Fund would treat those taxes as dividends paid to its
shareholders and each shareholder would be required to (1) include in gross
income, and treat as paid by him, his share of those taxes, (2) treat his share
of those taxes and of any dividend paid by the Fund that represents its income
from foreign and U.S. possessions sources as his own income from those sources,
and (3) either deduct the taxes deemed paid by him in computing his taxable
income or, alternatively, use the foregoing information in calculating the
foreign tax credit against his federal income tax. Each Fund will report to its
shareholders shortly after each taxable year their respective shares of the
Fund's foreign taxes and
44
<PAGE> 266
income from sources within foreign countries and U.S. possessions if it makes
this election. Pursuant to the Taxpayer Relief Act of 1997 ("Tax Act"),
individuals who have no more than $300 ($600 for married persons filing jointly)
of creditable foreign taxes included on Forms 1099 and all of whose foreign
source income is "qualified passive income" may elect each year to be exempt
from the extremely complicated foreign tax credit limitation and will be able to
claim a foreign tax credit without having to file the detailed Form 1116 that
otherwise is required.
PASSIVE FOREIGN INVESTMENT COMPANIES
Each Fund may invest in the stock of "passive foreign investment companies"
("PFICs"). A PFIC is a foreign corporation -- other than a "controlled foreign
corporation" (i.e., a foreign corporation in which, on any day during its
taxable year, more than 50% of the total voting power of all voting stock
therein or the total value of all stock therein is owned, directly, indirectly
or constructively, by "U.S. shareholders," defined as U.S. persons that
individually own, directly, indirectly or constructively, at least 10% of that
voting power) as to which a Fund is a U.S. shareholder -- that, in general,
meets either of the following tests: (1) at least 75% of its gross income is
passive or (2) an average of at least 50% of its assets produce, or are held for
the production of, passive income. Under certain circumstances, a Fund will be
subject to federal income tax on a portion of any "excess distribution" received
on, or of any gain from disposition of, stock of a PFIC (collectively "PFIC
income"), plus interest thereon, even if the Fund distributes the PFIC income as
a taxable dividend to its shareholders. The balance of the PFIC income will be
included in the Fund's investment company taxable income and, accordingly, will
not be taxable to the Fund to the extent it distributes that income to its
shareholders.
If a Fund invests in a PFIC and elects to treat the PFIC as a "qualified
electing fund" ("QEF"), then in lieu of the foregoing tax and interest
obligation, the Fund would be required to include in income each year its pro
rata share of the QEF's annual ordinary earnings and net capital gain (i.e., the
excess of net long-term capital gain over net short-term capital loss) -- which
most likely would have to be distributed by the Fund to satisfy the Distribution
Requirement and avoid imposition of the Excise Tax -- even if those earnings and
gain were not received by the Fund from the QEF. In most instances, it will be
very difficult, if not impossible, to make this election because of certain
requirements thereof.
A Fund may elect to "mark to market" its stock in any PFIC.
"Marking-to-market," in this context, means including in ordinary income each
taxable year the excess, if any, of the fair market value of the stock over the
Fund's adjusted basis therein as of the end of that year. Pursuant to the
election, a Fund also will be allowed to deduct (as ordinary, not capital, loss)
the excess, if any, of its adjusted basis in PFIC stock over the fair market
value thereof as of the taxable year-end, but only to the extent of any net
mark-to-market gains with respect to that stock included in income by the Fund
for prior taxable years. A Fund's adjusted basis in each PFIC's stock subject to
the election will be adjusted to reflect the amounts of income included and
deductions taken thereunder. Regulations proposed in 1992 provided a similar
election with respect to the stock of certain PFICs.
NON-U.S. SHAREHOLDERS
Dividends paid by a Fund to a shareholder who, as to the United States, is a
nonresident alien individual, nonresident alien fiduciary of a trust or estate,
foreign corporation or foreign partnership ("foreign shareholder") generally
will be subject to U.S. withholding tax (at a rate of 30% or lower treaty rate).
Withholding will not apply, however, to a dividend paid by a Fund to a foreign
shareholder that is "effectively connected with the conduct of a U.S. trade or
business," in which case the reporting and withholding requirements applicable
to domestic shareholders will apply. A distribution of net capital gain by a
Fund to a foreign shareholder generally will be subject to U.S. federal income
tax (at the rates applicable to domestic persons) only if the distribution is
"effectively connected" or the foreign shareholder is treated as a resident
alien individual for federal income tax purposes.
OPTIONS, FUTURES AND FOREIGN CURRENCY TRANSACTIONS
Each Fund's use of hedging transactions, such as selling (writing) and
purchasing options and Futures Contracts and entering into Forward Contracts,
involves complex rules that will determine, for federal income tax purposes, the
amount, character and timing of recognition of the gains and losses a Fund
realizes in connection therewith. Gains from the disposition of foreign
currencies (except certain gains that may be excluded by future regulations),
and gains from options, Futures and Forward Contracts derived by a Fund with
respect to its business of investing in securities or foreign currencies, will
qualify as permissible income under the Income Requirement.
Futures and Forward Contracts that are subject to Section 1256 of the Code
(other than those that are part of a "mixed straddle") ("Section 1256
Contracts") and that are held by a Fund at the end of its taxable year generally
will be deemed to have been sold at that time at market value for federal income
tax purposes. Sixty percent of any net gain or loss recognized on these deemed
sales, and 60% of any net realized gain or loss from any actual sales of Section
1256
45
<PAGE> 267
Contracts, will be treated as long-term capital gain or loss, and the balance
will be treated as short-term capital gain or loss. That 60% portion will
qualify for the reduced maximum tax rates on noncorporate taxpayers' net capital
gain enacted by the Tax Act -- 20% (10% for taxpayers in the 15% marginal tax
bracket) for gain recognized on capital assets held for more than 18
months -- instead of the 28% rate in effect before that legislation, which now
applies to gain on capital assets held for more than one year but no more than
18 months.
Section 988 of the Code also may apply to gains and losses from transactions
in foreign currencies, foreign-currency-denominated debt securities and options,
Futures and Forward Contracts on foreign currencies ("Section 988" gains and
losses). Each Section 988 gain or loss generally is computed separately and
treated as ordinary income or loss. In the case of overlap between sections 1256
and 988, special provisions determine the character and timing of any income,
gain or loss. Each Fund attempts to monitor Section 988 transactions to minimize
any adverse tax impact.
If a Fund has an "appreciated financial position" -- generally, an interest
(including an interest through an option, Futures or Forward Contract or short
sale) with respect to any stock, debt instrument (other than "straight debt") or
partnership interest the fair market value of which exceeds its adjusted
basis -- and enters into a "constructive sale" of the same or substantially
similar property, the Fund will be treated as having made an actual sale
thereof, with the result that gain will be recognized at that time. A
constructive sale generally consists of a short sale, an offsetting notional
principal contract or Futures or Forward Contract entered into by a Fund or a
related person with respect to the same or substantially similar property. In
addition, if the appreciated financial position is itself a short sale or such a
contract, acquisition of the underlying property or substantially similar
property will be deemed a constructive sale.
The foregoing is a general and abbreviated summary of certain federal tax
considerations affecting the Funds and their shareholders. Investors are urged
to consult their own tax advisors for more detailed information and for
information regarding any foreign, state and local taxes applicable to
distributions received from a Fund.
SHAREHOLDER INFORMATION
This information supplements the discussion in each Fund's Prospectus under
the title "Shareholder Information."
Timing of Purchase Orders. It is the responsibility of the dealer to ensure
that all orders are transmitted on a timely basis to the Transfer Agent. Any
loss resulting from the dealer's failure to submit an order within the
prescribed time frame will be borne by that dealer. If a check used to purchase
shares does not clear, or if any investment order must be canceled due to
nonpayment, the investor will be responsible for any resulting loss to an AIM
Fund or to AIM Distributors.
Share Certificates. AIM Funds will issue share certificates upon written
request to AFS. Otherwise, shares are held on the shareholder's behalf and
recorded on the Fund books. AIM Funds will not issue certificates for shares
held in prototype retirement plans.
Systematic Withdrawal Plan. Under a Systematic Withdrawal Plan, all shares are
to be held by the Transfer Agent and all dividends and distributions are
reinvested in shares of the applicable AIM Fund by the Transfer Agent. To
provide funds for payments made under the Systematic Withdrawal Plan, the
Transfer Agent redeems sufficient full and fractional shares at their net asset
value in effect at the time of each such redemption.
Payments under a Systematic Withdrawal Plan constitute taxable events. Since
such payments are funded by the redemption of shares, they may result in a
return of capital and in capital gains or losses, rather than in ordinary
income. Because sales charges are imposed on additional purchases of shares
(other than Class B or Class C Shares of the AIM Funds and AIM Cash Reserve
Shares of AIM Money Market Fund), it is disadvantageous to effect such purchases
while a Systematic Withdrawal Plan is in effect.
Each AIM Fund bears its share of the cost of operating the Systematic
Withdrawal Plan.
Terms and Conditions of Exchanges. 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
46
<PAGE> 268
exchanges by mail, which will be effective on the business day received by the
Transfer Agent as long as such request is received prior to NYSE Close. The
Transfer Agent and AIM Distributors may in certain cases be liable for losses
due to unauthorized or fraudulent transactions if they do not follow reasonable
procedures for verification of telephone transactions. Such reasonable
procedures may include recordings of telephone transactions (maintained for six
months), requests for confirmation of the shareholder's Social Security Number
and current address, and mailings of confirmations promptly after the
transaction.
By signing an account application form, an investor appoints the Transfer
Agent as his true and lawful attorney-in-fact to surrender for redemption any
and all unissued shares held by the Transfer Agent in the designated amount(s),
or in any other account with any of the AIM Funds, present or future, which has
the identical registration as the designated account(s), with full power of
substitution in the premises. The Transfer Agent and AIM Distributors are
thereby authorized and directed to accept and act upon any telephone redemptions
of shares held in any of the account(s) listed, from any person who requests the
redemption proceeds to be applied to purchase shares in any one or more of the
AIM Funds, provided that such fund is available for sale and provided that the
registration and mailing address of the shares to be purchased are identical to
the registration of the shares being redeemed. An investor acknowledges by
signing the form that he understands and agrees that the Transfer Agent and AIM
Distributors may not be liable for any loss, expense or cost arising out of any
telephone exchange requests effected in accordance with the authorization set
forth in these instructions if they reasonably believe such request to be
genuine, but may in certain cases be liable for losses due to unauthorized or
fraudulent transactions. The Transfer Agent reserves the right to modify or
terminate the telephone exchange privilege at any time without notice. An
investor may elect not to have this privilege by marking the appropriate box on
the application. Then any exchanges must be effected in writing by the investor.
Redemptions by Telephone. By signing an account application form, an investor
appoints the Transfer Agent as his true and lawful attorney-in-fact to surrender
for redemption any and all unissued shares held by the Transfer Agent in the
designated account(s), present or future, with full power of substitution in the
premises. The Transfer Agent and AIM Distributors are thereby authorized and
directed to accept and act upon any telephone redemptions of shares held in any
of the account(s) listed, from any person who requests the redemption. An
investor acknowledges by signing the form that he understands and agrees that
the Transfer Agent and AIM Distributors may not be liable for any loss, expense
or cost arising out of any telephone redemption requests effected in accordance
with the authorization set forth in these instructions if they reasonably
believe such request to be genuine, but may in certain cases be liable for
losses due to unauthorized or fraudulent transactions. Procedures for
verification of telephone transactions may include recordings of telephone
transactions (maintained for six months), requests for confirmation of the
shareholder's Social Security Number and current address, and mailings of
confirmations promptly after the transactions. The Transfer Agent reserves the
right to cease to act as attorney-in-fact subject to this appointment, and AIM
Distributors reserves the right to modify or terminate the telephone redemption
privilege at any time without notice. An investor may elect not to have this
privilege by marking the appropriate box on the application. Then any
redemptions must be effected in writing by the investor.
Signature Guarantees. In addition to those circumstances listed in the
"Shareholder Information" section of each Fund's prospectus, signature
guarantees are required in the following situations: (1) requests to transfer
the registration of shares to another owner; (2) telephone exchange and
telephone redemption authorization forms; (3) changes in previously designated
wiring or electronic funds transfer instructions; and (4) written redemptions or
exchanges of shares previously reported as lost, whether or not the redemption
amount is under $50,000 or the proceeds are to be sent to the address of record.
AIM Funds may waive or modify any signature guarantee requirements at any time.
Acceptable guarantors include banks, broker-dealers, credit unions, national
securities exchanges, savings associations and any other organization, provided
that such institution or organization qualifies as an "eligible guarantor
institution" as that term is defined in rules adopted by the SEC, and further
provided that such guarantor institution is listed in one of the reference
guides contained in the Transfer Agent's current Signature Guarantee Standards
and Procedures, such as certain domestic banks, credit unions, securities
dealers, or securities exchanges. The Transfer Agent will also accept signatures
with either: (1) a signature guaranteed with a medallion stamp of the STAMP
Program, or (2) a signature guaranteed with a medallion stamp of the NYSE
Medallion Signature Program, provided that in either event, the amount of the
transaction involved does not exceed the surety coverage amount indicated on the
medallion. For information regarding whether a particular institution or
organization qualifies as an "eligible guarantor institution," an investor
should contact the Client Services Department of AFS.
Dividends and Distributions. In determining the amount of capital gains, if
any, available for distribution, net capital gains are offset against available
net capital losses, if any, carried forward from previous fiscal periods.
47
<PAGE> 269
For funds that do not declare a dividend daily, such dividends and
distributions will be reinvested at the net asset value per share determined on
the ex-dividend date. For funds that declare a dividend daily, such dividends
and distributions will be reinvested at the net asset value per share determined
on the payable date.
Dividends on Class B and Class C shares are expected to be lower than those
for Class A shares or AIM Cash Reserve Shares because of higher distribution
fees paid by Class B and Class C shares. Dividends on all shares may also be
affected by other class-specific expenses.
Changes in the form of dividend and distribution payments may be made by the
shareholder at any time by notice to the Transfer Agent and are effective as to
any subsequent payment if such notice is received by the Transfer Agent prior to
the record date of such payment. Any dividend and distribution election remains
in effect until the Transfer Agent receives a revised written election by the
shareholder.
Any dividend or distribution paid by a fund which does not declare dividends
daily has the effect of reducing the net asset value per share on the
ex-dividend date by the amount of the dividend or distribution. Therefore, a
dividend or distribution declared shortly after a purchase of shares by an
investor would represent, in substance, a return of capital to the shareholder
with respect to such shares even though it would be subject to income taxes.
MISCELLANEOUS INFORMATION
AIM was organized in 1976, and, together with its subsidiaries, manages or
advises over 110 investment portfolios encompassing a broad range of investment
objectives. 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, 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 independent investment management groups that have a
significant presence in the institutional and retail segment of the investment
management industry in North America and Europe, and a growing presence in Asia.
CUSTODIAN
State Street Bank and Trust Company ("State Street"), 225 Franklin Street,
Boston, MA 02110, acts as custodian of the Funds' assets. State Street is
authorized to establish and has established separate accounts in foreign
currencies and to cause securities of the Trust to be held in separate accounts
outside the United States in the custody of non-U.S. banks.
TRANSFER AGENCY AND ACCOUNTING AGENCY SERVICES
The Transfer Agency and Service Agreement between the Trust and 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 Transfer Agency and Service Agreement became effective at
September 8, 1998.
Pursuant to the Transfer Agency and Service Agreement, INVESCO NY, as
Sub-Advisor also serves as pricing and accounting agent for the Funds and
received accounting services fees as follows:
<TABLE>
<CAPTION>
1998 1997 1996
-------- -------- --------
<S> <C> <C> <C>
Europe Fund............................................ $ * $138,072 $139,442
Japan Fund............................................. $ $ 26,210 $ 35,119
Mid Cap Fund........................................... $ $142,274 $173,767
Pacific Fund........................................... $ $ 99,321 $135,182
</TABLE>
- ---------------
* From 1/1/98 through 12/13/98
Pursuant to the Transfer Agency and Service Agreement, INVESCO AML, as
Sub-Advisor also serves as pricing and accounting agent, received accounting
services fees from 12/14/98 through 12/31/98 for Europe Fund in the amount of
$ .
48
<PAGE> 270
INDEPENDENT ACCOUNTANTS
The Trust's and the Funds' independent accountants are PricewaterhouseCoopers
LLP. PricewaterhouseCoopers LLP conducts annual audits of the Funds, assists in
the preparation of the Funds' federal and state income tax returns and consults
with the Trust and the Funds as to matters of accounting, regulatory filings and
federal and state income taxation.
The audited financial statements of the Trust included in this Statement of
Additional Information have been examined by PricewaterhouseCoopers LLP as
stated in their opinion appearing herein and are included in reliance upon such
opinion given upon the authority of that firm as experts in accounting and
auditing.
LEGAL MATTERS
The law firm of Kirkpatrick & Lockhart LLP, 1800 Massachusetts Avenue N.W.,
Washington, DC 20036-1800, acts as counsel to the Trust and the Funds.
SHAREHOLDER LIABILITY
Under Delaware law, the shareholders of the Trust enjoy the same limitations
of liability extended to shareholders of private, for-profit corporations. There
is a remote possibility, however, that under certain circumstances shareholders
of the Trust may be held personally liable for the Trust's obligations. However,
the Trust's Agreement and Declaration of Trust 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 a trustee. If a shareholder is held personally liable for the
obligations of the Trust, the Trust Agreement provides that the shareholder
shall be entitled out of the assets belonging to the applicable Fund (or
allocable to the applicable Class), to be held harmless from and indemnified
against all loss and expense arising from such liability in accordance with the
Trust's Bylaws and applicable law. Thus, the risk of a shareholder incurring
financial loss on account of such liability is limited to circumstances in which
the Trust itself would be unable to meet its obligations and where the other
party was held not to be bound by the disclaimer.
NAMES
Prior to May 29, 1998, AIM New Pacific Growth Fund operated under the name of
GT Global New Pacific Growth Fund; AIM Europe Growth Fund operated under the
name GT Global Europe Growth Fund; AIM Japan Growth Fund operated under the name
of GT Global Japan Growth Fund; AIM International Growth Fund operated under the
name of GT Global International Growth Fund; AIM Worldwide Growth Fund operated
under the name of GT Global Worldwide Growth Fund and AIM Mid Cap Growth Fund
operated under the name of GT Global America Mid Cap Growth Fund.
CONTROL PERSONS AND PRINCIPAL HOLDERS OF SECURITIES
To the best knowledge of the Trust, the names and addresses of the holders of
5% or more of the outstanding shares of any class of each Fund's equity
securities as of April , 1999, and the percentage of the outstanding shares
held by such holders are set forth below.
<TABLE>
<CAPTION>
PERCENT
PERCENT OWNED OF
OWNED OF RECORD AND
FUND NAME AND ADDRESS OF OWNER RECORD* BENEFICIALLY
- ---- ------------------------- -------- ------------
<S> <C> <C> <C>
Europe Growth Fund -- Advisor Class Charles Schwab & Co. Inc. % -0-
For the Excl Benef of Our Custs
Reinvest Account
101 Montgomery St.
San Francisco, CA 94104-4122
Attn: Mutual Funds
MLPF&S for the Sole Benefit of Its % -0-
Customers, Security #
Attn: Fund Administration
4800 Deer Lake Drive East, 2nd Floor
Jacksonville, FL 32246-6484
</TABLE>
- ---------------
<TABLE>
<S> <C> <C> <C>
* The Trust has no knowledge as to whether all or any portion of the shares owned of record are also owned
beneficially.
</TABLE>
49
<PAGE> 271
<TABLE>
<CAPTION>
PERCENT
PERCENT OWNED OF
OWNED OF RECORD AND
FUND NAME AND ADDRESS OF OWNER RECORD* BENEFICIALLY
- ---- ------------------------- -------- ------------
<S> <C> <C> <C>
Europe Growth Fund -- Class A MLPF&S for the Sole Benefit of Its % -0-
Customers, Security #974U7
Attn: Fund Administration
4800 Deer Lake Drive East, 2nd Floor
Jacksonville, FL 32246-6484
Japan Fund -- Advisor Class Donaldson Lufkin Jennette Securities % -0-
Corp. Inc.
P.O. Box 2052
Jersey City, New Jersey 87303-2052
MLPF&S for the Sole Benefit of Its % -0-
Customers, Security #97K48
Attn: Fund Administration
4800 Deer Lake Drive East, 2nd Floor
Jacksonville, FL 32246-6484
Japan Growth Fund -- Class A MLPF&S for the Sole Benefit of Its % -0-
Customers, Security #974U9
Attn: Fund Administration
4800 Deer Lake Drive East, 2nd Floor
Jacksonville, FL 32246-6484
Mid Cap Equity Fund -- Class A MLPF&S for the Sole Benefit of its % -0-
Customers, Security #974U8
Attn: Fund Administration
4800 Deer Lake Drive East, 2nd Floor
Jacksonville, FL 32246-6484
Pacific Fund -- Advisor Class Wells Fargo Bank NA TTEE FBO % -0-
LGT Asset Management AC 5000201000
Serp Prft Shr Plan ###-##-####
P O Box 9800 MAC 9137-027
Calabasas, CA 91372-0800
G.T. Capital Holdings, Inc. 401(k) FBO % -0-
Account: 045462854
50 California Street, 27th Floor
San Francisco, California 94111-4624
Attn: Human Resources
Pacific Fund -- Class A MLPF&S for the Sole Benefit of its % -0-
Customers, Security #97043
Attn: Fund Administration
4800 Deer Lake Drive East, 2nd Floor
Jacksonville, FL 32246-6484
</TABLE>
- ---------------
<TABLE>
<S> <C> <C> <C>
* The Trust has no knowledge as to whether all or any portion of the shares owned of record are also owned
beneficially.
</TABLE>
50
<PAGE> 272
INVESTMENT RESULTS
TOTAL RETURN QUOTATIONS
The standard formula for calculating total return is as follows:
(n)
P(1+T) =ERV
<TABLE>
<S> <C> <C> <C>
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).
</TABLE>
The standardized returns for the Class A and Class B shares of the Europe
Fund, stated as average annualized total returns for the periods shown, were:
<TABLE>
<CAPTION>
EUROPE FUND EUROPE FUND
PERIOD (CLASS A) (CLASS B)
- ------ ----------- -----------
<S> <C> <C>
Fiscal year ended December 31, 1998......................... 10.24% 10.80%
For the five years ended December 31, 1998.................. 8.69% 8.94%
For the ten years ended December 31, 1998................... 8.01% N/A
April 1, 1993 (commencement of operations) through December
31, 1998.................................................. N/A 11.43%
</TABLE>
The standardized returns for the Class A and Class B shares of the Japan Fund,
stated as average annualized total returns for the periods shown, were:
<TABLE>
<CAPTION>
JAPAN FUND JAPAN FUND
PERIOD (CLASS A) (CLASS B)
- ------ ---------- ----------
<S> <C> <C>
Fiscal year ended December 31, 1998......................... (6.01)% (6.18)%
For the five years ended December 31, 1998.................. (2.75)% (2.62)%
For the ten years ended December 31, 1998................... 0.14% N/A
April 1, 1993 (commencement of operations) through December
31, 1998.................................................. N/A 0.64%
</TABLE>
The standardized returns for the Class A and Class B shares of the Mid Cap
Fund, stated as average annualized total returns for the periods shown, were:
<TABLE>
<CAPTION>
MID CAP FUND MID CAP FUND
PERIOD (CLASS A) (CLASS B)
- ------ ------------ ------------
<S> <C> <C>
Fiscal year ended December 31, 1998......................... (9.94)% (9.88)%
For the five years ended December 31, 1998.................. 11.11% 11.38%
For the ten years ended December 31, 1998................... 15.24% N/A
April 1, 1993 (commencement of operations) through December
31, 1998.................................................. N/A 12.84%
June 9, 1987 (commencement of operations) through December
31, 1998.................................................. 12.57% N/A
</TABLE>
The standardized returns for the Class A and Class B shares of the Pacific
Fund, stated as average annualized total returns for the periods shown, were:
<TABLE>
<CAPTION>
PACIFIC FUND PACIFIC FUND
PERIOD (CLASS A) (CLASS B)
- ------ ------------ ------------
<S> <C> <C>
Fiscal year ended December 31, 1998......................... (23.57)% (23.56)%
For the five years ended December 31, 1998.................. (15.09)% (14.97)%
For the ten years ended December 31, 1998................... (0.27)% N/A
April 1, 1993 (commencement of operations) through December
31, 1998.................................................. N/A (7.09)%
</TABLE>
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<PAGE> 273
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
<TABLE>
<S> <C> <C> <C>
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.
</TABLE>
The average annual non-standardized returns for the Class A and Class B shares
of the Europe Fund, stated as average annualized total returns for the periods
shown, were:
<TABLE>
<CAPTION>
EUROPE FUND EUROPE FUND
PERIOD (CLASS A) (CLASS B)
- ------ ----------- -----------
<S> <C> <C>
Fiscal year ended December 31, 1998......................... 16.63% 15.80%
April 1, 1993 (commencement of operations) through December
31, 1998.................................................. N/A 11.53%
July 19, 1985 (commencement of operations) through December
31, 1998.................................................. 13.06% N/A
</TABLE>
The average annual non-standardized returns for the Class A and Class B shares
of the Japan Fund, stated as average annualized total returns for the periods
shown, were:
<TABLE>
<CAPTION>
JAPAN FUND JAPAN FUND
PERIOD (CLASS A) (CLASS B)
- ------ ---------- ----------
<S> <C> <C>
Fiscal year ended December 31, 1998......................... (0.54)% (1.25)%
April 1, 1993 (commencement of operations) through December
31, 1998.................................................. N/A 0.78%
July 19, 1985 (commencement of operations) through December
31, 1998.................................................. 10.81% N/A
</TABLE>
The average annual non-standardized returns for the Class A and Class B shares
of the Mid Cap Fund, stated as average annualized total returns for the periods
shown, were:
<TABLE>
<CAPTION>
MID CAP FUND MID CAP FUND
PERIOD (CLASS A) (CLASS B)
- ------ ------------ ------------
<S> <C> <C>
Fiscal year ended December 31, 1998......................... (4.71)% (5.41)%
April 1, 1993 (commencement of operations) through December
31, 1998.................................................. N/A 12.94%
June 9, 1987 (commencement of operations) through December
31, 1998.................................................. 13.12% N/A
</TABLE>
The average annual non-standardized returns for the Class A and Class B shares
of the Pacific Fund, stated as average annualized total returns for the periods
shown, were:
<TABLE>
<CAPTION>
PACIFIC FUND PACIFIC FUND
PERIOD (CLASS A) (CLASS B)
- ------ ------------ ------------
<S> <C> <C>
Fiscal year ended December 31, 1998......................... (19.09)% (19.55)%
April 1, 1993 (commencement of operations) through December
31, 1998.................................................. N/A (6.98)%
January 19, 1977 (commencement of operations) through
December 31, 1998......................................... 8.43% N/A
</TABLE>
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.
52
<PAGE> 274
The aggregate non-standardized returns (not taking sales charges into account)
for the Class A and Class B shares of the Europe Fund, stated as aggregate total
returns for the periods shown, were:
<TABLE>
<CAPTION>
EUROPE FUND EUROPE FUND
PERIOD (CLASS A) (CLASS B)
- ------ ----------- -----------
<S> <C> <C>
April 1, 1993 (commencement of operations) through December
31, 1998.................................................. N/A 87.33%
July 19, 1985 (commencement of operations) through December
31, 1998.................................................. 421.02% N/A
</TABLE>
The aggregate non-standardized returns (not taking sales charges into account)
for the Class A and Class B shares of the Japan Fund, stated as aggregate total
returns for the periods shown, were:
<TABLE>
<CAPTION>
JAPAN FUND JAPAN FUND
PERIOD (CLASS A) (CLASS B)
- ------ ---------- ----------
<S> <C> <C>
April 1, 1993 (commencement of operations) through December
31, 1998.................................................. N/A 4.59%
July 19, 1985 (commencement of operations) through December
31, 1998.................................................. 297.96% N/A
</TABLE>
The aggregate non-standardized returns (not taking sales charges into account)
for the Class A and Class B shares of the Mid Cap Fund, stated as aggregate
total returns for the periods shown, were:
<TABLE>
<CAPTION>
MID CAP FUND MID CAP FUND
PERIOD (CLASS A) (CLASS B)
- ------ ------------ ------------
<S> <C> <C>
April 1, 1993 (commencement of operations) through December
31, 1998.................................................. N/A 101.28%
June 9, 1987 (commencement of operations) through December
31, 1998.................................................. 315.98% N/A
</TABLE>
The aggregate non-standardized returns (not taking sales charges into account)
for the Class A and Class B shares of the Pacific Fund, stated as aggregate
total returns for the periods shown, were:
<TABLE>
<CAPTION>
PACIFIC FUND PACIFIC FUND
PERIOD (CLASS A) (CLASS B)
- ------ ------------ ------------
<S> <C> <C>
April 1, 1993 (commencement of operations) through December
31, 1998.................................................. N/A (34.03)%
January 19, 1977 (commencement of operations) through
December 31, 1998......................................... 490.56% N/A
</TABLE>
The aggregate non-standardized returns (taking sales charges into account) for
the Class A and Class B shares of the Europe Fund, stated as aggregate total
returns for the periods shown, were:
<TABLE>
<CAPTION>
EUROPE FUND EUROPE FUND
PERIOD (CLASS A) (CLASS B)
- ------ ----------- -----------
<S> <C> <C>
April 1, 1993 (commencement of operations) through December
31, 1998.................................................. N/A 86.33%
July 19, 1985 (commencement of operations) through December
31, 1998.................................................. 392.46% N/A
</TABLE>
The aggregate non-standardized returns (taking sales charges into account) for
the Class A and Class B shares of the Japan Fund, stated as aggregate total
returns for the periods shown, were:
<TABLE>
<CAPTION>
JAPAN FUND JAPAN FUND
PERIOD (CLASS A) (CLASS B)
- ------ ---------- ----------
<S> <C> <C>
April 1, 1993 (commencement of operations) through December
31, 1998.................................................. N/A 3.72%
July 19, 1985 (commencement of operations) through December
31, 1998.................................................. 276.08% N/A
</TABLE>
The aggregate non-standardized returns (taking sales charges into account) for
the Class A and Class B of the Mid Cap Fund, stated as aggregate total returns
for the periods shown, were:
<TABLE>
<CAPTION>
MID CAP FUND MID CAP FUND
PERIOD (CLASS A) (CLASS B)
- ------ ------------ ------------
<S> <C> <C>
April 1, 1993 (commencement of operations) through December
31, 1998.................................................. N/A 100.28%
June 9, 1987 (commencement of operations) through December
31, 1998.................................................. 293.17% N/A
</TABLE>
53
<PAGE> 275
The aggregate non-standardized returns (taking sales charges into account) for
the Class A and Class B shares of the Pacific Fund, stated as aggregate total
returns for the periods shown, were:
<TABLE>
<CAPTION>
PACIFIC PACIFIC
FUND FUND
PERIOD (CLASS A) (CLASS B)
- ------ --------- ---------
<S> <C> <C>
April 1, 1993 (commencement of operations) through December
31, 1998.................................................. N/A (34.47)%
January 19, 1977 (commencement of operations) through
December 31, 1998......................................... 458.18% N/A
</TABLE>
Each Fund's investment results will vary from time to time depending upon
market conditions, the composition of each Fund's portfolio and operating
expenses of each Fund, so that current or past yield or total return should not
be considered representative of what an investment in each Fund may earn in any
future period. These factors and possible differences in the methods used in
calculating investment results should be considered when comparing each Fund's
investment results with those published for other investment companies and other
investment vehicles. Each Fund's results also should be considered relative to
the risks associated with such Fund's investment objective and policies.
PERFORMANCE INFORMATION
Total return figures for the Funds are neither fixed nor guaranteed, and no
Fund's principal is insured. Performance quotations reflect historical
information and should not be considered representative of a Fund's performance
for any period in the future. Performance is a function of a number of factors
which can be expected to fluctuate. 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. Such
publications or media entities may include the following, among others:
Advertising Age
Barron's
Best's Review
Broker World
Business Week
Changing Times
Christian Science Monitor
Consumer Reports
Economist
EuroMoney
FACS of the Week
Financial Planning
Financial Product News
Financial World
Forbes
Fortune
Global Finance
Hartford Courant Inc.
Institutional Investor
Insurance Forum
Insurance Week
Investor's Daily
Journal of the American
Society of CLU & ChFC
Kiplinger Letter
Money
Mutual Fund Forecaster
Mutual Fund Magazine
Nation's Business
New York Times
Pension World
Pensions & Investments
Personal Investor
Financial Services Week
Philadelphia Inquirer
Smart Money
USA Today
U.S. News & World Report
Wall Street Journal
Washington Post
CNN
CNBC
PBS
54
<PAGE> 276
The Funds and AIM Distributors may from time to time, in advertisements, sales
literature and reports furnished to present or prospective shareholders, compare
each Fund with the following, or compare each Fund's performance to performance
data of similar mutual funds as published in the following, among others:
Bank Rate National Monitor Index
Bear Stearns Foreign Bond Index
Bond Buyer Index
CDA/Wiesenberger Investment Company Services
(data and mutual fund rankings and comparisons)
CNBC/Financial News Composite Index
COFI
Consumer Price Index
Datastream
Donoghue's
Dow Jones Industrial Average
EAFE Index
First Boston High Yield Index
Fitch (publications)
Ibbotson Associates International Bond Index
International Bank for Reconstruction and
Development (publications)
International Finance Corporation Emerging
Markets Database
International Financial Statistics
Lehman Bond Indices
Lipper Analytical Data Services, Inc. (data and
mutual fund rankings and comparisons)
Micropal, Inc. (data and mutual fund rankings and
comparisons)
Moody's Investors Service (publications)
Morgan Stanley Capital International All Country
(AC) World Index
Morgan Stanley Capital International World Indices
Morningstar, Inc. (data and mutual fund rankings
and comparisons)
NASDAQ
Organization for Economic Cooperation and
Development (publications)
Salomon Brothers Global Telecommunications
Index
Salomon Brothers World Government Bond Index-
Non-U.S.
Salomon Brothers World Government Bond Index
Standard & Poor's (publications)
Standard & Poor's 500 Composite Stock Price Index
Stangar
Wilshire Associates
World Bank (publications and reports)
The World Bank Publication of Trends in
Developing Countries
Worldscope
Each Fund may also compare its performance to rates on Certificates of Deposit
and other fixed rate investments such as the following:
10-year Treasuries
30-year Treasuries
30-day Treasury Bills
Information relating to foreign market performance, capitalization and
diversification is based on sources believed to be reliable but may be subject
to revision and has not been independently verified by the Funds or AIM
Distributors. Advertising for the Funds may from time to time include
discussions of general economic conditions and interest rates. Advertising for
the Funds may also include reference 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.
55
<PAGE> 277
APPENDIX
DESCRIPTION OF BOND RATINGS
Moody's Investors Service, Inc. ("Moody's") rates the debt securities issued
by various entities from "Aaa" to "C." Investment grade ratings are the first
four categories: 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 edged." Interest payments are protected by a large or by an
exceptionally stable margin and principal is secure. While the various
protective elements are likely to change, such changes as can be visualized are
most unlikely to impair the fundamentally strong position of such issues.
Aa -- Bonds which are rated Aa are judged to be of high quality by all
standards. Together with the Aaa group they comprise what are generally known as
high grade bonds. They are rated lower than the best bonds because margins of
protection may not be as large as in Aaa securities or fluctuation of protective
elements may be of greater amplitude or there may be other elements present
which make the long-term 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 some time 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. 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.
Standard & Poor's, a division of the McGraw-Hill Companies, Inc. ("S&P"),
rates the securities debt of various entities in categories ranging from "AAA"
to "D" according to quality. Investment grade ratings are the first four
categories: AAA -- An obligation rated "AAA" has the highest rating assigned by
S&P. The obligor's capacity to meet its financial commitment on the obligation
is extremely strong. AA -- An obligation rated "AA" differs from the highest
rated obligations only in a small degree. The obligor's capacity to meet its
financial commitment on the obligation is very strong. A -- An obligation rated
"A" is somewhat more susceptible to the adverse effects of changes in
circumstances and economic conditions than obligations in higher rated
categories. BBB -- An obligation rated "BBB" exhibits adequate protection
parameters. However, adverse economic conditions or changing circumstances are
more likely to lead to a weakened capacity of the obligor to meet its financial
commitment on the obligation. BB, B, CCC, CC, C -- Obligations rated "BB," "B,"
"CCC," "CC," and "C" are regarded as having significant speculative
characteristics. "BB" indicates the least degree of speculation and "C" the
highest. While such obligations will likely have some quality and protective
characteristics, these may be outweighed by large uncertainties or major
exposures to adverse conditions. BB -- An obligation rated "BB" is less
vulnerable to nonpayment than other speculative issues. However, it faces major
ongoing uncertainties or exposure to adverse business, financial, or economic
conditions which could lead to the obligor's inadequate capacity to meet its
financial commitment on the obligation. B -- An obligation rated "B" is more
vulnerable to nonpayment than obligations rated "BB," but the obligor currently
has the capacity to meet its financial commitment on the obligation. Adverse
business, financial, or economic conditions will likely impair the obligor's
capacity or willingness to meet its financial commitment on the obligation.
CCC -- An obligation rated "CCC" is currently vulnerable to nonpayment, and is
dependent upon favorable business, financial, and economic conditions for the
obligor to meet its financial commitment on the obligation. In the event of
adverse business, financial, or economic conditions, the obligor is not likely
to have the capacity to meet its financial commitment on the obligation.
CC -- An obligation rated "CC" is currently highly vulnerable to nonpayment.
C -- The "C" rating may be used to cover a situation where a bankruptcy petition
has been filed or similar action has been taken, but payments on this obligation
are being continued. D -- An obligation rated "D" is in payment default. The "D"
rating category is used when payments on an obligation are not made on the date
due even if the applicable grace period has not expired, unless S&P believes
that such payments will be made during such grace period. The "D" rating also
will be used upon the filing of a bankruptcy petition or the taking of a similar
action if payments on an obligation are jeopardized.
56
<PAGE> 278
PLUS (+) OR MINUS (-): The ratings from "AA" to "CCC" may be modified by the
addition of a plus or minus sign to show relative standing within the major
rating categories.
NR: Indicates that no public rating has been requested, that there is
insufficient information on which to base a rating, or that S&P does not rate a
particular type of obligation as a matter of policy.
DESCRIPTION OF COMMERCIAL PAPER RATINGS
Moody's employs the designation "Prime-1" to indicate commercial paper having
a superior ability for repayment of senior short-term debt obligations. Prime-1
repayment ability will often be evidenced by many of the following
characteristics: leading market positions in well-established industries; high
rates of return on funds employed; conservative capitalization structure with
moderate reliance on debt and ample asset protection; broad margins in earnings
coverage of fixed financial charges and high internal cash generation; and
well-established access to a range of financial markets and assured sources of
alternate liquidity. Issues rated Prime-2 have a strong ability for repayment of
senior short-term debt obligations. This normally will be evidenced by many of
the characteristics cited above but to a lesser degree. Earnings trends and
coverage ratios, while sound, may be more subject to variation. Capitalization
characteristics, while still appropriate, may be more affected by external
conditions. Ample alternate liquidity is maintained.
S&P ratings of commercial paper are graded into several categories ranging
from "A-1" for the highest quality obligations to "D" for the lowest. Issues in
the "A" category are delineated with numbers 1, 2, and 3 to indicate the
relative degree of safety. "A-1" -- This highest category indicates that the
degree of safety regarding timely payment is strong. Those issues determined to
possess extremely strong safety characteristics will be denoted with a plus sign
(+) designation. "A-2" -- Capacity for timely payments on issues with this
designation is satisfactory; however, the relative degree of safety is not as
high as for issues designated "A-1."
ABSENCE OF RATING
Where no rating has been assigned or where a rating has been suspended or
withdrawn, it may be for reasons unrelated to the quality of the issue.
Should no rating be assigned, the reason may be one of the following:
1. An application for rating was not received or accepted.
2. The issue or issuer belongs to a group of securities or companies
that are not rated as a matter of policy.
3. There is a lack of essential data pertaining to the issue or issuer.
4. The issue was privately placed, in which case the rating is not
published in Moody's publications.
Suspension or withdrawal may occur if new and material circumstances arise,
the effects of which preclude satisfactory analysis; if there is no longer
available reasonable up-to-date data to permit a judgment to be formed; if a
bond is called for redemption; or for other reasons.
Note: Moody's applies numerical modifiers, 1, 2 and 3 in each generic rating
classification from Aa to Caa. 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.
57
<PAGE> 279
FINANCIAL STATEMENTS
FS
<PAGE> 280
STATEMENT OF
ADDITIONAL INFORMATION
CLASS A, CLASS B AND CLASS C SHARES OF
AIM BASIC VALUE FUND
AIM SMALL CAP GROWTH FUND
(SERIES PORTFOLIOS OF
AIM GROWTH SERIES)
11 GREENWAY PLAZA
SUITE 100
HOUSTON, TX 77046-1173
(713) 626-1919
---------------------
THIS STATEMENT OF ADDITIONAL INFORMATION IS NOT A PROSPECTUS AND
IT SHOULD BE READ IN CONJUNCTION WITH A PROSPECTUS OF THE
ABOVE-NAMED FUNDS, A COPY OF WHICH MAY BE OBTAINED FREE
OF CHARGE FROM AUTHORIZED DEALERS OR BY WRITING
A I M DISTRIBUTORS, INC.,
P.O. BOX 4739, HOUSTON, TX 77210-4739
OR BY CALLING (800) 347-4246.
---------------------
STATEMENT OF ADDITIONAL INFORMATION DATED MAY 3, 1999 RELATING TO THE
AIM BASIC VALUE FUND PROSPECTUS AND THE AIM SMALL CAP GROWTH FUND PROSPECTUS,
EACH DATED MAY 3, 1999
<PAGE> 281
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE NO.
--------
<S> <C>
INTRODUCTION................................................ 4
GENERAL INFORMATION ABOUT THE FUNDS......................... 4
The Trust and Its Shares.................................. 4
INVESTMENT OBJECTIVES AND POLICIES.......................... 5
Investment Objectives..................................... 5
Selection of Investments.................................. 5
Investments in Other Investment Companies................. 6
Depositary Receipts....................................... 6
Warrants or Rights........................................ 6
Lending of Portfolio Securities........................... 7
Commercial Bank Obligations............................... 7
Repurchase Agreements..................................... 7
Borrowing, Reverse Repurchase Agreement and "Roll"
Transactions........................................... 7
When-Issued or Forward Commitment Securities.............. 8
Temporary Defensive Strategies............................ 8
OPTIONS AND FUTURES......................................... 9
Special Risks of Options and Futures...................... 9
Writing Call Options...................................... 9
Writing Put Options....................................... 10
Purchasing Put Options.................................... 11
Purchasing Call Options................................... 11
Index Options............................................. 12
Interest Rate and Stock Index Futures Contracts........... 13
Options on Futures Contracts.............................. 14
Limitations on Use of Futures, and Options on Futures..... 15
Cover..................................................... 15
RISK FACTORS................................................ 15
Illiquid Securities....................................... 15
Debt Securities........................................... 16
Equity Securities......................................... 16
Small Cap Companies....................................... 16
INVESTMENT LIMITATIONS...................................... 17
EXECUTION OF PORTFOLIO TRANSACTIONS......................... 18
Portfolio Trading and Turnover............................ 19
MANAGEMENT.................................................. 20
Trustees and Executive Officers........................... 20
Investment Management and Administrative Services Relating
to the Funds and the Portfolios........................ 22
Expenses of the Funds and the Portfolios.................. 22
THE DISTRIBUTION PLANS...................................... 23
The Class A and C Plan.................................... 23
The Class B Plan.......................................... 23
Both Plans................................................ 23
THE DISTRIBUTOR............................................. 26
Sales Charges and Dealer Concessions...................... 27
Reductions in Initial Sales Charges....................... 29
Contingent Deferred Sales Charge Exceptions............... 32
NET ASSET VALUE DETERMINATION............................... 33
</TABLE>
2
<PAGE> 282
<TABLE>
<CAPTION>
PAGE NO.
--------
<S> <C>
HOW TO PURCHASE AND REDEEM SHARES........................... 33
Backup Withholding........................................ 35
PROGRAMS AND SERVICES FOR SHAREHOLDERS...................... 36
DIVIDEND ORDER.............................................. 36
TAXES....................................................... 36
Taxation of Funds......................................... 36
Taxation of the Portfolios................................ 36
Taxation of the Fund's Shareholders....................... 37
SHAREHOLDER INFORMATION..................................... 38
MISCELLANEOUS INFORMATION................................... 40
Custodian................................................. 40
Transfer Agency and Accounting Agency Services............ 40
Independent Accountants................................... 40
Legal Matters............................................. 40
Shareholder Liability..................................... 40
Names..................................................... 40
Control Persons and Principal Holders of Securities....... 41
INVESTMENT RESULTS.......................................... 42
Total Return Quotations................................... 42
Performance Information................................... 43
APPENDIX.................................................... 45
Description of Bond Ratings............................... 45
Description of Commercial Paper Ratings................... 46
Absence of Rating......................................... 46
FINANCIAL STATEMENTS........................................ FS
</TABLE>
3
<PAGE> 283
INTRODUCTION
This Statement of Additional Information relates to the Class A and Class B
shares of AIM Small Cap Growth Fund, formerly AIM Small Cap Equity Fund ("Small
Cap Fund") and AIM Basic Value Fund, formerly AIM America Value Fund ("Basic
Value Fund") (individually, a "Fund," and collectively, the "Funds"). Each Fund
is a diversified series of AIM Growth Series (the "Trust"), a registered
open-end management investment company. The Small Cap Fund and Basic Value Fund
invest all of their investable assets in the Small Cap Portfolio and Value
Portfolio (individually, a "Portfolio," and collectively, the "Portfolios"),
respectively.
A I M Advisors, Inc. ("AIM") serves as the investment manager of and
administrator for the Portfolios and for the Funds.
The Trust is a series mutual fund. The rules and regulations of the Securities
and Exchange Commission (the "SEC") require all mutual funds to furnish
prospective investors certain information concerning the activities of the fund
being considered for investment. This information for Small Cap Fund is included
in a Prospectus dated May 3, 1999, and for Basic Value Fund is included in a
separated Prospectus dated May 3, 1999. Additional copies of the Prospectuses
and this Statement of Additional Information may be obtained without charge by
writing the principal distributor of the Funds' shares, A I M Distributors, Inc.
("AIM Distributors"), P.O. Box 4739, Houston, TX 77210-4739 or by calling (800)
347-4246. Investors must receive a Prospectus before they invest.
This Statement of Additional Information is intended to furnish prospective
investors with additional information concerning the Funds. Some of the
information required to be in this Statement of Additional Information is also
included in the Prospectuses; and, in order to avoid repetition, reference will
be made to sections of the Prospectuses. Additionally, the Prospectuses and this
Statement of Additional Information omit certain information contained in the
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 FUNDS
THE TRUST AND ITS SHARES
The Trust previously operated under the name G.T. Global Growth Series, which
was organized as a Massachusetts business trust on February 19, 1985. The Trust
was reorganized on May 29, 1998 as a Delaware business trust, and is registered
with the SEC as a diversified open-end series management investment company. The
Trust currently consists of the following portfolios: each of the Funds, AIM New
Pacific Growth Fund, AIM Europe Growth Fund, AIM Japan Growth Fund, AIM
International Growth Fund, AIM Worldwide Growth Fund, AIM Mid Cap Equity Fund
(formerly known as AIM Mid Cap Growth Fund), AIM Small Cap Growth Fund (formerly
known as AIM Small Cap Equity Fund), and AIM Basic Value Fund (formerly known as
AIM America Value Fund). Each of these funds has four separate classes: Class A,
Class B, Class C and Advisor Class shares. All historical financial and other
information contained in this Statement of Additional Information for periods
prior to May 29, 1998, is that of the series of G.T. Global Growth Series
(renamed AIM Growth Series).
This Statement of Additional Information relates solely to the Class A, B and
C shares of the Funds.
The term "majority of the outstanding shares" of the Trust, a particular Fund
or a particular class of a Fund or a particular Portfolio means, respectively,
the vote of the lesser of (a) 67% or more of the shares of the Trust, such Fund,
such class or such Portfolio present at a meeting of the Trust's shareholders,
if the holders of more than 50% of the outstanding shares of the Trust, such
Fund, such class or such Portfolio are present or represented by proxy, or (b)
more than 50% of the outstanding shares of the Trust, such Fund, such class or
such Portfolio.
Class A, Class B, Class C and Advisor Class shares of each Fund have equal
rights and privileges. Each share of a particular class is entitled to one vote,
to participate equally in dividends and distributions declared by the Trust's
Board of Trustees with respect to the class of such Fund and, upon liquidation
of the Fund, to participate proportionately in the net assets of the Fund
allocable to such class remaining after satisfaction of outstanding liabilities
of the Fund allocable to such class. Fund shares are fully paid, non-assessable
and fully transferable when issued and have no preemptive rights and have such
conversion and exchange rights as set forth in the Prospectuses and this
Statement of Additional Information. Fractional shares have proportionately the
same rights, including voting rights, as are provided for a full share.
4
<PAGE> 284
Shareholders of the Funds do not have cumulative voting rights, and therefore
the holders of more than 50% of the outstanding shares of all Funds voting
together for election of trustees may elect all of the members of the Board of
Trustees of the Trust. In such event, the remaining holders cannot elect any
trustees of the Trust.
INVESTMENT OBJECTIVES AND POLICIES
INVESTMENT OBJECTIVES
The investment objective of each Fund is long-term capital appreciation. The
Small Cap Fund and Basic Value Fund each seeks to achieve its investment
objective by investing all of its investable assets in the Small Cap Portfolio
and Value Portfolio, respectively, each of which is a subtrust (a "series") of
Growth Portfolio, a Delaware business trust registered as an open-end management
investment company with an investment objective that is identical to that of its
corresponding Fund. Whenever the phrase "all of the Fund's investable assets" is
used herein and in a Prospectus, it means that the only investment securities
that will be held by a Fund will be its interest in its corresponding Portfolio.
A Fund may withdraw its investment in its corresponding Portfolio at any time,
if the Board of Trustees of the Trust determines that it is in the best
interests of the Fund and its shareholders to do so.
A change in a Portfolio's investment objective, policies or limitations that
is not approved by the Board or shareholders of the corresponding Fund could
require that Fund to redeem its interest in the Portfolio. Any such redemption
could result in a distribution in kind of portfolio securities (as opposed to a
cash distribution) by the Portfolio. In addition, a distribution in kind could
result in a less diversified portfolio of investments for [the Fund] and could
adversely affect its liquidity. Should such a distribution occur, [the Fund]
could incur brokerage fees or other transaction costs in converting such
securities to cash. Upon redemption, the Board would consider what action might
be taken, including the investment of all the investable assets of [the Fund] in
another pooled investment entity having substantially the same investment
objective as [the Fund] or the direct retention by [the Fund] of its own
investment advisor to manage its assets in accordance with its investment
objective, policies and limitations discussed herein.
In addition to selling an interest therein to the Funds, each Portfolio may
sell interests therein to other non-affiliated investment companies and/or other
institutional investors. All institutional investors in a Portfolio will pay a
proportionate share of that Portfolio's expenses and will invest in the
Portfolio on the same terms and conditions. However, if another investment
company invests any or all of its assets in a Portfolio, it would not be
required to sell its shares at the same public offering price as the
corresponding Fund and may charge different sales commissions. Therefore,
investors in a Fund may experience different returns than investors in another
investment company that invests exclusively in a Portfolio. As of the date of
the Prospectus and this Statement of Additional Information, the Funds are the
only institutional investors in the Portfolios.
The Funds may be materially affected by the actions of other large investors,
if any, in the Portfolios. For example, as with all open-end investment
companies, if a large investor were to redeem its interest in a Portfolio, (1)
the Portfolio's remaining investors could experience higher pro rata operating
expenses, thereby producing lower returns, and (2) the Portfolio's security
holdings may become less diverse, resulting in increased risk. Institutional
investors in a Portfolio that have a greater pro rata ownership interest in the
Portfolio than the corresponding Fund could have effective voting control over
the operation of the Portfolio.
SELECTION OF INVESTMENTS
For purposes of the Prospectus and this Statement of Additional Information,
market capitalization means the total market value of a company's outstanding
common stock. There is no necessary correlation between market capitalization
and the financial attributes (such as level of assets, revenues or income) often
used to measure a company's size.
The debt obligations that the Portfolios may invest in are limited to U.S.
government securities and corporate debt securities of issuers domiciled in the
U.S. Each Portfolio will limit its purchases of debt securities to investment
grade debt obligations. "Investment grade" debt refers to those securities rated
within one of the four highest ratings categories by Moody's Investors Service,
Inc. ("Moody's") or by Standard & Poor's, a division of The McGraw-Hill
Companies, Inc. ("S&P"), or, if not similarly rated by any other nationally
recognized statistical rating organization ("NRSRO"), deemed by AIM to be of
equivalent quality.
AIM allocates investments among fixed income securities of particular issuers
on the basis of its views as to the best values then currently available in the
marketplace. Such values are a function of yield, maturity, issue classification
and quality characteristics, coupled with expectations regarding the economy,
movements in the general level and term of interest rates, currency values,
political developments, and variations in the supply of funds available for
investment in the
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world bond market relative to the demands placed upon it. If market interest
rates decline, fixed income securities generally appreciate in value and vice
versa.
INVESTMENTS IN OTHER INVESTMENT COMPANIES
The Portfolios may invest in the securities of closed-end investment companies
(including investment vehicles or companies advised by AIM or its affiliates
("Affiliated Funds")) within the limits of the Investment Company Act of 1940,
as amended (the "1940 Act"). These limitations currently provide that, in
general, each Portfolio may purchase shares of a closed-end investment company
unless (a) such a purchase would cause a Portfolio to own more than 3% of the
total outstanding voting stock of the investment company or (b) such a purchase
would cause a Portfolio to have more than 5% of its assets invested in the
investment company or more than 10% of its assets invested in an aggregate of
all such investment companies. Investment in investment companies may involve
the payment of substantial premiums above the value of such companies' portfolio
securities. The Portfolios do not intend to invest in such vehicles or funds
unless AIM determines that the potential benefits of such investments justify
the payment of any applicable premiums. As a shareholder in an investment
company, [the Portfolio] would bear [its] ratable share of that investment
company's expenses, including its advisory and administration fees. The return
on such securities will be reduced by operating expenses of such companies
including payments to the investment managers of those investment companies. At
the same time, [the Portfolio] would continue to pay [its]own management fees
and other expenses. With respect to investments in Affiliated Funds, AIM waives
its advisory fee to the extent that such fees are based on assets of a Fund
invested in Affiliated Funds.
DEPOSITARY RECEIPTS
Each Portfolio may invest up to 10% of its total assets in securities of
foreign issuers in the form of American Depositary Receipts ("ADRs") American
Depositary Shares ("ADSs"), Global Depositary Receipts ("GDRs") and European
Depositary Receipts ("EDRs") or other securities convertible into securities of
eligible European or Far Eastern issuers. These securities may not necessarily
be denominated in the same currency as the securities for which they may be
exchanged. ADRs and ADSs typically are issued by an American bank or trust
company and evidence ownership of underlying securities issued by a foreign
corporation. EDRs, which are sometimes referred to as Continental Depositary
Receipts ("CDRs"), are issued in Europe typically by foreign banks and trust
companies and evidence ownership of either foreign or domestic securities. GDRs
are similar to EDRs and are designed for use in several international financial
markets. Generally, ADRs and ADSs in registered form are designed for use in
United States securities markets and EDRs in bearer form are designed for use in
European securities markets. For purposes of a Portfolio's investment policies,
its investments in ADRs, ADSs, GDRs and EDRs will be deemed to be investments in
the equity securities representing securities of foreign issuers into which they
may be converted.
ADR facilities may be established as either "unsponsored" or "sponsored."
While ADRs issued under these two types of facilities are in some respects
similar, there are distinctions between them relating to the rights and
obligations of ADR holders and the practices of market participants. A
depository may establish an unsponsored facility without participation by (or
even necessarily the acquiescence of) the issuer of the deposited securities,
although typically the depository requests a letter of non-objection from such
issuer prior to the establishment of the facility. Holders of unsponsored ADRs
generally bear all the costs of such facilities. The depository usually charges
fees upon the deposit and withdrawal of the deposited securities, the conversion
of dividends into U.S. dollars, the disposition of non-cash distributions, and
the performance of other services. The depository of an unsponsored facility
frequently is under no obligation to distribute shareholder communications
received from the issuer of the deposited securities or to pass through voting
rights to ADR holders with respect to the deposited securities. Sponsored ADR
facilities are created in generally the same manner as unsponsored facilities,
except that the issuer of the deposited securities enters into a deposit
agreement with the depository. The deposit agreement sets out the rights and
responsibilities of the issuer, the depository and the ADR holders. With
sponsored facilities, the issuer of the deposited securities generally will bear
some of the costs relating to the facility (such as dividend payment fees of the
depository), although ADR holders continue to bear certain other costs (such as
deposit and withdrawal fees). Under the terms of most sponsored arrangements,
depositories agree to distribute notices of shareholder meetings and voting
instructions, and to provide shareholder communications and other information to
the ADR holders at the request of the issuer of the deposited securities. The
Portfolios may invest in both sponsored and unsponsored ADRs.
WARRANTS OR RIGHTS
Warrants or rights may be acquired by a Portfolio in connection with other
securities or separately and provide the Portfolio with the right to purchase at
a later date other securities of the issuer. Warrants are securities permitting,
but not
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obligating, their holder to subscribe for other securities or commodities.
Warrants do not carry with them the right to dividends or voting rights with
respect to the securities that they entitle their holder to purchase, and they
do not represent any rights in the assets of the issuer. As a result, warrants
may be considered more speculative than certain other types of investments. In
addition, the value of a warrant does not necessarily change with the value of
the underlying securities and a warrant ceases to have value if it is not
exercised prior to its expiration date.
LENDING OF PORTFOLIO SECURITIES
For the purpose of realizing additional income, each Portfolio may make
secured loans of its portfolio securities amounting to not more than 30% of its
total assets. Securities loans are made to broker/dealers or institutional
investors pursuant to agreements requiring that the loans continuously be
secured by collateral at least equal at all times to the value of the securities
lent, plus any accrued interest, "marked to market" on a daily basis. The
Portfolios may pay reasonable administrative and custodial fees in connection
with the loans of their securities. While the securities loans are outstanding,
the Portfolios will continue to receive the equivalent of the interest or
dividends paid by the issuer on the securities, as well as interest on the
investment of the collateral or a fee from the borrower. Each Portfolio will
have a right to call each loan at any time and obtain the securities within the
stated settlement period. The Portfolios will not have the right to vote equity
securities while they are being lent, but may call in a loan in anticipation of
any important vote. Loans will only be made to firms deemed by AIM to be of good
standing and will not be made unless, in the judgment of AIM, the consideration
to be earned from such loans would justify the risk.
COMMERCIAL BANK OBLIGATIONS
For the purposes of each Portfolio's investment policies with respect to bank
obligations, obligations of foreign branches of U.S. banks are obligations of
the issuing bank and may be general obligations of the parent bank. Such
obligations, however, may be limited by the terms of a specific obligation and
by government regulation. Although a Portfolio typically will acquire
obligations issued and supported by the credit of U.S. banks having total assets
at the time of purchase of $1 billion or more, this $1 billion figure is not an
investment policy or restriction of any Portfolio. For the purposes of
calculation with respect to the $1 billion figure, the assets of a bank will be
deemed to include the assets of its U.S. and non-U.S. branches.
REPURCHASE AGREEMENTS
A repurchase agreement is a transaction in which a Portfolio purchases a
security from a bank or recognized securities dealer and simultaneously commits
to resell that security to the bank or dealer at an agreed-upon price, date and
market rate of interest unrelated to the coupon rate or maturity of the
purchased security. Although repurchase agreements carry certain risks not
associated with direct investment in securities, including possible decline in
the market value of the underlying securities and delays and costs to the
Portfolio if the other party to the repurchase agreement becomes bankrupt, the
Portfolios intend to enter into repurchase agreements only with banks and
dealers believed by AIM to present minimal credit risks in accordance with
guidelines approved by Growth Portfolio's Board of Trustees. AIM will review and
monitor the creditworthiness of such institutions under the general supervision
of Growth Portfolio's Board.
Each Portfolio will invest only in repurchase agreements collateralized at all
times in an amount at least equal to the repurchase price plus accrued interest.
To the extent that the proceeds from any sale of such collateral upon a default
in the obligation to repurchase were less than the repurchase price, the Fund
would suffer a loss. If the financial institution which is party to the
repurchase agreement petitions for bankruptcy or otherwise becomes subject to
bankruptcy or other liquidation proceedings, there may be restrictions on the
Portfolio's ability to sell the collateral and the Portfolio could suffer a
loss. However, with respect to financial institutions whose bankruptcy or
liquidation proceedings are subject to the U.S. Bankruptcy Code, the Portfolios
intend to comply with provisions under the U.S. Bankruptcy Code that would allow
them to immediately to resell the collateral. A Portfolio will not enter into a
repurchase agreement with a maturity of more than seven days if, as a result,
more than 15% of the value of its net assets would be invested in such
repurchase agreements and other illiquid investments.
BORROWING, REVERSE REPURCHASE AGREEMENTS AND "ROLL" TRANSACTIONS
Each Portfolio's borrowings will not exceed 33 1/3% of its total assets, i.e.,
each Portfolio's total assets at all times will equal at least 300% of the
amount of outstanding borrowings. If market fluctuations in the value of a
Portfolio's portfolio 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.
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Each Portfolio also may borrow up to 5% of its total assets for temporary or
emergency purposes other than to meet redemptions. Any borrowing by a Portfolio
may cause greater fluctuation in the value of its corresponding Fund's shares
than would be the case if the Portfolio did not borrow.
Each Portfolio's fundamental investment limitations permit the Portfolio to
borrow money for leveraging purposes. Each Portfolio, however, currently is
prohibited, pursuant to a non-fundamental investment policy, from borrowing
money in order to purchase securities. Nevertheless, this policy may be changed
in the future by Growth Portfolio's Board of Trustees. If a Portfolio employs
leverage in the future, it would be subject to certain additional risks. Use of
leverage creates an opportunity for greater growth of capital but would
exaggerate any increases or decreases in a Portfolio's net asset value. When the
income and gains on securities purchased with the proceeds of borrowings exceed
the costs of such borrowings, a Portfolio's earnings or net asset value will
increase faster than otherwise would be the case; conversely, if such income and
gains fail to exceed such costs, a Portfolio's earnings or net asset value would
decline faster than would otherwise be the case.
Each Portfolio may enter into reverse repurchase agreements. A reverse
repurchase agreement is a borrowing transaction in which the Portfolio transfers
possession of a security to another party, such as a bank or broker/dealer in
return for cash, and agrees to repurchase the security in the future at an
agreed upon price, which includes an interest component. Each Portfolio also may
engage in "roll" borrowing transactions which involve its sale of Government
National Mortgage Association certificates or other securities together with a
commitment (for which the Portfolio may receive a fee) to purchase similar, but
not identical, securities at a future date. Each Portfolio will segregate with a
custodian, liquid assets in an amount sufficient to cover its obligations under
"roll" transactions and reverse repurchase agreements with broker/dealers. No
segregation is required for reverse repurchase agreements with banks.
WHEN-ISSUED OR FORWARD COMMITMENT SECURITIES
Each Portfolio may purchase debt securities on a "when-issued" basis and may
purchase or sell such securities on a "forward commitment" basis in order to
hedge against anticipated changes in interest rates and prices. The price, which
generally is expressed in yield terms, is fixed at the time the commitment is
made, but delivery and payment for the securities take place at a later date.
When-issued securities and forward commitments may be sold prior to the
settlement date, but a Portfolio will purchase or sell when-issued securities or
enter into forward commitments only with the intention of actually receiving or
delivering the securities, as the case may be. No income accrues on securities
that have been purchased pursuant to a forward commitment or on a when-issued
basis prior to delivery to a Portfolio. If a Portfolio disposes of the right to
acquire a when-issued security prior to its acquisition or disposes of its right
to deliver or receive against a forward commitment, it may incur a gain or loss.
At the time a Portfolio enters into a transaction on a when-issued or forward
commitment basis, it will segregate cash or liquid securities equal to the value
of the when-issued or forward commitment securities with its custodian and will
mark to market daily such assets. There is a risk that the securities may not be
delivered and that a Portfolio may incur a loss.
TEMPORARY DEFENSIVE STRATEGIES
In the interest of preserving shareholders' capital, AIM and/or the
Sub-advisor may employ a temporary defensive investment strategy if it
determines such a strategy to be warranted due to market, economic or political
conditions. During such time, a Portfolio may invest less than 65% of its total
assets in the types of securities covered by its primary investment policy. In
addition, most or all investments of a Portfolio may be made in the United
States and denominated in U.S. dollars. Further, pending investment of proceeds
from new sales of Portfolio shares or to meet its ordinary daily cash needs, a
Portfolio may hold cash (U.S. dollars, foreign currencies or multinational
currency units such as euros) and may invest in high quality foreign or domestic
money market instruments.
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.
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OPTIONS AND FUTURES
SPECIAL RISKS OF OPTIONS AND FUTURES
The use of options and futures contracts involves special considerations and
risks, as described below. Risks pertaining to particular instruments are
described in the sections that follow.
(1) Successful use of most of these instruments depends upon AIM's
ability to predict movements of the overall securities markets, which
requires different skills than predicting changes in the prices of
individual securities. While AIM is experienced in the use of these
instruments, there can be no assurance that any particular strategy adopted
will succeed.
(2) There might be imperfect correlation, or even no correlation,
between price movements of an instrument and price movements of the
investments being hedged. For example, if the value of an instrument used
in a short hedge increased by less than the decline in value of the hedged
investment, the hedge would not be fully successful. Such a lack of
correlation might occur due to factors unrelated to the value of the
investments being hedged, such as speculative or other pressures on the
markets in which the hedging instrument is traded. The effectiveness of
hedges using hedging instruments on indices will depend on the degree of
correlation between price movements in the index and price movements in the
investments being hedged.
(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. For example, if a
Portfolio entered into a short hedge because AIM projected a decline in the
price of a security in the Portfolio's securities portfolio, and the price
of that security increased instead, the gain from that increase might be
wholly or partially offset by a decline in the price of the hedging
instrument. Moreover, if the price of the hedging instrument declined by
more than the increase in the price of the security, the Portfolio could
suffer a loss. In either such case, the Portfolio would have been in a
better position had it not hedged at all.
(4) There is no assurance that a liquid secondary market will exist
for any particular option, futures contract or option thereon at any
particular time.
(5) As described below, a Portfolio 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 (i.e., instruments other than purchased options). If the Portfolio
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 Portfolio'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 Portfolio sell a portfolio security at a disadvantageous
time. The Portfolio's ability to close out a position in an instrument
prior to expiration or maturity depends on the existence of a liquid
secondary market or, in the absence of such a market, the ability and
willingness of the other party to the transaction ("contra party") to enter
into a transaction closing out the position. Therefore, there is no
assurance that any position can be closed out at a time and price that is
favorable to a Portfolio.
WRITING CALL OPTIONS
A Portfolio may write (sell) call options on securities and indices. Call
options generally will be written on securities that, in the opinion of AIM, are
not expected to make any major price moves in the near future but that, over the
long term, are deemed to be attractive investments for the Portfolio.
A call option gives the holder (buyer) the right to purchase a security 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 the writer of a call option continues, he or she may be assigned an exercise
notice, requiring him or her to deliver the underlying security against payment
of the exercise price. This obligation terminates upon the expiration of the
call option, or such earlier time at which the writer effects a closing purchase
transaction by purchasing an option identical to that previously sold.
Portfolio securities on which call options may be written will be purchased
solely on the basis of investment considerations consistent with each
Portfolio's investment objective. When writing a call option, a Portfolio, in
return for the premium, gives up the opportunity for profit from a price
increase in the underlying security above the exercise price, and retains the
risk of loss should the price of the security decline. Unlike one who owns
securities not subject to an
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option, a Portfolio has no control over when it may be required to sell the
underlying securities, since most options may be exercised at any time prior to
the option's expiration. If a call option that a Portfolio has written expires,
the Portfolio 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
during the option period. If the call option is exercised, the Portfolio will
realize a gain or loss from the sale of the underlying security, which will be
increased or offset by the premium received. Neither Portfolio considers a
security covered by a call option to be "pledged" as that term is used in the
Portfolio's policy that limits the pledging or mortgaging of its assets.
Writing call options can serve as a limited short hedge because declines in
the value of the hedged investment would be offset to the extent of the premium
received for writing the option. However, if the security appreciates to a price
higher than the exercise price of the call option, it can be expected that the
option will be exercised and a Portfolio will be obligated to sell the security
at less than its market value.
The premium that a Portfolio receives for writing a call option is deemed to
constitute the market value of an option. The premium a Portfolio will receive
from writing a call option will reflect, among other things, the current market
price of the underlying investment, the relationship of the exercise price to
such market price, the historical price volatility of the underlying investment
and the length of the option period. In determining whether a particular call
option should be written, AIM will consider the reasonableness of the
anticipated premium and the likelihood that a liquid secondary market will exist
for those options.
Closing transactions will be effected in order to realize a profit on an
outstanding call option, to prevent an underlying security from being called, or
to permit the sale of the underlying security. Furthermore, effecting a closing
transaction will permit a Portfolio to write another call option on the
underlying security with either a different exercise price or expiration date or
both.
Each Portfolio will pay transaction costs in connection with the writing of
options and in entering into closing purchase contracts. Transaction costs
relating to options activity normally are higher than those applicable to
purchases and sales of portfolio securities.
The exercise price of the options may be below, equal to or above the current
market values of the underlying securities or indices at the time the options
are written. From time to time, a Portfolio may purchase an underlying security
for delivery in accordance with the exercise of an option, rather than
delivering such security from its portfolio. In such cases, additional costs
will be incurred.
A Portfolio will realize a profit or loss from a closing purchase transaction
if the cost of the transaction is less or more, respectively, than the premium
received from writing the option. Because increases in the market price of a
call option generally will reflect increases in the market price of the
underlying security, any loss resulting from the repurchase of a call option is
likely to be offset in whole or in part by appreciation of the underlying
security owned by the Portfolio.
WRITING PUT OPTIONS
The Portfolios may write put options on securities and indices. A put option
gives the purchaser of the option the right to sell, and the writer (seller) the
obligation to buy, the underlying security at the exercise price at any time
until (American style) or on (European style) the expiration date. The operation
of put options in other respects, including their related risks and rewards, is
substantially identical to that of call options.
A Portfolio generally would write put options in circumstances where AIM
wishes to purchase the underlying security for the Portfolio's portfolio at a
price lower than the current market price of the security. In such event, the
Portfolio 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.
Since the Portfolio also would receive interest on debt securities maintained to
cover the exercise price of the option, this technique could be used to enhance
current return during periods of market uncertainty. The risk in such a
transaction would be that the market price of the underlying security would
decline below the exercise price, less the premium received.
Writing put options can serve as a limited long hedge because increases in the
value of the hedged investment would be offset to the extent of the premium
received for writing the option. However, if the security depreciates to a price
lower than the exercise price of the put option, it can be expected that the put
option will be exercised and a Portfolio will be obligated to purchase the
security at greater than its market value.
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PURCHASING PUT OPTIONS
Each Portfolio may purchase put options on securities and indices. As the
holder of a put option, a Portfolio would have the right to sell the underlying
security at the exercise price at any time until (American style) or on
(European style) the expiration date. A Portfolio may enter into closing sale
transactions with respect to such options, exercise such options or permit such
options to expire.
A Portfolio may purchase a put option on an underlying security ("protective
put") owned by the Portfolio in order to protect against an anticipated decline
in the value of the security. Such hedge protection is provided only during the
life of the put option when the Portfolio, as the holder of the put option, is
able to sell the underlying security at the put exercise price regardless of any
decline in the underlying security's market price. The premium paid for the put
option and any transaction costs would reduce any profit otherwise available for
distribution when the security eventually is sold.
A Portfolio also may purchase put options at a time when the Portfolio does
not own the underlying security. By purchasing put options on a security it does
not own, a Portfolio seeks to benefit from a decline in the market price of the
underlying security. If the put option is not sold when it has remaining value,
and if the market price of the underlying security remains equal to or greater
than the exercise price during the life of the put option, the Portfolio will
lose its entire investment in the put option. In order for the purchase of a put
option to be profitable, the market price of the underlying security must
decline sufficiently below the exercise price to cover the premium and
transaction costs, unless the put option is sold in a closing sale transaction.
PURCHASING CALL OPTIONS
Each Portfolio may purchase call options on securities and indices. As the
holder of a call option, a Portfolio would have the right to purchase the
underlying security at the exercise price at any time until (American style) or
on (European style) the expiration date. A Portfolio may enter into closing sale
transactions with respect to such option, exercise such option or permit such
option to expire.
Call options may be purchased by a Portfolio for the purpose of acquiring the
underlying security for its portfolio. Utilized in this fashion, the purchase of
call options would enable a Portfolio to acquire the security at the exercise
price of the call option plus the premium paid. At times, the net cost of
acquiring the security in this manner may be less than the cost of acquiring the
security directly. This technique also may be useful to the Portfolios in
purchasing a large block of securities that would be more difficult to acquire
by direct market purchases. As long as it holds such a call option, rather than
the underlying security itself, a Portfolio is partially protected from any
unexpected decline in the market price of the underlying security 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 Portfolio also may purchase call options on underlying securities it owns
to avoid realizing losses that would result in a reduction of its current
return. For example, where a Portfolio has written a call option on an
underlying security having a current market value below the price at which it
purchased the security, an increase in the market price could result in the
exercise of the call option written by the Portfolio and the realization of a
loss on the underlying security. Accordingly, the Portfolio could purchase a
call option on the same underlying security, which could be exercised to fulfill
the Portfolio's delivery obligations under its written call (if it is
exercised). This strategy could allow the Portfolio to avoid selling the
portfolio security at a time when it has an unrealized loss; however, the
Portfolio would have to pay a premium to purchase the call option plus
transaction costs.
Aggregate premiums paid for put and call options will not exceed 5% of such
Portfolio's total assets at the time of purchase.
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 Portfolio will not purchase an OTC option unless AIM 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.
The staff of the SEC considers purchased OTC options to be illiquid
securities. A Portfolio may also sell OTC options and, in connection therewith,
set aside assets or cover its obligations with respect to OTC options written by
the Portfolio.
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The assets used as cover for OTC options written by a Portfolio will be
considered illiquid unless the OTC options are sold to qualified dealers who
agree that the Portfolio 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.
A Portfolio's ability to establish and close out positions in exchange-listed
options depends on the existence of a liquid market. A Portfolio intends to
purchase or write only those exchange-listed options for which there appears to
be a liquid secondary market. However, there can be no assurance that such a
market will exist at any particular time. Closing transactions can be made for
OTC options only by negotiating directly with the contra party or by a
transaction in the secondary market if any such market exists. Although a
Portfolio will enter into OTC options only with contra parties that are expected
to be capable of entering into closing transactions with the Portfolio, there is
no assurance that the Portfolio 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 contra party, the Portfolio might be unable to close out an OTC option
position at any time prior to its expiration.
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. When a Portfolio writes
a call on an index, it receives a premium and agrees that, prior to the
expiration date, the purchaser of the call, upon exercise of the call, will
receive from the Portfolio an amount of cash if the closing level of the index
upon which the call is based is greater than the exercise price of the call. The
amount of cash is equal to the difference between the closing price of the index
and the exercise price of the call times a specified multiple (the
"multiplier"), which determines the total dollar value for each point of such
difference. When a Portfolio buys a call on an index, it pays a premium and has
the same rights as to such call as are indicated above. When a Portfolio buys a
put on an index, it pays a premium and has the right, prior to the expiration
date, to require the seller of the put, upon the Portfolio's exercise of the
put, to deliver to the Portfolio an amount of cash if the closing level of the
index upon which the put is based is less than the exercise price of the put,
which amount of cash is determined by the multiplier, as described above for
calls. When a Portfolio writes a put on an index, it receives a premium and the
purchaser has the right, prior to the expiration date, to require the Portfolio
to deliver to it an amount of cash equal to the difference between the closing
level of the index and the exercise price times the multiplier, if the closing
level is less than the exercise price.
The risks of investment in index options may be greater than options on
securities. Because index options are settled in cash, when a Portfolio writes a
call on an index it cannot provide in advance for its potential settlement
obligations by acquiring and holding the underlying securities. A Portfolio can
offset some of the risk of writing a call index option position by holding a
diversified portfolio of securities similar to those on which the underlying
index is based. However, a Portfolio 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 vary
from the value of the index.
Even if a Portfolio could assemble a securities portfolio that exactly
reproduced the composition of the underlying index, it still would not be fully
covered from a risk standpoint because of the "timing risk" inherent in writing
index options. When an index option is exercised, the amount of cash that the
holder is entitled to receive is determined by the difference between the
exercise price and the closing index level on the date when the option is
exercised. As with other kinds of options, the Portfolio as the call writer,
will not know that it has been assigned until the next business day at the
earliest. The time lag between exercise and notice of assignment poses no risk
for the writer of a covered call on a specific underlying security, such as
common stock, because there the writer's obligation is to deliver the underlying
security, not to pay its value as of a fixed time in the past. So long as the
writer already owns the underlying security, it can satisfy its settlement
obligations by simply delivering it, and the risk that its value may have
declined since the exercise date is borne by the exercising holder. In contrast,
even if the writer of an index call holds securities that exactly match the
composition of the underlying index, it will not be able to satisfy its
assignment obligations by delivering those securities against payment of the
exercise price. Instead, it will be required to pay cash in an amount based on
the closing index value on the exercise date; and by the time it learns that it
has been assigned, the index may have declined, with a corresponding decline in
the value of its securities portfolio. This "timing risk" is an inherent
limitation on the ability of index call writers to cover their risk exposure by
holding securities positions.
If a Portfolio purchases an index option and exercises it before the closing
index value for that day is available, it runs the risk that the level of the
underlying index may subsequently change. If such a change causes the exercised
option to fall out-of-the-money, the Portfolio will be required to pay the
difference between the closing index value and the exercise price of the option
(times the applicable multiplier) to the assigned writer.
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INTEREST RATE AND STOCK INDEX FUTURES CONTRACTS
A Portfolio may enter into interest rate or stock index futures contracts
("Futures" or "Futures Contracts") as a hedge against changes in prevailing
levels of interest rates or stock price levels in order to establish more
definitely the effective return on securities held or intended to be acquired by
the Portfolio. A Portfolio's hedging may include sales of Futures as an offset
against the effect of expected increases in interest rates, or decreases in
stock prices, and purchases of Futures as an offset against the effect of
expected declines in interest rates, or increases in stock prices.
The Portfolios only will enter into Futures Contracts that are traded 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 by the Commodity Futures Trading
Commission ("CFTC").
Although techniques other than sales and purchases of Futures Contracts could
be used to reduce a Portfolio's exposure to interest rate and stock market
fluctuations, the Portfolio may be able to hedge its exposure more effectively
and at a lower cost through using Futures Contracts.
A Futures Contract provides for the future sale by one party and purchase by
another party of a specified amount of a specific financial instrument for a
specified price at a designated date, time and place. A stock index Futures
Contract 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 at
which the Futures Contract is originally struck; 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 Futures Contract is outstanding.
Although Futures Contracts typically require future delivery of and payment
for financial instruments, Futures Contracts usually are closed out before the
delivery date. Closing out an open Futures Contract sale or purchase is effected
by entering into an offsetting Futures Contract purchase or sale, respectively,
for the same aggregate amount of the identical financial instrument and the same
delivery date. If the offsetting purchase price is less than the original sale
price, the Portfolio realizes a gain; if it is more, the Portfolio realizes a
loss. Conversely, if the offsetting sale price is more than the original
purchase price, the Portfolio realizes a gain; if it is less, the Portfolio
realizes a loss. The transaction costs also must be included in these
calculations. There can be no assurance, however, that a Portfolio will be able
to enter into an offsetting transaction with respect to a particular Futures
Contract at a particular time. If a Portfolio is not able to enter into an
offsetting transaction, the Portfolio will continue to be required to maintain
the margin deposits on the Futures Contract.
As an example of an offsetting transaction, the contractual obligations
arising from the sale of one September stock index Futures Contract on an
exchange may be fulfilled at any time before delivery under the Futures Contract
is required (i.e., on a specified date in September, the "delivery month") by
the purchase of the same September stock index Futures Contract on the same
exchange. In such instance, the difference between the price at which the
Futures Contract was sold and the price paid for the offsetting purchase, after
allowance for transaction costs, represents the profit or loss to the Portfolio.
Each Portfolio's Futures transactions will be entered into for hedging
purposes only; that is, Futures Contracts will be sold to protect against a
decline in the price of securities that a Portfolio owns, or Futures Contracts
will be purchased to protect a Portfolio against an increase in the price of
securities it has committed to purchase or expects to purchase.
"Margin" with respect to Futures Contracts is the amount of funds that must be
deposited by a Portfolio in order to initiate Futures trading and to maintain
the Portfolio's open positions in Futures Contracts. A margin deposit made when
the Futures Contract is entered into ("initial margin") is intended to ensure
the Portfolio's performance under the Futures Contract. The margin required for
a particular Futures Contract is set by the exchange on which the Futures
Contract 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 the Portfolio entered into the Futures
Contract will be made on a daily basis as the price of the underlying security
or index fluctuates making the Futures Contract more or less valuable, a process
known as marking-to-market.
Risks of Using Futures Contracts. The prices of Futures Contracts are volatile
and are influenced by, among other things, actual and anticipated changes in
interest rates and in stock market movements, which in turn are affected by
fiscal and monetary policies and national and international political and
economic events.
There is a risk of imperfect correlation between changes in prices of Futures
Contracts and prices of the securities in the Portfolio's portfolio being
hedged. The degree of imperfection of correlation depends upon circumstances
such as
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variations in speculative market demand for Futures and for securities,
including technical influences in Futures trading; and differences between the
financial instruments being hedged and the instruments underlying the standard
Futures Contracts available for trading. A decision of whether, when and how to
hedge involves skill and judgment, and even a well-conceived hedge may be
unsuccessful to some degree because of unexpected market behavior or interest
rate trends.
Because of the low margin deposits required, Futures trading involves an
extremely high degree of leverage. As a result, a relatively small price
movement in a Futures Contract may result in immediate and substantial loss, as
well as gain, to the investor. For example, if at the time of purchase, 10% of
the value of the Futures Contract is deposited as margin, a subsequent 10%
decrease in the value of the Futures Contract would result in a total loss of
the margin deposit, before any deduction for the transaction costs, if the
account were then closed out. A 15% decrease would result in a loss equal to
150% of the original margin deposit, if the Futures Contract were closed out.
Thus, a purchase or sale of a Futures Contract may result in losses in excess of
the amount invested in the Futures Contract.
Most U.S. Futures exchanges limit the amount of fluctuation permitted in
Futures Contract and options on Futures Contract prices during a single trading
day. The daily limit establishes the maximum amount that the price of a Futures
Contract or option may vary either up or down from the previous day's settlement
price at the end of a trading session. Once the daily limit has been reached in
a particular type of Futures Contract or option, no trades may be made on that
day at a price beyond that limit. The daily limit governs only price movement
during a particular trading day and therefore does not limit potential losses,
because the limit may prevent the liquidation of unfavorable positions. Futures
Contract and option prices occasionally have moved to the daily limit for
several consecutive trading days with little or no trading, thereby preventing
prompt liquidation of positions and subjecting some traders to substantial
losses.
If a Portfolio were unable to liquidate a Futures or option on Futures
position due to the absence of a liquid secondary market or the imposition of
price limits, it could incur substantial losses. The Portfolio would continue to
be subject to market risk with respect to the position. In addition, except in
the case of purchased options, the Portfolio 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.
Certain characteristics of the Futures market might increase the risk that
movements in the prices of Futures Contracts or options on Futures might not
correlate perfectly with movements in the prices of the investments being
hedged. For example, all participants in the Futures and options on Futures
markets are subject to daily variation margin calls and might be compelled to
liquidate Futures or options on Futures positions whose prices are moving
unfavorably to avoid being subject to further calls. These liquidations could
increase price volatility of the instruments and distort the normal price
relationship between the Futures or options and the investments being hedged.
Also, because initial margin deposit requirements in the Futures market are less
onerous than margin requirements in the securities markets, there might be
increased participation by speculators in the Futures markets. This
participation also might cause temporary price distortions. In addition,
activities of large traders in both the Futures and securities markets involving
arbitrage, "program trading" and other investment strategies might result in
temporary price distortions.
OPTIONS ON FUTURES CONTRACTS
Options on Futures Contracts are similar to options on securities, 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, which represents the amount by which the
market price of the Futures Contract, at exercise, exceeds (in the case of a
call) or is less than (in the case of a put) the exercise price of the option on
the Futures Contract. If an option is exercised on the last trading day prior to
the expiration date of the option, the settlement will be made entirely in cash
equal to the difference between the exercise price of the option and the closing
level of the securities or index upon which the Futures Contract is based on the
expiration date. Purchasers of options who fail to exercise their options prior
to the exercise date suffer a loss of the premium paid.
The purchase of call options on Futures can serve as a long hedge, and the
purchase of put options on Futures can serve as a short hedge. Writing call
options on Futures can serve as a limited short hedge, and writing put options
on Futures can serve as a limited long hedge, using a strategy similar to that
used for writing options on securities or indices.
If a Portfolio writes an option on a Futures Contract, it will be required to
deposit initial and variation margin pursuant to requirements similar to those
applicable to Futures Contracts. Premiums received from the writing of an option
on a Futures Contract are included in the initial margin deposit.
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A Portfolio may seek to close out an option position by selling an option
covering the same Futures Contract and having the same exercise price and
expiration date. The ability to establish and close out positions on such
options is subject to the maintenance of a liquid secondary market.
LIMITATION ON USE OF FUTURES AND OPTIONS ON FUTURES
To the extent that a Portfolio enters into Futures Contracts and options on
Futures Contracts, in each case other than for bona fide hedging purposes (as
defined by the CFTC), the aggregate initial margin and premiums required to
establish these positions (excluding the amount by which options are
"in-the-money") will not exceed 5% of the liquidation value of the Portfolio's
portfolio, after taking into account unrealized profits and unrealized losses on
any contracts the Portfolio has entered into. In general, a call option on a
Futures Contract is "in-the-money" if the value of the underlying Futures
Contract exceeds the strike, i.e., exercise, price of the call; a put option on
a Futures Contract is "in-the-money" if the value of the underlying Futures
Contract is exceeded by the strike price of the put. This guideline may be
modified by Growth Portfolio's Board of Trustees without a shareholder vote.
This limitation does not limit the percentage of a Portfolio's assets at risk to
5%.
COVER
Transactions using Futures Contracts and options (other than options purchased
by a Portfolio) expose the Portfolio to an obligation to another party. A
Portfolio will not enter into any such transactions unless it owns either (1) an
offsetting ("covered") position in securities or other options or Futures
Contracts, or (2) cash, receivables and short-term debt securities with a value
sufficient at all times to cover its potential obligations not covered as
provided in (1) above. Each Portfolio will comply with SEC guidelines regarding
cover for these instruments and, if the guidelines so require, set aside cash or
liquid securities.
Assets used as cover or held in a segregated account cannot be sold while the
position in the corresponding Futures Contract or option is open, unless they
are replaced with other appropriate assets. If a large portion of a Portfolio's
assets are used for cover or otherwise set aside, it could affect portfolio
management or the Portfolio's ability to meet redemption requests or other
current obligations.
RISK FACTORS
ILLIQUID SECURITIES
A Portfolio may invest up to 15% of its net assets in illiquid securities.
Securities may be considered illiquid if a Portfolio cannot reasonably expect
within seven days to sell the securities for approximately the amount at which
the Portfolio values such securities. See "Investment Limitations." The sale of
illiquid securities, if they can be sold at all, generally will require more
time and result in higher brokerage charges or dealer discounts and other
selling expenses than the sale of liquid securities such as securities eligible
for trading on U.S. securities exchanges or in the OTC markets. Moreover,
restricted securities, which may be illiquid for purposes of this limitation,
often sell, if at all, at a price lower than similar securities that are not
subject to restrictions on resale.
Illiquid securities include those that are subject to restrictions contained
in the securities laws of other countries. However, securities that are freely
marketable in the country where they are principally traded, but would not be
freely marketable in the United States, will not be considered illiquid. Where
registration is required, a Portfolio may be obligated to pay all or part of the
registration expenses and a considerable period may elapse between the time of
the decision to sell and the time the Portfolio may be permitted to sell a
security under an effective registration statement. If, during such a period,
adverse market conditions were to develop, the Portfolio might obtain a less
favorable price than prevailed when it decided to sell.
Not all restricted securities are illiquid. In recent years a large
institutional market has developed for certain securities that are not
registered under the Securities Act of 1933, as amended (the "1933 Act"),
including private placements, repurchase agreements, commercial paper, foreign
securities and corporate bonds and notes. These instruments are often restricted
securities because the securities are sold in transactions not requiring
registration. Institutional investors generally will not seek to sell these
instruments to the general public, but instead will often depend either on an
efficient institutional market in which such unregistered securities can be
readily resold or on an issuer's ability to honor a demand for repayment.
Therefore, the fact that there are contractual or legal restrictions on resale
to the general public or certain institutions is not dispositive of the
liquidity of such investments.
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Rule 144A under the 1933 Act establishes a "safe harbor" from the registration
requirements of the 1933 Act for resales of certain securities to qualified
institutional buyers. Institutional markets for restricted securities have
developed as a result of Rule 144A, providing both readily ascertainable values
for restricted securities and the ability to liquidate an investment to satisfy
share redemption orders. Such markets include automated systems for the trading,
clearance and settlement of unregistered securities of domestic and foreign
issuers, such as the PORTAL System sponsored by the National Association of
Securities Dealers, Inc. An insufficient number of qualified institutional
buyers interested in purchasing Rule 144A-eligible restricted securities held by
a Portfolio, however, could affect adversely the marketability of such portfolio
securities and the Portfolio might be unable to dispose of such securities
promptly or at favorable prices.
With respect to liquidity determinations generally, Growth Portfolio's Board
of Trustees has the ultimate responsibility for determining whether specific
securities, including restricted securities eligible for resale to qualified
institutional buyers pursuant to Rule 144A under the 1933 Act, are liquid or
illiquid. That Board of Trustees has delegated the function of making day-to-day
determinations of liquidity to AIM in accordance with procedures approved by
that Board of Trustees. AIM takes into account a number of factors in reaching
liquidity decisions, including: (i) the frequency of trading in the security;
(ii) the number of dealers who make quotes for the security; (iii) the number of
dealers who have undertaken to make a market in the security; (iv) the number of
other potential purchasers; and (v) the nature of the security and how trading
is effected (e.g., the time needed to sell the security, how offers are
solicited, and the mechanics of transfer). AIM monitors the liquidity of
securities in each Portfolio's securities portfolio and periodically reports
such determinations to Growth Portfolio's Board of Trustees. If the liquidity
percentage restriction of a Portfolio is satisfied at the time of investment, a
later increase in the percentage of illiquid securities held by the Portfolio
resulting from a change in market value or assets will not constitute a
violation of that restriction. If as a result of a change in market value or
assets, the percentage of illiquid securities held by a Portfolio increases
above the applicable limit, AIM will take appropriate steps to bring the
aggregate amount of illiquid assets back within the prescribed limitations as
soon as reasonably practicable, taking into account the effect of any
disposition on that Portfolio.
DEBT SECURITIES
Each Portfolio may invest in U.S. government securities and corporate debt
securities of issuers domiciled in the United States. Each Portfolio limits its
purchases of debt securities to investment grade obligations. The value of debt
securities held by a Portfolio will fluctuate with changes in the perceived
creditworthiness of the issues of such securities and interest rates. In
selecting debt securities for investment, AIM reviews and monitors the
creditworthiness of each issuer and issue and analyzes interest rate trends and
specific developments that may affect individual issuers, in addition to relying
on ratings assigned by S&P, Moody's or another nationally recognized statistical
rating organization ("NRSRO") as indicators of quality. Debt securities rated
Baa by Moody's or BBB by S&P are investment grade, although Moody's considers
securities rated Baa to have speculative characteristics. Changes in economic
conditions or other circumstances are more likely to lead to a weakened capacity
for such securities to make principal and interest payments than is the case for
higher grade debt securities. Each Portfolio is also permitted to purchase debt
securities that are not rated by S&P, Moody's or another NRSRO but that AIM
determines to be of comparable quality to that of rated securities in which the
Portfolio may invest. Such securities are included in the computation of any
percentage limitations applicable to the comparable rated securities.
Ratings of debt securities represent the rating agencies' opinions regarding
their quality, are not a guarantee of quality and may be reduced after a
Portfolio has acquired the security. AIM will consider such an event in
determining whether a Portfolio should continue to hold the security but is not
required to dispose of it. Credit ratings attempt to evaluate the safety of
principal and interest payments and do not reflect an assessment of the
volatility of the security's market value or the liquidity of an investment in
the security. Also, NRSROs may fail to make timely changes in credit ratings in
response to subsequent events, so that an issuer's current financial condition
may be better or worse than the rating indicates. For a description of Moody's
and S&P ratings, see "Description of Debt Ratings" herein.
EQUITY SECURITIES
Equity securities, particularly common stocks, generally represent the most
junior position in an issuer's capital structure and entitle holders to an
interest in the assets of an issuer, if any, remaining after all more senior
claims have been satisfied.
SMALL CAP COMPANIES
The Small Cap Portfolio invests primarily in equity securities of U.S. small
cap companies. Small cap companies may be more vulnerable than larger companies
to adverse business, economic or market developments. Small cap companies may
also have more limited product lines, markets or financial resources than
companies with larger capitalizations, and may
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be more dependent on a relatively small management group. In addition, small cap
companies may not be well-known to the investing public, may not have
institutional ownership and may have only cyclical, static or moderate growth
prospects. Most small cap company stocks pay low or no dividends. Securities of
small cap companies are generally less liquid and their prices more volatile
than those of securities of larger companies. The securities of some small cap
companies may not be widely traded, and the Portfolio's position in securities
of such companies may be substantial in relation to the market for such
securities. Accordingly, it may be difficult for the Portfolio to dispose of
securities of these small cap companies at prevailing market prices in order to
meet redemptions.
INVESTMENT LIMITATIONS
The Small Cap Fund and Basic Value Fund each has the following fundamental
investment policy to enable it to invest in the Small Cap Portfolio and Value
Portfolio, respectively:
Notwithstanding any other investment policy of the Fund, the Fund may invest
all of its investable assets (cash, securities and receivables related to
securities) in an open-end management investment company having substantially
the same investment objective, policies and limitations as the Fund.
All other investment policies and limitations of each Fund and its
corresponding Portfolio are identical. Therefore, although the following
discusses certain investment policies and limitations of each Portfolio and
Growth Portfolio's Board of Trustees, it applies equally to each Fund and the
Trust's Board of Trustees.
Each Portfolio has adopted the following investment limitations as fundamental
policies that may not be changed without approval by the affirmative vote of a
majority of the outstanding shares of the Portfolio. Neither Portfolio may:
(1) Purchase or sell real estate, except that investments in
securities of issuers that invest in real estate and investments in
mortgage-backed securities, mortgage participations or other instruments
supported by interests in real estate are not subject to this limitation,
and except that a Portfolio may exercise rights under agreements relating
to such securities, including the right to enforce security interests and
to hold real estate acquired by reason of such enforcement until that real
estate can be liquidated in an orderly manner;
(2) Purchase or sell physical commodities, but a Portfolio may
purchase, sell or enter into financial options and futures, forward and
spot currency contracts, swap transactions and other financial contracts or
derivative instruments;
(3) Issue senior securities or borrow money, except as permitted under
the 1940 Act and then not in excess of 33 1/3% of a Portfolio's total
assets (including the amount borrowed but reduced by any liabilities not
constituting borrowings) at the time of the borrowing, except that a
Portfolio may borrow up to an additional 5% of its total assets (not
including the amount borrowed) for temporary or emergency purposes;
(4) Make loans, except through loans of portfolio securities or
through repurchase agreements, provided that for purposes of this
limitation, the acquisition of bonds, debentures, other debt securities or
instruments, or participations or other interests therein and investments
in government obligations, commercial paper, certificates of deposit,
bankers' acceptances or similar instruments will not be considered the
making of a loan;
(5) Purchase securities of any one issuer if, as a result, more than
5% of a Portfolio's total assets would be invested in securities of that
issuer or a Portfolio would own or hold more than 10% of the outstanding
voting securities of that issuer, except that up to 25% of a Portfolio's
total assets may be invested without regard to this limitation, and except
that this limitation does not apply to securities issued or guaranteed by
the U.S. government, its agencies or instrumentalities or to securities
issued by other investment companies;
(6) Engage in the business of underwriting securities of other
issuers, except to the extent that a Portfolio might be considered an
underwriter under the federal securities laws in connection with its
disposition of portfolio securities; or
(7) Purchase any security if, as a result of that purchase, 25% or
more of a Portfolio's total assets would be invested in securities of
issuers having their principal business activities in the same industry,
except that this limitation does not apply to securities issued or
guaranteed by the U.S. government, its agencies or instrumentalities.
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The following investment limitations of each Portfolio are not fundamental
policies and may be changed by vote of Growth Portfolio's Board of Trustees
without shareholder approval. Neither Portfolio may:
(1) Invest more than 15% of its net assets in illiquid securities, a
term which means securities that cannot be disposed of within seven days in
the normal course of business at approximately the amount at which the
Portfolio has valued the securities and includes, among other things,
repurchase agreements maturing in more than seven days;
(2) Borrow money except for temporary or emergency purposes (not for
leveraging) in excess of 33 1/3% of the value of the Portfolio's total
assets;
(3) Enter into a futures contract or an option on a futures contract,
in each case other than for bona fide hedging purposes (as defined by the
CFTC), if the aggregate initial margin and premiums required to establish
all of these positions (excluding the amount by which options are
"in-the-money") exceeds 5% of the liquidation value of the Portfolio's
portfolio, after taking into account unrealized profits and unrealized
losses on any contracts the Portfolio has entered into;
(4) Purchase securities of other investment companies, except to the
extent permitted by the 1940 Act, in the open market at no more than
customary commission rates. This limitation does not apply to securities
received or acquired as dividends, through offers of exchange, or as a
result of reorganization, consolidation, or merger;
(5) Purchase securities on margin, provided that a Portfolio may
obtain short-term credits as may be necessary for the clearance of
purchases and sales of securities, and further provided that a Portfolio
may make margin deposits in connection with its use of financial options
and futures, forward and spot currency contracts, swap transactions and
other financial contracts or derivative instruments; or
(6) Mortgage, pledge, or hypothecate any of its assets, provided that
this shall not apply to the transfer of securities in connection with any
permissible borrowing or to collateral arrangements in connection with
permissible activities.
The approval of [the Fund] and of other investors in a Portfolio, if any, is
not required to change the investment objective, policies or limitations of that
Portfolio, unless otherwise specified. Written notice shall be provided to
shareholders of a Fund thirty days prior to any changes in a Portfolio's
investment objective.
If a percentage restriction on investment or utilization of assets in an
investment policy or limitation is adhered to at the time an investment is made,
a later change in percentage ownership of a security or kind of securities
resulting from changing market values or a similar type of event will not be
considered a violation of a Portfolio's investment policies or restrictions. A
Portfolio may exchange securities, exercise conversion or subscription rights,
warrants, or other rights to purchase common stock or other equity securities
and may hold, except to the extent limited by the 1940 Act, any such securities
so acquired without regard to the Portfolio's investment policies and
limitations. The original cost of the securities so acquired will be included in
any subsequent determination of a Portfolio's compliance with the investment
percentage limitations referred to above and in the Prospectus.
Investors should refer to each Fund's Prospectus for further information with
respect to that particular Fund's investment objective, which may not be changed
without the approval of its shareholders, and other investment policies,
techniques and limitations, which may be changed without shareholder approval.
EXECUTION OF PORTFOLIO TRANSACTIONS
Subject to policies established by Growth Portfolio's Board of Trustees, AIM
is responsible for the execution of the Portfolios' securities transactions and
the selection of brokers/dealers who execute such transactions on behalf of the
Portfolios. In executing transactions, AIM seeks the best net results for each
Portfolio, taking into account such factors as the price (including the
applicable brokerage commission or dealer spread), size of the order, difficulty
of execution and operational facilities of the firm involved. Although AIM
generally seeks reasonably competitive commission rates and spreads, payment of
the lowest commission or spread is not necessarily consistent with the best net
results. While the Portfolios may engage in soft dollar arrangements for
research services, as described below, the Portfolios have no obligation to deal
with any broker/dealer or group of broker/dealers in the execution of portfolio
transactions.
Consistent with the interests of the Portfolios, AIM may select brokers to
execute the Portfolios' securities transactions on the basis of the research
services they provide to AIM for its use in managing the Portfolios and its
other advisory accounts. Such services may include furnishing analyses, reports
and information concerning issuers, industries, securities,
18
<PAGE> 298
geographic regions, economic factors and trends, portfolio strategy, and
performance of accounts, and effecting securities transactions and performing
functions incidental thereto (such as clearance and settlement). Research and
brokerage services received from such broker are in addition to, and not in lieu
of, the services required to be performed by AIM under the applicable investment
management and administration contract. A commission paid to such broker may be
higher than that which another qualified broker would have charged for effecting
the same transaction, provided that AIM determines in good faith that such
commission is reasonable in terms either of that particular transaction or the
overall responsibility of AIM to the Portfolios and its other clients and that
the total commissions paid by each Fund will be reasonable in relation to the
benefits received by the Portfolios over the long term. Research services may
also be received from dealers who execute Portfolio transactions in OTC markets.
AIM may allocate brokerage transactions to broker/dealers who have entered
into arrangements under which the broker/dealer allocates a portion of the
commissions paid by the Portfolio toward payment of its expenses, such as
custodian fees.
Investment decisions for each Portfolio and for other investment accounts
managed by AIM are made independently of each other in light of differing
conditions. However, the same investment decision occasionally may be made for
two or more of such accounts, including one or more Portfolios. In such cases,
simultaneous transactions may occur. Purchases or sales are then allocated as to
price or amount in a manner deemed fair and equitable to all accounts involved.
While in some cases this practice could have a detrimental effect upon the price
or value of the security as far as a Portfolio is concerned, in other cases AIM
believes that coordination and the ability to participate in volume transactions
will be beneficial to the Portfolios.
Under a policy adopted by Growth Portfolio's Board of Trustees, and subject to
the policy of obtaining the best net results, AIM may consider a broker/dealer's
sale of the shares of the Funds and the other funds for which AIM serves as
investment manager and/or administrator in selecting broker/dealers for the
execution of portfolio transactions. This policy does not imply a commitment to
execute portfolio transactions through all broker/dealers that sell shares of
the Funds and such other funds.
Each Portfolio contemplates that, consistent with the policy of obtaining the
best net results, brokerage transactions may be conducted through certain
companies that are affiliated with AIM. Growth Portfolio's Board of Trustees has
adopted procedures in conformity with Rule 17e-1 under the 1940 Act to ensure
that all brokerage commissions paid to such affiliates are reasonable and fair
in the context of the market in which they are operating. Any such transactions
will be effected and related compensation paid only in accordance with
applicable SEC regulations.
The Portfolios may engage in certain principal and agency transactions with
banks and their affiliates that own 5% or more of the outstanding voting
securities of a Portfolio, provided the conditions of an exemptive order
received by the Funds from the SEC are met. In addition, a Portfolio may
purchase or sell a security from or to another AIM Fund provided the Portfolios
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.
For the fiscal years ended December 31, 1998, December 31, 1997 and December
31, 1996, the Small Cap Portfolio paid aggregate brokerage commissions of
$ , $91,971 and $54,241, respectively. For the fiscal years ended December
31, 1998, December 31, 1997 and December 31, 1996, the Value Portfolio paid
aggregate brokerage commissions of $ , $22,202 and $37,380, respectively.
PORTFOLIO TRADING AND TURNOVER
Although the Portfolios generally do not intend to trade for short-term
profits, the securities held by a Portfolio will be sold whenever AIM believes
it is appropriate to do so, without regard to the length of time a particular
security may have been held. Portfolio turnover rate is calculated by dividing
the lesser of sales or purchases of portfolio securities by each Portfolio's
average month-end portfolio value, excluding short-term investments. The
portfolio turnover rate will not be a limiting factor when AIM deems portfolio
changes appropriate. Higher portfolio turnover involves correspondingly greater
brokerage commissions and other transaction costs that a Portfolio will bear
directly and may result in the realization of net capital gains that are taxable
when distributed to each corresponding Fund's shareholders. For the fiscal years
ended December 31, 1998 and December 31, 1997 the Small Cap Portfolio's and
Value Portfolio's portfolio turnover rates were % and 233%, and % and
93%, respectively.
19
<PAGE> 299
MANAGEMENT
The Trust's Board of Trustees has overall responsibility for the operation of
the Funds. The Board of Trustees has approved all significant agreements between
the Trust and persons or companies furnishing services to the Funds including
the investment management and administration agreement with AIM, the agreements
with AIM Distributors regarding distribution of the Funds' shares, the custody
agreement and the transfer agency agreement. The day-to-day operations of the
Funds are delegated to the officers of the Trust, subject always to the
investment objectives and policies of the Funds and to the general supervision
of the Trust's Board.
TRUSTEES AND EXECUTIVE OFFICERS
The Trust's Trustees and Executive Officers are listed below. Unless otherwise
indicated, the address of each Executive Officer is 11 Greenway Plaza, Suite
100, Houston, Texas 77046.
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------
NAME, ADDRESS AND AGE POSITIONS HELD WITH REGISTRANT PRINCIPAL OCCUPATION WITH REGISTRANT
--------------------- ------------------------------ ------------------------------------
- ----------------------------------------------------------------------------------------------------
<S> <C> <C>
*ROBERT H. GRAHAM (52) Trustee, Chairman of the Board Director, President and Chief Executive
and President Officer, A I M Management Group Inc.;
Director and President, A I M Advisors,
Inc.; Director and Senior Vice
President, A I M Capital Management,
Inc., A I M Distributors, Inc., A I M
Fund Services, Inc. and Fund Management
Company; Director, AMVESCAP PLC.
- ----------------------------------------------------------------------------------------------------
C. DEREK ANDERSON (57) Trustee President, Plantagenet Capital
220 Sansome Street Management, LLC (an investment
Suite 400 partnership); Chief Executive Officer,
San Francisco, CA 94104 Plantagenet Holdings, Ltd. (an
investment banking firm); Director,
Anderson Capital Management, Inc. since
1988; Director, PremiumWear, Inc.
(formerly Munsingwear, Inc.) (a casual
apparel company); Director, "R" Homes,
Inc. and various other companies; and
Trustee, each of the other investment
companies registered under the 1940 Act
that is sub-advised or sub-administered
by the Sub-advisor.
- ----------------------------------------------------------------------------------------------------
FRANK S. BAYLEY (59) Trustee Partner, law firm of Baker & McKenzie;
Two Embarcadero Center Director and Chairman, C.D. Stimson
Suite 2400 Company (a private investment company);
San Francisco, CA 94111 and Trustee, each of the other
investment companies registered under
the 1940 Act that is sub-advised or
sub-administered by the Sub-advisor.
- ----------------------------------------------------------------------------------------------------
ARTHUR C. PATTERSON (55) Trustee Managing Partner, Accel Partners (a
428 University Avenue venture capital firm); Director,
Palo Alto, CA 94301 Viasoft and PageMart, Inc. (both public
software companies) and several other
privately held software and
communications companies; and Trustee,
each of the other investment companies
registered under the 1940 Act that is
sub-advised or sub-administered by the
Sub-advisor.
- ----------------------------------------------------------------------------------------------------
RUTH H. QUIGLEY (64) Trustee Private investor; President, Quigley
1055 California Street Friedlander & Co., Inc. (a financial
San Francisco, CA 94108 advisory services firm) from 1984 to
1986; and Director, each of the other
investment companies registered under
the 1940 Act that is sub-advised or
sub-administered by the Sub-advisor.
- ----------------------------------------------------------------------------------------------------
</TABLE>
- ---------------
<TABLE>
<S> <C> <C>
* A trustee who is an "interested person" of the Trust and AIM Advisors, Inc. as defined in the 1940
Act.
</TABLE>
20
<PAGE> 300
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------
NAME, ADDRESS AND AGE POSITIONS HELD WITH REGISTRANT PRINCIPAL OCCUPATION WITH REGISTRANT
--------------------- ------------------------------ ------------------------------------
- ----------------------------------------------------------------------------------------------------
<S> <C> <C>
+JOHN J. ARTHUR (53) Vice President Director and Senior Vice President,
A I M Advisors, Inc.; Vice President
and Treasurer, A I M Management Group
Inc.
- ----------------------------------------------------------------------------------------------------
KENNETH W. CHANCEY (53) Vice President and Principal Senior Vice President -- Mutual Fund
50 California Street Accounting Officer Accounting, INVESCO (NY), Inc. since
San Francisco, CA 94111 1997; Vice President -- Mutual Fund
Accounting, INVESCO (NY), Inc. from
1992 to 1997.
- ----------------------------------------------------------------------------------------------------
MELVILLE B. COX (54) 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.
- ----------------------------------------------------------------------------------------------------
GARY T. CRUM (50) Vice President Director and President, A I M Capital
Management, Inc.; Director and Senior
Vice President, A I M Management Group
Inc. and A I M Advisors, Inc.; and
Director, A I M Distributors, Inc. and
AMVESCAP PLC.
- ----------------------------------------------------------------------------------------------------
SAMUEL D. SIRKO (39) Vice President and Secretary Vice President, Assistant General
Counsel and Assistant Secretary, A I M
Advisors, Inc.; and Assistant General
Counsel and Assistant Secretary, A I M
Management Group Inc., A I M Capital
Management, Inc., A I M Distributors,
Inc., A I M Fund Services, Inc. and
Fund Management Company.
- ----------------------------------------------------------------------------------------------------
+CAROL F. RELIHAN (43) 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.
- ----------------------------------------------------------------------------------------------------
DANA R. SUTTON (39) Vice President and Assistant Vice President and Fund Controller,
Treasurer A I M Advisors, Inc.; and Assistant
Vice President and Assistant Treasurer,
Fund Management Company.
- ----------------------------------------------------------------------------------------------------
</TABLE>
- ---------------
+ Mr. Arthur and Ms. Relihan are married to each other.
The Board of Trustees has a Nominating and Audit Committee, comprised of Miss
Quigley and Messrs. Anderson, Bayley and Patterson, which is responsible for
nominating persons to serve as Trustees, reviewing audits of the Trust and the
Funds and recommending firms to serve as independent auditors of the Trust. All
of the Trust's Trustees also serve as directors or trustees of some or all of
the other investment companies managed, administered or advised by AIM. All of
the Trust's executive officers hold similar offices with some or all of the
other investment companies managed, administered or advised by AIM. Each Trustee
who is not a director, officer or employee of AIM or any affiliated company is
paid aggregate fees of $5,000 a year, plus $300 per Fund for each meeting of the
Board attended, and reimbursed travel and other expenses incurred in connection
with attendance at such meetings. Other Trustees and Officers receive no
compensation or expense reimbursements from the Trust. For the fiscal year ended
December 31, 1998, Mr. Anderson, Mr. Bayley, Mr. Patterson and Miss Quigley, who
are not directors, officers or employees of AIM or any affiliated company,
received total compensation of $ , $ , $ and
$ , respectively, from the Trust for their services as Trustees. For
the year ended December 31, 1998, Mr. Anderson, Mr. Bayley, Mr. Patterson and
Miss Quigley, who are not directors, officers or employees of AIM or any other
affiliated company, received total compensation of $ , $ ,
$ and $ , respectively, from the investment companies managed
or administered by AIM for which he or she served as a Trustee. Fees and
expenses disbursed to the Trustees
21
<PAGE> 301
contained no accrued or payable pension or retirement benefits. [As of April ,
1999, the Officers and Trustees and their families as a group owned in the
aggregate beneficially or of record less than 1% of the shares of the Basic
Value Fund and less than 1% of the shares of the Small Cap Fund.]
INVESTMENT MANAGEMENT AND ADMINISTRATION SERVICES RELATING TO FUNDS AND THE
PORTFOLIOS
AIM serves as each Portfolio's investment manager and administrator under an
investment management and administration contract between the Growth Portfolio
and AIM ("Portfolio Management Contract"). AIM serves as administrator to each
Fund under an administration contract between the Trust and AIM ("Administration
Contract").
The Administration Contracts will not be deemed advisory contracts, as defined
under the 1940 Act. As investment managers and administrators, AIM makes all
investment decisions for each Portfolio and, as administrator, administers each
Portfolio's and Fund's affairs. Among other things, AIM furnishes the services
and pays the compensation and travel expenses of persons who perform the
executive, administrative, clerical and bookkeeping functions of the Portfolios
and the Funds and provide suitable office space and necessary small office
equipment and utilities.
The Portfolio Management Contracts may be renewed with respect to a Portfolio
for one-year terms, provided that any such renewal has been specifically
approved at least annually by: (i) the Portfolio's Board of Trustees or the vote
of a majority of the Portfolio's outstanding voting securities (as defined in
the 1940 Act), and (ii) a majority of the Portfolio's Trustees who are not
parties to the Portfolio Management Contracts or "interested persons" of any
such party (as defined in the 1940 Act), cast in person at a meeting called for
the specific purpose of voting on such approval. The Portfolio Management
Contracts provide that with respect to each Portfolio, and the Administration
Contracts provide that with respect to each Fund, either the Trust, the
Portfolio or AIM may terminate the contract without penalty upon sixty days'
written notice to the other party. The Portfolio Management Contracts terminate
automatically in the event of their assignment (as defined in the 1940 Act).
[For the fiscal years ended December 31, 1997 and December 31, 1996, the Small
Cap Portfolio and the Value Portfolio paid fees of $120,544 and $73,312; and
$74,372 and $27,487, respectively, to INVESCO (NY), Inc. For the same periods,
the Small Cap Fund and Basic Value Fund paid administration fees of $63,460 and
$39,004; and $39,171 and $14,722, respectively, to INVESCO (NY), Inc. For the
fiscal years ended December 31, 1997 and December 31, 1996, INVESCO (NY), Inc.
reimbursed the Small Cap Portfolio and Value Portfolio for their respective
investment management and administration fees in the amounts of $67,837 and
$73,312; and $74,372 and $27,487, respectively; for the same periods, INVESCO
(NY), Inc. reimbursed the Small Cap Fund and Basic Value Fund for their
respective administration fees in the amounts of $63,460 and $39,004; and
$39,171 and $14,722, respectively. Accordingly, INVESCO (NY), Inc. reimbursed
each Fund and its corresponding Portfolio investment management and
administration fees in the aggregate amounts of $131,297 and $112,316; and
$113,543 and $42,209, respectively.]
[For the fiscal years ended December 31, 1997 and December 31, 1996, INVESCO
(NY), Inc., pursuant to its voluntary expense undertaking, reimbursed the Small
Cap Fund and Basic Value Fund for expenses in the additional amounts of $0 and
$58,269; and $38,419 and $164,683, respectively.]
EXPENSES OF THE FUNDS AND THE PORTFOLIOS
Each Fund and each Portfolio pays all expenses not assumed by AIM, AIM
Distributors and other agents. These expenses include, in addition to the
advisory, distribution, transfer agency, pricing and accounting agency and
brokerage fees discussed above, legal and audit expenses, custodian fees,
trustees' fees, organizational fees, fidelity bond and other insurance premiums,
taxes, extraordinary expenses, and expenses of reports and prospectuses sent to
existing investors. The allocation of general Trust expense and expenses shared
by the Funds with one another, are made on a basis deemed fair and equitable,
which may be based on the relative net assets of the Funds or the nature of the
services performed and relative applicability to each Fund. Similarly, the
allocation of general Growth Portfolio expenses, and expenses shared by the
Portfolios with each other, are made on a basis deemed fair and equitable and
may be based on the relative net assets of the Portfolios or the nature of the
services performed and relative applicability to each Portfolio. Expenditures,
including costs incurred in connection with the purchase or sale of portfolio
securities, that are capitalized in accordance with generally accepted
accounting principles applicable to investment companies, are accounted for as
capital items and not as expenses.
22
<PAGE> 302
THE DISTRIBUTION PLANS
THE CLASS A AND C PLAN
The Trust has adopted a Master Distribution Plan pursuant to Rule 12b-1 under
the 1940 Act relating to the Class A and Class C shares of the Funds (the "Class
A and C Plan"). The Class A and C Plan provides that the Class A shares pay
0.35% per annum of their 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 Class A shares. Under the Class A and C Plan,
Class C shares of Basic Value Fund and Small Cap Fund pay compensation to AIM
Distributors at an annual rate of 1.00% of the average daily net assets
attributable to Class C shares. The Class A and C Plan is designed to compensate
AIM Distributors, on a quarterly basis, for certain promotional and other
sales-related costs, and to implement a dealer incentive program which provides
for periodic payments to selected dealers who furnish continuing personal
shareholder services to their customers who purchase and own Class A or Class C
shares of a Fund. Payments can also be directed by AIM Distributors to selected
institutions who have entered into service agreements with respect to Class A
and Class C shares of each Fund and who provide continuing personal services to
their customers who own Class A and Class C shares of the Funds. The service
fees payable to selected institutions are calculated at the annual rate of 0.25%
of the average daily net asset value of those Fund shares that are held in such
institution's customers' accounts which were purchased on or after a prescribed
date set forth in the Plan. Activities appropriate for financing under the Class
A Plan include, but are not limited to, the following: printing of prospectuses
and statements of additional information and reports for other than existing
shareholders; overhead; preparation and distribution of advertising material and
sales literature; expenses of organizing and conducting sales seminars;
supplemental payments to dealers and other institutions such as asset-based
sales charges or as payments of service fees under shareholder service
arrangements; and costs of administering the Class A and C Plan.
Of the aggregate amount payable under the Class A and C Plan, payments to
dealers and other financial institutions that provide continuing personal
shareholder services to their customers who purchase and own shares of the Fund,
in amounts of up to 0.25% of the average daily net assets of the Fund
attributable to the customers of such dealers or financial institutions are
characterized as a service fee, and payments to dealers and other financial
institutions in excess of such amount and payments to AIM Distributors would be
characterized as an asset-based sales charge pursuant to the Class A and C Plan.
Payments pursuant to the Plans are subject to any applicable limitations imposed
by rules of the National Association of Securities Dealers, Inc.
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 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. 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. AIM Distributors may transfer and sell its
rights to payments under the Class B Plan in order to finance distribution
expenditures in respect of Class B shares.
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
the 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
23
<PAGE> 303
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 the Funds; 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 the Funds reasonably may request, to the extent
permitted by applicable statute, rule or regulation. Similar agreements may be
permitted under the Plans for institutions which provide recordkeeping for and
administrative services to 401(k) plans.
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.
Under a Shareholder Service Agreement, each Fund agrees to pay periodically
fees to selected dealers and other institutions who render the foregoing
services to their customers. The fees payable under a Shareholder Service
Agreement generally will be calculated at the end of each payment period for
each business day of 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 each 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.
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.
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.
Prior to June 1, 1998, the Trust had adopted a different Rule 12b-1 plan, that
operated as a "reimbursement-type" plan (the "Prior Plan"). The information
provided below relates to payments made under the Prior Plan, which provided for
payments to GT Global Inc., the distributor of the Funds at the time the Prior
Plan was in effect.
For the fiscal year ended December 31, 1998, each Fund paid the following
amounts under the Prior Plan:
<TABLE>
<CAPTION>
% OF CLASS
AVERAGE DAILY
NET ASSETS
-----------------
CLASS A CLASS B CLASS A CLASS B
------- -------- ------- -------
<S> <C> <C> <C> <C>
Basic Value Fund............................... $ $ 0.35% 1.00%
Small Cap Fund................................. $ $ 0.35% 1.00%
</TABLE>
For the fiscal year ended December 31, 1998, each Fund paid the following
amounts under the current Plan:
<TABLE>
<CAPTION>
% OF CLASS
AVERAGE DAILY
NET ASSETS
-----------------
CLASS A CLASS B CLASS A CLASS B
------- -------- ------- -------
<S> <C> <C> <C> <C>
Basic Value Fund............................... $ $ 0.35% 1.00%
Small Cap Fund................................. $ $ 0.35% 1.00%
</TABLE>
24
<PAGE> 304
Actual fees by category paid by the Fund with regard to the Class A shares
during the year ended December 31, 1998 follows:
<TABLE>
<CAPTION>
BASIC VALUE SMALL CAP
FUND FUND
----------- ---------
<S> <C> <C>
CLASS A
Advertising............................................... $ $
Printing and mailing prospectuses, semi-annual reports and
annual reports (other than to current shareholders)....
Seminars..................................................
Compensation to Underwriters to partially offset other
marketing expenses..................................... 0 0
Compensation to Dealers including finder's fees...........
Compensation to Sales Personnel........................... 0 0
Annual Report Total.......................................
</TABLE>
Actual fees by category paid by the Fund with regard to the Class B Shares
during the year ended December 31, 1998 as follows:
<TABLE>
<CAPTION>
BASIC VALUE SMALL CAP
FUND FUND
----------- ----------
<S> <C> <C>
CLASS B
Advertising............................................... $ $
Printing and mailing prospectuses, semi-annual reports and
annual reports (other than to current shareholders)....
Seminars..................................................
Compensation to Underwriters to partially offset other
marketing expenses.....................................
Compensation to Dealers...................................
Compensation to Sales Personnel........................... 0 0
Annual Report Totals......................................
</TABLE>
The Plans require AIM Distributors to provide the Board of Trustees at least
quarterly with a written report of the amounts expended pursuant to the Plans
and the purposes for which such expenditures were made. The Board of Directors
reviews these reports in connection with their decisions with respect to the
Plans.
As required by Rule 12b-1, the Plans and related forms of Shareholder Service
Agreements were approved by the Board of Trustees, including a majority of the
Trustees who are not "interested persons" (as defined in the 1940 Act) of the
Trust and who have no direct or indirect financial interest in the operation of
the Plans or in any agreements related to the Plans ("Qualified Trustees"). In
approving the Plans in accordance with the requirements of Rule 12b-1, the
Trustees considered various factors and determined that there is a reasonable
likelihood that the Plans would benefit each class of each Fund and their
respective shareholders.
The Plans do not obligate the Funds to reimburse AIM Distributors for the
actual expenses AIM Distributors may incur in fulfilling its obligations under
the Plans. Thus, even if AIM Distributors' actual expenses exceed the fee
payable to AIM Distributors thereunder at any given time, the Funds will not be
obligated to pay more than that fee. If AIM Distributors' expenses are less than
the fee it receives, AIM Distributors will retain the full amount of the fee.
Unless terminated earlier in accordance with their terms, the Plans continue
in effect until May 29, 1999 and each year thereafter, as long as such
continuance is specifically approved at least annually by the Board of Trustees,
including a majority of the Qualified Trustees.
The Plans may be terminated by the vote of a majority of the Qualified
Trustees, or, with respect to a particular class, by the vote of a majority of
the outstanding voting securities of that class.
Any change in the Plans that would increase materially the distribution
expenses paid by the applicable class requires shareholder approval; otherwise,
it may be amended by the Trustees, including a majority of the Qualified
Trustees, by votes cast in person at a meeting called for the purpose of voting
upon such amendment. As long as the Plans are in effect, the selection or
nomination of the Qualified Trustees is committed to the discretion of the
Qualified Trustees. In the event the Class A and C Plan is amended in a manner
which the Board of Trustees determines would materially increase the charges
paid under the Class A and C Plan, the Class B shares of the Funds will no
longer convert into Class A shares of
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<PAGE> 305
the same 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, on the one hand, and
the Class B Plan, on the other hand, are: (i) the Class A and C Plan allows
payment to AIM Distributors or to dealers or financial institutions of up to
0.35% of average daily net assets of the Class A shares of each Fund, as
compared to 1.00% of such assets of each Fund's Class B shares; (ii) the Class B
Plan obligates the Class B shares to continue to make payments to AIM
Distributors following termination of the Class B shares Distribution Agreement
with respect to Class B shares sold by or attributable to the distribution
efforts of AIM Distributors and its predecessor, GT Global, Inc. unless there
has been a complete termination of the Class B Plan (as defined in such Plan)
and (iii) the Class B Plan expressly authorizes AIM Distributors to assign,
transfer or pledge its rights to payments pursuant to the Class B Plan.
THE DISTRIBUTOR
The Trust has entered into distribution arrangements with AIM Distributors,
P.O. Box 4739, Houston, Texas 77210-4739, a registered broker-dealer and a
wholly owned subsidiary of AIM, to act as the distributor of Class A, Class B
and Class C shares of the Funds. Certain Trustees and officers of the Trust are
affiliated with AIM Distributors. A Master Distribution Agreement with AIM
Distributors relating to the Class B shares of the Funds was approved by the
Board of Trustees on May 7, 1998 and a Master Distribution Agreement with AIM
Distributors relating to the Class A shares and Class C shares was approved by
the Board of Trustees on [December , 1998]. Both such Master Distribution
Agreements are hereinafter collectively referred to as the "Distribution
Agreements."
The Distribution Agreements provide AIM Distributors with the exclusive right
to distribute shares of the Funds directly and through institutions with whom
AIM Distributors has entered into selected dealer agreements. Under the
Distribution Agreement for the Class B shares, AIM Distributors sells Class B
shares of the Funds at net asset value subject to a contingent deferred sales
charge established by AIM Distributors. AIM Distributors is authorized to
advance to institutions through whom Class B shares are sold a sales commission
under schedules established by AIM Distributors. The Distribution Agreement for
the Class B shares provides that AIM Distributors (or its assignee or
transferee) will receive 0.75% (of the total 1.00% payable under the
distribution plan applicable to Class B shares) of each Fund's average daily net
assets attributable to Class B shares attributable to the sales efforts of AIM
Distributors.
The Distribution Agreements provide that AIM Distributors will bear the
expenses of printing from the final proof and distributing 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 Fund), and any promotional or sales
literature used by AIM Distributors or furnished by AIM Distributors to dealers
in connection with the public offering of the Fund's shares, including expenses
of advertising in connection with such public offerings. AIM Distributors has
not undertaken to sell any specified number of shares of any classes of the
Funds.
AIM Distributors expects to pay sales commissions from its own resources to
dealers and institutions who sell Class B shares of the Funds at the time of
such sales. Payments with respect to Class B shares will equal 4.0% of the
purchase price of the Class B shares sold by the dealer or institution, and will
consist of a sales commission equal to 3.75% of the purchase price of the Class
B shares sold plus an advance of the first year service fee of 0.25% with
respect to such shares. The portion of the payments to AIM Distributors under
the Class B Plan which constitutes an asset-based sales charge (0.75%) is
intended in part to permit AIM Distributors to recoup a portion of such sales
commissions plus financing costs. AIM Distributors anticipates that it will
require a number of years to recoup from Class B Plan payments the sales
commissions paid to dealers and institutions in connection with sales of Class B
shares. In the future, if multiple distributors serve 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
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<PAGE> 306
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 and its predecessor; provided,
however, that a complete termination of the Class B Plan (as defined in such
Plan) would terminate all payments by the Fund of asset based distribution fees
and service fees to AIM Distributors. Termination of the Class B Plan or
Distribution Agreement does not affect the obligation of Class B shareholders to
pay contingent deferred sales charges.
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 GT Global,
Inc., the Trust's former distributor prior to June 1, 1998, for the fiscal year
ended December 31, 1998.
<TABLE>
<CAPTION>
1998 1997
------------------ ------------------
SALES AMOUNT SALES AMOUNT
CHARGES RETAINED CHARGES RETAINED
------- -------- ------- --------
<S> <C> <C> <C> <C>
Basic Value Fund............................... $ $ $ $
Small Cap Fund................................. $ $ $ $
</TABLE>
The following chart reflects the contingent deferred sales charges paid by
Class A and Class B shareholders for the fiscal years ended December 31, 1998,
1997 and 1996 for Class A and Class B shares:
<TABLE>
<CAPTION>
1998 1997 1996
------- ------- -------
<S> <C> <C> <C>
Basic Value Fund......................................... $ $55,700 $ 5,608
Small Cap Fund........................................... $ $60,107 $28,162
</TABLE>
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 Advisor
MultiFlex 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 European Development Fund, AIM Europe Growth Fund,
AIM Global Utilities Fund, AIM Global Growth & Income Fund, AIM International
Equity Fund, AIM Japan Growth Fund, AIM Large Cap Growth Fund, AIM Mid Cap
Equity Fund, AIM Money Market Fund, AIM New Pacific Growth Fund, AIM Select
Growth Fund, AIM Small Cap Growth Fund, AIM Small Cap Opportunities Fund, AIM
Value Fund and AIM Weingarten Fund.
<TABLE>
<CAPTION>
DEALER
INVESTOR'S SALES CHARGE CONCESSION
-------------------------- -------------
AS A AS A AS A
PERCENTAGE PERCENTAGE PERCENTAGE
OF THE PUBLIC OF THE NET OF THE PUBLIC
OFFERING AMOUNT OFFERING
AMOUNT OF INVESTMENT IN SINGLE TRANSACTION 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>
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
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<PAGE> 307
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 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 Fund, AIM Municipal
Bond Fund, AIM Strategic Income Fund and AIM Tax-Exempt Bond Fund of
Connecticut.
<TABLE>
<CAPTION>
DEALER
INVESTOR'S SALES CHARGE CONCESSION
-------------------------- -------------
AS A AS A AS A
PERCENTAGE PERCENTAGE PERCENTAGE
OF THE PUBLIC OF THE NET OF THE PUBLIC
OFFERING AMOUNT OFFERING
AMOUNT OF INVESTMENT IN SINGLE TRANSACTION PRICE INVESTED PRICE
- ------------------------------------------ ------------- ---------- -------------
<S> <C> <C> <C>
Less than $50,000........................................... 4.75% 4.99% 4.00%
$50,000 but less than $100,000.............................. 4.00 4.17 3.25
$100,000 but less than $250,000............................. 3.75 3.90 3.00
$250,000 but less than $500,000............................. 2.50 2.56 2.00
$500,000 but less than $1,000,000........................... 2.00 2.04 1.60
</TABLE>
Category III. Certain AIM Funds are currently sold with a sales charge ranging
from 1.00% to 0.50% of the offering price on purchases of less than $1,000,000.
These AIM Funds are the Class A shares of each of AIM Limited Maturity Treasury
Fund and AIM Tax-Free Intermediate Fund.
<TABLE>
<CAPTION>
DEALER
INVESTOR'S SALES CHARGE CONCESSION
-------------------------- -------------
AS A AS A AS A
PERCENTAGE PERCENTAGE PERCENTAGE
OF THE PUBLIC OF THE NET OF THE PUBLIC
OFFERING AMOUNT OFFERING
AMOUNT OF INVESTMENT IN 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; 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. In some instances, these incentives may
be offered only to certain dealers who have sold or may sell significant amounts
of shares. At the option of the dealer, such incentives may take the form of
payment for travel expenses, including lodging, incurred in connection with
trips taken by qualifying registered representatives and their families to
places within or outside the United States. The total amount of such additional
bonus payments or other consideration shall not exceed 0.25% of the public
offering price of the shares sold. Any such bonus or incentive programs will not
change the price paid by investors for the purchase of the applicable AIM Fund's
shares or the amount that any particular AIM Fund will receive as proceeds from
such sales. Dealers may not use sales of the AIM Funds' shares to qualify for
any incentives to the extent that such incentives may be prohibited by the laws
of any state.
AIM Distributors may make payments to dealers and institutions who are dealers
of record for purchases of $1 million or more of Class A shares (or shares which
normally involve payment of initial sales charges), which are sold at net asset
value and are subject to a contingent deferred sales charge, for all AIM Funds
other than Class A shares of each of AIM Limited Maturity Treasury Fund and AIM
Tax-Free Intermediate Fund as follows: 1% of the first $2 million of such
purchases, plus 0.80% of the next $1 million of such purchases, plus 0.50% of
the next $17 million of such purchases, plus 0.25% of amounts in excess of $20
million of such purchases. AIM Distributors may make payments to dealers and
28
<PAGE> 308
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 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.
AIM Distributors may pay investment dealers or other financial service firms
for share purchases (measured on an annual basis) of Class A Shares of all AIM
Funds except AIM Limited Maturity Treasury Fund, AIM Tax-Free Intermediate Fund
and AIM Tax-Exempt Cash Fund sold at net asset value to an employee benefit plan
as follows: 1% of the first $2 million of such purchases, plus 0.80% of the next
$1 million of such purchases, plus 0.50% of the next $17 million of such
purchases, plus 0.25% of amounts in excess of $20 million of such purchases and
up to 0.10% of the net asset value of any Class A shares of AIM Limited Maturity
Treasury Fund sold at net asset value to an employee benefit plan in accordance
with this paragraph.
REDUCTIONS IN INITIAL SALES CHARGES
Reductions in the initial sales charges shown in the sales charge tables
(quantity discounts) apply to purchases of shares of the AIM Funds that are
otherwise subject to an initial sales charge, provided that such purchases are
made by a "purchaser" as hereinafter defined. Purchases of Class A shares of AIM
Tax-Exempt Cash Fund, AIM Cash Reserve Shares of AIM Money Market Fund and Class
B and Class C shares of the AIM Funds will not be taken, into account in
determining whether a purchase qualifies for a reduction in initial sales
charges.
The term "purchaser" means:
- 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);
- 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;
- 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;
29
<PAGE> 309
- 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
- any other organized group of persons, whether incorporated or not, provided
the organization has been in existence for at least six months and has some
purpose other than the purchase at a discount of redeemable securities of a
registered investment company.
Investors or dealers seeking to qualify orders for a reduced initial sales
charge must identify such orders and, if necessary, support their qualification
for the reduced charge. AIM Distributors reserves the right to determine whether
any purchaser is entitled, by virtue of the foregoing definition, to the reduced
sales charge. No person or entity may distribute shares of the AIM Funds without
payment of the applicable sales charge other than to persons or entities who
qualify for a reduction in the sales charge as provided herein.
1. Letters of Intent. A purchaser, as previously defined, may pay reduced
initial sales charges by completing the appropriate section of the account
application and by fulfilling a Letter of Intent ("LOI"). The LOI privilege is
also available to holders of the Connecticut General Guaranteed Account,
established for tax qualified group annuities, for contracts purchased on or
before June 30, 1992. The LOI confirms such purchaser's intention as to the
total investment to be made in shares of the AIM Funds (except for (i) Class A
shares of AIM Tax-Exempt Cash Fund, and AIM Cash Reserve Shares of AIM Money
Market Fund and (ii) Class B and Class C shares of the AIM Funds) 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
30
<PAGE> 310
AIM Funds) 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 and (ii) Class B and Class C shares
of the AIM Funds) owned by such purchaser, calculated at their then current
public offering price. If a purchaser so qualifies for a reduced sales charge,
the reduced sales charge applies to the total amount of money then being
invested by such purchaser and not just to the portion that exceeds the
breakpoint above which a reduced sales charge applies. For example, if a
purchaser already owns qualifying shares of any AIM Fund with a value of $20,000
and wishes to invest an additional $20,000 in a fund, with a maximum initial
sales charge of 5.50%, the reduced initial sales charge of 5.25% will apply to
the full $20,000 purchase and not just to the $15,000 in excess of the $25,000
breakpoint. To qualify for obtaining the discount applicable to a particular
purchase, the purchaser or his dealer must furnish AFS with a list of the
account numbers and the names in which such accounts of the purchaser are
registered at the time the purchase is made.
Purchases At Net Asset Value. Purchases of shares of any of the AIM Funds at
net asset value (without payment of an initial sales charge) may be made in
connection with: (a) the reinvestment of dividends and distributions from a
fund; (b) exchanges of shares of certain other 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:
- A I M Management Group Inc. ("AIM Management") and its affiliates, or
their clients;
- 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;
- 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, Inc.; and any deferred compensation plan for
directors of investment companies sponsored by CIGNA Investments, Inc.
or its affiliates;
- 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;
- Purchases through approved fee-based programs;
- Employee benefit plans designated as qualified purchasers as defined above,
provided the initial investment in the Fund(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;
- 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;
- Shareholders of record of Advisor Class shares of AIM International
Growth Fund and AIM Worldwide Growth Fund on February 12, 1999 who have
continuously owned shares of the AIM Funds.
- 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;
- 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;
- Shareholders of the GT Global funds as of April 30, 1987 who since that date
continually have owned shares of one or more of these funds; and
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- Certain former AMA Investment Advisers' shareholders who became shareholders
of the AIM Global Health Care Fund in October 1989, and who have
continuously held shares in the GT Global funds since that time.
As used above, immediate family includes an individual and his or her spouse,
children, parents and parents of spouse.
CONTINGENT DEFERRED SALES CHARGE EXCEPTIONS
CDSCs will not apply to the following:
- Additional purchases of Class C shares of AIM Advisor Flex Fund, AIM Advisor
International Value Fund, AIM Advisor Large Cap Value Fund, AIM Advisor
MultiFlex Fund and AIM Advisor Real Estate Fund by shareholders of record on
April 30, 1995, of these Funds, except that shareholders whose
broker-dealers maintain a single omnibus account with AFS on behalf of those
shareholders, perform sub-accounting functions with respect to those
shareholders, and are unable to segregate shareholders of record prior to
April 30, 1995, from shareholders whose accounts were opened after that date
will be subject to a CDSC on all purchases made after March 1, 1996;
- 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;
- 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;
- 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;
- Liquidation by the Fund when the account value falls below the minimum
required account size of $500;
- Investment account(s) of AIM; and
- Class C shares where the investor's dealer or record notifies the
distributor prior to the time of investment that the dealer waives the
payment otherwise payable to him.
Upon the redemption of shares in Categories I and II purchased in amounts of
$1 million or more, no CDSC will be applied in the following situations:
- Shares held more than 18 months;
- 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;
- Private foundations or endowment funds;
- 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
- Shares acquired by exchange from Class A shares in Categories I and II
unless the shares acquired by exchange are redeemed within 18 months of the
original purchase of the Class A shares.
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NET ASSET VALUE DETERMINATION
The net asset value per share of each Fund and Portfolio is normally
determined daily as of the close of trading of the New York Stock Exchange
("NYSE") (generally 4:00 p.m. Eastern time) on each business day of the Fund and
Portfolio. In the event the NYSE closes early (i.e., before 4:00 p.m. Eastern
time) on a particular day, the net asset value of a Fund or Portfolio is
determined as of the close of the NYSE on such day. Net asset value per share is
determined by dividing the value of a Portfolio'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 or a Portfolio's net asset
value per share is made in accordance with generally accepted accounting
principles.
Each equity security 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 mean between the closing bid and asked prices on
that day. Each security traded in the over-the-counter market (but not including
securities reported on the NASDAQ National Market System) is valued at the mean
between the last bid and asked prices based upon quotes furnished by market
makers for such securities. 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 mean between the closing bid and asked prices on that day.
Debt securities 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, 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 Portfolio's or the
Fund's Board of Trustees. Short-term obligations having 60 days or less to
maturity are valued on the basis of amortized cost. For purposes of determining
net asset value per share, futures and options contracts generally will be
valued 15 minutes after the close of trading of the NYSE.
Generally, trading in 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 or Portfolio'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 NYSE which will not be reflected in the
computation of a Fund's or Portfolio'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 Portfolio's or the Fund's Board of Trustees.
HOW TO PURCHASE AND REDEEM SHARES
A complete description of the manner in which shares of the Funds may be
purchased appears in the Funds' Prospectuses under the heading "Shareholder
Information -- Purchasing Shares."
The sales charge normally deducted on purchases of Class A shares 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 expenses 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 set forth in the Funds' Prospectuses.
[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 AIM Funds, which are
permitted to be made without penalty pursuant to the Code, other than tax-free
rollovers or
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transfers of assets, and the proceeds of which are reinvested in AIM 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.]
[Class B shares purchased before June 1, 1998 are subject to the following
waivers from the contingent deferred sales charge otherwise due upon redemption
in addition to the waivers provided for redemptions of currently issued Class B
shares as described in the Prospectus: (1) total or partial redemptions
resulting from a distribution following retirement in the case of a
tax-qualified employer-sponsored retirement; (2) minimum required distributions
made in connection with an IRA, Keogh Plan or custodial account under Section
403(b) of the Code or other retirement plan following attainment of age 70 1/2;
(3) redemptions pursuant to distributions from a tax-qualified
employer-sponsored retirement plan, which is invested in AIM 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
AIM 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.]
[For purposes of a Letter of Intent entered into prior to June 1, 1998, any
registered investment adviser, trust company or bank trust department which
exercises investment discretion and which intends within thirteen months to
invest $500,000 or more can be treated as a single purchaser, provided further
that such entity places all purchases and redemption orders. Such entities
should be prepared to establish their qualifications for such treatment.]
Complete information concerning the method of exchanging shares of the Funds
for shares of the other AIM Funds is set forth in the Prospectuses under the
heading "Exchange Privilege."
Information concerning redemption of the Funds' shares is set forth in the
Prospectuses under the heading "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. AIM intends to redeem all
shares of the Funds in cash. In addition to the Funds' obligation to redeem
shares, AIM Distributors may also repurchase shares as an accommodation to
shareholders. To effect a repurchase, those dealers who have executed Selected
Dealer Agreements with AIM Distributors must phone orders to the order desk of
the Funds at (800) 959-4246 and guarantee delivery of all required documents in
good order. A repurchase is effected at the net asset value per share of the
applicable Fund next determined after the repurchase order is received. Such an
arrangement is subject to timely receipt by A I M Fund Services, Inc. ("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.
The right of redemption may be suspended or the date of payment postponed when
(a) trading on the 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.
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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 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 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
reportable interest, dividend, broker or barter exchange accounts opened
after 1983, or broker accounts considered inactive during 1983.
Except as explained in (5) above, other reportable payments are subject to
backup withholding only if (1) or (2) above applies.
Certain payees and payments are exempt from backup withholding and information
reporting. A complete listing of such exempt entities appears in the
instructions for the Requester of Form W-9 (which can be obtained from the IRS)
and includes, among others, the following:
- a corporation
- an organization exempt from tax under Section 501(a), an individual
retirement plan (IRA), or a custodial account under Section 403(b)(7)
- the United States or any of its agencies or instrumentalities
- a state, the District of Columbia, a possession of the United States, or any
of their political subdivisions or instrumentalities
- a foreign government or any of its political subdivisions, agencies or
instrumentalities
- an international organization or any of its agencies or instrumentalities
- a foreign central bank of issue
- a dealer in securities or commodities required to register in the U.S. or a
possession of the U.S.
- a futures commission merchant registered with the Commodity Futures Trading
Commission
- a real estate investment trust
- an entity registered at all times during the tax year under the 1940 Act
- a common trust fund operated by a bank under Section 584(a)
- a financial institution
- 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
- 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.
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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 distributions. Under applicable treaty law,
residents of treaty countries may qualify for a reduced rate of withholding or a
withholding exemption.
PROGRAMS AND SERVICES FOR SHAREHOLDERS
The Funds provide certain services for shareholders and certain investment or
redemption programs. See "Exchange Privilege" and "How to Redeem Shares" in the
Prospectus. All inquiries concerning these programs should be made directly to
A I M Fund Services, Inc., P.O. Box 4739, Houston, Texas 77210-4739, toll free
at (800) 959-4246.
DIVIDEND ORDER
Dividends may be paid to someone other than the registered owner, or sent to
an address other than the address of record. (Please note that signature
guarantees are required to effect this option.) An investor also may direct that
his or her dividends be invested in one of the other AIM Funds and there is no
sales charge for these investments; initial investment minimums apply. See
"Dividends, Distributions and Tax Matters -- Dividends and Distributions" in the
Prospectus. To effect this option, please contact your authorized dealer. For
more information concerning AIM Funds other than the Funds, please obtain a
current prospectus by contacting your authorized dealer, by writing to A I M
Fund Services, Inc., P.O. Box 4739, Houston, Texas 77210-4739, or by calling
toll free (800) 959-4246.
TAXES
TAXATION OF THE FUNDS
Each Fund is treated as a separate corporation for federal income tax
purposes. To continue to qualify for treatment as a regulated investment company
("RIC") under the Code, each Fund must distribute to its shareholders for each
taxable year at least 90% of its investment company taxable income (consisting
generally of net investment income and net short-term capital gain) and must
meet several additional requirements. With respect to each Fund, these
requirements include the following: (1) the Fund must derive at least 90% of its
gross income each taxable year from dividends, interest, payments with respect
to securities loans and gains from the sale or other disposition of securities,
or other income (including gains from options or Futures) derived with respect
to its business of investing in securities ("Income Requirement"); and (2) the
Diversification Requirements. Each Fund, as an investor in its corresponding
Portfolio, is deemed to own a proportionate share of the Portfolio's assets, and
to earn a proportionate share of the Portfolio's income, for purposes of
determining whether the Fund satisfies all of the requirements described above
to qualify as a RIC.
Each Fund will be subject to a nondeductible 4% excise tax ("Excise Tax") to
the extent it fails to distribute by the end of any calendar year substantially
all of its ordinary income for that year and capital gain net income for the
one-year period ending on October 31 of that year, plus certain other amounts.
See the next section for a discussion of the tax consequences to each Fund of
hedging transactions engaged in by its corresponding Portfolio.
TAXATION OF THE PORTFOLIOS
The Portfolios and their Relationship to the Funds. Each Portfolio is treated
as a separate partnership for federal income tax purposes and is not a "publicly
traded partnership." As a result, each Portfolio is not subject to federal
income tax; instead, each Fund, as an investor in its corresponding Portfolio,
is required to take into account in determining its federal income tax liability
its share of the Portfolio's income, gains, losses, deductions and credits,
without regard to whether it has received any cash distributions from the
Portfolio.
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Because, as noted above, each Fund is deemed to own a proportionate share of
its corresponding Portfolio's assets, and to earn a proportionate share of its
corresponding Portfolio's income, for purposes of determining whether the Fund
satisfies the requirements to qualify as a RIC, each Portfolio intends to
conduct its operations so that its corresponding Fund will be able to continue
to satisfy all those requirements.
Distributions to each Fund from its corresponding Portfolio (whether pursuant
to a partial or complete withdrawal or otherwise) will not result in the Fund's
recognition of any gain or loss for federal income tax purposes, except that (1)
gain will be recognized to the extent any cash that is distributed exceeds the
Fund's basis for its interest in the Portfolio before the distribution, (2)
income or gain will be recognized if the distribution is in liquidation of the
Fund's entire interest in the Portfolio and includes a disproportionate share of
any unrealized receivables held by the Portfolio, and (3) loss will be
recognized if a liquidation distribution consists solely of cash and/or
unrealized receivables. Each Fund's basis for its interest in its corresponding
Portfolio generally will equal the amount of cash and the basis of any property
the Fund invests in the Portfolio, increased by the Fund's share of the
Portfolio's net income and gains and decreased by (a) the amount of cash and the
basis of any property the Portfolio distributes to the Fund and (b) the Fund's
share of the Portfolio's losses.
Options and Futures Transactions. The Portfolios' use of hedging transactions,
such as selling (writing) and purchasing options and Futures, involves complex
rules that will determine, for federal income tax purposes, the amount,
character and timing of recognition of the gains and losses a Portfolio realizes
in connection therewith. Gains from options and Futures derived by a Portfolio
with respect to its business of investing in securities will qualify as
permissible income under the Income Requirement for its corresponding Fund.
Futures that are subject to section 1256 of the Code (other than those that
are part of a "mixed straddle") ("Section 1256 Contracts") and that are held by
a Portfolio at the end of its taxable year generally will be deemed to have been
sold at that time at market value for federal income tax purposes. Sixty percent
of any net gain or loss recognized on these deemed sales, and 60% of any net
realized gain or loss from any actual sales of Section 1256 Contracts, will be
treated as long-term capital gain or loss, and the balance will be treated as
short-term capital gain or loss. That 60% portion will qualify for the reduced
maximum tax rates on noncorporate taxpayers' net capital gain (i.e., the excess
of net long-term capital gain over net short-term capital loss) enacted by the
Taxpayer Relief Act of 1997 -- 20% (10% for taxpayers in the 15% marginal tax
bracket) for gain recognized on capital assets held for more than 18
months -- instead of the 28% rate in effect before that legislation, which now
applies to gain on capital assets held for more than one year but not more than
18 months. However, technical corrections legislation passed by the House of
Representatives late in 1997 would clarify that the lower rates apply.
If a Portfolio has an "appreciated financial position" -- generally, an
interest (including an interest through an option, Futures Contract or short
sale) with respect to any stock, debt instrument (other than "straight debt") or
partnership interest the fair market value of which exceeds its adjusted
basis -- and enters into a "constructive sale" of the same or substantially
similar property, the Portfolio will be treated as having made an actual sale
thereof, with the result that gain will be recognized at that time. A
constructive sale generally consists of a short sale, an offsetting notional
principal contract or Futures Contract entered into by a Portfolio or a related
person with respect to the same or substantially similar property. In addition,
if the appreciated financial position is itself a short sale or such a contract,
acquisition of the underlying property or substantially similar property will be
deemed a constructive sale.
TAXATION OF THE FUNDS' SHAREHOLDERS
Dividends and distributions declared by a Fund in, and payable to shareholders
of record as of a date in, October, November or December of any year will be
deemed to have been paid by the Fund and received by the shareholders on
December 31 of that year if the distributions are paid by the Fund during the
following January. Accordingly, those distributions will be taxed to
shareholders for the year in which that December 31 falls.
If Fund shares are sold at a loss after being held for six months or less, the
loss will be treated as long-term, instead of short-term, capital loss to the
extent of any capital gain distributions received on those shares. Investors
also should be aware that if shares are purchased shortly before the record date
for any dividend or other distribution, the shareholder will pay full price for
the shares and receive some portion of the price back as a taxable distribution.
Dividends paid by a Fund to a shareholder who, as to the United States, is a
nonresident alien individual, nonresident alien fiduciary of a trust or estate,
foreign corporation or foreign partnership ("foreign shareholder") generally
will be subject to U.S. withholding tax (at a rate of 30% or lower treaty rate).
Withholding will not apply, however, to a dividend paid by a Fund to a foreign
shareholder that is "effectively connected with the conduct of a U.S. trade or
business," in which case the reporting and withholding requirements applicable
to domestic shareholders will apply. A distribution of net capital gain by a
Fund to a foreign shareholder generally will be subject to U.S. federal income
tax (at the rates
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applicable to domestic persons) only if the distribution is "effectively
connected" or the foreign shareholder is treated as a resident alien individual
for federal income tax purposes.
The foregoing is a general and abbreviated summary of certain federal tax
considerations affecting the Funds, their shareholders and the Portfolios.
Investors are urged to consult their own tax advisers for more detailed
information and for information regarding any foreign, state and local taxes
applicable to distributions received from a Fund.
SHAREHOLDER INFORMATION
This information supplements the discussion in each Fund's Prospectus under
the title "Shareholder Information."
Timing of Purchase Orders. It is the responsibility of the dealer to ensure
that all orders are transmitted on a timely basis to the Transfer Agent. Any
loss resulting from the dealer's failure to submit an order within the
prescribed time frame will be borne by that dealer. If a check used to purchase
shares does not clear, or if any investment order must be canceled due to
nonpayment, the investor will be responsible for any resulting loss to an AIM
Fund or to AIM Distributors.
Share Certificates. AIM Funds will issue share certificates upon written
request to AFS. Otherwise, shares are held on the shareholder's behalf and
recorded on the Fund books. AIM Funds will not issue certificates for shares
held in prototype retirement plans.
Systematic Withdrawal Plan. Under a Systematic Withdrawal Plan, all shares are
to be held by the Transfer Agent and all dividends and distributions are
reinvested in shares of the applicable AIM Fund by the Transfer Agent. To
provide funds for payments made under the Systematic Withdrawal Plan, the
Transfer Agent redeems sufficient full and fractional shares at their net asset
value in effect at the time of each such redemption.
Payments under a Systematic Withdrawal Plan constitute taxable events. Since
such payments are funded by the redemption of shares, they may result in a
return of capital and in capital gains or losses, rather than in ordinary
income. Because sales charges are imposed on additional purchases of shares
(other than Class B or Class C Shares of the AIM Funds and AIM Cash Reserve
Shares of AIM Money Market Fund), it is disadvantageous to effect such purchases
while a Systematic Withdrawal Plan is in effect.
Each AIM Fund bears its share of the cost of operating the Systematic
Withdrawal Plan.
Terms and Conditions of Exchanges. If a shareholder is exchanging into a fund
paying daily dividends, and the release of the exchange proceeds is delayed for
the foregoing five-day period, such shareholder will not begin to accrue
dividends until the sixth business day after the exchange.
Exchanges by Telephone. AIM Distributors has made arrangements with certain
dealers and investment advisory firms to accept telephone instructions to
exchange shares between any of the AIM Funds. AIM Distributors reserves the
right to impose conditions on dealers or investment advisors who make telephone
exchanges of shares of the funds, including the condition that any such dealer
or investment advisor enter into an agreement (which contains additional
conditions with respect to exchanges of shares) with AIM Distributors. To
exchange shares by telephone, a shareholder, dealer or investment advisor who
has satisfied the foregoing conditions must call AFS at (800) 959-4246. If a
shareholder is unable to reach AFS by telephone, he may also request exchanges
by telegraph or use overnight courier services to expedite exchanges by mail,
which will be effective on the business day received by the Transfer Agent as
long as such request is received prior to NYSE Close. The Transfer Agent and AIM
Distributors may in certain cases be liable for losses due to unauthorized or
fraudulent transactions if they do not follow reasonable procedures for
verification of telephone transactions. Such reasonable procedures may include
recordings of telephone transactions (maintained for six months), requests for
confirmation of the shareholder's Social Security Number and current address,
and mailings of confirmations promptly after the transaction.
By signing an account application form, an investor appoints the Transfer
Agent as his true and lawful attorney-in-fact to surrender for redemption any
and all unissued shares held by the Transfer Agent in the designated account(s),
or in any other account with any of the AIM Funds, present or future, which has
the identical registration as the designated account(s), with full power of
substitution in the premises. The Transfer Agent and AIM Distributors are
thereby authorized and directed to accept and act upon any telephone redemptions
of shares held in any of the account(s) listed, from any person who requests the
redemption proceeds to be applied to purchase shares in any one or more of the
AIM Funds, provided that such fund is available for sale and provided that the
registration and mailing address of the shares to be purchased are identical to
the registration of the shares being redeemed. An investor acknowledges by
signing the form that he understands and agrees that the Transfer Agent and AIM
Distributors may not be liable for any loss, expense or cost arising out of any
telephone exchange requests effected in accordance with the authorization set
forth in these
38
<PAGE> 318
instructions if they reasonably believe such request to be genuine, but may in
certain cases be liable for losses due to unauthorized or fraudulent
transactions. The Transfer Agent reserves the right to modify or terminate the
telephone exchange privilege at any time without notice. An investor may elect
not to have this privilege by marking the appropriate box on the application.
Then any exchanges must be effected in writing by the investor.
Redemptions by Telephone. By signing an account application form, an investor
appoints the Transfer Agent as his true and lawful attorney-in-fact to surrender
for redemption any and all unissued shares held by the Transfer Agent in the
designated account(s), present or future, with full power of substitution in the
premises. The Transfer Agent and AIM Distributors are thereby authorized and
directed to accept and act upon any telephone redemptions of shares held in any
of the account(s) listed, from any person who requests the redemption. An
investor acknowledges by signing the form that he understands and agrees that
the Transfer Agent and AIM Distributors may not be liable for any loss, expense
or cost arising out of any telephone redemption requests effected in accordance
with the authorization set forth in these instructions if they reasonably
believe such request to be genuine, but may in certain cases be liable for
losses due to unauthorized or fraudulent transactions. Procedures for
verification of telephone transactions may include recordings of telephone
transactions (maintained for six months), requests for confirmation of the
shareholder's Social Security Number and current address, and mailings of
confirmations promptly after the transactions. The Transfer Agent reserves the
right to cease to act as attorney-in-fact subject to this appointment, and AIM
Distributors reserves the right to modify or terminate the telephone redemption
privilege at any time without notice. An investor may elect not to have this
privilege by marking the appropriate box on the application. Then any
redemptions must be effected in writing by the investor.
Signature Guarantees. In addition to those circumstances listed in the
"Shareholder Information" section of each Fund's prospectus, signature
guarantees are required in the following situations: (1) requests to transfer
the registration of shares to another owner; (2) telephone exchange and
telephone redemption authorization forms; (3) changes in previously designated
wiring or electronic funds transfer instructions; and (4) written redemptions or
exchanges of shares previously reported as lost, whether or not the redemption
amount is under $50,000 or the proceeds are to be sent to the address of record.
AIM Funds may waive or modify any signature guarantee requirements at any time.
Acceptable guarantors include banks, broker-dealers, credit unions, national
securities exchanges, savings associations and any other organization, provided
that such institution or organization qualifies as an "eligible guarantor
institution" as that term is defined in rules adopted by the SEC, and further
provided that such guarantor institution is listed in one of the reference
guides contained in the Transfer Agent's current Signature Guarantee Standards
and Procedures, such as certain domestic banks, credit unions, securities
dealers, or securities exchanges. The Transfer Agent will also accept signatures
with either: (1) a signature guaranteed with a medallion stamp of the STAMP
Program, or (2) a signature guaranteed with a medallion stamp of the NYSE
Medallion Signature Program, provided that in either event, the amount of the
transaction involved does not exceed the surety coverage amount indicated on the
medallion. For information regarding whether a particular institution or
organization qualifies as an "eligible guarantor institution," an investor
should contact the Client Services Department of AFS.
Dividends and Distributions. In determining the amount of capital gains, if
any, available for distribution, net capital gains are offset against available
net capital losses, if any, carried forward from previous fiscal periods.
For funds that do not declare a dividend daily, such dividends and
distributions will be reinvested at the net asset value per share determined on
the ex-dividend date. For funds that declare a dividend daily, such dividends
and distributions will be reinvested at the net asset value per share determined
on the payable date.
Dividends on Class B and Class C shares are expected to be lower than those
for Class A shares or AIM Cash Reserve Shares because of higher distribution
fees paid by Class B and Class C shares. Dividends on all shares may also be
affected by other class-specific expenses.
Changes in the form of dividend and distribution payments may be made by the
shareholder at any time by notice to the Transfer Agent and are effective as to
any subsequent payment if such notice is received by the Transfer Agent prior to
the record date of such payment. Any dividend and distribution election remains
in effect until the Transfer Agent receives a revised written election by the
shareholder.
Any dividend or distribution paid by a fund which does not declare dividends
daily has the effect of reducing the net asset value per share on the
ex-dividend date by the amount of the dividend or distribution. Therefore, a
dividend or distribution declared shortly after a purchase of shares by an
investor would represent, in substance, a return of capital to the shareholder
with respect to such shares even though it would be subject to income taxes.
39
<PAGE> 319
MISCELLANEOUS INFORMATION
AIM was organized in 1976, and, together with its subsidiaries, manages or
advises over 110 investment portfolios encompassing a broad range of investment
objectives. 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, 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 independent investment management groups that have a
significant presence in the institutional and retail segment of the investment
management industry in North America and Europe, and a growing presence in Asia.
CUSTODIAN
State Street Bank and Trust Company, 225 Franklin Street, Boston, MA 02110,
acts as custodian of the Portfolios' assets.
TRANSFER AGENCY AND ACCOUNTING AGENCY SERVICES
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 Transfer Agency and Service
Agreement became effective on September 8, 1998. AIM also serves as each Fund's
pricing and accounting agent. For the fiscal years ended December 31, 1998,
December 31, 1997 and December 31, 1996, the Small Cap Fund and Basic Value Fund
paid accounting services fees of $ , $6,379 and $3,900; and $ , $3,938
and $1,472, $ , respectively.
INDEPENDENT ACCOUNTANTS
The Trust's, the Funds' and the Portfolios' independent accountants are
PricewaterhouseCoopers LLP. PricewaterhouseCoopers LLP conducts annual audits of
the Funds and the Portfolios, assists in the preparation of the Funds' and the
Portfolios' federal and state income tax returns and consults with the Trust and
the Funds and Growth Portfolio and the Portfolios as to matters of accounting,
regulatory filings and federal and state income taxation.
The audited financial statements of the Trust and Growth Portfolio included in
this Statement of Additional Information have been examined by
PricewaterhouseCoopers LLP as stated in their opinion appearing herein and are
included in reliance upon such opinion given upon the authority of that firm as
experts in accounting and auditing.
LEGAL MATTERS
The law firm of Kirkpatrick & Lockhart LLP, 1800 Massachusetts Avenue N.W.,
Washington, DC 20036-1800, acts as counsel to the Trust and the Funds.
SHAREHOLDER LIABILITY
Under Delaware law, the shareholders of the Trust enjoy the same limitations
of liability extended to shareholders of private, for-profit corporations. There
is a remote possibility, however, that under certain circumstances shareholders
of the Trust may be held personally liable for the Trust's obligations. However,
the Trust's Agreement and Declaration of Trust 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 a trustee. If a shareholder is held personally liable for the
obligations of the Trust, the Trust Agreement provides that the shareholder
shall be entitled out of the assets belonging to the applicable Fund (or
allocable to the applicable Class), to be held harmless from and indemnified
against all loss and expense arising from such liability in accordance with the
Trust's Bylaws and applicable law. Thus, the risk of a shareholder incurring
financial loss on account of such liability is limited to circumstances in which
the Trust itself would be unable to meet its obligations and where the other
party was held not to be bound by the disclaimer.
NAMES
Prior to May 29, 1998, AIM Basic Value Fund operated under the name of GT
Global America Value Fund, and AIM Small Cap Equity Fund operated under the name
of GT Global America Small Cap Growth Fund.
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<PAGE> 320
CONTROL PERSONS AND PRINCIPAL HOLDERS OF SECURITIES
To the best knowledge of the Trust, the names and addresses of the holders of
5% or more of the outstanding shares of any class of each Fund's equity
securities as of April , 1999, and the percentage of the outstanding shares
held by such holders are set forth below.
<TABLE>
<CAPTION>
PERCENT
PERCENT OWNED OF
OWNED OF RECORD AND
FUND NAME AND ADDRESS OF OWNER RECORD* BENEFICIALLY
---- ------------------------- -------- ------------
<S> <C> <C> <C>
Basic Value Fund -- Advisor Class INVESCO (NY) Asset Management Inc. % -0-
1166 Avenue of the Americas
New York, New York 10036-2708
Attn: Julio Garcia
Basic Value Fund -- Class B MLPF&S for the Sole Benefit of its % -0-
Customers, Security #97Hx6
Attn: Fund Administration
4800 Deer Lake Drive East, 2nd Floor
Jacksonville, FL 32246-6484
Small Cap Fund -- Advisor Class Donaldson Lufkin Jenrette Securities % -0-
Corp. Inc.
P.O. Box 2052
Jersey City, New Jersey 07303-2052
Small Cap Fund -- Class A MLPF&S for the Sole Benefit of its % -0-
Customers, Security #97Hx3
Attn: Fund Administration
4800 Deer Lake Drive East, 2nd Floor
Jacksonville, FL 32246-6484
Small Cap Fund -- Class B MLPF&S for the Sole Benefit of its % -0-
Customers, Security #97Hx5
Attn: Fund Administration
4800 Deer Lake Drive East, 2nd Floor
Jacksonville, FL 32246-6484
</TABLE>
- ---------------
* The Trust has no knowledge as to whether all or any portion of the shares
owned of record are also owned beneficially.
41
<PAGE> 321
INVESTMENT RESULTS
TOTAL RETURN QUOTATIONS
The standard formula for calculating total return is as follows:
(n)
P(1+T) =ERV
<TABLE>
<S> <C> <C> <C>
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).
</TABLE>
The standardized returns for the Class A and Class B shares of the Basic Value
Fund and Small Cap Fund, stated as average annualized total returns for the
periods shown, were:
<TABLE>
<CAPTION>
BASIC VALUE BASIC VALUE SMALL CAP SMALL CAP
FUND FUND FUND FUND
PERIOD (CLASS A) (CLASS B) (CLASS A) (CLASS B)
------ ----------- ----------- --------- ---------
<S> <C> <C> <C> <C>
Fiscal year ended December 31, 1998.......... 1.15% 1.34% 16.38% 17.22%
October 18, 1995 (commencement of operations)
through December 31, 1998.................. 16.99% 17.69% 15.55% 16.16%
</TABLE>
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
<TABLE>
<S> <C> <C> <C>
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.
</TABLE>
The average annual non-standardized returns for the Class A and Class B shares
of the Basic Value Fund and Small Cap Fund, stated as average annualized total
returns for the periods shown, were:
<TABLE>
<CAPTION>
BASIC VALUE BASIC VALUE SMALL CAP SMALL CAP
FUND FUND FUND FUND
PERIOD (CLASS A) (CLASS B) (CLASS A) (CLASS B)
------ ----------- ----------- --------- ---------
<S> <C> <C> <C> <C>
Fiscal year ended December 31, 1998........... 7.02% 6.34% 23.15% 22.22%
October 18, 1995 (commencement of operations)
through December 31, 1998................... 19.09% 18.34% 17.62% 16.83%
</TABLE>
Cumulative total return across a stated period may be calculated as follows:
(n)
P(1+V) =ERV
<TABLE>
<S> <C> <C> <C>
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.
ERV = ending redeemable value of a hypothetical $1,000 payment at
the end of the stated period.
</TABLE>
42
<PAGE> 322
The aggregate non-standardized returns (not taking sales charges into account)
for the Class A and Class B shares of the Basic Value Fund and the Small Cap
Fund, stated as aggregate total returns for the periods shown, were:
<TABLE>
<CAPTION>
BASIC VALUE BASIC VALUE SMALL CAP SMALL CAP
FUND FUND FUND FUND
PERIOD (CLASS A) (CLASS B) (CLASS A) (CLASS B)
------ ----------- ----------- --------- ---------
<S> <C> <C> <C> <C>
October 18, 1995 (commencement of
operations) through December 31, 1998..... 74.99% 71.50% 68.17% 64.57%
</TABLE>
The aggregate non-standardized returns (taking sales charges into account) for
the Class A and Class B shares of the Basic Value Fund and Small Cap Fund,
stated as aggregate total returns for the periods shown, were:
<TABLE>
<CAPTION>
AMERICA VALUE AMERICA VALUE SMALL CAP SMALL CAP
FUND FUND FUND FUND
PERIOD (CLASS A) (CLASS B) (CLASS A) (CLASS B)
------ ------------- ------------- --------- ---------
<S> <C> <C> <C> <C>
October 18, 1995 (commencement of
operations) through December 31,
1998................................. 65.30% 68.50% 58.86% 61.57%
</TABLE>
Each Fund's investment results will vary from time to time depending upon
market conditions, the composition of each Fund's portfolio and operating
expenses of each Fund, so that current or past yield or total return should not
be considered representative of what an investment in each Fund may earn in any
future period. These factors and possible differences in the methods used in
calculating investment results should be considered when comparing each Fund's
investment results with those published for other investment companies and other
investment vehicles. Each Fund's results also should be considered relative to
the risks associated with such Fund's investment objective and policies.
PERFORMANCE INFORMATION
Total return and yield figures for the Funds are neither fixed nor guaranteed,
and no Fund's principal is insured. Performance quotations reflect historical
information and should not be considered representative of a Fund's performance
for any period in the future. Performance is a function of a number of factors
which can be expected to fluctuate. 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. Such
publications or media entities may include the following, among others:
Advertising Age
Barron's
Best's Review
Broker World
Business Week
Changing Times
Christian Science Monitor
Consumer Reports
Economist
EuroMoney
FACS of the Week
Financial Planning
Financial Product News
Financial World
Forbes
Fortune
Global Finance
Hartford Courant Inc.
Institutional Investor
Insurance Forum
Insurance Week
Investor's Daily
Journal of the American
Society of CLU & ChFC
Kiplinger Letter
Money
Mutual Fund Forecaster
Mutual Fund Magazine
Nation's Business
New York Times
Pension World
Pensions & Investments
Personal Investor
Financial Services Week
Philadelphia Inquirer
Smart Money
USA Today
U.S. News & World Report
Wall Street Journal
Washington Post
CNN
CNBC
PBS
43
<PAGE> 323
The Funds and AIM Distributors may from time to time, in advertisements, sales
literature and reports furnished to present or prospective shareholders, compare
each Fund with the following, or compare each Fund's performance to performance
data of similar mutual funds as published in the following, among others:
Bank Rate National Monitor Index
Bear Stearns Foreign Bond Index
Bond Buyer Index
CDA/Wiesenberger Investment Company Services
(data and mutual fund rankings and comparisons)
CNBC/Financial News Composite Index
COFI
Consumer Price Index
Datastream
Donoghue's
Dow Jones Industrial Average
EAFE Index
First Boston High Yield Index
Fitch (publications)
Ibbotson Associates International Bond Index
International Bank for Reconstruction and
Development (publications)
International Finance Corporation Emerging
Markets Database
International Financial Statistics
Lehman Bond Indices
Lipper Analytical Data Services, Inc. (data and
mutual fund rankings and comparisons)
Micropal, Inc. (data and mutual fund rankings
and comparisons)
Moody's Investors Service (publications)
Morgan Stanley Capital International All Country
(AC) World Index
Morgan Stanley Capital International World
Indices
Morningstar, Inc. (data and mutual fund rankings
and comparisons)
NASDAQ
Organization for Economic Cooperation and
Development (publications)
Salomon Brothers Global Telecommunications
Index
Salomon Brothers World Government Bond
Index -- Non-U.S.
Salomon Brothers World Government Bond
Index
Standard & Poor's (publications)
Standard & Poor's 500 Composite Stock Price
Index
Stangar
Wilshire Associates
World Bank (publications and reports)
The World Bank Publication of Trends in
Developing Countries
Worldscope
Each Fund may also compare its performance to rates on Certificates of Deposit
and other fixed rate investments such as the following:
10-year Treasuries
30-year Treasuries
30-day Treasury Bills
Information relating to foreign market performance, capitalization and
diversification is based on sources believed to be reliable but may be subject
to revision and has not been independently verified by the Funds or AIM
Distributors. Advertising for the Funds may from time to time include
discussions of general economic conditions and interest rates. Advertising for
the Funds may also include reference 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.
44
<PAGE> 324
APPENDIX
DESCRIPTION OF BOND RATINGS
Moody's Investors Service, Inc. ("Moody's") rates the debt securities issued
by various entities from "Aaa" to "C." Investment grade ratings are the first
four categories:
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 edged." Interest payments are protected by a large or by an exceptionally
stable margin and principal is secure. While the various protective elements are
likely to change, such changes as can be visualized are most unlikely to impair
the fundamentally strong position of such issues. Aa -- Bonds which are rated Aa
are judged to be of high quality by all standards. Together with the Aaa group
they comprise what are generally known as high grade bonds. They are rated lower
than the best bonds because margins of protection may not be as large as in Aaa
securities or fluctuation of protective elements may be of greater amplitude or
there may be other elements present which make the long-term 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 some time 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. 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.
Standard & Poor's, a division of The McGraw-Hill Companies, Inc. ("S&P") rates
the securities debt of various entities in categories ranging from "AAA" to "D"
according to quality. Investment grade ratings are the first four categories:
AAA -- An obligation rated "AAA" has the highest rating assigned by S&P. The
obligor's capacity to meet its financial commitment on the obligation is
extremely strong. AA -- An obligation rated "AA" differs from the highest rated
obligations only in a small degree. The obligor's capacity to meets its
financial commitment on the obligation is very strong. A -- An obligation rated
"A" is somewhat more susceptible to the adverse effects of changes in
circumstances and economic conditions than obligations in higher rated
categories. BBB -- An obligation rated "BBB" exhibits adequate protection
parameters. However, adverse economic conditions or changing circumstances are
more likely to lead to a weakened capacity of the obligor to meet its financial
commitment on the obligation. BB, B, CCC, CC, C -- Obligations rated "BB," "B,"
"CCC," "CC," and "C" are regarded as having significant speculative
characteristics. "BB" indicates the least degree of speculation and "C" the
highest. While such obligations will likely have some quality and protective
characteristics, these may be outweighed by large uncertainties or major
exposures to adverse conditions. BB -- An obligation rated "BB" is less
vulnerable to nonpayment than other speculative issues. However, it faces major
ongoing uncertainties or exposure to adverse business, financial, or economic
conditions which could lead to the obligor's inadequate capacity to meet its
financial commitment on the obligation. B -- An obligation rated "B" is more
vulnerable to nonpayment than obligations rated "BB," but the obligor currently
has the capacity to meet its financial commitment on the obligation. Adverse
business, financial, or economic conditions will likely impair the obligor's
capacity or willingness to meet its financial commitment on the obligation.
CCC -- An obligation rated "CCC" is currently vulnerable to nonpayment, and is
dependent upon favorable business, financial, and economic conditions for the
obligor to meet its financial commitment on the obligation. In the event of
adverse business, financial, or economic conditions, the obligor is not likely
to have the capacity to meet its financial commitment on the obligation.
CC -- An obligation rated "CC" is currently highly vulnerable to nonpayment.
C -- The "C" rating may be used to cover a situation where a bankruptcy petition
has been filed or similar action has been taken, but payments on this obligation
are being continued. D -- An obligation rated "D" is in payment default. The "D"
rating category is used when payments on an obligation are not made on the date
due even if the applicable grace period has not expired, unless S&P believes
that such payments will be made during such grace period. The "D" rating also
will be used upon the filing of a bankruptcy petition or the taking of a similar
action if payments on an obligation are jeopardized.
45
<PAGE> 325
PLUS (+) OR MINUS (-): The ratings from "AA" to "CCC" may be modified by the
addition of a plus or minus sign to show relative standing within the major
rating categories.
NR: Indicates that no public rating has been requested, that there is
insufficient information on which to base a rating, or that S&P does not rate a
particular type of obligation as a matter of policy.
DESCRIPTION OF COMMERCIAL PAPER RATINGS
Moody's employs the designation "Prime-1" to indicate commercial paper having
a superior ability for repayment of senior short-term debt obligations. Prime-1
repayment ability will often be evidenced by many of the following
characteristics: leading market positions in well-established industries; high
rates of return on funds employed; conservative capitalization structure with
moderate reliance on debt and ample asset protection; broad margins in earnings
coverage of fixed financial charges and high internal cash generation; and
well-established access to a range of financial markets and assured sources of
alternate liquidity. Issues rated Prime-2 have a strong ability for repayment of
senior short-term debt obligations. This normally will be evidenced by many of
the characteristics cited above but to a lesser degree. Earnings trends and
coverage ratios, while sound, may be more subject to variation. Capitalization
characteristics, while still appropriate, may be more affected by external
conditions. Ample alternate liquidity is maintained.
S&P ratings of commercial paper are graded into several categories ranging
from "A-1" for the highest quality obligations to "D" for the lowest. Issues in
the "A" category are delineated with numbers 1, 2, and 3 to indicate the
relative degree of safety. "A-1" -- This highest category indicates that the
degree of safety regarding timely payment is strong. Those issues determined to
possess extremely strong safety characteristics will be denoted with a plus sign
(+) designation. "A-2" -- Capacity for timely payments on issues with this
designation is satisfactory; however, the relative degree of safety is not as
high as for issues designated "A-1."
ABSENCE OF RATING
Where no rating has been assigned or where a rating has been suspended or
withdrawn, it may be for reasons unrelated to the quality of the issue.
Should no rating be assigned, the reason may be one of the following:
1. An application for rating was not received or accepted.
2. The issue or issuer belongs to a group of securities or companies
that are not rated as a matter of policy.
3. There is a lack of essential data pertaining to the issue or
issuer.
4. The issue was privately placed, in which case the rating is not
published in Moody's publications.
Suspension or withdrawal may occur if new and material circumstances arise,
the effects of which preclude satisfactory analysis; if there is no longer
available reasonable up-to-date data to permit a judgment to be formed; if a
bond is called for redemption; or for other reasons.
Note: Moody's applies numerical modifiers, 1, 2 and 3 in each generic rating
classification from Aa to Caa. 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.
46
<PAGE> 326
FINANCIAL STATEMENTS
FS
<PAGE> 327
STATEMENT OF
ADDITIONAL INFORMATION
ADVISOR CLASS SHARES OF
AIM EUROPE GROWTH FUND
AIM JAPAN GROWTH FUND
AIM MID CAP EQUITY FUND
AIM NEW PACIFIC GROWTH FUND
(SERIES PORTFOLIOS OF
AIM GROWTH SERIES)
11 GREENWAY PLAZA
SUITE 100
HOUSTON, TX 77046-1173
(713) 626-1919
---------------------
THIS STATEMENT OF ADDITIONAL INFORMATION IS NOT A PROSPECTUS AND
IT SHOULD BE READ IN CONJUNCTION WITH A PROSPECTUS OF THE
ABOVE-NAMED FUNDS, A COPY OF WHICH MAY BE OBTAINED FREE
OF CHARGE FROM AUTHORIZED DEALERS OR BY WRITING
A I M DISTRIBUTORS, INC.,
P.O. BOX 4739, HOUSTON, TX 77210-4739
OR BY CALLING (800) 347-4246.
---------------------
STATEMENT OF ADDITIONAL INFORMATION DATED MAY 3, 1999
RELATING TO THE AIM NEW PACIFIC GROWTH FUND PROSPECTUS, THE AIM EUROPE GROWTH
FUND PROSPECTUS, THE AIM MID CAP EQUITY FUND PROSPECTUS AND THE AIM JAPAN GROWTH
FUND PROSPECTUS
EACH DATED MAY 3, 1999
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TABLE OF CONTENTS
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INTRODUCTION................................................ 4
GENERAL INFORMATION ABOUT THE FUNDS......................... 4
The Trust and its Shares.................................. 4
INVESTMENT OBJECTIVES AND POLICIES.......................... 5
Selection of Investments.................................. 5
Investments in Other Investment Companies................. 6
Samurai and Yankee Bonds.................................. 6
Depositary Receipts....................................... 6
Warrants or Rights........................................ 7
Lending of Portfolio Securities........................... 7
Commercial Bank Obligations............................... 7
Privatizations............................................ 8
Repurchase Agreements..................................... 8
Borrowing, Reverse Repurchase Agreements and "Roll"
Transactions........................................... 8
When-Issued or Forward Commitment Securities.............. 9
Temporary Defensive Strategies............................ 9
OPTIONS, FUTURES AND CURRENCY STRATEGIES.................... 9
Special Risks of Options, Futures and Currency
Strategies............................................. 9
Writing Call Options...................................... 10
Writing Put Options....................................... 11
Purchasing Put Options.................................... 11
Purchasing Call Options................................... 11
Index Options............................................. 12
Interest Rate, Currency and Stock Index Futures
Contracts.............................................. 13
Options on Futures Contracts.............................. 15
Limitations on Use of Futures, Options on Futures and
Certain Options on Currencies.......................... 15
Forward Contracts......................................... 16
Foreign Currency Strategies -- Special Considerations..... 16
Cover..................................................... 17
RISK FACTORS................................................ 17
Illiquid Securities....................................... 17
Foreign Securities........................................ 18
Debt Securities........................................... 23
Equity Securities......................................... 23
INVESTMENT LIMITATIONS...................................... 23
EXECUTION OF PORTFOLIO TRANSACTIONS......................... 25
Portfolio Trading and Turnover............................ 26
MANAGEMENT.................................................. 27
Trustees and Executive Officers........................... 27
Investment Management and Administration Services......... 29
Distribution Services..................................... 29
Expenses of the Funds..................................... 29
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NET ASSET VALUE DETERMINATION............................... 30
HOW TO PURCHASE AND REDEEM SHARES........................... 30
Backup Withholding........................................ 31
Programs and Services for Shareholders.................... 32
Dividend Order............................................ 32
TAXES....................................................... 32
General................................................... 32
Foreign Taxes............................................. 33
Passive Foreign Investment Companies...................... 33
Non-U.S. Shareholders..................................... 34
Options, Futures and Foreign Currency Transactions........ 34
SHAREHOLDER INFORMATION..................................... 35
MISCELLANEOUS INFORMATION................................... 37
Custodian................................................. 37
Transfer Agency and Accounting Agency Services............ 37
Independent Accountants................................... 37
Legal Matters............................................. 37
Shareholder Liability..................................... 37
Names..................................................... 38
Control Persons and Principal Holders of Securities....... 38
INVESTMENT RESULTS.......................................... 39
Total Return Quotations................................... 39
Performance Information................................... 41
APPENDIX.................................................... 43
Description of Bond Ratings............................... 43
Description of Commercial Paper Ratings................... 44
Absence of Rating......................................... 44
FINANCIAL STATEMENTS........................................ FS
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INTRODUCTION
This Statement of Additional Information relates to the Advisor Class shares
of AIM Europe Growth Fund ("Europe Fund"), AIM Japan Growth Fund ("Japan Fund"),
AIM Mid Cap Equity Fund, formerly AIM Mid Cap Growth Fund, ("Mid Cap Fund") and
AIM New Pacific Growth Fund ("Pacific Fund") (individually, a "Fund," and
collectively, the "Funds"). Each Fund is a diversified series of AIM Growth
Series (the "Trust"), a registered open-end management investment company.
A I M Advisors, Inc. ("AIM") serves as the investment manager of and
administrator for Europe Fund, Japan Fund, Mid Cap Fund and Pacific Fund.
INVESCO (NY), Inc. ("INVESCO NY") serves as the investment sub-advisor of Japan
Fund and Pacific Fund. INVESCO Asset Management Ltd. ("INVESCO AML") serves as
the investment sub-advisor of Europe Fund. INVESCO NY and INVESCO AML may be
referred to collectively as the "Sub-advisors."
The Trust is a series mutual fund. The rules and regulations of the Securities
and Exchange Commission (the "SEC") require all mutual funds to furnish
prospective investors certain information concerning the activities of the fund
being considered for investment. This information for Pacific Fund is included
in a separate Prospectus dated May 3, 1999, for Europe Fund is included in a
separate Prospectus dated May 3, 1999, for Mid Cap Fund is included in a
separate Prospectus dated May 3, 1999, and for Japan Fund is included in a
separate Prospectus dated May 3, 1999. Additional copies of the Prospectuses and
this Statement of Additional Information may be obtained without charge by
writing the principal distributor of the Funds' shares, A I M Distributors, Inc.
("AIM Distributors"), P.O. Box 4739, Houston, TX 77210-4739 or by calling (800)
347-4246. Investors must receive a Prospectus before they invest.
This Statement of Additional Information is intended to furnish prospective
investors with additional information concerning the Funds. Some of the
information required to be in this Statement of Additional Information is also
included in the Prospectus; and, in order to avoid repetition, reference will be
made to sections of the Prospectus. Additionally, the Prospectus and this
Statement of Additional Information omit certain information contained in the
Registration Statement filed with the SEC. Copies of the Registration Statement,
including items omitted from the Prospectus and this Statement of Additional
Information, may be obtained from the SEC by paying the charges prescribed under
its rules and regulations.
GENERAL INFORMATION ABOUT THE FUNDS
THE TRUST AND ITS SHARES
The Trust previously operated under the name G.T. Global Growth Series, which
was organized as a Massachusetts business trust on February 19, 1985. The Trust
was reorganized on May 29, 1998 as a Delaware business trust, and is registered
with the SEC as a diversified open-end series management investment company. The
Trust currently consists of the following portfolios: each of the six Funds, AIM
Small Cap Growth Fund, formerly known as AIM Small Cap Equity Fund, and AIM
Basic Value Fund, formerly known as AIM America Value Fund. Each of these funds
has four separate classes: Class A, Class B, Class C and Advisor Class shares.
All historical financial and other information contained in this Statement of
Additional Information for periods prior to May 29, 1998, is that of the series
G.T. Global Growth Series.
This Statement of Additional Information relates solely to the Advisor Class
shares of the Funds.
The term "majority of the outstanding shares" of the Trust, a particular Fund,
or a particular class of a Fund means, respectively, the vote of the lesser of
(a) 67% or more of the shares of the Trust, such Fund or such class present at a
meeting of the Trust's shareholders, if the holders of more than 50% of the
outstanding shares of the Trust, such Fund or such class are present or
represented by proxy, or (b) more than 50% of the outstanding shares of the
Trust, such Fund or such class.
Class A, Class B and Class C and Advisor Class shares of each Fund have equal
rights and privileges. Each share of a particular class is entitled to one vote,
to participate equally in dividends and distributions declared by the Trust's
Board of Trustees with respect to the class of such Fund and, upon liquidation
of the Fund, to participate proportionately in the net assets of the Fund
allocable to such class remaining after satisfaction of outstanding liabilities
of the Fund allocable to such class. Fund shares are fully paid, non-assessable
and fully transferable when issued and have no preemptive rights and have such
conversion and exchange rights as set forth in the Prospectus and this Statement
of Additional Information. Fractional shares have proportionately the same
rights, including voting rights, as are provided for a full share.
Shareholders of the Funds do not have cumulative voting rights, and therefore
the holders of more than 50% of the outstanding shares of all Funds voting
together for election of trustees may elect all of the members of the Board of
Trustees of the Trust. In such event, the remaining holders cannot elect any
trustees of the Trust.
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INVESTMENT OBJECTIVES AND POLICIES
In addition to the primary investment policies set forth in the Prospectuses,
each Fund may engage in other types of investments, as described below.
Pacific Fund, Europe Fund, and Japan Fund each may invest up to 35% of its
total assets in the equity securities of issuers domiciled outside of its
primary investment areas (Japan for Japan Fund). Such investments may include:
(a) securities of issuers in countries that are not located in the primary
investment area but are linked by tradition, economic markets, cultural
similarities or geography to the countries in such primary investment area; and
(b) securities of issuers located elsewhere in the world that have operations in
the primary investment area or that stand to benefit from political and economic
events in the primary investment area.
For purposes of the Prospectus and this Statement of Additional Information,
an issuer typically is considered to be domiciled in a particular country if it
is (a) organized under the laws of, or has its principal office in, a particular
country or (b) normally derives 50% or more of its total revenues from business
in that country, provided that, in the view of AIM and/or the Sub-advisors, the
value of such issuer's securities tends to reflect such country's development to
a greater extent than developments elsewhere. However, these are not absolute
requirements, and certain companies incorporated in a particular country and
considered by AIM and/or the Sub-advisors to be located in that country may have
substantial foreign operations or subsidiaries and/or export sales exceeding in
size the assets or sales in that country.
Pacific Fund, Europe Fund, and Japan Fund each may invest up to 35% of its
total assets in debt securities, including U.S. and foreign government
securities and corporate debt securities, Samurai and Yankee bonds, Euro bonds
and Depositary Receipts. The issuers of such debt securities may or may not be
domiciled in the primary investment area of a Fund. Each Fund will limit its
purchases of debt securities to investment grade obligations. "Investment grade"
debt refers to those securities rated within one of the four highest ratings
categories by Moody's Investors Service, Inc. ("Moody's") or by Standard &
Poor's, a division of The McGraw-Hill Companies, Inc. ("S&P"), or, if not
similarly rated by any other nationally recognized statistical rating
organization ("NRSRO"), deemed by AIM and/or the Sub-advisors to be of
equivalent quality.
SELECTION OF INVESTMENTS
Because the development of the world's economies and stock markets is rapidly
evolving, from time to time the Board of Trustees may add or delete countries
from a Fund's primary investment area as set forth in the Fund's Prospectus.
In determining the appropriate distribution of investments among various
countries and geographic regions for the Funds, AIM and/or the Sub-advisors
ordinarily consider the following factors: prospects for relative economic
growth between the different countries in which each Fund may invest; expected
levels of inflation; government policies influencing business conditions; the
outlook for currency relationships; and the range of the individual investment
opportunities available to international investors.
AIM and/or the Sub-advisors allocate investments among fixed income securities
of particular issuers on the basis of its views as to the best values then
currently available in the marketplace. Such values are a function of yield,
maturity, issue classification and quality characteristics, coupled with
expectations regarding the economy, movements in the general level and term of
interest rates, currency values, political developments, and variations in the
supply of funds available for investment in the world bond market relative to
the demands placed upon it. If market interest rates decline, fixed income
securities generally appreciate in value and vice versa. Fixed income securities
denominated in currencies other than the U.S. dollar or in multinational
currency units are evaluated on the strength of the particular currency against
the U.S. dollar as well as on the current and expected levels of interest rates
in the country or countries. In addition to the foregoing, a Fund may seek to
take advantage of differences in relative values of fixed income securities
among various countries.
In analyzing companies for investment by each Fund, AIM and/or the
Sub-advisors ordinarily look for one or more of the following characteristics:
an above-average earnings growth per share; high return on invested capital; a
healthy balance sheet; sound financial and accounting policies and overall
financial strength; strong competitive advantages; effective research and
product development and marketing; efficient service; pricing flexibility;
strength of management; and general operating characteristics which will enable
the companies to compete successfully in their respective marketplaces. In
certain countries, governmental restrictions and other limitations on investment
may affect the maximum percentage of equity ownership in any one company by a
Fund or the Funds in the aggregate. In addition, in some instances only special
classes of securities may be purchased by foreigners and the market prices,
liquidity and rights with respect to those securities may vary from shares owned
by nationals.
As of June 30, 1998, the market capitalizations of companies comprising the
Russell Mid Cap Index ranged from approximately $1.4 to $10.3 billion. Market
capitalization means the total market value of a company's outstanding
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common stock. There is no necessary correlation between market capitalization
and the financial attributes (such as level of assets, revenues or income) often
used to measure a company's size.
Equity securities in which the Mid Cap Fund may invest include common stocks,
preferred stocks, convertible debt securities and warrants to acquire such
securities. The Fund may also invest up to 35% of its total assets in the equity
securities of (a) issuers domiciled in the United States that, at the time of
purchase, have market capitalizations outside the range of market
capitalizations of companies that are included in the Russell Mid Cap Index; and
(b) issuers domiciled outside the United States, including (i) issuers linked by
tradition, economic markets, cultural similarities or geography to the United
States; and (ii) issuers located elsewhere in the world that have operations in
the United States or that stand to benefit from political or economic events in
the United States. In addition, the Fund may invest up to 35% of its total
assets in investment grade debt securities, including U.S. and foreign
government securities and corporate debt securities, Samurai and Yankee bonds,
Euro bonds and Depositary Receipts. The issuers of such debt securities may or
may not be domiciled in the United States.
At this time, AIM and/or the Sub-advisors are not aware of the existence of
any investment or exchange control regulations that might substantially impair
the operations of the Funds as described in the Prospectus and this Statement of
Additional Information. Although restrictions may in the future make it
undesirable to invest in certain countries, AIM and/or the Sub-advisors does not
believe that any current repatriation restrictions would affect its decisions to
invest in the countries eligible for investment by any Fund. It should be noted,
however, that this situation could change at any time.
INVESTMENTS IN OTHER INVESTMENT COMPANIES
With respect to certain countries, investments by a Fund presently may be made
only by acquiring shares of other investment companies (including investment
vehicles or companies advised by AIM and/or the Sub-advisors or their affiliates
("Affiliated Funds")) with local governmental approval to invest in those
countries. At such time as direct investment in these countries is allowed, the
Funds anticipate investing directly in these markets. The Funds may also invest
in the securities of closed-end investment companies within the limits of the
Investment Company Act of 1940, as amended (the "1940 Act"). These limitations
currently provide that, in part, each Fund may purchase shares of a closed-end
investment company unless: (a) such a purchase would cause a Fund to own more
than 3% of the total outstanding voting stock of the investment company or (b)
such a purchase would cause a Fund to have more than 5% of its assets invested
in the investment company or more than 10% of its assets invested in an
aggregate of all such investment companies. Investment in investment companies
may involve the payment of substantial premiums above the value of such
companies' portfolio securities. The Funds do not intend to invest in such
vehicles or funds unless AIM and/or the Sub-advisors determine that the
potential benefits of such investments justify the payment of any applicable
premiums. As a shareholder in an investment company, [the Fund] would bear [its]
ratable share of that investment company's expenses, including its advisory and
administration fees. The return on such securities will be reduced by operating
expenses of such companies including payments to the investment managers of
those investment companies. At the same time, [the Fund] would continue to pay
[its] own management fees and other expenses. With respect to investments in
Affiliated Funds, AIM and/or the Sub-advisors waive their advisory fee to the
extent that such fees are based on assets of a Fund invested in Affiliated
Funds.
SAMURAI AND YANKEE BONDS
The Japan Fund and the Pacific Fund may invest in yen-denominated bonds sold
in Japan by non-Japanese issuers ("Samurai bonds"), and the Mid Cap Fund may
invest in dollar-denominated bonds sold in the United States by non-U.S. issuers
("Yankee bonds"). As compared with bonds issued in their countries of domicile,
such bond issues normally carry a higher interest rate but are less actively
traded. It is the policy of each Fund to invest in Samurai or Yankee bond issues
only after taking into account considerations of quality and liquidity, as well
as yield. These bonds are issued by governments that are members of the
Organization for Economic Cooperation and Development or have AAA ratings. None
of the Funds has invested in Samurai or Yankee bonds since 1982.
DEPOSITARY RECEIPTS
Each Fund may hold securities of foreign issuers in the form of American
Depositary Receipts ("ADRs"), American Depositary Shares ("ADSs"), Global
Depositary Receipts ("GDRs") and European Depositary Receipts ("EDRs") or other
securities convertible into securities of eligible European or Far Eastern
issuers. These securities may not necessarily be denominated in the same
currency as the securities for which they may be exchanged. ADRs and ADSs
typically are issued by an American bank or trust company and evidence ownership
of underlying securities issued by a foreign corporation. EDRs, which are
sometimes referred to as Continental Depositary Receipts ("CDRs"), are issued in
Europe
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typically by foreign banks and trust companies and evidence ownership of either
foreign or domestic securities. GDRs are similar to EDRs and are designed for
use in several international financial markets. Generally, ADRs and ADSs in
registered form are designed for use in United States securities markets and
EDRs in bearer form are designed for use in European securities markets. For
purposes of a Fund's investment policies, its investments in ADRs, ADSs, GDRs
and EDRs will be deemed to be investments in the equity securities representing
securities of foreign issuers into which they may be converted.
ADR facilities may be established as either "unsponsored" or "sponsored."
While ADRs issued under these two types of facilities are in some respects
similar, there are distinctions between them relating to the rights and
obligations of ADR holders and the practices of market participants. A
depository may establish an unsponsored facility without participation by (or
even necessarily the acquiescence of) the issuer of the deposited securities,
although typically the depository requests a letter of non-objection from such
issuer prior to the establishment of the facility. Holders of unsponsored ADRs
generally bear all the costs of such facilities. The depository usually charges
fees upon the deposit and withdrawal of the deposited securities, the conversion
of dividends into U.S. dollars, the disposition of non-cash distributions and
the performance of other services. The depository of an unsponsored facility
frequently is under no obligation to distribute shareholder communications
received from the issuer of the deposited securities or to pass through voting
rights to ADR holders with respect to the deposited securities. Sponsored ADR
facilities are created in generally the same manner as unsponsored facilities,
except that the issuer of the deposited securities enters into a deposit
agreement with the depository. The deposit agreement sets out the rights and
responsibilities of the issuer, the depository and the ADR holders. With
sponsored facilities, the issuer of the deposited securities generally will bear
some of the costs relating to the facility (such as dividend payment fees of the
depository), although ADR holders continue to bear certain other costs (such as
deposit and withdrawal fees). Under the terms of most sponsored arrangements,
depositories agree to distribute notices of shareholder meetings and voting
instructions, and to provide shareholder communications and other information to
the ADR holders at the request of the issuer of the deposited securities. The
Funds may invest in both sponsored and unsponsored ADRs.
WARRANTS OR RIGHTS
Warrants or rights may be acquired by a Fund in connection with other
securities or separately and provide the Fund with the right to purchase at a
later date other securities of the issuer. Warrants are securities permitting,
but not obligating, their holder to subscribe for other securities or
commodities. Warrants do not carry with them the right to dividends or voting
rights with respect to the securities that they entitle their holder to
purchase, and they do not represent any rights in the assets of the issuer. As a
result, warrants may be considered more speculative than certain other types of
investments. In addition, the value of a warrant does not necessarily change
with the value of the underlying securities and a warrant ceases to have value
if it is not exercised prior to its expiration date.
LENDING OF PORTFOLIO SECURITIES
For the purpose of realizing additional income, each Fund may make secured
loans of its portfolio securities amounting to not more than 30% of its total
assets. Securities loans are made to broker/dealers or institutional investors
pursuant to agreements requiring that the loans continuously be secured by
collateral at least equal at all times to the value of the securities lent, plus
any accrued interest, "marked to market" on a daily basis. The Funds may pay
reasonable administrative and custodial fees in connection with the loans of
their securities. While the securities loans are outstanding, the Funds will
continue to receive the equivalent of the interest or dividends paid by the
issuer on the securities, as well as interest on the investment of the
collateral or a fee from the borrower. Each Fund will have a right to call each
loan at any time and obtain the securities within the stated settlement period.
The Funds will not have the right to vote equity securities while they are being
lent, but may call in a loan in anticipation of any important vote. Loans only
will be made to firms deemed by AIM and/or the Sub-advisors to be of good
standing and will not be made unless, in the judgment of AIM and/or the
Sub-advisors, the consideration to be earned from such loans would justify the
risk.
COMMERCIAL BANK OBLIGATIONS
For the purposes of each Fund's investment policies with respect to bank
obligations, obligations of foreign branches of U.S. banks and of foreign banks
are obligations of the issuing bank and may be general obligations of the parent
bank. Such obligations, however, may be limited by the terms of a specific
obligation and by government regulation. As with investment in non-U.S.
securities in general, investments in the obligations of foreign branches of
U.S. banks and of foreign banks may subject the Funds to investment risks that
are different in some respects from those of investments in obligations of
domestic issuers. Although a Fund typically will acquire obligations issued and
supported by the credit of U.S. or foreign banks having total assets at the time
of purchase of $1 billion or more, this $1 billion figure is not an
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investment policy or restriction of any Fund. For the purposes of calculation
with respect to the $1 billion figure, the assets of a bank will be deemed to
include the assets of its U.S. and non-U.S. branches.
PRIVATIZATIONS
The governments of some foreign countries have been engaged in programs of
selling part or all of their stakes in government owned or controlled
enterprises ("privatizations"). AIM and/or the Sub-advisors believe that
privatizations may offer opportunities for significant capital appreciation and
intends to invest in privatizations in appropriate circumstances. In certain
foreign countries, the ability of foreign entities to participate in
privatizations may be limited by local law, or the terms on which a Fund may be
permitted to participate may be less advantageous than those for local
investors. There can be no assurance that foreign governments will continue to
sell companies currently owned or controlled by them or that privatization
programs will be successful.
REPURCHASE AGREEMENTS
A repurchase agreement is a transaction in which a Fund purchases a security
from a bank or recognized securities dealer and simultaneously commits to resell
that security to the bank or dealer at an agreed-upon price, date and market
rate of interest unrelated to the coupon rate or maturity of the purchased
security. Although repurchase agreements carry certain risks not associated with
direct investments in securities, including possible decline in the market value
of the underlying securities and delays and costs to the Fund if the other party
to the repurchase agreement becomes bankrupt, the Funds intend to enter into
repurchase agreements only with banks and dealers believed by AIM and/or the
Sub-advisors to present minimal credit risks in accordance with guidelines
approved by the Trust's Board of Trustees (the "Board"). AIM and/or the
Sub-advisors reviews and monitors the creditworthiness of such institutions
under the Board's general supervision.
A Fund will invest only in repurchase agreements collateralized at all times
in an amount at least equal to the repurchase price plus accrued interest. To
the extent that the proceeds from any sale of such collateral upon a default in
the obligation to repurchase were less than the repurchase price, the Fund would
suffer a loss. If the financial institution which is party to the repurchase
agreement petitions for bankruptcy or otherwise becomes subject to bankruptcy or
other liquidation proceedings, there may be restrictions on the Fund's ability
to sell the collateral and the Fund could suffer a loss. However, with respect
to financial institutions whose bankruptcy or liquidation proceedings are
subject to the U.S. Bankruptcy Code, each Fund intends to comply with provisions
under the U.S. Bankruptcy Code that would allow it immediately to resell the
collateral. A Fund will not enter into a repurchase agreement with a maturity of
more than seven days if, as a result, more than 15% of the value of its net
assets would be invested in such repurchase agreements and other illiquid
investments.
BORROWING, REVERSE REPURCHASE AGREEMENTS AND "ROLL" TRANSACTIONS
Each Fund's borrowings will not exceed 33 1/3% of its total assets, i.e., each
Fund's total assets at all times will equal at least 300% of the amount of
outstanding borrowings. If market fluctuations in the value of a Fund's
portfolio holdings or other factors cause the ratio of the Fund's total assets
to outstanding borrowings to fall below 300%, within three days (excluding
Sundays and holidays) of such event the Fund 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 Fund also may borrow up to
5% of its total assets for temporary or emergency purposes other than to meet
redemptions. Any borrowing by a Fund may cause greater fluctuation in the value
of its shares than would be the case if the Fund did not borrow.
Each Fund's fundamental investment limitations permit the Fund to borrow money
for leveraging purposes. Each Fund, however, currently is prohibited, pursuant
to a non-fundamental investment policy, from borrowing money in order to
purchase securities. Nevertheless, this policy may be changed in the future by
the Trust's Board of Trustees. If a Fund employs leverage in the future, it
would be subject to certain additional risks. Use of leverage creates an
opportunity for greater growth of capital but would exaggerate any increases or
decreases in a Fund's net asset value. When the income and gains on securities
purchased with the proceeds of borrowings exceed the costs of such borrowings, a
Fund's earnings or net asset value will increase faster than otherwise would be
the case; conversely, if such income and gains fail to exceed such costs, a
Fund's earnings or net asset value would decline faster than would otherwise be
the case.
Each Fund may enter into reverse repurchase agreements. A reverse repurchase
agreement is a borrowing transaction in which the Fund transfers possession of a
security to another party, such as a bank or broker/dealer in return for cash,
and agrees to repurchase the security in the future at an agreed upon price,
which includes an interest component. Each Fund also may engage in "roll"
borrowing transactions which involve its sale of Government National Mortgage
Association
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certificates or other securities together with a commitment (for which the Fund
may receive a fee) to purchase similar, but not identical, securities at a
future date. A Fund will segregate with a custodian liquid assets in an amount
sufficient to cover its obligations under "roll" transactions and reverse
repurchase agreements with broker/dealers. No segregation is required for
reverse repurchase agreements with banks.
WHEN-ISSUED OR FORWARD COMMITMENT SECURITIES
A Fund may purchase debt securities on a "when-issued" basis and may purchase
or sell such securities on a "forward commitment" basis in order to hedge
against anticipated changes in interest rates and prices. The Price, which
generally is expressed in yield terms, is fixed at the time the commitment is
made, but delivery and payment for the securities take place at a later date.
When-issued securities and forward commitments may be sold prior to the
settlement date, but a Fund will purchase or sell when-issued securities or
enter into forward commitments only with the intention of actually receiving or
delivering the securities, as the case may be. No income accrues on securities
that have been purchased pursuant to a forward commitment or on a when-issued
basis prior to delivery to a Fund. If a Fund disposes of the right to acquire a
when-issued security prior to its acquisition or disposes of its right to
deliver or receive against a forward commitment, it may incur a gain or loss. At
the time a Fund enters into a transaction on a when-issued or forward commitment
basis, it will segregate cash or liquid securities equal to the value of the
when-issued or forward commitment securities with its custodian and will mark to
market daily such assets. There is a risk that the securities may not be
delivered and that a Fund may incur a loss.
TEMPORARY DEFENSIVE STRATEGIES
Money market instruments in which the Funds 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 the
Sub-advisors to be of comparable quality.
OPTIONS, FUTURES AND CURRENCY STRATEGIES
SPECIAL RISKS OF OPTIONS, FUTURES AND CURRENCY STRATEGIES
The use of options, futures contracts and forward currency contracts ("Forward
Contracts") involves special considerations and risks, as described below. Risks
pertaining to particular instruments are described in the sections that follow.
(1) Successful use of most of these instruments depends upon AIM
and/or the Sub-advisors' ability to predict movements of the overall
securities and currency markets, which requires different skills than
predicting changes in the prices of individual securities. While AIM and/or
the Sub-advisors are experienced in the use of these instruments, there can
be no assurance that any particular strategy adopted will succeed.
(2) There might be imperfect correlation, or even no correlation,
between price movements of an instrument and price movements of the
investments being hedged. For example, if the value of an instrument used
in a short hedge increased by less than the decline in value of the hedged
investment, the hedge would not be fully successful. Such a lack of
correlation might occur due to factors unrelated to the value of the
investments being hedged, such as speculative or other pressures on the
markets in which the hedging instrument is traded. The effectiveness of
hedges using hedging instruments on indices will depend on the degree of
correlation between price movements in the index and price movements in the
investments being hedged.
(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. For example, if a Fund
entered into a short hedge because AIM and/or the Sub-advisors projected a
decline in the price of a security in the Fund's portfolio, and the price
of that security increased instead, the gain from threat increase might by
wholly or partially offset by a decline in the price of the hedging
instrument. Moreover, if the price of the hedging instrument declined by
more than the increase in the price of the security, the Fund could suffer
a loss. In either such case, the Fund would have been in a better position
had it not hedged at all.
(4) There is no assurance that a liquid secondary market will exist
for any particular option, futures contract or option thereon at any
particular time.
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(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 (i.e.,
instruments other than purchased options). If the 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. The Fund's ability to close out a
position in an instrument prior to expiration or maturity depends on the
existence of a liquid secondary market or, in the absence of such a market,
the ability and willingness of the other party to the transaction ("contra
party") to enter into a transaction closing out the position. Therefore,
there is no assurance that any position can be closed out at a time and
price that is favorable to the Fund.
WRITING CALL OPTIONS
A Fund may write (sell) call options on securities, indices and currencies.
Call options generally will be written on securities and currencies that, in the
opinion of AIM and/or the Sub-advisors, are not expected to make any major price
moves in the near future but that, over the long term, are deemed to be
attractive investments for the Fund.
A call option gives the holder (buyer) the right to purchase a security or
currency 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 the writer of a call option continues, he may be assigned an
exercise notice, requiring him to deliver the underlying security or currency
against payment of the exercise price. This obligation terminates upon the
expiration of the call option, or such earlier time at which the writer effects
a closing purchase transaction by purchasing an option identical to that
previously sold.
Portfolio securities or currencies on which call options may be written will
be purchased solely on the basis of investment considerations consistent with
each Fund's investment objectives. 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 or currency above the exercise price, and retains the
risk of loss should the price of the security or currency decline. Unlike one
who owns securities or currencies not subject to an option, a Fund has no
control over when it may be required to sell the underlying securities 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, the Fund
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 or currency
during the option period. If the call option is exercised, the Fund will realize
a gain or loss from the sale of the underlying security or currency, which will
be increased or offset by the premium received. The Fund does not consider a
security or currency covered by a call option to be "pledged" as that term is
used in the Fund's policy that limits the pledging or mortgaging of its assets.
Writing call options can serve as a limited short hedge because declines in
the value of the hedged investment would be offset to the extent of the premium
received for writing the option. However, if the security or currency
appreciates to a price higher than the exercise price of the call option, it can
be expected that the option will be exercised and a Fund will be obligated to
sell the security or currency at less than its market value.
The premium that a Fund receives for writing a call option is deemed to
constitute the market value of an option. The premium a Fund will receive from
writing a call option will reflect, among other things, the current market price
of the underlying investment, the relationship of the exercise price to such
market price, the historical price volatility of the underlying investment and
the length of the option period. In determining whether a particular call option
should be written, AIM and/or the Sub-advisors will consider the reasonableness
of the anticipated premium and the likelihood that a liquid secondary market
will exist for those options.
Closing transactions will be effected in order to realize a profit on an
outstanding call option, to prevent an underlying security or currency from
being called, or to permit the sale of the underlying security or currency.
Furthermore, effecting a closing transaction will permit the Fund to write
another call option on the underlying security or currency with either a
different exercise price or expiration date or both.
The Funds will pay transaction costs in connection with the writing of options
and in entering into closing purchase contracts. Transaction costs relating to
options activity normally are higher than those applicable to purchases and
sales of portfolio securities.
The exercise price of the options may be below, equal to or above the current
market values of the underlying securities, indices or currencies at the time
the options are written. From time to time, a Fund may purchase an underlying
security or currency for delivery in accordance with the exercise of an option,
rather than delivering such security or currency from its portfolio. In such
cases, additional costs will be incurred.
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A Fund will realize a profit or loss from a closing purchase transaction if
the cost of the transaction is less or more, respectively, than the premium
received from writing the option. Because increases in the market price of a
call option generally will reflect increases in the market price of the
underlying security or currency, any loss resulting from the repurchase of a
call option is likely to be offset in whole or in part by appreciation of the
underlying security or currency owned by the Fund.
WRITING PUT OPTIONS
The Funds may write put options on securities, indices and currencies. A put
option gives the purchaser of the option the right to sell, and the writer
(seller) the obligation to buy, the underlying security or currency at the
exercise price at any time until (American style) or on (European style) the
expiration date. The operation of put options in other respects, including their
related risks and rewards, is substantially identical to that of call options.
A Fund generally would write put options in circumstances where AIM and/or the
Sub-advisors wish to purchase the underlying security or currency for the Fund's
portfolio at a price lower than the current market price of the security or
currency. In such event, the 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. Since the Fund also would receive interest on debt securities
or currencies maintained to cover the exercise price of the option, this
technique could be used to enhance current return during periods of market
uncertainty. The risk in such a transaction would be that the market price of
the underlying security or currency would decline below the exercise price, less
the premium received.
Writing put options can serve as a limited long hedge because increases in the
value of the hedged investment would be offset to the extent of the premium
received for writing the option. However, if the security or currency
depreciates to a price lower than the exercise price of the put option, it can
be expected that the put option will be exercised and a Fund will be obligated
to purchase the security or currency at more than its market value.
PURCHASING PUT OPTIONS
Each Fund may purchase put options on securities, indices and currencies. As
the holder of a put option, a Fund would have the right to sell the underlying
security 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 option, exercise such option or permit such
option to expire.
A Fund may purchase a put option on an underlying security or currency
("protective put") owned by the Fund in order to protect against an anticipated
decline in the value of the security or currency. Such hedge protection is
provided only during the life of the put option when the Fund, as the holder of
the put option, is able to sell the underlying security or currency at the put
exercise price regardless of any decline in the underlying security's market
price or currency's exchange value. The premium paid for the put option and any
transaction costs would reduce any profit otherwise available for distribution
when the security or currency eventually is sold.
A Fund also may purchase put options at a time when the Fund does not own the
underlying security or currency. By purchasing put options on a security or
currency it does not own, a Fund seeks to benefit from a decline in the market
price of the underlying security or currency. If the put option is not sold when
it has remaining value, and if the market price of the underlying security or
currency remains equal to or greater than the exercise price during the life of
the put option, the Fund will lose its entire investment in the put option. In
order for the purchase of a put option to be profitable, the market price of the
underlying security or currency must decline sufficiently below the exercise
price to cover the premium and transaction costs, unless the put option is sold
in a closing sale transaction.
PURCHASING CALL OPTIONS
Each Fund may purchase call options on securities, indices and currencies. As
the holder of a call option, a Fund would have the right to purchase the
underlying security 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 option, exercise such option
or permit such option to expire.
Call options may be purchased by a Fund for the purpose of acquiring the
underlying security or currency for its portfolio. Utilized in this fashion, the
purchase of call options would enable a Fund to acquire the security or currency
at the exercise price of the call option plus the premium paid. At times, the
net cost of acquiring the security or currency in this manner may be less than
the cost of acquiring the security or currency directly. This technique also may
be useful to the Funds in purchasing a large block of securities that would be
more difficult to acquire by direct market purchases. As long as it holds such a
call option, rather than the underlying security or currency itself, a Fund is
partially protected from
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any unexpected decline in the market price of the underlying security 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 Fund also may purchase call options on underlying securities or
currencies it owns to avoid realizing losses that would result in a reduction of
its current return. For example, where a Fund has written a call option on an
underlying security or currency having a current market value below the price at
which it purchased the security or currency, an increase in the market price
could result in the exercise of the call option written by the Fund and the
realization of a loss on the underlying security or currency. Accordingly, the
Fund could purchase a call option on the same underlying security or currency,
which could be exercised to fulfill the Fund's delivery obligations under its
written call (if it is exercised). This strategy could allow the Fund to avoid
selling the portfolio security or currency at a time when it has an unrealized
loss; however, the Fund would have to pay a premium to purchase the call option
plus transaction costs.
Aggregate premiums paid for put and call options will not exceed 5% of such
Fund's total assets at the time of purchase.
Each Fund may attempt to accomplish objectives similar to those involved in
using Forward Contracts by purchasing put or call options on currencies. A put
option gives a Fund as purchaser the right (but not the obligation) to sell a
specified amount of currency at the exercise price at any time until (American
style) or on (European style) the expiration of the option. A call option gives
a Fund as purchaser the right (but not the obligation) to purchase a specified
amount of currency at the exercise price at any time until (American style) or
on (European style) the expiration date of the option. A Fund might purchase a
currency put option, for example, to protect itself against a decline in the
dollar value of a currency in which it holds or anticipates holding securities.
If the currency's value should decline against the dollar, the loss in currency
value should be offset, in whole or in part, by an increase in the value of the
put. If the value of the currency instead should rise against the dollar, any
gain to the Fund would be reduced by the premium it had paid for the put option.
A currency call option might be purchased, for example, in anticipation of, or
to protect against, a rise in the value against the dollar of a currency in
which the Fund anticipates purchasing securities.
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 AIM and/or the Sub-advisors
believe 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.
The staff of the SEC considers purchased OTC options 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
the Fund. The assets used as cover for OTC options written by a 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.
A Fund's ability to establish and close out positions in exchange-listed
options depends on the existence of a liquid market. A Fund intends to purchase
or write only those exchange-listed options for which there appears to be a
liquid secondary market. However, there can be no assurance that such a market
will exist at any particular time. Closing transactions can be made for OTC
options only by negotiating directly with the contra party or by a transaction
in the secondary market if any such market exists. Although a Fund will enter
into OTC options only with contra parties that are expected to be capable of
entering into closing transactions with the Fund, 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 contra party, the
Fund might be unable to close out an OTC option position at any time prior to
its expiration.
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. When a Fund writes a
call on an index, it receives a premium and agrees that, prior to the expiration
date, the purchaser of the call, upon exercise of the call, will receive from
the Fund an amount of cash if the closing level of the index upon
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which the call is based is greater than the exercise price of the call. The
amount of cash is equal to the difference between the closing price of the index
and the exercise price of the call times a specified multiple (the
"multiplier"), which determines the total dollar value for each point of such
difference. When a Fund buys a call on an index, it pays a premium and has the
same rights as to such calls as are indicated above. When a Fund buys a put on
an index, it pays a premium and has the right, prior to the expiration date, to
require the seller of the put, upon the Fund's exercise of the put, to deliver
to the Fund an amount of cash if the closing level of the index upon which the
put is based is less than the exercise price of the put, which amount of cash is
determined by the multiplier, as described above for calls. When a Fund writes a
put on an index, it receives a premium and the purchaser has the right, prior to
the expiration date, to require the Fund to deliver to it an amount of cash
equal to the difference between the closing level of the index and the exercise
price times the multiplier, if the closing level is less than the exercise
price.
The risks of investment in index options may be greater than options on
securities. Because index options are settled in cash, when a Fund writes a call
on an index it cannot provide in advance for its potential settlement
obligations by acquiring and holding the underlying securities. A Fund can
offset some of the risk of writing a call index option position by holding a
diversified portfolio of securities similar to those on which the underlying
index is based. However, a Fund cannot, as a practical matter, acquire 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 vary from the
value of the index.
Even if a Fund could assemble a securities portfolio that exactly reproduced
the composition of the underlying index, it still would not be fully covered
from a risk standpoint because of the "timing risk" inherent in writing index
options. When an index option is exercised, the amount of cash that the holder
is entitled to receive is determined by the difference between the exercise
price and the closing index level on the date when the option is exercised. As
with other kinds of options, the Fund, as the call writer, will not know that it
has been assigned until the next business day at the earliest. The time lag
between exercise and notice of assignment poses no risk for the writer of a
covered call on a specific underlying security, such as common stock, because
there the writer's obligation is to deliver the underlying security, not to pay
its value as of a fixed time in the past. So long as the writer already owns the
underlying security, it can satisfy its settlement obligations by simply
delivering it, and the risk that its value may have declined since the exercise
date is borne by the exercising holder. In contrast, even if the writer of an
index call holds securities that exactly match the composition of the underlying
index, it will not be able to satisfy its assignment obligations by delivering
those securities against payment of the exercise price. Instead, it will be
required to pay cash in an amount based on the closing index value on the
exercise date; and by the time it learns that it has been assigned, the index
may have declined, with a corresponding decline in the value of its securities
portfolio. This "timing risk" is an inherent limitation on the ability of index
call writers to cover their risk exposure by holding securities positions.
If a Fund purchases an index option and exercises it before the closing index
value for that day is available, it runs the risk that the level of the
underlying index may subsequently change. If such a change causes the exercised
option to fall out-of-the-money, the Fund will be required to pay the difference
between the closing index value and the exercise price of the option (times the
applicable multiplier) to the assigned writer.
INTEREST RATE, CURRENCY AND STOCK INDEX FUTURES CONTRACTS
A Fund may enter into interest rate, currency or stock index futures contracts
("Futures" or "Futures Contracts") as a hedge against changes in prevailing
levels of interest rates, currency exchange rates or stock price levels in order
to establish more definitely the effective return on securities or currencies
held or intended to be acquired by the Fund. The Funds' hedging may include
sales of Futures as an offset against the effect of expected increases in
interest rates, or decreases in currency exchange rates and stock prices, and
purchases of Futures as an offset against the effect of expected declines in
interest rates, or increases in currency exchange rates or stock prices.
The Funds only will enter into Futures Contracts that are traded 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 by the Commodity Futures Trading
Commission ("CFTC"). Futures are exchanged in London at the London International
Financial Futures Exchange.
Although techniques other than sales and purchases of Futures Contracts could
be used to reduce the Funds' exposure to interest rate and currency exchange
rate fluctuations, the Funds may be able to hedge its exposure more effectively
and at a lower cost through using Futures Contracts.
A Futures Contract provides for the future sale by one party and purchase by
another party of a specified amount of a specific financial instrument (security
or currency) for a specified price at a designated date, time and place. A stock
index Futures Contract 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 at
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which the Futures Contract is originally struck; 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 Futures Contract is outstanding.
Although Futures Contracts typically require future delivery of and payment
for financial instruments or currencies, Futures Contracts usually are closed
out before the delivery date. Closing out an open Futures Contract sale or
purchase is effected by entering into an offsetting Futures Contract purchase or
sale, respectively, for the same aggregate amount of the identical financial
instrument or currency and the same delivery date. If the offsetting purchase
price is less than the original sale price, the Fund realizes a gain; if it is
more, the Fund realizes a loss. Conversely, if the offsetting sale price is more
than the original purchase price, the Fund realizes a gain; if it is less, the
Fund realizes a loss. The transaction costs also must be included in these
calculations. There can be no assurance, however, that the Funds will be able to
enter into an offsetting transaction with respect to a particular Futures
Contract at a particular time. If a Fund is not able to enter into an offsetting
transaction, the Fund will continue to be required to maintain the margin
deposits on the Futures Contract.
As an example of an offsetting transaction, the contractual obligations
arising from the sale of one Futures Contract of September Deutschemarks on an
exchange may be fulfilled at any time before delivery under the Futures Contract
is required (i.e., on a specified date in September, the "delivery month") by
the purchase of another Futures Contract of September Deutschemarks on the same
exchange. In such instance, the difference between the price at which the
Futures Contract was sold and the price paid for the offsetting purchase, after
allowance for transaction costs, represents the profit or loss to the Fund.
The Funds' Futures transactions will be entered into for hedging purposes
only; that is, Futures Contracts will be sold to protect against a decline in
the price of securities or currencies that a Fund owns, or Futures Contracts
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 Contracts is the amount of funds that must be
deposited by a Fund in order to initiate Futures trading and to maintain the
Fund's open positions in Futures Contracts. A margin deposit made when the
Futures Contract is entered into ("initial margin") is intended to ensure the
Fund's performance under the Futures Contract. The margin required for a
particular Futures Contract is set by the exchange on which the Futures Contract
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 the 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 Contract more or less valuable, a process
known as marking-to-market.
Risks of Using Futures Contracts. The prices of Futures Contracts are volatile
and are influenced by, among other things, actual and anticipated changes in
interest and currency rates, which in turn are affected by fiscal and monetary
policies and national and international political and economic events.
There is a risk of imperfect correlation between changes in prices of Futures
Contracts and prices of the securities or currencies in the Fund's portfolio
being hedged. The degree of imperfection of correlation depends upon
circumstances such as: variations in speculative market demand for Futures and
for securities or currencies, including technical influences in Futures trading;
and differences between the financial instruments being hedged and the
instruments underlying the standard Futures Contracts available for trading. A
decision of whether, when and how to hedge involves skill and judgment, and even
a well-conceived hedge may be unsuccessful to some degree because of unexpected
market behavior or interest or currency rate trends.
Because of the low margin deposits required, Futures trading involves an
extremely high degree of leverage. As a result, a relatively small price
movement in a Futures Contract may result in immediate and substantial loss, as
well as gain, to the investor. For example, if at the time of purchase, 10% of
the value of the Futures Contract is deposited as margin, a subsequent 10%
decrease in the value of the Futures Contract would result in a total loss of
the margin deposit, before any deduction for the transaction costs, if the
account were then closed out. A 15% decrease would result in a loss equal to
150% of the original margin deposit, if the Futures Contract were closed out.
Thus, a purchase or sale of a Futures Contract may result in losses in excess of
the amount invested in the Futures Contract.
Most U.S. Futures exchanges limit the amount of fluctuation permitted in
Futures Contract and option on Futures Contract prices during a single trading
day. The daily limit establishes the maximum amount that the price of a Futures
Contract or option may vary either up or down from the previous day's settlement
price at the end of a trading session. Once the daily limit has been reached in
a particular type of Futures Contract or option, no trades may be made on that
day at a price beyond that limit. The daily limit governs only price movement
during a particular trading day and therefore
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does not limit potential losses, because the limit may prevent the liquidation
of unfavorable positions. Futures Contract and option prices occasionally have
moved to the daily limit for several consecutive trading days with little or no
trading, thereby preventing prompt liquidation of positions and subjecting some
traders to substantial losses.
If a Fund were unable to liquidate a Futures or option on 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.
Certain characteristics of the Futures market might increase the risk that
movements in the prices of Futures Contracts or options on Futures might not
correlate perfectly with movements in the prices of the investments being
hedged. For example, all participants in the Futures and options on Futures
markets are subject to daily variation margin calls and might be compelled to
liquidate Futures or options on Futures positions whose prices are moving
unfavorably to avoid being subject to further calls. These liquidations could
increase price volatility of the instruments and distort the normal price
relationship between the Futures or options and the investments being hedged.
Also, because initial margin deposit requirements in the Futures market are less
onerous than margin requirements in the securities markets, there might be
increased participation by speculators in the Futures markets. This
participation also might cause temporary price distortions. In addition,
activities of large traders in both the Futures and securities markets involving
arbitrage, "program trading" and other investment strategies might result in
temporary price distortions.
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,
which represents the amount by which the market price of the Futures Contract,
at exercise, exceeds (in the case of a call) or is less than (in the case of a
put) the exercise price of the option on the Futures Contract. If an option is
exercised on the last trading day prior to the expiration date of the option,
the settlement will be made entirely in cash equal to the difference between the
exercise price of the option and the closing level of the securities, currencies
or index upon which the Futures Contract is based on the expiration date.
Purchasers of options who fail to exercise their options prior to the exercise
date suffer a loss of the premium paid.
The purchase of call options on Futures can serve as a long hedge, and the
purchase of put options on Futures can serve as a short hedge. Writing call
options on Futures can serve as a limited short hedge, and writing put options
on Futures can serve as a limited long hedge, using a strategy similar to that
used for writing options on securities, foreign currencies or indices.
If a Fund writes an option on a Futures Contract, it will be required to
deposit initial and variation margin pursuant to requirements similar to those
applicable to Futures Contracts. Premiums received from the writing of an option
on a Futures Contract are included in the initial margin deposit.
A Fund may seek to close out an option position by selling an option covering
the same Futures Contract and having the same exercise price and expiration
date. The ability to establish and close out positions on such options is
subject to the maintenance of a liquid secondary market.
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 liquidation value of the Fund's portfolio, after taking into
account unrealized profits and unrealized losses on any contracts the Fund has
entered into. In general, a call option on a Futures Contract is "in-the-money"
if the value of the underlying Futures Contract exceeds the strike, i.e.,
exercise, price of the call; a put option on a Futures Contract is
"in-the-money" if the value of the underlying Futures Contract is exceeded by
the strike price of the put. This guideline may be modified by the Trust's Board
of Trustees without a shareholder vote. This limitation does not limit the
percentage of a Fund's assets at risk to 5%.
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FORWARD CONTRACTS
A Forward Contract is an obligation, generally 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 may
either 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.
A Fund engages in forward currency transactions in anticipation of or to
protect itself against fluctuations in exchange rates. A Fund might sell a
particular foreign currency forward, for example, when it holds bonds
denominated in a foreign currency but anticipates, and seeks to be protected
against, a decline in the currency against the U.S. dollar. Similarly, a Fund
might sell the U.S. dollar forward when it holds bonds denominated in U.S.
dollars but anticipates, and seeks to be protected against, a decline in the
U.S. dollar relative to other currencies. Further, a Fund might purchase a
currency forward to "lock in" the price of securities denominated in that
currency that it anticipates purchasing.
Forward Contracts are traded in the interbank market conducted directly
between currency traders (usually large commercial banks) and their customers. A
Forward Contract generally has no deposit requirement, and no commissions are
charged at any stage for trades. Each Fund will enter into such Forward
Contracts with major U.S. or foreign banks and securities or currency dealers in
accordance with guidelines approved by the Board.
Each Fund may enter into Forward Contracts either with respect to specific
transactions or with respect to the overall investments of the Fund. The precise
matching of the Forward Contract amounts and the value of specific securities
generally will not be possible because the future value of such securities in
foreign currencies will change as a consequence of market movements in the value
of those securities between the date the Forward Contract is entered into and
the date it matures. Accordingly, it may be necessary for a Fund to purchase
additional foreign currency on the spot (i.e., cash) market (and bear the
expense of such purchase) if the market value of the security is less than the
amount of foreign currency the Fund is obligated to deliver and if a decision is
made to sell the security and make delivery of the foreign currency. Conversely,
it may be necessary to sell on the spot market some of the foreign currency the
Fund is obligated to deliver. The projection of short-term currency market
movements is extremely difficult, and the successful execution of a short-term
hedging strategy is highly uncertain. Forward Contracts involve the risk that
anticipated currency movements will not be predicted accurately, causing a Fund
to sustain losses on these contracts and transaction costs.
At or before the maturity of a Forward Contract requiring a Fund to sell a
currency, the Fund either may sell a portfolio security and use the sale
proceeds to make delivery of the currency or retain the security and offset its
contractual obligation to deliver the currency by purchasing a second contract
pursuant to which the Fund will obtain, on the maturity date, the same amount of
the currency that it is obligated to deliver. Similarly, a Fund may close out a
Forward Contract requiring it to purchase a specified currency by entering into
a second contract if its contra party agrees, entitling it to sell the same
amount of the same currency on the maturity date of the first contract. The Fund
would realize a gain or loss as a result of entering into such an offsetting
Forward Contract under either circumstance to the extent the exchange rate or
rates between the currencies involved moved between the execution dates of the
first contract and the offsetting contract.
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 usually are 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 Contracts 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.
FOREIGN CURRENCY STRATEGIES -- SPECIAL CONSIDERATIONS
A Fund may use options on foreign currencies, Futures on foreign currencies,
options on Futures on foreign currencies and Forward Contracts to hedge against
movements in the values of the foreign currencies in which the Fund's securities
are denominated. Such currency hedges can protect against price movements in a
security that a Fund owns or intends to acquire that are attributable to changes
in the value of the currency in which it is denominated. Such hedges do not,
however, protect against price movements in the securities that are attributable
to other causes.
A Fund might seek to hedge against changes in the value of a particular
currency when no Futures Contract, Forward Contract or option involving that
currency is available or one of such contracts is more expensive than certain
other contracts. In such cases, the Fund may hedge against price movements in
that currency by entering into a contract on another currency or basket of
currencies, the values of which AIM and/or the Sub-advisors believe will have a
positive
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correlation to the value of the currency being hedged. The risk that movements
in the price of the contract will not correlate perfectly with movements in the
price of the currency being hedged is magnified when this strategy is used.
The value of Futures Contracts, options on Futures Contracts, Forward
Contracts and options on foreign currencies depends on the value of the
underlying currency relative to the U.S. dollar. Because foreign currency
transactions occurring in the interbank market might involve substantially
larger amounts than those involved in the use of Futures Contracts, Forward
Contracts or options, a Fund could be disadvantaged by dealing in the odd lot
market (generally consisting of transactions of less than $1 million) for the
underlying foreign currencies at prices that are less favorable than for round
lots.
There is no systematic reporting of last sale information for foreign
currencies or any regulatory requirements that quotations available through
dealers or other market sources be firm or revised on a timely basis. Quotation
information generally is representative of very large transactions in the
interbank market and thus might not reflect odd-lot transactions where rates
might be less favorable. The interbank market in foreign currencies is a global,
round-the-clock market. To the extent the U.S. options or Futures markets are
closed while the markets for the underlying currencies remain open, significant
price and rate movements might take place in the underlying markets that cannot
be reflected in the markets for the Futures contracts or options until they
reopen.
Settlement of Futures Contracts, Forward Contracts and options involving
foreign currencies might be required to take place within the country issuing
the underlying currency. Thus, a Fund might be required to accept or make
delivery of the underlying foreign currency in accordance with any U.S. or
foreign regulations regarding the maintenance of foreign banking arrangements by
U.S. residents and might be required to pay any fees, taxes and charges
associated with such delivery assessed in the issuing country.
COVER
Transactions using Forward Contracts, Futures Contracts and options (other
than options purchased by a Fund) expose the 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, receivables and
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.
Assets used as cover or held in a segregated account 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.
RISK FACTORS
ILLIQUID SECURITIES
A Fund may invest up to 15% of its net assets in illiquid securities.
Securities may be considered illiquid if a Fund cannot reasonably expect within
seven days to sell the securities for approximately the amount at which the Fund
values such securities. See "Investment Limitations." The sale of illiquid
securities, if they can be sold at all, generally will require more time and
result in higher brokerage charges or dealer discounts and other selling
expenses than the sale of liquid securities such as securities eligible for
trading on U.S. securities exchanges or in the OTC markets. Moreover, restricted
securities, which may be illiquid for purposes of this limitation, often sell,
if at all, at a price lower than similar securities that are not subject to
restrictions on resale.
Illiquid securities include those that are subject to restrictions contained
in the securities laws of other countries. However, securities that are freely
marketable in the country where they are principally traded, but would not be
freely marketable in the United States, will not be considered illiquid. Where
registration is required, a Fund may be obligated to pay all or part of the
registration expenses and a considerable period may elapse between the time of
the decision to sell and the time the Fund may be permitted to sell a security
under an effective registration statement. If, during such a period, adverse
market conditions were to develop, the Fund might obtain a less favorable price
than prevailed when it decided to sell.
Not all restricted securities are illiquid. In recent years a large
institutional market has developed for certain securities that are not
registered under the Securities Act of 1933, as amended (the "1933 Act"),
including private placements,
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repurchase agreements, commercial paper, foreign securities and corporate bonds
and notes. These instruments are often restricted securities because the
securities are sold in transactions not requiring registration. Institutional
investors generally will not seek to sell these instruments to the general
public, but instead will often depend either on an efficient institutional
market in which such unregistered securities can be readily resold or on an
issuer's ability to honor a demand for repayment. Therefore, the fact that there
are contractual or legal restrictions on resale to the general public or certain
institutions is not dispositive of the liquidity of such investments.
Rule 144A under the 1933 Act establishes a "safe harbor" from the registration
requirements of the 1933 Act for resales of certain securities to qualified
institutional buyers. Institutional markets for restricted securities have
developed as a result of Rule 144A, providing both readily ascertainable values
for restricted securities and the ability to liquidate an investment to satisfy
share redemption orders. Such markets include automated systems for the trading,
clearance and settlement of unregistered securities of domestic and foreign
issuers, such as the PORTAL System sponsored by the National Association of
Securities Dealers, Inc. An insufficient number of qualified institutional
buyers interested in purchasing Rule 144A-eligible restricted securities held by
a Fund, however, could affect adversely the marketability of such portfolio
securities and the Fund might be unable to dispose of such securities promptly
or at favorable prices.
With respect to liquidity determinations generally, the Trust's Board of
Trustees has the ultimate responsibility for determining whether specific
securities, including restricted securities eligible for resale to qualified
institutional buyers pursuant to Rule 144A under the 1933 Act, are liquid or
illiquid. The Trust's Board has delegated the function of making day-to-day
determinations of liquidity to AIM and/or the Sub-advisors in accordance with
procedures approved by the Board. AIM and/or the Sub-advisors take into account
a number of factors in reaching liquidity decisions, including: (i) the
frequency of trading in the security; (ii) the number of dealers who make quotes
for the security; (iii) the number of dealers who have undertaken to make a
market in the security; (iv) the number of other potential purchasers; and (v)
the nature of the security and how trading is effected (e.g., the time needed to
sell the security, how offers are solicited, and the mechanics of transfer.) AIM
and/or the Sub-advisors monitor the liquidity of securities in each Fund's
portfolio and periodically reports such determinations to the Trust's Board of
Trustees. If the liquidity percentage restriction of a Fund is satisfied at the
time of investment, a later increase in the percentage of illiquid securities
held by the Fund resulting from a change in market value or assets will not
constitute a violation of that restriction. If as a result of a change in market
value or assets, the percentage of illiquid securities held by the Fund
increases above the applicable limit, AIM and/or the Sub-advisors will take
appropriate steps to bring the aggregate amount of illiquid assets back within
the prescribed limitations as soon as reasonably practicable, taking into
account the effect of any disposition on the Fund.
FOREIGN SECURITIES
Political, Social and Economic Risks. Investing in securities of non-U.S.
companies may entail additional risks due to the potential political, social and
economic instability of certain countries and the risks of expropriation,
nationalization, confiscation or the imposition of restrictions on foreign
investment, convertibility of currencies into U.S. dollars and on repatriation
of capital invested. In the event of such expropriation, nationalization,
confiscatory taxation, or other confiscation by any country, a Fund could lose
its entire investment in any such country.
Religious, Political and Ethnic Instability. Certain countries in which a Fund
may invest may have groups that advocate radical religious or revolutionary
philosophies or support ethnic independence. Any disturbance on the part of such
individuals could carry the potential for widespread destruction or confiscation
of property owned by individuals and entities foreign to such country and could
cause the loss of the Fund's investment in those countries. Instability may also
result from, among other things: (i) authoritarian governments or military
involvement in political and economic decision-making, including changes in
government through extra-constitutional means; (ii) popular unrest associated
with demands for improved political, economic and social conditions; and (iii)
hostile relations with neighboring or other countries. Such political, social
and economic instability could disrupt the principal financial markets in which
a Fund invests and adversely affect the value of its assets.
Foreign Investment Restrictions. Certain countries prohibit or impose
substantial restrictions on investments in their capital markets, particularly
their equity markets, by foreign entities such as a Fund. These restrictions or
controls may at times limit or preclude investment in certain securities and may
increase the cost and expenses of the Fund. For example, certain countries
require prior governmental approval before investments by foreign persons may be
made, or may limit the amount of investment by foreign persons in a particular
company, or limit the investment by foreign persons to only a specific class of
securities of a company that may have less advantageous terms than securities of
the company available for purchase by nationals. Moreover, the national policies
of certain countries may restrict investment opportunities in issuers or
industries deemed sensitive to national interests. In addition, some countries
require governmental approval for the repatriation of investment income, capital
or the proceeds of securities sales by foreign investors. In addition, if there
is a deterioration in a country's balance of payments or for other reasons, a
country may impose restrictions on foreign
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capital remittances abroad. A Fund could be adversely affected by delays in, or
a refusal to grant, any required governmental approval for repatriation, as well
as by the application to it of other restrictions on investments.
Non-Uniform Corporate Disclosure Standards and Governmental
Regulation. Foreign companies are subject to accounting, auditing and financial
standards and requirements that differ, in some cases significantly, from those
applicable to U.S. companies. In particular, the assets, liabilities and profits
appearing on the financial statements of such a company may not reflect its
financial position or results of operations in the way they would be reflected
had such financial statements been prepared in accordance with U.S. generally
accepted accounting principles. Most of the foreign securities held by a Fund
(other than the Mid Cap Fund) will not be registered with the SEC or regulators
of any foreign country, nor will the issuers thereof be subject to the SEC's
reporting requirements. Thus, there will be less available information
concerning most foreign issuers of securities held by a Fund than is available
concerning U.S. issuers. In instances where the financial statements of an
issuer are not deemed to reflect accurately the financial situation of the
issuer, AIM and/or the Sub-advisors will take appropriate steps to evaluate the
proposed investment, which may include on-site inspection of the issuer,
interviews with its management and consultations with accountants, bankers and
other specialists. There is substantially less publicly available information
about foreign companies than there are reports and ratings published about U.S.
companies and the U.S. government. In addition, where public information is
available, it may be less reliable than such information regarding U.S. issuers.
Issuers of securities in foreign jurisdictions are generally not subject to the
same degree of regulation as are U.S. issuers with respect to such matters as
restrictions on market manipulation, insider trading rules, shareholder proxy
requirements and timely disclosure of information.
Currency Fluctuations. Because each Fund, other than the Mid Cap Fund, under
normal circumstances will invest a substantial portion of its total assets in
the securities of foreign issuers that are denominated in foreign currencies,
the strength or weakness of the U.S. dollar against such foreign currencies will
account for a significant part of the Fund's investment performance. A decline
in the value of any particular currency against the U.S. dollar will cause a
decline in the U.S. dollar value of a Fund's holdings of securities and cash
denominated in such currency and, therefore, will cause an overall decline in
the Fund's net asset value and any net investment income and capital gains
derived from such securities to be distributed in U.S. dollars to shareholders
of the Fund. Moreover, if the value of the foreign currencies in which a Fund
receives its income declines relative to the U.S. dollar between the receipt of
income and the making of Fund distributions, it may be required to liquidate
securities in order to make distributions if it has insufficient cash in U.S.
dollars to meet distribution requirements.
The rate of exchange between the U.S. dollar and other currencies is
determined by several factors, including the supply and demand for particular
currencies, central bank efforts to support particular currencies, the relative
movement of interest rate and the pace of business activity in the other
countries and the United States, and other economic and financial conditions
affecting the world economy.
Although each Fund values its assets daily in terms of U.S. dollars, they do
not intend to convert their holdings of foreign currencies into U.S. dollars on
a daily basis. Each Fund will do so, from time to time, and investors should be
aware of the costs of currency conversion. Although foreign exchange dealers do
not charge a fee for conversion, they do realize a profit based on the
difference ("spread") between the prices at which they buy and sell various
currencies. Thus, a dealer may offer to sell a foreign currency to a Fund at one
rate, while offering a lesser rate of exchange should a Fund desire to sell that
currency to the dealer.
Adverse Market Characteristics. Securities of many foreign issuers may be less
liquid and their prices more volatile than securities of comparable U.S.
issuers. In addition, foreign securities markets and brokers generally are
subject to less governmental supervision and regulation than in the United
States, and foreign securities exchange transactions usually are subject to
fixed commissions, which generally are higher than negotiated commissions on
U.S. transactions. In addition, foreign securities exchange transactions may be
subject to difficulties associated with the settlement of such transactions.
Delays in settlement could result in temporary periods when assets of a Fund are
uninvested and no return is earned thereon. The inability of a Fund to make
intended security purchases due to settlement problems could cause the Fund to
miss attractive investment opportunities. Inability to dispose of a portfolio
security due to settlement problems either could result in losses to a Fund due
to subsequent declines in value of the portfolio security or, if a Fund has
entered into a contract to sell the security, could result in possible liability
to the purchaser. AIM and/or the Sub-advisors will consider such difficulties
when determining the allocation of each Fund's assets, although AIM and/or the
Sub-advisors do not believe that such difficulties will have a material adverse
effect on the Funds' portfolio trading activities.
The Funds may use foreign custodians, which may involve risks in addition to
those related to the use of U.S. custodians. Such risks include uncertainties
relating to: (i) determining and monitoring the financial strength, reputation
and standing of the foreign custodian; (ii) maintaining appropriate safeguards
to protect the Funds' investments and (iii) obtaining and enforcing judgments
against such custodians.
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The risk also exists that an emergency situation may arise in one or more
foreign markets as a result of which trading of securities may cease or may be
substantially curtailed and prices for [the Fund's] portfolio securities in such
markets may not be readily available. Section 22(e) of the 1940 Act permits a
registered investment company to suspend redemption of its shares for any period
during which an emergency exists, as determined by the SEC. Accordingly, when
[the Fund] believes that appropriate circumstances warrant, it will promptly
apply to the SEC for a determination that an emergency exists within the meaning
of Section 22(e). During the period commencing from [the Fund's] identification
of such conditions until the date of SEC action, the portfolio securities of
[the Fund] in the affected markets will be valued at fair value as determined in
good faith by or under the direction of the Trust's Board of Trustees.
Withholding Taxes. A Fund's net investment income from foreign issuers may be
subject to non-U.S. withholding taxes by the foreign issuer's country, thereby
reducing the Fund's net investment income or delaying the receipt of income
where those taxes may be recaptured. See "Taxes" herein.
Concentration. To the extent a Fund invests a significant portion of its
assets in securities of issuers located in a particular country or region of the
world, it may be subject to greater risks and may experience greater volatility
than a fund that is more broadly diversified geographically.
Special Considerations Affecting Western European Countries. The countries
that are members of the European Economic Community ("Common Market") (Austria,
Belgium, Denmark, Finland, France, Germany, Greece, Ireland, Italy, Luxembourg,
Netherlands, Portugal, Spain, Sweden and the United Kingdom) eliminated certain
import tariffs and quotas and other trade barriers with respect to one another
over the past several years. AIM and/or the Sub-advisors believe that this
deregulation should improve the prospects for economic growth in many Western
European countries. Among other things, the deregulation could enable companies
domiciled in one country to avail themselves of lower labor costs existing in
other countries. In addition, this deregulation could benefit companies
domiciled in one country by opening additional markets for their goods and
services in other countries. Since, however, it is not clear what the exact form
or effect of these Common Market reforms will be on business in Western Europe,
it is impossible to predict the long-term impact of the implementation of these
programs on the securities owned by a Fund.
Special Considerations Affecting Russia and Eastern European
Countries. Investing in Russia and Eastern European countries involves a high
degree of risk and special considerations not typically associated with
investing in the U.S. securities markets and should be considered highly
speculative. Such risks include: (1) delays in settling portfolio transactions
and risk of loss arising out of the system of share registration and custody;
(2) the risk that it may be impossible or more difficult than in other countries
to obtain and/or enforce a judgment; (3) pervasiveness of corruption and crime
in the economic system; (4) currency exchange rate volatility and the lack of
available currency hedging instruments; (5) higher rates of inflation (including
the risk of social unrest associated with periods of hyper-inflation) and high
unemployment; (6) controls on foreign investment and local practices disfavoring
foreign investors and limitations on repatriation of invested capital, profits
and dividends and on a Fund's ability to exchange local currencies for U.S.
dollars; (7) political instability and social unrest and violence; (8) the risk
that the governments of Russia and Eastern European countries may decide not to
continue to support the economic reform programs implemented recently and may
follow radically different political and/or economic policies to the detriment
of investors, including non-market-oriented policies such as the support of
certain industries at the expense of other sectors or investors, or a return to
the centrally planned economy that existed when such countries had a communist
form of government; (9) the financial condition of companies in these countries,
including large amounts of inter-company debt that may create a payments crisis
on a national scale; (10) dependency on exports and the corresponding importance
of international trade; (11) the risk that the tax system in these countries
will not be reformed to prevent inconsistent, retroactive and/or exorbitant
taxation; and (12) the underdeveloped nature of the securities markets.
Special Considerations Affecting Pacific Region Countries. Many Pacific region
countries may be subject to a greater degree of social, political and economic
instability than is the case in the United States. Such instability may result
from, among other things, the following: (i) authoritarian governments or
military involvement in political and economic decision making, and changes in
government through extra-constitutional means; (ii) popular unrest associated
with demands for improved political, economic and social conditions; (iii)
internal insurgencies; (iv) hostile relations with neighboring countries; and
(v) ethnic, religious and racial disaffection. Such social, political and
economic instability could significantly disrupt the principal financial markets
in which a Fund invests and adversely affect the value of a Fund's assets. In
addition, there may be the possibility of asset expropriations or future
confiscatory levels of taxation affecting the Funds.
In China, India, Indonesia, Malaysia, the Philippines, Singapore, South Korea
and Thailand, government regulation or a company's charter may limit the maximum
foreign aggregate ownership of equity in the company. South Korea generally
prohibits foreign investment in won-denominated debt securities, and Sri Lanka
prohibits foreign investment in
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government debt securities. South Korea prohibits foreign investment in
specified telecommunications companies, and the Philippines prohibits foreign
investment in mass media companies and companies providing certain professional
services. In the Philippines, a Fund may generally invest in "B" shares of
Philippine issuers engaged in partly nationalized business activities, the
market prices, liquidity and rights of which may vary from shares owned by
nationals. Similarly, in China, a Fund may only invest in "B" shares of
securities traded on The Shanghai Securities Exchange and The Shenzhen Stock
Exchange, currently the two officially recognized securities exchanges in China.
"B" shares traded on The Shanghai Securities Exchange are settled in U.S.
dollars, and those traded on The Shenzhen Stock Exchange are generally settled
in Hong Kong dollars. Certain countries, such as India, face serious exchange
constraints.
If, because of restrictions on repatriation or conversion of funds, a Fund
were unable to timely distribute substantially all of its net investment income,
and net capital gains, the Fund could be subject to federal income and excise
taxes that would not otherwise be incurred and could cease to qualify for the
favorable tax treatment afforded to regulated investment companies ("RICs")
under the Internal Revenue Code of 1986, as amended (the "Code"). In such case,
it would become subject to federal income tax on all of its income and net
gains.
Several Pacific region countries have or in the past have had hostile
relationships with neighboring nations or have experienced internal insurgency.
Thailand has experienced border conflicts with Laos and Cambodia, and India is
engaged in border disputes with several of its neighbors, including China and
Pakistan. An uneasy truce exists between North Korea and South Korea, and the
recurrence of hostilities remains possible. Reunification of North Korea and
South Korea could have a detrimental effect on the economy of South Korea. Also,
China continues to claim sovereignty over Taiwan and has, in the past, conducted
military maneuvers near Taiwan.
The economies of most Pacific region countries are heavily dependent upon
international trade and are accordingly affected by protective trade barriers
and the economic conditions of their trading partners, principally the United
States, Japan, China and the European Community. The enactment by the United
States or other principal trading partners of protectionist trade legislation,
reduction of foreign investment in the local economies and general declines in
the international securities markets could have a significant adverse effect
upon the securities markets of Pacific region countries. In addition, the
economies of some of the Asia Pacific region countries, Australia and Indonesia,
for example, are vulnerable to weakness in world prices for their commodity
exports, including crude oil.
Few of the Pacific region countries have Western-style or fully democratic
governments. Some governments in the region are authoritarian in nature and
influenced by security forces. For example, during the course of the last 25
years, governments in the region have been installed or removed as a result of
military coups, while others have periodically demonstrated repressive police
state characteristics. In several Pacific region countries, the leadership
ability of the government has suffered as a result of recent corruption
scandals. Disparities of wealth, among other factors, have also led to social
unrest in some of the Asia Pacific region countries, accompanied, in certain
cases, by violence and labor unrest. Ethnic, religious and racial disaffection,
as evidenced in India, Pakistan, and Sri Lanka, for example, have created
social, economic and political problems. Such problems also have occurred in
other regions.
Starting in mid-1997, some Pacific region countries began to experience
currency devaluations that resulted in high interest rate levels and sharp
reductions in economic activity. While the currency crisis diminished prospects
for short-term corporate earnings growth, AIM and/or the Sub-advisors believe
that high interest rate levels may force governments and corporations to
restructure the financial sector in a manner that may facilitate a return to
high levels of long-term economic activity.
China assumed sovereignty over Hong Kong in July 1997. Although China has
committed by treaty to preserve the economic and social freedoms enjoyed in Hong
Kong for fifty years, the continuation of the current form of the economic
system in Hong Kong will depend on the actions of the government of China. In
addition, such assumption of sovereignty has increased sensitivity in Hong Kong
to political developments and statements by public figures in China. Business
confidence in Hong Kong, therefore, can be significantly affected by such
developments and statements, which in turn can affect markets and business
performance. Investments in Hong Kong may be subject to expropriation,
nationalization or confiscation, in which case a Fund could lose its entire
investment in Hong Kong.
In addition, there is continuing risk that the Hong Kong dollar will be
devalued and a risk of possible loss of investor confidence in the Hong Kong
markets and dollar. However, factors exist that are likely to mitigate this
risk. First, China has stated its intention to implement a "one country, two
systems" policy, which would preserve monetary sovereignty and leave control in
the hands of the Hong Kong Monetary Authority ("HKMA").
Second, fixed rate parity with the U.S. dollar is seen as critical to
maintaining investors' confidence in the transition to Chinese rule and,
therefore, it is anticipated that, if international investors lose confidence in
Hong Kong dollar assets, the HKMA would take steps to support the currency,
though the taking of such steps cannot be assured. Third, Hong Kong's
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and China's sizable combined foreign exchange reserve may be used to support the
value of the Hong Kong dollar, provided that China does not appropriate such
reserves for other uses, which is not anticipated but cannot be assured.
Finally, China would be likely to experience significant adverse political and
economic consequences if confidence in the Hong Kong dollar and the territory
assets were to be endangered.
Special Considerations Affecting Japan. Japan's economic growth has declined
significantly since 1990. The general government position has deteriorated as
a result of weakening economic growth and stimulative measures taken to support
economic activity and to restore financial stability. Although the decline in
interest rates and fiscal stimulation packages have helped to contain
recessionary forces, uncertainties remain. Japan is also heavily dependent upon
international trade, so its economy is especially sensitive to trade barriers
and disputes.
The common stocks of many Japanese companies trade at high price-earnings
ratios, which may be attributable in part to inefficiencies associated with
Japanese corporate operations. Differences in accounting methods make it
difficult to compare the earnings of Japanese companies with those of companies
in other countries, especially the United States. In general, however, reported
net income in Japan is understated relative to U.S. accounting standards and
this is one reason why price-earnings ratios of the stocks of Japanese companies
have tended historically to be higher than those for U.S. stocks. In addition,
Japanese companies have tended to have higher growth rates than U.S. companies,
and Japanese interest rates have generally been lower than in the United States,
both of which factors tend to result in lower discount rates and higher
price-earnings ratios in Japan than in the United States.
The Japanese securities markets are less regulated than those in the United
States. Evidence has emerged from time to time of distortion of market prices to
serve political or other purposes. Shareholders' rights are also not always
equally enforced.
In addition, Japan's banking industry is undergoing problems related to bad
loans and declining values in real estate.
Special Considerations Affecting Latin American Countries. Most Latin American
countries have experienced substantial, and in some periods extremely high,
rates of inflation for many years. Inflation and rapid fluctuations in inflation
rates have had and may continue to have very negative effects on the economies
and securities markets of certain Latin American countries. Certain Latin
American countries are also among the largest debtors to commercial banks and
foreign governments. At times certain Latin American countries have declared
moratoria on the payment of principal and/or interest on external debt. In
addition, certain Latin American securities markets have experienced high
volatility in recent years.
Latin American countries may also close certain sectors of their economies to
equity investments by foreigners. Further, due to the absence of securities
markets and publicly owned corporations and due to restrictions on direct
investment by foreign entities, investments may only be made in certain Latin
American countries solely or primarily through governmentally approved
investment vehicles or companies.
Certain Latin American countries may have managed currencies that are
maintained at artificial levels to the U.S. dollar rather than at levels
determined by the market. This type of system can lead to sudden and large
adjustments in the currency which, in turn, can have a disruptive and negative
effect on foreign investors. For example, in late 1994, the value of the Mexican
peso lost more than one-third of its value relative to the U.S. dollar.
Special Considerations Affecting Emerging Markets. Because of the special
risks associated with investing in emerging markets, an investment in a Fund
should be considered speculative. Investors are strongly advised to consider
carefully the special risks involved in emerging markets, which are in addition
to the usual risks of investing in developed foreign markets around the world.
Investing in the securities of companies in emerging markets may entail special
risks relating to potential political and economic instability and the risks of
expropriation, nationalization, confiscation or the imposition of restrictions
on foreign investment, convertibility into U.S. dollars and on repatriation of
capital invested. In the event of such expropriation, nationalization or other
confiscation by any country, a Fund could lose its entire investment in any such
country.
Economies in emerging markets generally are dependent heavily upon
international trade and, accordingly, have been and may continue to be affected
adversely by trade barriers, exchange controls, managed adjustments in relative
currency values and other protectionist measures imposed or negotiated by the
countries with which they trade. These economies also have been and may continue
to be affected adversely by economic conditions in the countries in which they
trade.
Emerging securities markets are substantially smaller, less developed, less
liquid and more volatile than the major securities markets. The limited size of
emerging securities markets and limited trading value in issuers compared to the
volume of trading in U.S. securities could cause prices to be erratic for
reasons apart from factors that affect the quality of the securities. For
example, limited market size may cause prices to be unduly influenced by traders
who control large
22
<PAGE> 349
positions. Adverse publicity and investors' perceptions, whether or not based on
fundamental analysis, may decrease the value and liquidity of portfolio
securities, especially in these markets. In addition, securities traded in
certain emerging markets may be subject to risks due to the inexperience of
financial intermediaries, a lack of modern technology, the lack of a sufficient
capital base to expand business operations, and the possibility of permanent or
temporary termination of trading.
Settlement mechanisms in emerging securities markets may be less efficient and
reliable than in more developed markets. In such emerging markets there may be
share registration and delivery delays or failures.
Many emerging market countries have experienced substantial, and in some
periods extremely high, rates of inflation for many years. Inflation and rapid
fluctuations in inflation rates and corresponding currency devaluations have had
and may continue to have negative effects on the economies and securities
markets of certain emerging market countries.
DEBT SECURITIES
The value of debt securities held by a Fund will fluctuate with changes in the
perceived creditworthiness of the issuers of such securities and interest rates.
Each Fund is permitted to purchase investment grade debt securities. In
selecting debt securities for investment, AIM and/or the Sub-advisors review and
monitor the creditworthiness of each issuer and issue and analyze interest rate
trends and specific developments that may affect individual issuers, in addition
to relying on ratings assigned by S&P, Moody's or another nationally recognized
statistical rating organization ("NRSRO") as indicators of quality. Debt
securities rated Baa by Moody's or BBB by S&P are investment grade, although
Moody's considers securities rated Baa to have speculative characteristics.
Changes in economic conditions or other circumstances are more likely to lead to
a weakened capacity for such securities to make principal and interest payments
than is the case for higher grade debt securities. Each Fund is also permitted
to purchase debt securities that are not rated by S&P, Moody's or another NRSRO,
but that AIM and/or the Sub-advisors determine to be of comparable quality to
that of rated securities in which the Fund may invest. Such securities are
included in the computation of any percentage limitations applicable to the
comparable rated securities.
Ratings of debt securities represent the rating agencies' opinions regarding
their quality, are not a guarantee of quality and may be reduced after a Fund
has acquired the security. AIM and/or the Sub-advisors will consider such an
event in determining whether a Fund should continue to hold the security but is
not required to dispose of it. Credit ratings attempt to evaluate the safety of
principal and interest payments and do not reflect an assessment of the
volatility of the security's market value or the liquidity of an investment in
the security. Also, NRSROs may fail to make timely changes in credit ratings in
response to subsequent events, so that an issuer's current financial condition
may be better or worse than the rating indicates. For a description of Moody's
and S&P ratings, see "Appendix" herein.
EQUITY SECURITIES
Equity securities, particularly common stocks, generally represent the most
junior position in an issuer's capital structure and entitle holders to an
interest in the assets of an issuer, if any, remaining after all more senior
claims have been satisfied.
INVESTMENT LIMITATIONS
Each Fund has adopted the following investment limitations as fundamental
policies that may not be changed without approval by the affirmative vote of a
majority of the outstanding shares of the Fund. No Fund may:
(1) Purchase or sell real estate, except that investments in
securities of issuers that invest in real estate and investments in
mortgage-backed securities, mortgage participations or other instruments
supported by interests in real estate are not subject to this limitation,
and except that the Fund may exercise rights under agreements relating to
such securities, including the right to enforce security interests and to
hold real estate acquired by reason of such enforcement until that real
estate can be liquidated in an orderly manner;
(2) Purchase or sell physical commodities, but the Fund may purchase,
sell or enter into financial options and futures, forward and spot currency
contracts, swap transactions and other financial contracts or derivative
instruments;
(3) Issue senior securities or borrow money, except as permitted under
the 1940 Act and then not in excess of 33 1/3% of the Fund's total assets
(including the amount borrowed but reduced by any liabilities not
constituting borrowings) at the time of the borrowing, except that the Fund
may borrow up to an additional 5% of its total assets (not including the
amount borrowed) for temporary or emergency purposes;
23
<PAGE> 350
(4) Make loans, except through loans of portfolio securities or
through repurchase agreements, provided that for purposes of this
limitation, the acquisition of bonds, debentures, other debt securities or
instruments, or participations or other interests therein and investments
in government obligations, commercial paper, certificates of deposit,
bankers' acceptances or similar instruments will not be considered the
making of a loan;
(5) Purchase securities of any one issuer if, as a result, more than
5% of the Fund's total assets would be invested in securities of that
issuer or the Fund would own or hold more than 10% of the outstanding
voting securities of that issuer, except that up to 25% of the Fund's total
assets may be invested without regard to this limitation, and except that
this limitation does not apply to securities issued or guaranteed by the
U.S. government, its agencies or instrumentalities or to securities issued
by other investment companies;
(6) Engage in the business of underwriting securities of other
issuers, except to the extent that the Fund might be considered an
underwriter under the federal securities laws in connection with its
disposition of portfolio securities; or
(7) Purchase any security if, as a result of that purchase, 25% or
more of the Fund's total assets would be invested in securities of issuers
having their principal business activities in the same industry, except
that this limitation does not apply to securities issued or guaranteed by
the U.S. government, its agencies or instrumentalities.
Notwithstanding any other investment policy of the Fund, the Fund may invest
all of its investable assets (cash, securities and receivables related to
securities) in an open-end management investment company having substantially
the same investment objective, policies and limitations as the Fund.
For purposes of the concentration policy contained in limitation (7) above,
each Fund intends to comply with the SEC staff position that securities issued
or guaranteed as to principal and interest by any single foreign government or
any supranational organization are considered to be securities of issuers in the
same industry.
The following investment limitations of each Fund are not fundamental policies
and may be changed by vote of the Trust's Board of Trustees without shareholder
approval. Each Fund may not:
(1) Invest more than 15% of its net assets in illiquid securities, a
term which means securities that cannot be disposed of within seven days in
the normal course of business at approximately the amount at which the Fund
has valued the securities and includes, among other things, repurchase
agreements maturing in more than seven days;
(2) Borrow money except for temporary or emergency purposes (not for
leveraging) in excess of 33 1/3% of the value of the Fund's total assets;
(3) Enter into a futures contract, an option on a futures contract or
an option on foreign currency traded on a CFTC-regulated exchange, in each
case other than for bona fide hedging purposes (as defined by the CFTC), if
the aggregate initial margin and premiums required to establish all of
these positions (excluding the amount by which options are "in-the-money")
exceeds 5% of the liquidation value of the Fund's portfolio, after taking
into account unrealized profits and unrealized losses on any contracts the
Fund has entered into;
(4) Purchase securities on margin, provided that the Fund may obtain
short-term credits as may be necessary for the clearance of purchases and
sales of securities, and further provided that the Fund may make margin
deposits in connection with its use of financial options and futures,
forward and spot currency contracts, swap transactions and other financial
contracts or derivative instruments; or
(5) Mortgage, pledge, or hypothecate any of its assets, provided that
this shall not apply to the transfer of securities in connection with any
permissible borrowing or to collateral arrangements in connection with
permissible activities.
If a percentage restriction on investment or utilization of assets in an
investment policy or limitation is adhered to at the time an investment is made,
a later change in percentage ownership of a security or kind of securities
resulting from changing market values or a similar type of event will not be
considered a violation of a Fund's investment policies or restrictions. A Fund
may exchange securities, exercise conversion or subscription rights, warrants,
or other rights to purchase common stock or other equity securities and may
hold, except to the extent limited by the 1940 Act, any such securities so
acquired without regard to the Fund's investment policies and restrictions. The
original cost of the securities so acquired will be included in any subsequent
determination of a Fund's compliance with the investment percentage limitations
referred to above and in the Prospectus.
24
<PAGE> 351
Investors should refer to each Fund's Prospectus for further information with
respect to that particular Fund's investment objective, which may not be changed
without the approval of its shareholders, and other investment policies,
techniques and limitations, which may be changed without shareholder approval.
EXECUTION OF PORTFOLIO TRANSACTIONS
Subject to policies established by the Trust's Board of Trustees, AIM and/or
the Sub-advisors are responsible for the execution of the Funds' portfolio
transactions and the selection of brokers/dealers who execute such transactions
on behalf of the Funds. In executing transactions, AIM and/or the Sub-advisors
seek the best net results for each Fund, taking into account such factors as the
price (including the applicable brokerage commission or dealer spread), size of
the order, difficulty of execution and operational facilities of the firm
involved. Although AIM and/or the Sub-advisors generally seek reasonably
competitive commission rates and spreads, payment of the lowest commission or
spread is not necessarily consistent with the best net results. While the Funds
may engage in soft dollar arrangements for research services, as described
below, the Funds have no obligation to deal with any broker/dealer or group of
broker/dealers in the execution of portfolio transactions.
Consistent with the interests of the Funds, AIM and/or the Sub-advisors may
select brokers to execute the Funds' portfolio transactions on the basis of the
research services they provide to AIM and/or the Sub-advisors for its use in
managing the Funds and its other advisory accounts. Such services may include
furnishing analysis, reports and information concerning issuers, industries,
securities, geographic regions, economic factors and trends, portfolio strategy,
and performance of accounts; and effecting securities transactions and
performing functions incidental thereto (such as clearance and settlement).
Research and brokerage services received from such broker are in addition to,
and not in lieu of, the services required to be performed by AIM and/or the
Sub-advisors under the applicable investment management and administration
contract. A commission paid to such broker may be higher than that which another
qualified broker would have charged for effecting the same transaction, provided
that AIM and/or the Sub-advisors determine in good faith that such commission
is reasonable in terms either of that particular transaction or the overall
responsibility of AIM and/or the Sub-advisors to the Funds and its other clients
and that the total commissions paid by each Fund will be reasonable in relation
to the benefits received by the Funds over the long term. Research services may
also be received from dealers who execute Fund transactions in OTC markets.
AIM and/or the Sub-advisors may allocate brokerage transactions to
broker/dealers who have entered into arrangements under which the broker/dealer
allocates a portion of the commissions paid by the Fund toward payment of its
expenses, such as transfer agent and custodian fees.
Investment decisions for each Fund and for other investment accounts managed
by AIM and/or the Sub-advisors are made independently of each other in light of
differing conditions. However, the same investment decision occasionally may be
made for two or more of such accounts, including one or more Funds. In such
cases, simultaneous transactions may occur. Purchases or sales are then
allocated as to price or amount in a manner deemed fair and equitable to all
accounts involved. While in some cases this practice could have a detrimental
effect upon the price or value of the security as far as a Fund is concerned, in
other cases AIM and/or the Sub-advisors believe that coordination and the
ability to participate in volume transactions will be beneficial to the Funds.
Under a policy adopted by the Trust's Board of Trustees, and subject to the
policy of obtaining the best net results, AIM and/or the Sub-advisors may
consider a broker/dealer's sale of the shares of the Funds and the other funds
for which AIM or the Sub-advisors serve as investment manager and/or
administrator in selecting broker/dealers for the execution of portfolio
transactions. This policy does not imply a commitment to execute portfolio
transactions through all broker/ dealers that sell shares of the Funds and such
other funds.
Each Fund contemplates purchasing most foreign equity securities in OTC
markets or stock exchanges located in the countries in which the respective
principal offices of the issuers of the various securities are located, if that
is the best available market. The fixed commissions paid in connection with most
such foreign stock transactions generally are higher than negotiated commissions
on U.S. transactions. There generally is less government supervision and
regulation of foreign stock exchanges and brokers than in the United States.
Foreign security settlements may in some instances be subject to delays and
related administrative uncertainties.
Foreign equity securities may be held by a Fund in the form of ADRs, ADSs,
EDRs, GDRs, CDRs or securities convertible into foreign equity securities. ADRs,
ADSs, EDRs, GDRs and CDRs may be listed on stock exchanges, or traded in the 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. The foreign and domestic debt securities and money market instruments in
which the Funds may invest are generally traded in the OTC markets.
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<PAGE> 352
Each Fund contemplates that, consistent with the policy of obtaining the best
net results, brokerage transactions may be conducted through certain companies
that are affiliated with AIM or [either of] the Sub-advisors. The Trust's Board
of Trustees has adopted procedures in conformity with Rule 17e-1 under the 1940
Act to ensure that all brokerage commissions paid to such affiliates are
reasonable and fair in the context of the market in which they are operating.
Any such transactions will be effected and related compensation paid only in
accordance with applicable SEC regulations.
The Funds may engage in certain principal and agency transactions with banks
and their affiliates that own 5% or more of the outstanding voting securities of
a Fund, provided the conditions of an exemptive order received by the Funds from
the SEC are met. In addition, a Fund may purchase or sell a security from or to
another AIM Fund provided the Funds follow procedures adopted by the 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.
For the fiscal year ended December 31, 1997, no payments were made to
affiliated brokers.
[For the fiscal year ended December 31, 1998, no payments were made to
affiliated brokers.]
Aggregate brokerage commissions paid by the Funds for their three most recent
fiscal years were:
<TABLE>
<CAPTION>
FUND 1998 1997 1996
---- ---------- ---------- ----------
<S> <C> <C> <C>
Europe Fund................................... $ $2,217,385 $2,711,139
Japan Fund.................................... $ $ 218,841 $ 253,623
Mid Cap Fund.................................. $ $2,193,539 $2,760,768
Pacific Fund.................................. $ $2,767,789 $5,151,533
</TABLE>
PORTFOLIO TRADING AND TURNOVER
Although the Funds generally do not intend to trade for short-term profits,
the securities held by a Fund will be sold whenever AIM and/or the Sub-advisors
believe it is appropriate to do so, without regard to the length of time a
particular security may have been held. Portfolio turnover rate is calculated by
dividing the lesser of sales or purchases of portfolio securities by each Fund's
average month-end portfolio sales, excluding short-term investments. The
portfolio turnover rate will not be a limiting factor when AIM and/or the
Sub-advisors deem portfolio changes appropriate. Higher portfolio turnover
involves correspondingly greater brokerage commissions and other transaction
costs that a Fund will bear directly and may result in the realization of net
capital gains that are taxable when distributed to the Fund's shareholders. The
portfolio turnover rates for the fiscal years ended December 31, 1998 and 1997
were as follows:
<TABLE>
<CAPTION>
FUND 1998 1997
---- ---- ----
<S> <C> <C>
Europe Fund................................................. % 107%
Japan Fund.................................................. % 58%
Mid Cap Fund................................................ % 190%
Pacific Fund................................................ % 80%
</TABLE>
26
<PAGE> 353
MANAGEMENT
The Trust's Board of Trustees has overall responsibility for the operation of
the Funds. The Board of Trustees has approved all significant agreements between
the Trust and persons or companies furnishing services to the Funds including
the investment management and administration agreement with AIM, the investment
sub-advisory agreement between AIM and the Sub-advisors, the agreements with AIM
Distributors regarding distribution of the Funds' shares, the custody agreement
and the transfer agency agreement. The day-to-day operations of the Funds are
delegated to the officers of the Trust, subject always to the investment
objectives and policies of the Funds and to the general supervision of the
Trust's Board.
TRUSTEES AND EXECUTIVE OFFICERS
The Trust's Trustees and Executive Officers are listed below. Unless otherwise
indicated, the address of each Executive Officer is 11 Greenway Plaza, Suite
100, Houston, Texas 77046.
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------
POSITIONS HELD
NAME, ADDRESS AND AGE WITH REGISTRANT PRINCIPAL OCCUPATION DURING PAST 5 YEARS
- ----------------------------------------------------------------------------------------------------------
<S> <C> <C>
*ROBERT H. GRAHAM, (52) Trustee, Chairman of the Director, President and Chief Executive Officer,
Board and 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, AMVESCAP PLC.
- ----------------------------------------------------------------------------------------------------------
C. DEREK ANDERSON, (57) Trustee Mr. Anderson is President, Plantagenet Capital
220 Sansome Street Management, LLC (an investment partnership); Chief
Suite 400 Executive Officer, Plantagenet Holdings, Ltd. (an
San Francisco, CA 94104 investment banking firm); Director, Anderson Capital
Management, Inc. since 1988; Director, PremiumWear,
Inc. (formerly Munsingwear, Inc.) (a casual apparel
company) and Director, "R" Homes, Inc. and various
other companies. Mr. Anderson is also a trustee of
each of the other investment companies registered
under the 1940 Act that is sub-advised or sub-
administered by the Sub-advisors.
- ----------------------------------------------------------------------------------------------------------
FRANK C. BAYLEY, (59) Trustee Mr. Bayley is a partner of the law firm of Baker &
Two Embarcadero Center McKenzie, and serves as a Director and Chairman of
Suite 2400 C.D. Stimson Company (a private investment company).
San Francisco, CA 94111 Mr. Bayley is also a trustee of each of the other
investment companies registered under the 1940 Act
that is sub-advised or sub-administered by the
Sub-advisors.
- ----------------------------------------------------------------------------------------------------------
ARTHUR C. PATTERSON, Trustee Mr. Patterson is Managing Partner of Accel Partners
(55) (a venture capital firm). He also serves as a
428 University Avenue director of Viasoft and PageMart, Inc. (both public
Palo Alto, CA 94301 software companies) as well as several other
privately held software and communications companies.
Mr. Patterson is also a trustee of each of the other
investment companies registered under the 1940 Act
that is sub-advised or sub-administered by the Sub-
advisors.
- ----------------------------------------------------------------------------------------------------------
</TABLE>
- ---------------
<TABLE>
<S> <C> <C>
* A trustee who is an "interested person" of the Trust and A I M Advisors, Inc. as defined in the 1940
Act.
</TABLE>
27
<PAGE> 354
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------
POSITIONS HELD
NAME, ADDRESS AND AGE WITH REGISTRANT PRINCIPAL OCCUPATION DURING PAST 5 YEARS
- ----------------------------------------------------------------------------------------------------------
<S> <C> <C>
RUTH H. QUIGLEY, (64) Trustee Miss Quigley is a private investor. From 1984 to
1055 California Street 1986, she was President of Quigley Friedlander & Co.,
San Francisco, CA 94108 Inc. (a financial advisory services firm). Miss
Quigley is also a trustee of each of the other
investment companies registered under the 1940 Act
that is sub-advised or sub-administered by the
Sub-advisors.
- ----------------------------------------------------------------------------------------------------------
+JOHN J. ARTHUR, (53) Vice President Director and Senior Vice President, A I M Advisors,
Inc.; Vice President and Treasurer, A I M Management
Group Inc.
- ----------------------------------------------------------------------------------------------------------
KENNETH W. CHANCEY, (52) Vice President and Senior Vice President - Mutual Fund Accounting,
50 California Street Principal Accounting INVESCO (NY), Inc., since 1997; Vice President --
San Francisco, CA 94111 Officer Mutual Fund Accounting, INVESCO (NY), Inc. from
1992 to 1997.
- ----------------------------------------------------------------------------------------------------------
MELVILLE B. COX, (54) 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.
- ----------------------------------------------------------------------------------------------------------
GARY T. CRUM, (50) Vice President Director and President, A I M Capital Management,
Inc.; Director and Senior Vice President, A I M
Management Group Inc. and A I M Advisors, Inc.; and
Director, A I M Distributors, Inc. and AMVESCAP PLC.
- ----------------------------------------------------------------------------------------------------------
SAMUEL D. SIRKO (39) Vice President and Vice President, Assistant General Counsel and
Secretary Assistant Secretary, A I M Advisors, Inc.; and
Assistant General Counsel and Assistant Secretary,
A I M Management Group Inc., A I M Capital
Management, Inc., A I M Distributors, Inc., A I M
Fund Services, Inc., and Fund Management Company.
- ----------------------------------------------------------------------------------------------------------
+CAROL F. RELIHAN, (43) 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.
- ----------------------------------------------------------------------------------------------------------
DANA R. SUTTON, (39) Vice President and Vice President and Fund Controller, A I M Advisors,
Assistant Treasurer Inc.; and Assistant Vice President and Assistant
Treasurer, Fund Management Company.
- ----------------------------------------------------------------------------------------------------------
</TABLE>
- ---------------
+ Mr. Arthur and Ms. Relihan are married to each other.
The Board of Trustees has a Nominating and Audit Committee, comprised of Miss
Quigley and Messrs. Anderson, Bayley and Patterson, which is responsible for
nominating persons to serve as Trustees, reviewing audits of the Trust and the
Funds and recommending firms to serve as independent auditors of the Trust. All
of the Trust's Trustees also serve as directors or trustees of some or all of
the other investment companies managed, administered or advised by AIM. All of
the Trust's Executive Officers hold similar offices with some or all of the
other investment companies managed, administered or advised by AIM. Each Trustee
who is not a director, officer or employee of AIM and/or the Sub-advisors or any
affiliated company is paid aggregate fees of $5,000 a year plus $300 per Fund
for each meeting of the Board attended by the Trustee, and reimbursed travel and
other expenses incurred in connection with attendance at such meetings. Other
Trustees and Officers receive no compensation or expense reimbursements from the
Trust. For the fiscal year ended
28
<PAGE> 355
December 31, 1998, the Trust paid Mr. Anderson, Mr. Bayley, Mr. Patterson and
Miss Quigley, who are not directors, officers or employees of AIM and/or the
Sub-advisors or any affiliated company, total compensation of $ , $ ,
$ and $ , respectively, for their services as Trustees. For the year
ended December 31, 1998, Mr. Anderson, Mr. Bayley, Mr. Patterson and Miss
Quigley, who are not directors, officers or employees of AIM and/or the
Sub-advisors or any other affiliated company, received total compensation of
$ , $ , $ and $ , respectively, from the investment companies
managed or administered by AIM and sub-advised or sub-administered by the
Sub-advisors for which he or she serves as a Trustee. Fees and expenses
disbursed to the Trustees contained no accrued or payable pension or retirement
benefits. [As of April , 1999, the Officers and Trustees and their families as
a group owned in the aggregate beneficially or of record less than 1% of the
outstanding shares of any Fund.]
INVESTMENT MANAGEMENT AND ADMINISTRATION SERVICES
AIM serves as the investment manager and administrator to each Fund under an
investment management and administration contract ("Management Contract")
between the Trust and AIM. INVESCO NY serves as the sub-advisor to Pacific Fund
and Japan Fund under a sub-advisory contract between AIM and INVESCO NY
("Sub-Management Contract"). INVESCO AML serves the sub-adviser to Europe Fund
under a sub-advisory contract between AIM and INVESCO AML ("Sub-Management
Contract"). Both Sub-Management Contracts together with the Management Contract
may be referred to hereafter as the "Management Contracts." As investment
managers and administrators, AIM and/or the Sub-advisors make all investment
decisions for each Fund and administer each Fund's affairs. Among other things,
AIM and/or the Sub-advisors furnish the services and pay the compensation and
travel expenses of persons who perform the executive, administrative, clerical
and bookkeeping functions of the Trust and the Funds and provide suitable office
space and necessary small office equipment and utilities.
The Management Contracts may be renewed for additional one-year terms with
respect to each Fund, provided that any such renewal has been specifically
approved at least annually by: (i) the Board of Trustees or the vote of a
majority of the Fund's outstanding voting securities (as defined in the 1940
Act), and (ii) a majority of Trustees who are not parties to the Management
Contracts or "interested persons" of any such party (as defined in the 1940
Act), cast in person at a meeting called for the specific purpose of voting on
such approval. With respect to any Fund, either the Trust or each of AIM or the
Sub-advisors may terminate the Management Contracts without penalty upon sixty
days' written notice to the other party. The Management Contracts terminate
automatically in the event of their assignment (as defined in the 1940 Act).
The amounts of investment management and administration fees paid by each Fund
to INVESCO NY during the Funds' three most recent fiscal years were as follows:
<TABLE>
<CAPTION>
FUND 1998 1997 1996
---- ---------- ---------- ----------
<S> <C> <C> <C>
Europe Fund................................... * $5,228,246 $5,416,280
Japan Fund.................................... $1,017,788 $1,367,702
Mid Cap Fund.................................. $3,999,732 $4,982,969
Pacific Fund.................................. $3,736,264 $5,260,774
</TABLE>
- ---------------
* From January 1, 1998 through December 13, 1998.
The amount of investment management fees paid to INVESCO AML from December 14,
1998 through December 31, 1998 for the Europe Fund was $ .
DISTRIBUTION SERVICES
Each Fund's Advisor Class shares are offered continuously through the Funds'
principal underwriter and distributor, AIM Distributors, on a "best efforts"
basis without a front-end sales charge or a contingent deferred sales charge.
EXPENSES OF THE FUNDS
Each Fund pays all expenses not assumed by AIM, the Sub-advisors, AIM
Distributors and other agents. These expenses include, in addition to the
advisory, distribution, transfer agency, pricing and accounting agency and
brokerage fees discussed above, legal and audit expenses, custodian fees,
trustees' fees, organizational fees, fidelity bond and other insurance premiums,
taxes, extraordinary expenses and expenses of reports and prospectuses sent to
existing investors. Certain of these expenses, such as custodial fees and
brokerage fees generally are higher for non-U.S. securities. The allocation of
general Trust expenses, and expenses shared by the Funds with one another, are
made on a basis deemed fair and equitable, which may be based on the relative
net assets of the Funds or the nature of the services performed and
29
<PAGE> 356
relative applicability to each Fund. Expenditures, including costs incurred in
connection with the purchase or sale of portfolio securities, that are
capitalized in accordance with generally accepted accounting principles
applicable to investment companies, are accounted for as capital items and not
as expenses. The ratio of each Fund's, other than Mid Cap Fund's, expenses to
its relative net assets can be expected to be higher than the expense ratios of
funds investing solely in domestic securities, since the cost of maintaining the
custody of foreign securities and the rate of investment management fees paid by
each Fund generally are higher than the comparable expenses of such other funds.
NET ASSET VALUE DETERMINATION
The net asset value per share of each Fund is normally determined daily as of
the close of trading on the New York Stock Exchange ("NYSE") (generally 4:00
p.m. Eastern time) on each business day of the Fund. In the event the NYSE
closes early (i.e., before 4:00 p.m. Eastern time) on a particular day, the net
asset value of a Fund is determined as of the close of the NYSE on such day. Net
asset value per share is determined by dividing the value of each 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 each 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 mean between the closing bid and
asked prices on that day. Each security traded in the over-the-counter market
(but not including securities reported on the NASDAQ National Market System) is
valued at the mean between the last bid and asked prices based upon quotes
furnished by market makers for such securities. 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 mean between the closing bid and asked
prices on that day. Debt securities 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, 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. For purposes of
determining net asset value per share, futures and options contracts generally
will be valued 15 minutes after the close of trading of the NYSE.
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 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 of the Fund.
Fund securities primarily traded in foreign markets may be traded in such
markets on days which are not business days of the Funds. Because the net asset
value per share of each Fund is determined only on business days of the Fund,
the net asset value per share of a Fund may be significantly affected on days
when an investor cannot exchange or redeem shares of a Fund.
HOW TO PURCHASE AND REDEEM SHARES
A complete description of the manner in which shares of the Funds may be
purchased appears in the Funds' Prospectuses under the heading "Shareholder
Information -- Purchasing Shares."
Complete information concerning the method of exchanging shares of the Funds
for shares of the other AIM Funds is set forth in the Prospectuses under the
heading "Exchange Privilege."
Information concerning redemption of the Funds' shares is set forth in the
Prospectuses under the heading "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. AIM intends to redeem all
shares of the Funds in cash. In addition to
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the Funds' obligation to redeem shares, AIM Distributors may also repurchase
shares as an accommodation to shareholders. To effect a repurchase, those
dealers who have executed Selected Dealer Agreements with AIM Distributors must
phone orders to the order desk of the Funds at (800) 959-4246 and guarantee
delivery of all required documents in good order. A repurchase is effected at
the net asset value per share of the applicable Fund next determined after the
repurchase order is received. Such an arrangement is subject to timely receipt
by A I M Fund Services, Inc. ("AFS"), of all required documents in good order.
If such documents are not received within a reasonable time after the order is
placed, the order is subject to cancellation. While there is no charge imposed
by 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.
The right of redemption may be suspended or the date of payment postponed when
(a) trading on the 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.
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 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 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
reportable interest, dividend, broker or barter exchange accounts opened
after 1983, or broker accounts considered inactive during 1983.
Except as explained in (5) above, other reportable payments are subject to
backup withholding only if (1) or (2) above applies.
Certain payees and payments are exempt from backup withholding and information
reporting. A complete listing of such exempt entities appears in the
Instructions for the Requester of Form W-9 (which can be obtained from the IRS)
and includes, among others, the following:
- a corporation
- an organization exempt from tax under Section 501(a), an individual
retirement plan (IRA), or a custodial account under Section 403(b)(7)
- the United States or any of its agencies or instrumentalities
- a state, the District of Columbia, a possession of the United States, or any
of their political subdivisions or instrumentalities
- a foreign government or any of its political subdivisions, agencies or
instrumentalities
- an international organization or any of its agencies or instrumentalities
- a foreign central bank of issue
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- a dealer in securities or commodities required to register in the U.S. or a
possession of the U.S.
- a futures commission merchant registered with the Commodity Futures Trading
Commission
- a real estate investment trust
- an entity registered at all times during the tax year under the 1940 Act
- a common trust fund operated by a bank under Section 584(a)
- a financial institution
- 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
- 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 distributions. Under applicable treaty law,
residents of treaty countries may qualify for a reduced rate of withholding or a
withholding exemption.
PROGRAMS AND SERVICES FOR SHAREHOLDERS. The Funds provide certain services for
shareholders and certain investment or redemption programs. See "Exchange
Privilege" and "How to Redeem Shares" in the Prospectuses. All inquiries
concerning these programs should be made directly to A I M Fund Services, Inc.,
P.O. Box 4739, Houston, Texas 77210-4739, toll free at (800) 959-4246.
DIVIDEND ORDER. Dividends may be paid to someone other than the registered
owner, or sent to an address other than the address of record. (Please note that
signature guarantees are required to effect this option.) An investor also may
direct that his or her dividends be invested in one of the other AIM Funds and
there is no sales charge for these investments; initial investment minimums
apply. See "Dividends, Distributions and Tax Matters -- Dividends and
Distributions" in the Prospectuses. To effect this option, please contact your
authorized dealer. For more information concerning AIM Funds other than the
Funds, please obtain a current prospectus by contacting your authorized dealer,
by writing to A I M Fund Services, Inc., P.O. Box 4739, Houston, Texas
77210-4739, or by calling toll free (800) 959-4246.
TAXES
GENERAL
Each Fund is treated as a separate corporation for federal income tax
purposes. To continue to qualify for treatment as a RIC under the Code, each
Fund must distribute to its shareholders for each taxable year at least 90% of
its investment company taxable income (consisting generally of net investment
income, net short-term capital gain and net gains from certain foreign currency
transactions) ("Distribution Requirement") and must meet several additional
requirements. With respect to each Fund, these requirements include the
following: (1) the Fund must derive at least 90% of its gross income each
taxable year from dividends, interest, payments with respect to securities loans
and gains from the sale or other disposition of securities or foreign
currencies, or other income (including gains from options, Futures or Forward
Contracts) derived with respect to its business of investing in securities or
those currencies ("Income Requirement"); and (2) the Diversification
Requirements.
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Dividends and other distributions declared by a Fund in, and payable to
shareholders of record as of a date in, October, November or December of any
year will be deemed to have been paid by the Fund and received by the
shareholders on December 31 of that year if the distributions are paid by the
Fund during the following January. Accordingly, those distributions will be
taxed to shareholders for the year in which that December 31 falls.
If Fund shares are sold at a loss after being held for six months or less, the
loss will be treated as long-term, instead of short-term, capital loss to the
extent of any capital gain distributions received on those shares. Investors
also should be aware that if shares are purchased shortly before the record date
for any dividend or other distribution, the shareholder will pay full price for
the shares and receive some portion of the price back as a taxable distribution.
Each Fund will be subject to a nondeductible 4% excise tax ("Excise Tax") to
the extent it fails to distribute by the end of any calendar year substantially
all of its ordinary income for that year and capital gain net income for the
one-year period ending on October 31 of that year, plus certain other amounts.
FOREIGN TAXES
Dividends and interest received by a Fund, and gains realized thereby, may be
subject to income, withholding or other taxes imposed by foreign countries and
U.S. possessions ("foreign taxes") that would reduce the yield and/or total
return on its securities. Tax conventions between certain countries and the
United States may reduce or eliminate foreign taxes, however, and many foreign
countries do not impose taxes on capital gains in respect of investments by
foreign investors. If more than 50% of the value of a Fund's total assets at the
close of its taxable year consists of securities of foreign corporations, the
Fund will be eligible to, and may, file an election with the Internal Revenue
Service that will enable its shareholders, in effect, to receive the benefit of
the foreign tax credit with respect to any foreign taxes paid by it. Pursuant to
the election, a Fund would treat those taxes as dividends paid to its
shareholders and each shareholder would be required to (1) include in gross
income, and treat as paid by him, his share of those taxes, (2) treat his share
of those taxes and of any dividend paid by the Fund that represents its income
from foreign and U.S. possessions sources as his own income from those sources,
and (3) either deduct the taxes deemed paid by him in computing his taxable
income or, alternatively, use the foregoing information in calculating the
foreign tax credit against his federal income tax. Each Fund will report to its
shareholders shortly after each taxable year their respective shares of the
Fund's foreign taxes and income from sources within foreign countries and U.S.
possessions if it makes this election. Pursuant to the Taxpayer Relief Act of
1997 ("Tax Act"), individuals who have no more than $300 ($600 for married
persons filing jointly) of creditable foreign taxes included on Forms 1099 and
all of whose foreign source income is "qualified passive income" may elect each
year to be exempt from the extremely complicated foreign tax credit limitation
and will be able to claim a foreign tax credit without having to file the
detailed Form 1116 that otherwise is required.
PASSIVE FOREIGN INVESTMENT COMPANIES
Each Fund (other than the Mid Cap Fund) may invest in the stock of "passive
foreign investment companies" ("PFICs"). A PFIC is a foreign
corporation -- other than a "controlled foreign corporation" (i.e., a foreign
corporation in which, on any day during its taxable year, more than 50% of the
total voting power of all voting stock therein or the total value of all stock
therein is owned, directly, indirectly or constructively, by "U.S.
shareholders," defined as U.S. persons that individually own, directly,
indirectly or constructively, at least 10% of that voting power) as to which a
Fund is a U.S. shareholder -- that, in general, meets either of the following
tests: (1) at least 75% of its gross income is passive or (2) an average of at
least 50% of its assets produce, or are held for the production of, passive
income. Under certain circumstances, a Fund will be subject to federal income
tax on a portion of any "excess distribution" received on, or of any gain from
disposition of, stock of a PFIC (collectively "PFIC income"), plus interest
thereon, even if the Fund distributes the PFIC income as a taxable dividend to
its shareholders. The balance of the PFIC income will be included in the Fund's
investment company taxable income and, accordingly, will not be taxable to the
Fund to the extent it distributes that income to its shareholders.
If a Fund invests in a PFIC and elects to treat the PFIC as a "qualified
electing fund" ("QEF"), then in lieu of the foregoing tax and interest
obligation, the Fund would be required to include in income each year its pro
rata share of the QEF's annual ordinary earnings and net capital gain (i.e., the
excess of net long-term capital gain over net short-term capital loss) -- which
most likely would have to be distributed by the Fund to satisfy the Distribution
Requirement and avoid imposition of the Excise Tax -- even if those earnings and
gain were not received by the Fund from the QEF. In most instances, it will be
very difficult, if not impossible, to make this election because of certain
requirements thereof.
A Fund may elect to "mark to market" its stock in any PFIC.
"Marking-to-market," in this context, means including in ordinary income each
taxable year the excess, if any, of the fair market value of the stock over the
Fund's adjusted basis therein as of the end of that year. Pursuant to the
election, a Fund also will be allowed to deduct (as ordinary, not capital,
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loss) the excess, if any, of its adjusted basis in PFIC stock over the fair
market value thereof as of the taxable year-end, but only to the extent of any
net mark-to-market gains with respect to that stock included in income by the
Fund for prior taxable years. A Fund's adjusted basis in each PFIC's stock
subject to the election will be adjusted to reflect the amounts of income
included and deductions taken thereunder. Regulations proposed in 1992 provided
a similar election with respect to the stock of certain PFICs.
NON-U.S. SHAREHOLDERS
Dividends paid by a Fund to a shareholder who, as to the United States, is a
nonresident alien individual, nonresident alien fiduciary of a trust or estate,
foreign corporation or foreign partnership ("foreign shareholder") generally
will be subject to U.S. withholding tax (at a rate of 30% or lower treaty rate).
Withholding will not apply, however, to a dividend paid by a Fund to a foreign
shareholder that is "effectively connected with the conduct of a U.S. trade or
business," in which case the reporting and withholding requirements applicable
to domestic shareholders will apply. A distribution of net capital gain by a
Fund to foreign shareholders generally will be subject to U.S. federal income
tax (at the rates applicable to domestic persons) only if the distribution is
"effectively connected" or the foreign shareholder is treated as a resident
alien individual for federal income tax purposes.
OPTIONS, FUTURES AND FOREIGN CURRENCY TRANSACTIONS
Each Fund's use of hedging transactions, such as selling (writing) and
purchasing options and Futures Contracts and entering into Forward Contracts,
involves complex rules that will determine, for federal income tax purposes, the
amount, character and timing of recognition of the gains and losses a Fund
realizes in connection therewith. Gains from the disposition of foreign
currencies (except certain gains that may be excluded by future regulations),
and gains from options, Futures and Forward Contracts derived by a Fund with
respect to its business of investing in securities or foreign currencies, will
qualify as permissible income under the Income Requirement.
Futures and Forward Contracts that are subject to Section 1256 of the Code
(other than those that are part of a "mixed straddle") ("Section 1256
Contracts") and that are held by a Fund at the end of its taxable year generally
will be deemed to have been sold at that time at market value for federal income
tax purposes. Sixty percent of any net gain or loss recognized on these deemed
sales, and 60% of any net realized gain or loss from any actual sales of Section
1256 Contracts, will be treated as long-term capital gain or loss, and the
balance will be treated as short-term capital gain or loss. That 60% portion
will qualify for the reduced maximum tax rates on noncorporate taxpayers' net
capital gain enacted by the Tax Act -- 20% (10% for taxpayers in the 15%
marginal tax bracket) for gain recognized on capital assets held for more than
18 months -- instead of the 28% rate in effect before that legislation, which
now applies to gain on capital assets held for more than one year but no more
than 18 months.
Section 988 of the Code also may apply to gains and losses from transactions
in foreign currencies, foreign-currency-denominated debt securities and options,
Futures and Forward Contracts on foreign currencies ("Section 988" gains and
losses). Each Section 988 gain or loss generally is computed separately and
treated as ordinary income or loss. In the case of overlap between sections 1256
and 988, special provisions determine the character and timing of any income,
gain or loss. Each Fund attempts to monitor section 988 transactions to minimize
any adverse tax impact.
If a Fund has an "appreciated financial position" -- generally, an interest
(including an interest through an option, Futures or Forward Contract or short
sale) with respect to any stock, debt instrument (other than "straight debt") or
partnership interest the fair market value of which exceeds its adjusted
basis -- and enters into a "constructive sale" of the same or substantially
similar property, the Fund will be treated as having made an actual sale
thereof, with the result that gain will be recognized at that time. A
constructive sale generally consists of a short sale, an offsetting notional
principal contract or Futures or Forward Contract entered into by a Fund or a
related person with respect to the same or substantially similar property. In
addition, if the appreciated financial position is itself a short sale or such a
contract, acquisition of the underlying property or substantially similar
property will be deemed a constructive sale.
The foregoing is a general and abbreviated summary of certain federal tax
considerations affecting the Funds and their shareholders. Investors are urged
to consult their own tax advisers for more detailed information and for
information regarding any foreign, state and local taxes applicable to
distributions received from a Fund.
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SHAREHOLDER INFORMATION
This information supplements the discussion in each Fund's Prospectus under
the title "Shareholder Information."
Timing of Purchase Orders. It is the responsibility of the dealer to ensure
that all orders are transmitted on a timely basis to the Transfer Agent. Any
loss resulting from the dealer's failure to submit an order within the
prescribed time frame will be borne by that dealer. If a check used to purchase
shares does not clear, or if any investment order must be canceled due to
nonpayment, the investor will be responsible for any resulting loss to an AIM
Fund or to AIM Distributors.
Share Certificates. AIM Funds will issue share certificates upon written
request to AFS. Otherwise, shares are held on the shareholder's behalf and
recorded on the Fund books. AIM Funds will not issue certificates for shares
held in prototype retirement plans.
Systematic Withdrawal Plan. Under a Systematic Withdrawal Plan, all shares are
to be held by the Transfer Agent and all dividends and distributions are
reinvested in shares of the applicable AIM Fund by the Transfer Agent. To
provide funds for payments made under the Systematic Withdrawal Plan, the
Transfer Agent redeems sufficient full and fractional shares at their net asset
value in effect at the time of each such redemption.
Payments under a Systematic Withdrawal Plan constitute taxable events. Since
such payments are funded by the redemption of shares, they may result in a
return of capital and in capital gains or losses, rather than in ordinary
income. Because sales charges are imposed on additional purchases of shares
(other than Class B or Class C Shares of the AIM Funds and AIM Cash Reserve
Shares of AIM Money Market Fund), it is disadvantageous to effect such purchases
while a Systematic Withdrawal Plan is in effect.
Each AIM Fund bears its share of the cost of operating the Systematic
Withdrawal Plan.
Terms and Conditions of Exchanges. If a shareholder is exchanging into a fund
paying daily dividends, and the release of the exchange proceeds is delayed for
the foregoing five-day period, such shareholder will not begin to accrue
dividends until the sixth business day after the exchange.
Exchanges by Telephone. AIM Distributors has made arrangements with certain
dealers and investment advisory firms to accept telephone instructions to
exchange shares between any of the AIM Funds. AIM Distributors reserves the
right to impose conditions on dealers or investment advisors who make telephone
exchanges of shares of the funds, including the condition that any such dealer
or investment advisor enter into an agreement (which contains additional
conditions with respect to exchanges of shares) with AIM Distributors. To
exchange shares by telephone, a shareholder, dealer or investment advisor who
has satisfied the foregoing conditions must call AFS at (800) 959-4246. If a
shareholder is unable to reach AFS by telephone, he may also request exchanges
by telegraph or use overnight courier services to expedite exchanges by mail,
which will be effective on the business day received by the Transfer Agent as
long as such request is received prior to NYSE Close. The Transfer Agent and AIM
Distributors may in certain cases be liable for losses due to unauthorized or
fraudulent transactions if they do not follow reasonable procedures for
verification of telephone transactions. Such reasonable procedures may include
recordings of telephone transactions (maintained for six months), requests for
confirmation of the shareholders Social Security Number and current address, and
mailings of confirmations promptly after the transaction.
By signing an account application form, an investor appoints the Transfer
Agent as his true and lawful attorney-in-fact to surrender for redemption any
and all unissued shares held by the Transfer Agent in the designated account(s),
or in any other account with any of the AIM Funds, present or future, which has
the identical registration as the designated account(s), with full power of
substitution in the premises. The Transfer Agent and AIM Distributors are
thereby authorized and directed to accept and act upon any telephone redemptions
of shares held in any of the account(s) listed, from any person who requests the
redemption proceeds to be applied to purchase shares in any one or more of the
AIM Funds, provided that such fund is available for sale and provided that the
registration and mailing address of the shares to be purchased are identical to
the registration of the shares being redeemed. An investor acknowledges by
signing the form that he understands and agrees that the Transfer Agent and AIM
Distributors may not be liable for any loss, expense or cost arising out of any
telephone exchange requests effected in accordance with the authorization set
forth in these instructions if they reasonably believe such request to be
genuine, but may in certain cases be liable for losses due to unauthorized or
fraudulent transactions. The Transfer Agent reserves the right to modify or
terminate the telephone exchange privilege at any time without notice. An
investor may elect not to have this privilege by marking the appropriate box on
the application. Then any exchanges must be effected in writing by the investor.
Redemptions by Telephone. By signing an account application form, an investor
appoints the Transfer Agent as his true and lawful attorney-in-fact to surrender
for redemption any and all unissued shares held by the Transfer Agent in the
designated account(s), present or future, with full power of substitution in the
premises. The Transfer Agent and AIM
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Distributors are thereby authorized and directed to accept and act upon any
telephone redemptions of shares held in any of the account(s) listed, from any
person who requests the redemption. An investor acknowledges by signing the form
that he understands and agrees that the Transfer Agent and AIM Distributors may
not be liable for any loss, expense or cost arising out of any telephone
redemption requests effected in accordance with the authorization set forth in
these instructions if they reasonably believe such request to be genuine, but
may in certain cases be liable for losses due to unauthorized or fraudulent
transactions. Procedures for verification of telephone transactions may include
recordings of telephone transactions (maintained for six months), requests for
confirmation of the shareholder's Social Security Number and current address,
and mailings of confirmations promptly after the transactions. The Transfer
Agent reserves the right to cease to act as attorney-in-fact subject to this
appointment, and AIM Distributors reserves the right to modify or terminate the
telephone redemption privilege at any time without notice. An investor may elect
not to have this privilege by marking the appropriate box on the application.
Then any redemptions must be effected in writing by the investor.
Signature Guarantees. In addition to those circumstances listed in the
"Shareholder Information" section of each Fund's prospectus, signature
guarantees are required in the following situations: (1) requests to transfer
the registration of shares to another owner; (2) telephone exchange and
telephone redemption authorization forms; (3) changes in previously designated
wiring or electronic funds transfer instructions; and (4) written redemptions or
exchanges of shares previously reported as lost, whether or not the redemption
amount is under $50,000 or the proceeds are to be sent to the address of record.
AIM Funds may waive or modify any signature guarantee requirements at any time.
Acceptable guarantors include banks, broker-dealers, credit unions, national
securities exchanges, savings associations and any other organization, provided
that such institution or organization qualifies as an "eligible guarantor
institution" as that term is defined in rules adopted by the SEC, and further
provided that such guarantor institution is listed in one of the reference
guides contained in the Transfer Agent's current Signature Guarantee Standards
and Procedures, such as certain domestic banks, credit unions, securities
dealers, or securities exchanges. The Transfer Agent will also accept signatures
with either: (1) a signature guaranteed with a medallion stamp of the STAMP
Program, or (2) a signature guaranteed with a medallion stamp of the NYSE
Medallion Signature Program, provided that in either event, the amount of the
transaction involved does not exceed the surety coverage amount indicated on the
medallion. For information regarding whether a particular institution or
organization qualifies as an "eligible guarantor institution," an investor
should contact the Client Services Department of AFS.
Dividends and Distributions. In determining the amount of capital gains, if
any, available for distribution, net capital gains are offset against available
net capital losses, if any, carried forward from previous fiscal periods.
For funds that do not declare a dividend daily, such dividends and
distributions will be reinvested at the net asset value per share determined on
the ex-dividend date. For funds that declare a dividend daily, such dividends
and distributions will be reinvested at the net asset value per share determined
on the payable date.
Dividends on Class B and Class C shares are expected to be lower than those
for Class A shares or AIM Cash Reserve Shares because of higher distribution
fees paid by Class B and Class C shares. Dividends on all shares may also be
affected by other class-specific expenses.
Changes in the form of dividend and distribution payments may be made by the
shareholder at any time by notice to the Transfer Agent and are effective as to
any subsequent payment if such notice is received by the Transfer Agent prior to
the record date of such payment. Any dividend and distribution election remains
in effect until the Transfer Agent receives a revised written election by the
shareholder.
Any dividend or distribution paid by a fund which does not declare dividends
daily has the effect of reducing the net asset value per share on the
ex-dividend date by the amount of the dividend or distribution. Therefore, a
dividend or distribution declared shortly after a purchase of shares by an
investor would represent, in substance, a return of capital to the shareholder
with respect to such shares even though it would be subject to income taxes.
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MISCELLANEOUS INFORMATION
AIM was organized in 1976, and together with its subsidiaries, manages or
advises over 110 investment portfolios encompassing a broad range of investment
objectives. AIM is a direct, wholly owned subsidiary of A I M Management Group
Inc. ("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, 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 independent investment management
groups that have a significant presence in the institutional and retail segment
of the investment management industry in North America and Europe, and a growing
presence in Asia.
CUSTODIAN
State Street Bank and Trust Company ("State Street"), 225 Franklin Street,
Boston, MA 02110, acts as custodian of the Funds' assets. State Street is
authorized to establish and has established separate accounts in foreign
currencies and to cause securities of the Company to be held in separate
accounts outside the United States in the custody of non-U.S. banks.
TRANSFER AGENCY AND ACCOUNTING AGENCY SERVICES
The Transfer Agency and Service Agreement between the Trust and 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 Transfer Agency and Service Agreement became effective on
September 8, 1998.
Pursuant to the Transfer Agency and Service Agreement, INVESCO NY, as
Sub-advisor also serves as pricing and accounting agent for the Funds and
received accounting services fees as follows:
<TABLE>
<CAPTION>
1998 1997 1996
---- -------- --------
<S> <C> <C> <C>
Europe Fund.............................................. $ * $138,072 $139,442
Japan Fund............................................... $ $ 26,210 $ 35,119
Mid Cap Fund............................................. $ $142,274 $173,767
Pacific Fund............................................. $ $ 99,321 $135,182
</TABLE>
- ---------------
* From 1/1/98 through 12/13/98
Pursuant to the Transfer Agency and Service Agreement, INVESCO AML, as
Sub-advisor also serves as pricing and accounting agent and received accounting
services fees from 12/14/98 through 12/31/98 for the Europe Fund in the amount
of $ .
INDEPENDENT ACCOUNTANTS
The Trust's and the Funds' independent accountants are PricewaterhouseCoopers
LLP. PricewaterhouseCoopers LLP conducts annual audits of the Funds, assists in
the preparation of the Funds' federal and state income tax returns and consults
with the Trust and the Funds as to matters of accounting, regulatory filings and
federal and state income taxation.
The audited financial statements of the Trust included in this Statement of
Additional Information have been examined by PricewaterhouseCoopers LLP as
stated in their opinion appearing herein and are included in reliance upon such
opinion given upon the authority of that firm as experts in accounting and
auditing.
LEGAL MATTERS
The law firm of Kirkpatrick & Lockhart LLP, 1800 Massachusetts Avenue N.W.,
Washington, DC 20036-1800, acts as counsel to the Trust and the Funds.
SHAREHOLDER LIABILITY
Under Delaware law, the shareholders of the Trust enjoy the same limitations
of liability extended to shareholders of private, for-profit corporations. There
is a remote possibility, however, that under certain circumstances shareholders
of the Trust may be held personally liable for the Trust's obligations. However,
the Trust's Agreement and Declaration of
37
<PAGE> 364
Trust 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 a trustee. If a
shareholder is held personally liable for the obligations of the Trust, the
Trust Agreement provides that the shareholder shall be entitled out of the
assets belonging to the applicable Fund (or allocable to the applicable Class),
to be held harmless from and indemnified against all loss and expense arising
from such liability in accordance with the Trust's Bylaws and applicable law.
Thus, the risk of a shareholder incurring financial loss on account of such
liability is limited to circumstances in which the Trust itself would be unable
to meet its obligations and where the other party was held not to be bound by
the disclaimer.
NAMES
Prior to May 29, 1998, AIM New Pacific Growth Fund operated under the name of
GT Global New Pacific Growth Fund; AIM Europe Growth Fund operated under the
name GT Global Europe Growth Fund; AIM Japan Growth Fund operated under the name
of GT Global Japan Growth Fund; and AIM Mid Cap Growth Fund operated under the
name of GT Global America Mid Cap Growth Fund.
CONTROL PERSONS AND PRINCIPAL HOLDERS OF SECURITIES
To the best knowledge of the Trust, the names and addresses of the holders of
5% or more of the outstanding shares of any class of each Fund's equity
securities as of April , 1999, and the percentage of the outstanding shares
held by such holders are set forth below.
<TABLE>
<CAPTION>
PERCENT
PERCENT OWNED OF
OWNED OF RECORD AND
FUND NAME AND ADDRESS OF OWNER RECORD* BENEFICIALLY
---- ------------------------- -------- ------------
<S> <C> <C> <C>
Europe Growth Fund -- Advisor Class Charles Schwab & Co. Inc. % -0-
For the Excl Benef of Our Custs
Reinvest Account
101 Montgomery St.
San Francisco, CA 94104-4122
Attn: Mutual Funds
MLPF&S for the Sole Benefit of Its % -0-
Customers, Security #
Attn: Fund Administration
4800 Deer Lake Drive East, 2nd Floor
Jacksonville, FL 32246-6484
Europe Growth Fund -- Class A MLPF&S for the Sole Benefit of Its % -0-
Customers, Security #974U7
Attn: Fund Administration
4800 Deer Lake Drive East, 2nd Floor
Jacksonville, FL 32246-6484
Japan Fund -- Advisor Class Donaldson Lufkin Jenrette % -0-
Securities Corp. Inc.
P.O. Box 2052
Jersey City, New Jersey 07303-2052
MLPF&S for the Sole Benefit of Its % -0-
Customers, Security #97K48
Attn: Fund Administration
4800 Deer Lake Drive East, 2nd Floor
Jacksonville, FL 32246-6484
Japan Growth Fund -- Class A MLPF&S for the Sole Benefit of Its % -0-
Customers, Security #974U9
Attn: Fund Administration
4800 Deer Lake Drive East, 2nd Floor
Jacksonville, FL 32246-6484
</TABLE>
- ---------------
<TABLE>
<S> <C> <C> <C>
* The Trust has no knowledge as to whether all or any portion of the shares owned of
record are also owned beneficially.
</TABLE>
38
<PAGE> 365
<TABLE>
<CAPTION>
PERCENT
PERCENT OWNED OF
OWNED OF RECORD AND
FUND NAME AND ADDRESS OF OWNER RECORD* BENEFICIALLY
---- ------------------------- -------- ------------
<S> <C> <C> <C>
Mid Cap Growth Fund -- Class A MLPF&S for the Sole Benefit of Its % -0-
Customers, Security #974U8
Attn: Fund Administration
4800 Deer Lake Drive East, 2nd Floor
Jacksonville, FL 32246-6484
Pacific Fund -- Advisor Class Wells Fargo Bank NA TTEE FBO % -0-
LGT Asset Management AC 5000201000
Serp Prft Shr Pln ###-##-####
P O Box 9800 MAC 9137-027
Calabasas, CA 91372-0800
G.T. Capital Holdings, Inc. 401(k) -0-
FBO %
Account: 045-46-2854
50 California Street, 27th Floor
San Francisco, California 94111-4624
Attn: Human Resources
Pacific Fund -- Class A MLPF&S for the Sole Benefit of Its % -0-
Customers, Security #97043
Attn: Fund Administration
4800 Deer Lake Drive East, 2nd Floor
Jacksonville, FL 32246-6484
</TABLE>
- ---------------
* The Trust has no knowledge as to whether all or any portion of the shares
owned of record are also owned beneficially.
INVESTMENT RESULTS
TOTAL RETURN QUOTATIONS
The standard formula for calculating total return is as follows:
(n)
P(1+T) =ERV
<TABLE>
<S> <C> <C> <C>
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
portions of such period).
</TABLE>
The standardized returns for the Advisor Class shares of the Europe Fund,
stated as average annualized total returns for the periods shown, were:
<TABLE>
<CAPTION>
EUROPE FUND
PERIOD (ADVISOR CLASS)
------ ---------------
<S> <C>
Fiscal year ended December 31, 1998......................... 16.88%
For the five years ended December 31, 1998.................. n/a
For the ten years ended December 31, 1998................... n/a
June 1, 1995 (commencement of operations) through December
31, 1998.................................................. 15.55%
</TABLE>
39
<PAGE> 366
The standardized returns for the Advisor Class shares of the Japan Fund,
stated as average annualized total returns for the periods shown, were:
<TABLE>
<CAPTION>
JAPAN FUND
PERIOD (ADVISOR CLASS)
------ ---------------
<S> <C>
Fiscal year ended December 31, 1998......................... (0.31)%
For the five years ended December 31, 1998.................. n/a
For the ten years ended December 31, 1998................... n/a
June 1, 1995 (commencement of operations) through December
31, 1998.................................................. 0.13%
</TABLE>
The standardized returns for the Advisor Class shares of the Mid Cap Fund,
stated as average annualized total returns for the periods shown, were:
<TABLE>
<CAPTION>
MID CAP FUND
PERIOD (ADVISOR CLASS)
------ ---------------
<S> <C>
Fiscal year ended December 31, 1998......................... (4.59)%
For the five years ended December 31, 1998.................. n/a
For the ten years ended December 31, 1998................... n/a
June 1, 1995 (commencement of operations) through December
31, 1998.................................................. 8.26%
</TABLE>
The standardized returns for the Advisor Class shares of the Pacific Fund,
stated as average annualized total returns for the periods shown, were:
<TABLE>
<CAPTION>
PACIFIC FUND
PERIOD (ADVISOR CLASS)
------ ---------------
<S> <C>
Fiscal year ended December 31, 1998......................... (18.51)%
For the five years ended December 31, 1998.................. n/a
For the ten years ended December 31, 1998................... n/a
June 1, 1995 (commencement of operations) through December
31, 1998.................................................. (15.60)%
</TABLE>
Standard total return quotes may be accompanied by total return figures
calculated by alternative methods. For example, cumulative total return across a
stated period may be calculated as follows:
(n)
P(1+V) =ERV
<TABLE>
<S> <C> <C> <C>
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.
</TABLE>
The aggregate non-standardized returns (not taking sales charges into account)
for the Advisor Class shares of the Europe Fund, stated as aggregate total
returns for the periods shown, were:
<TABLE>
<CAPTION>
EUROPE FUND
PERIOD (ADVISOR CLASS)
------ ---------------
<S> <C>
June 1, 1995 (commencement of operations) through December
31, 1998.................................................. 67.86%
</TABLE>
The aggregate non-standardized returns (not taking sales charges into account)
for the Advisor Class shares of the Japan Fund, stated as aggregate total
returns for the periods shown, were:
<TABLE>
<CAPTION>
JAPAN FUND
PERIOD (ADVISOR CLASS)
------ ---------------
<S> <C>
June 1, 1995 (commencement of operations) through December
31, 1998.................................................. 1.24%
</TABLE>
40
<PAGE> 367
The aggregate non-standardized returns (not taking sales charges into account)
for the Advisor Class shares of the Mid Cap Fund, stated as aggregate total
returns for the periods shown, were:
<TABLE>
<CAPTION>
MID CAP FUND
PERIOD (ADVISOR CLASS)
------ ---------------
<S> <C>
June 1, 1995 (commencement of operations) through December
31, 1998.................................................. 32.89%
</TABLE>
The aggregate non-standardized returns (not taking sales charges into account)
for the Advisor Class shares of the Pacific Fund, stated as aggregate total
returns for the periods shown, were:
<TABLE>
<CAPTION>
PACIFIC FUND
PERIOD (ADVISOR CLASS)
------ ---------------
<S> <C>
June 1, 1995 (commencement of operations) through December
31, 1998.................................................. (45.54)%
</TABLE>
Each Fund's investment results will vary from time to time depending upon
market conditions, the composition of each Fund's portfolio and operating
expenses of each Fund, so that current or past yield or total return should not
be considered representative of what an investment in each Fund may earn in any
future period. These factors and possible differences in the methods used in
calculating investment results should be considered when comparing each Fund's
investment results with those published for other investment companies and other
investment vehicles. Each Fund's results also should be considered relative to
the risks associated with such Fund's investment objective and policies.
PERFORMANCE INFORMATION
Total return figures for the Funds are neither fixed nor guaranteed, and no
Fund's principal is insured. Performance quotations reflect historical
information and should not be considered representative of a Fund's performance
for any period in the future. Performance is a function of a number of factors
which can be expected to fluctuate. 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. Such
publications or media entities may include the following, among others:
Advertising Age
Barron's
Best's Review
Broker World
Business Week
Changing Times
Christian Science Monitor
Consumer Reports
Economist
EuroMoney
FACS of the Week
Financial Planning
Financial Product News
Financial World
Forbes
Fortune
Global Finance
Hartford Courant Inc.
Institutional Investor
Insurance Forum
Insurance Week
Investor's Daily
Journal of the American
Society of CLU & ChFC
Kiplinger Letter
Money
Mutual Fund Forecaster
Mutual Fund Magazine
Nation's Business
New York Times
Pension World
Pensions & Investments
Personal Investor
Financial Services Week
Philadelphia Inquirer
Smart Money
USA Today
U.S. News & World Report
Wall Street Journal
Washington Post
CNN
CNBC
PBS
41
<PAGE> 368
The Funds and AIM Distributors may from time to time, in advertisements, sales
literature and reports furnished to present or prospective shareholders, compare
each Fund with the following, or compare each Fund's performance to performance
data of similar mutual funds as published in the following, among others:
Bank Rate National Monitor Index
Bear Stearns Foreign Bond Index
Bond Buyer Index
CDA/Wiesenberger Investment Company Services
(data and mutual fund rankings and comparisons)
CNBC/Financial News Composite Index
COFI
Consumer Price Index
Datastream
Donoghue's
Dow Jones Industrial Average
EAFE Index
First Boston High Yield Index
Fitch (publications)
Ibbotson Associates International Bond Index
International Bank for Reconstruction and
Development (publications)
International Finance Corporation Emerging
Markets Database
International Financial Statistics
Lehman Bond Indices
Lipper Analytical Data Services, Inc. (data and
mutual fund rankings and comparisons)
Micropal, Inc. (data and mutual fund rankings
and comparisons)
Moody's Investors Service (publications)
Morgan Stanley Capital International All Country
(AC) World Index
Morgan Stanley Capital International World
Indices
Morningstar, Inc. (data and mutual fund rankings
and comparisons)
NASDAQ
Organization for Economic Cooperation and
Development (publications)
Salomon Brothers Global Telecommunications
Index
Salomon Brothers World Government Bond
Index-Non-U.S.
Salomon Brothers World Government Bond
Index
Standard & Poor's (publications)
Standard & Poor's 500 Composite Stock Price
Index
Stangar
Wilshire Associates
World Bank (publications and reports)
The World Bank Publication of Trends in
Developing Countries
Worldscope
Each Fund may also compare its performance to rates on Certificates of Deposit
and other fixed rate investments such as the following:
10-year Treasuries
30-year Treasuries
30-day Treasury Bills
Information relating to foreign market performance, capitalization and
diversification is based on sources believed to be reliable but may be subject
to revision and has not been independently verified by the Funds or AIM
Distributors. Advertising for the Funds may from time to time include
discussions of general economic conditions and interest rates. Advertising for
the Funds may also include reference 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.
42
<PAGE> 369
APPENDIX
DESCRIPTION OF BOND RATINGS
Moody's Investors Service, Inc. ("Moody's") rates the debt securities issued
by various entities from "Aaa" to "C." Investment Grade Ratings are the first
four categories: 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 edged." Interest payments are protected by a large or by an
exceptionally stable margin and principal is secure. While the various
protective elements are likely to change, such changes as can be visualized are
most unlikely to impair the fundamentally strong position of such issues.
Aa -- Bonds which are rated Aa are judged to be of high quality by all
standards. Together with the Aaa group they comprise what are generally known as
high grade bonds. They are rated lower than the best bonds because margins of
protection may not be as large as in Aaa securities or fluctuation of protective
elements may be of greater amplitude or there may be other elements present
which make the long-term 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 some time 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. 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.
Standard & Poor's, a division of the McGraw Hill Companies, Inc. ("S&P") rates
the securities debt of various entities in categories ranging from "AAA" to "D"
according to quality. Investment grade ratings are the first four categories:
AAA -- An obligation rated "AAA" has the highest rating assigned by S&P. The
obligor's capacity to meet its financial commitment on the obligation is
extremely strong. AA -- An obligation rated "AA" differs from the highest rated
obligations only in a small degree. The obligor's capacity to meet its financial
commitment on the obligation is very strong. A -- An obligation rated "A" is
somewhat more susceptible to the adverse effects of changes in circumstances and
economic conditions than obligations in higher rated categories. BBB -- An
obligation rated "BBB" exhibits adequate protection parameters. However, adverse
economic conditions or changing circumstances are more likely to lead to a
weakened capacity of the obligor to meet its financial commitment on the
obligation. BB, B, CCC, CC, C -- Obligations rated "BB," "B," "CCC," "CC," and
"C" are regarded as having significant speculative characteristics. "BB"
indicates the least degree of speculation and "C" the highest. While such
obligations will likely have some quality and protective characteristics, these
may be outweighed by large uncertainties or major exposures to adverse
conditions. BB -- An obligation rated "BB" is less vulnerable to nonpayment than
other speculative issues. However, it faces major ongoing uncertainties or
exposure to adverse business, financial, or economic conditions which could lead
to the obligor's inadequate capacity to meet its financial commitment on the
obligation. B -- An obligation rated "B" is more vulnerable to nonpayment than
obligations rated "BB," but the obligor currently has the capacity to meet its
financial commitment on the obligation. Adverse business, financial, or economic
conditions will likely impair the obligor's capacity or willingness to meet its
financial commitment on the obligation. CCC -- An obligation rated "CCC" is
currently vulnerable to nonpayment, and is dependent upon favorable business,
financial and economic conditions for the obligor to meet its financial
commitment on the obligation. In the event of adverse business, financial, or
economic conditions, the obligor is not likely to have the capacity to meet its
financial commitment on the obligation. CC -- An obligation rated "CC" is
currently highly vulnerable to nonpayment. C -- The "C" rating may be used to
cover a situation where a bankruptcy petition has been filed or similar action
has been taken, but payments on this obligation are being continued. D -- An
obligation rated "D" is in payment default. The "D" rating category is used when
payments on an obligation are not made on the date due even if the applicable
grace period has not expired, unless S&P believes that such payments will be
made during such grace period. The "D" rating also will be used upon the filing
of a bankruptcy petition or the taking of a similar action if payments on an
obligation are jeopardized.
43
<PAGE> 370
PLUS (+) OR MINUS (-): The ratings from "AA" to "CCC" may be modified by the
addition of a plus or minus sign to show relative standing within the major
rating categories.
NR: Indicates that no public rating has been requested, that there is
insufficient information on which to base a rating, or that S&P does not rate a
particular type of obligation as a matter of policy.
DESCRIPTION OF COMMERCIAL PAPER RATINGS
Moody's employs the designation "Prime-1" to indicate commercial paper having
a superior ability for repayment of senior short-term debt obligations. Prime-1
repayment ability will often be evidenced by many of the following
characteristics: leading market positions in well-established industries; high
rates of return on funds employed; conservative capitalization structure with
moderate reliance on debt and ample asset protection; broad margins in earnings
coverage of fixed financial charges and high internal cash generation; and
well-established access to a range of financial markets and assured sources of
alternate liquidity. Issues rated Prime-2 have a strong ability for repayment of
senior short-term debt obligations. This normally will be evidenced by many of
the characteristics cited above but to a lesser degree. Earnings trends and
coverage ratios, while sound, may be more subject to variation. Capitalization
characteristics, while still appropriate, may be more affected by external
conditions. Ample alternative liquidity is maintained.
S&P ratings of commercial paper are graded into several categories ranging
from "A-1" for the highest quality obligations to "D" for the lowest. Issues in
the "A" category are delineated with numbers 1, 2, and 3 to indicate the
relative degree of safety. "A-1" -- This highest category indicates that the
degree of safety regarding timely payment is strong. Those issues determined to
possess extremely strong safety characteristics will be denoted with a plus sign
(+) designation. "A-2" -- Capacity for timely payments on issues with this
designation is satisfactory; however, the relative degree of safety is not as
high as for issues designated "A-1."
ABSENCE OF RATING
Where no rating has been assigned or where a rating has been suspended or
withdrawn, it may be for reasons unrelated to the quality of the issue.
Should no rating be assigned, the reason may be one of the following:
1. An application for rating was not received or accepted.
2. The issue or issuer belongs to a group of securities or companies
that are not rated as a matter of policy.
3. There is a lack of essential data pertaining to the issue or
issuer.
4. The issue was privately placed, in which case the rating is not
published in Moody's publications.
Suspension or withdrawal may occur if new and material circumstances arise,
the effects of which preclude satisfactory analysis; if there is no longer
available reasonable up-to-date data to permit a judgment to be formed; if a
bond is called for redemption; or for other reasons.
Note: Moody's applies numerical modifiers, 1, 2 and 3 in each generic rating
classification from Aa to Caa. 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.
44
<PAGE> 371
FINANCIAL STATEMENTS
FS
<PAGE> 372
STATEMENT OF
ADDITIONAL INFORMATION
ADVISOR CLASS SHARES OF
AIM BASIC VALUE FUND
AIM SMALL CAP GROWTH FUND
(SERIES PORTFOLIOS OF
AIM GROWTH SERIES)
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 OF THE
ABOVE-NAMED FUNDS, A COPY OF WHICH MAY BE OBTAINED FREE
OF CHARGE FROM AUTHORIZED DEALERS OR BY WRITING
A I M DISTRIBUTORS, INC.,
P.O. BOX 4739, HOUSTON, TEXAS 77210-4739
OR BY CALLING (800) 347-4246
---------------------
STATEMENT OF ADDITIONAL INFORMATION DATED MAY 3, 1999
RELATING TO THE AIM BASIC VALUE FUND PROSPECTUS
AND THE AIM SMALL CAP GROWTH FUND PROSPECTUS,
EACH DATED MAY 3, 1999
<PAGE> 373
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE NO.
--------
<S> <C>
INTRODUCTION................................................ 4
GENERAL INFORMATION ABOUT THE FUNDS......................... 4
The Trust and Its Shares.................................. 4
INVESTMENT OBJECTIVES AND POLICIES.......................... 5
Investment Objectives..................................... 5
Selection of Investments.................................. 5
Investments in Other Investment Companies................. 5
Depositary Receipts....................................... 6
Warrants or Rights........................................ 6
Lending of Portfolio Securities........................... 6
Commercial Bank Obligations............................... 6
Repurchase Agreements..................................... 7
Borrowing, Reverse Repurchase Agreements and "Roll"
Transactions........................................... 7
When-Issued or Forward Commitment Securities.............. 7
Temporary Defensive Strategies............................ 8
OPTIONS AND FUTURES......................................... 8
Special Risks of Options and Futures...................... 8
Writing Call Options...................................... 8
Writing Put Options....................................... 9
Purchasing Put Options.................................... 10
Purchasing Call Options................................... 10
Index Options............................................. 11
Interest Rate and Stock Index Futures Contracts........... 11
Options on Futures Contracts.............................. 13
Limitations on Use of Futures and Options on Futures...... 13
Cover..................................................... 13
RISK FACTORS................................................ 14
Illiquid Securities....................................... 14
Debt Securities........................................... 14
Equity Securities......................................... 15
Small Cap Companies....................................... 15
INVESTMENT LIMITATIONS...................................... 15
EXECUTION OF PORTFOLIO TRANSACTIONS......................... 16
Portfolio Trading and Turnover............................ 17
MANAGEMENT.................................................. 18
Trustees and Executive Officers........................... 18
Investment Management and Administration Services Relating
to the Funds and the Portfolios........................ 19
Distribution Services..................................... 20
Expenses of the Funds and the Portfolios.................. 20
NET ASSET VALUE DETERMINATION............................... 20
HOW TO PURCHASE AND REDEEM SHARES........................... 21
Backup Withholding........................................ 21
PROGRAMS AND SERVICES FOR SHAREHOLDERS...................... 22
DIVIDEND ORDER.............................................. 23
TAXES....................................................... 23
Taxation of the Funds..................................... 23
Taxation of the Portfolios................................ 23
Taxation of the Funds' Shareholders....................... 24
</TABLE>
2
<PAGE> 374
<TABLE>
<CAPTION>
PAGE NO.
--------
<S> <C>
SHAREHOLDER INFORMATION..................................... 24
MISCELLANEOUS INFORMATION................................... 26
Custodian................................................. 26
Transfer Agency and Accounting Agency Services............ 26
Independent Accountants................................... 26
Legal Matters............................................. 26
Shareholder Liability..................................... 26
Names..................................................... 27
Control Persons and Principal Holders of Securities....... 27
INVESTMENT RESULTS.......................................... 27
Total Return Quotations................................... 27
Performance Information................................... 29
APPENDIX.................................................... 31
Description of Bond Ratings............................... 31
Description of Commercial Paper Ratings................... 32
Absence of Rating......................................... 32
FINANCIAL STATEMENTS........................................ FS
</TABLE>
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INTRODUCTION
This Statement of Additional Information relates to the Advisor Class shares
of AIM Small Cap Growth Fund, formerly AIM Small Cap Equity Fund ("Small Cap
Fund") and AIM Basic Value Fund, formerly AIM America Value Fund ("Basic Value
Fund") (individually, a "Fund," and collectively, the "Funds"). Each Fund is a
diversified series of AIM Growth Series (the "Trust"), a registered open-end
management investment company. The Small Cap Fund and Basic Value Fund invest
all of their investable assets in the Small Cap Portfolio and Value Portfolio
(individually, a "Portfolio," and collectively, the "Portfolios"), respectively.
A I M Advisors, Inc. ("AIM") serves as the investment manager of and
administrator for the Portfolios and for the Funds.
The Trust is a series mutual fund. The rules and regulations of the Securities
and Exchange Commission (the "SEC") require all mutual funds to furnish
prospective investors certain information concerning the activities of the fund
being considered for investment. This information for Small Cap Fund is included
in a Prospectus dated May 3, 1999, and for Basic Value Fund is included in a
separate Prospectus dated May 3, 1999. Additional copies of the Prospectuses and
this Statement of Additional Information may be obtained without charge by
writing the principal distributor of the Funds' shares, A I M Distributors, Inc.
("AIM Distributors"), P.O. Box 4739, Houston, TX 77210-4739 or by calling (800)
347-4246. Investors must receive a Prospectus before they invest.
This Statement of Additional Information is intended to furnish prospective
investors with additional information concerning the Funds. Some of the
information required to be in this Statement of Additional Information is also
included in the Prospectuses, and, in order to avoid repetition, reference will
be made to sections of the Prospectuses. Additionally, the Prospectuses and this
Statement of Additional Information omit certain information contained in the
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 FUNDS
THE TRUST AND ITS SHARES
The Trust previously operated under the name G.T. Global Growth Series, which
was organized as a Massachusetts business trust on February 19, 1985. The Trust
was reorganized on May 29, 1998 as a Delaware business trust, and is registered
with the SEC as a diversified open-end series management investment company. The
Trust currently consists of the following portfolios: AIM New Pacific Growth
Fund, AIM Europe Growth Fund, AIM Japan Growth Fund, AIM Mid Cap Equity Fund
(formerly known as AIM Mid Cap Growth Fund), AIM Small Cap Growth Fund (formerly
known as Small Cap Equity Fund) and AIM Basic Value Fund (formerly known as AIM
America Value Fund). Each of these funds has four separate classes: Class A,
Class B, Class C and Advisor Class shares. All historical financial and other
information contained in this Statement of Additional Information for periods
prior to May 29, 1998, is that of the series of G.T. Global Growth Series
(renamed AIM Growth Series).
This Statement of Additional Information relates solely to the Advisor Class
shares of the Funds.
The term "majority of the outstanding shares" of the Trust, a particular Fund,
a particular class of a Fund, or a particular Portfolio means, respectively, the
vote of the lesser of (a) 67% or more of the shares of the Trust, such Fund,
such class or such Portfolio present at a meeting of the Trust's shareholders,
if the holders of more than 50% of the outstanding shares of the Trust, such
Fund, such class or such Portfolio are present or represented by proxy, or (b)
more than 50% of the outstanding shares of the Trust, such Fund, such class or
such Portfolio.
Class A, Class B, Class C and Advisor Class shares of each Fund have equal
rights and privileges. Each share of a particular class is entitled to one vote,
to participate equally in dividends and distributions declared by the Trust's
Board of Trustees with respect to the class of such Fund and, upon liquidation
of the Fund, to participate proportionately in the net assets of the Fund
allocable to such class remaining after satisfaction of outstanding liabilities
of the Fund allocable to such class. Fund shares are fully paid, non-assessable
and fully transferable when issued and have no preemptive rights and have such
conversion and exchange rights as set forth in the Prospectus and this Statement
of Additional Information. Fractional shares have proportionately the same
rights, including voting rights, as are provided for a full share.
Shareholders of the Funds do not have cumulative voting rights, and therefore
the holders of more than 50% of the outstanding shares of all Funds voting
together for election of trustees may elect all of the members of the Board of
Trustees of the Trust, in such event, the remaining holders cannot elect any
trustees of the Trust.
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INVESTMENT OBJECTIVES AND POLICIES
INVESTMENT OBJECTIVES
The investment objective of each Fund is long-term capital appreciation. The
Small Cap Fund and Basic Value Fund each seeks to achieve its investment
objective by investing all of its investable assets in the Small Cap Portfolio
and Value Portfolio, respectively, each of which is a subtrust (a "series") of
Growth Portfolio, a Delaware business trust registered as an open-end management
investment company with an investment objective that is identical to that of its
corresponding Fund. Whenever the phrase "all of the Fund's investable assets" is
used herein and in the Prospectus, it means that the only investment securities
that will be held by a Fund will be its interest in its corresponding Portfolio.
A Fund may withdraw its investment in its corresponding Portfolio at any time,
if the Board of Trustees of the Trust determines that it is in the best
interests of the Fund and its shareholders to do so.
A change in a Portfolio's investment objective, policies or limitations that
is not approved by the Board or shareholders of the corresponding Fund could
require that Fund to redeem its interest in the Portfolio. Any such redemption
could result in a distribution in kind of portfolio securities (as opposed to a
cash distribution) by the Portfolio. In addition, a distribution in kind could
result in a less diversified portfolio of investments for the Fund and could
adversely affect its liquidity. Should such a distribution occur, the Fund could
incur brokerage fees or other transaction costs in converting such securities to
cash. Upon redemption, the Board would consider what action might be taken,
including the investment of all the investable assets of the Fund in another
pooled investment entity having substantially the same investment objective as
the Fund or the direct retention by the Fund of its own investment advisor to
manage its assets in accordance with its investment objective, policies and
limitations discussed herein.
In addition to selling an interest therein to the Funds, each Portfolio may
sell interests therein to other non-affiliated investment companies and/or other
institutional investors. All institutional investors in a Portfolio will pay a
proportionate share of that Portfolio's expenses and will invest in the
Portfolio on the same terms and conditions. However, if another investment
company invests any or all of its assets in a Portfolio, it would not be
required to sell its shares at the same public offering price as the
corresponding Fund and may charge different sales commissions. Therefore,
investors in a Fund may experience different returns than investors in another
investment company that invests exclusively in a Portfolio. As of the date of
the Prospectus and this Statement of Additional Information, the Funds are the
only institutional investors in the Portfolios.
The Funds may be materially affected by the actions of other large investors,
if any, in the Portfolios. For example, as with all open-end investment
companies, if a large investor were to redeem its interest in a Portfolio, (1)
the Portfolio's remaining investors could experience higher pro rata operating
expenses, thereby producing lower returns, and (2) the Portfolio's security
holdings may become less diverse, resulting in increased risk. Institutional
investors in a Portfolio that have a greater pro rata ownership interest in the
Portfolio than the corresponding Fund could have effective voting control over
the operation of the Portfolio.
SELECTION OF INVESTMENTS
For purposes of the Prospectus and this Statement of Additional Information,
market capitalization means the total market value of a company's outstanding
common stock. There is no necessary correlation between market capitalization
and the financial attributes (such as level of assets, revenues or income) often
used to measure a company's size.
The debt obligations that the Portfolios may invest in are limited to U.S.
government securities and corporate debt securities of issuers domiciled in the
U.S. Each Portfolio will limit its purchases of debt securities to investment
grade debt obligations. "Investment grade" debt refers to those securities rated
within one of the four highest ratings categories by Moody's Investors Service,
Inc. ("Moody's") or by Standard & Poor's, a division of The McGraw-Hill
Companies, Inc. ("S&P"), or, if not similarly rated by any other nationally
recognized statistical rating organization ("NRSRO"), deemed by AIM to be of
equivalent quality.
AIM allocates investments among fixed income securities of particular issuers
on the basis of its views as to the best values then currently available in the
marketplace. Such values are a function of yield, maturity, issue classification
and quality characteristics, coupled with expectations regarding the economy and
movements in the general level and term of interest rates.
INVESTMENTS IN OTHER INVESTMENT COMPANIES
The Portfolios may invest in the securities of closed-end investment companies
(including investment vehicles or companies advised by AIM or its affiliates
("Affiliated Funds")) within the limits of the Investment Company Act of 1940,
as amended (the "1940 Act"). These limitations currently provide that, in
general, each Portfolio may purchase shares of a closed-end investment company
unless (a) such a purchase would cause a Portfolio to own more than 3% of the
total outstanding voting stock of the investment company or (b) such a purchase
would cause a Portfolio to have more than 5% of its assets invested in the
investment company or more than 10% of its assets invested in an aggregate of
all such investment companies. Investment in investment companies may involve
the payment of substantial premiums above the value of such companies' portfolio
securities. The Portfolios do not intend to invest in such vehicles or funds
unless AIM determines that the potential benefits of such investments justify
the payment of any applicable premiums. As a shareholder in an investment
company, [the Portfolio] would bear [its] ratable share of that investment
company's expenses, including its advisory and administration fees. The return
on such securities will be reduced by operating expenses of such companies
including payments to the investment managers of those investment companies. At
the same time, [the Portfolio] would
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<PAGE> 377
continue to pay [its] own management fees and other expenses. With respect to
investments in Affiliated Funds, AIM waives its advisory fee to the extent that
such fees are based on assets of a Fund invested in Affiliated Funds.
DEPOSITARY RECEIPTS
Each Portfolio may invest up to 10% of its total assets in securities of
foreign issuers in the form of American Depositary Receipts ("ADRs"), American
Depositary Shares ("ADSs"), Global Depositary Receipts ("GDRs") and European
Depositary Receipts ("EDRs") or other securities convertible into securities of
eligible European or Far Eastern issuers. These securities may not necessarily
be denominated in the same currency as the securities for which they may be
exchanged. ADRs and ADSs typically are issued by an American bank or trust
company and evidence ownership of underlying securities issued by a foreign
corporation. EDRs, which are sometimes referred to as Continental Depositary
Receipts ("CDRs"), are issued in Europe typically by foreign banks and trust
companies and evidence ownership of either foreign or domestic securities. GDRs
are similar to EDRs and are designed for use in several international financial
markets. Generally, ADRs and ADSs in registered form are designed for use in
United States securities markets and EDRs in bearer form are designed for use in
European securities markets. For purposes of a Portfolio's investment policies,
its investments in ADRs, ADSs, GDRs and EDRs will be deemed to be investments in
the equity securities representing securities of foreign issuers into which they
may be converted.
ADR facilities may be established as either "unsponsored" or "sponsored."
While ADRs issued under these two types of facilities are in some respects
similar, there are distinctions between them relating to the rights and
obligations of ADR holders and the practices of market participants. A
depository may establish an unsponsored facility without participation by (or
even necessarily the acquiescence of) the issuer of the deposited securities,
although typically the depository requests a letter of non-objection from such
issuer prior to the establishment of the facility. Holders of unsponsored ADRs
generally bear all the costs of such facilities. The depository usually charges
fees upon the deposit and withdrawal of the deposited securities, the conversion
of dividends into U.S. dollars, the disposition of non-cash distributions, and
the performance of other services. The depository of an unsponsored facility
frequently is under no obligation to distribute shareholder communications
received from the issuer of the deposited securities or to pass through voting
rights to ADR holders with respect to the deposited securities. Sponsored ADR
facilities are created in generally the same manner as unsponsored facilities,
except that the issuer of the deposited securities enters into a deposit
agreement with the depository. The deposit agreement sets out the rights and
responsibilities of the issuer, the depository and the ADR holders. With
sponsored facilities, the issuer of the deposited securities generally will bear
some of the costs relating to the facility (such as dividend payment fees of the
depository), although ADR holders continue to bear certain other costs (such as
deposit and withdrawal fees). Under the terms of most sponsored arrangements,
depositories agree to distribute notices of shareholder meetings and voting
instructions, and to provide shareholder communications and other information to
the ADR holders at the request of the issuer of the deposited securities. The
Portfolios may invest in both sponsored and unsponsored ADRs.
WARRANTS OR RIGHTS
Warrants or rights may be acquired by a Portfolio in connection with other
securities or separately and provide the Portfolio with the right to purchase at
a later date other securities of the issuer. Warrants are securities permitting,
but not obligating, their holder to subscribe for other securities or
commodities. Warrants do not carry with them the right to dividends or voting
rights with respect to the securities that they entitle their holder to
purchase, and they do not represent any rights in the assets of the issuer. As a
result, warrants may be considered more speculative than certain other types of
investments. In addition, the value of a warrant does not necessarily change
with the value of the underlying securities and a warrant ceases to have value
if it is not exercised prior to its expiration date.
LENDING OF PORTFOLIO SECURITIES
For the purpose of realizing additional income, each Portfolio may make
secured loans of its portfolio securities amounting to not more than 30% of its
total assets. Securities loans are made to broker/dealers or institutional
investors pursuant to agreements requiring that the loans continuously be
secured by collateral at least equal at all times to the value of the securities
lent, plus any accrued interest, "marked to market" on a daily basis. The
Portfolios may pay reasonable administrative and custodial fees in connection
with the loans of their securities. While the securities loans are outstanding,
the Portfolios will continue to receive the equivalent of the interest or
dividends paid by the issuer on the securities, as well as interest on the
investment of the collateral or a fee from the borrower. Each Portfolio will
have a right to call each loan at any time and obtain the securities within the
stated settlement period. The Portfolios will not have the right to vote equity
securities while they are being lent, but may call in a loan in anticipation of
any important vote. Loans will only be made to firms deemed by AIM to be of good
standing and will not be made unless, in the judgment of AIM, the consideration
to be earned from such loans would justify the risk.
COMMERCIAL BANK OBLIGATIONS
For the purposes of each Portfolio's investment policies with respect to bank
obligations, obligations of foreign branches of U.S. banks are obligations of
the issuing bank and may be general obligations of the parent bank. Such
obligations, however, may be limited by the terms of a specific obligation and
by government regulation. Although a Portfolio typically will acquire
obligations issued and supported by the credit of U.S. banks having total assets
at the time of purchase of $1 billion or more, this $1 billion figure is not an
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investment policy or restriction of any Portfolio. For the purposes of
calculation with respect to the $1 billion figure, the assets of a bank will be
deemed to include the assets of its U.S. and non-U.S. branches.
REPURCHASE AGREEMENTS
A repurchase agreement is a transaction in which a Portfolio purchases a
security from a bank or recognized securities dealer and simultaneously commits
to resell that security to the bank or dealer at an agreed-upon price, date and
market rate of interest unrelated to the coupon rate or maturity of the
purchased security. Although repurchase agreements carry certain risks not
associated with direct investment in securities, including possible decline in
market value of the underlying securities and delays and costs to the Portfolio
if the other party to the repurchase agreement becomes bankrupt, the Portfolios
intend to enter into repurchase agreements only with banks and dealers believed
by AIM to present minimal credit risks in accordance with guidelines approved by
Growth Portfolio's Board of Trustees. AIM will review and monitor the
creditworthiness of such institutions under the general supervision of Growth
Portfolio's Board.
Each Portfolio will invest only in repurchase agreements collateralized at all
times in an amount at least equal to the repurchase price plus accrued interest.
To the extent that the proceeds from any sale of such collateral upon a default
in the obligation to repurchase were less than the repurchase price, the Fund
would suffer a loss. If the financial institution which is party to the
repurchase agreement petitions for bankruptcy or otherwise becomes subject to
bankruptcy or other liquidation proceedings, there may be restrictions on the
Portfolio's ability to sell the collateral and the Portfolio could suffer a
loss. However, with respect to financial institutions whose bankruptcy or
liquidation proceedings are subject to the U.S. Bankruptcy Code, the Portfolios
intend to comply with provisions under the U.S. Bankruptcy Code that would allow
them to immediately to resell the collateral. A Portfolio will not enter into a
repurchase agreement with a maturity of more than seven days if, as a result,
more than 15% of the value of its net assets would be invested in such
repurchase agreements and other illiquid investments.
BORROWING, REVERSE REPURCHASE AGREEMENTS AND "ROLL" TRANSACTIONS
Each Portfolio's borrowings will not exceed 33 1/3% of its total assets, i.e.,
each Portfolio's total assets at all times will equal at least 300% of the
amount of outstanding borrowings. If market fluctuations in the value of a
Portfolio's portfolio 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 total assets for temporary or
emergency purposes other than to meet redemptions. Any borrowing by a Portfolio
may cause greater fluctuation in the value of its corresponding Fund's shares
than would be the case if the Portfolio did not borrow.
Each Portfolio's fundamental investment limitations permit the Portfolio to
borrow money for leveraging purposes. Each Portfolio, however, currently is
prohibited, pursuant to a non-fundamental investment policy, from borrowing
money in order to purchase securities. Nevertheless, this policy may be changed
in the future by Growth Portfolio's Board of Trustees. If a Portfolio employs
leverage in the future, it would be subject to certain additional risks. Use of
leverage creates an opportunity for greater growth of capital but would
exaggerate any increases or decreases in a Portfolio's net asset value. When the
income and gains on securities purchased with the proceeds of borrowings exceed
the costs of such borrowings, a Portfolio's earnings or net asset value will
increase faster than otherwise would be the case; conversely, if such income and
gains fail to exceed such costs, a Portfolio's earnings or net asset value would
decline faster than would otherwise be the case.
Each Portfolio may enter into reverse repurchase agreements. A reverse
repurchase agreement is a borrowing transaction in which the Portfolio transfers
possession of a security to another party, such as a bank or broker/dealer in
return for cash, and agrees to repurchase the security in the future at an
agreed upon price, which includes an interest component. Each Portfolio also may
engage in "roll" borrowing transactions which involve its sale of Government
National Mortgage Association certificates or other securities together with a
commitment (for which the Portfolio may receive a fee) to purchase similar, but
not identical, securities at a future date. Each Portfolio will segregate with a
custodian, liquid assets in an amount sufficient to cover its obligations under
"roll" transactions and reverse repurchase agreements with broker/dealers. No
segregation is required for reverse repurchase agreements with banks.
WHEN-ISSUED OR FORWARD COMMITMENT SECURITIES
Each Portfolio may purchase debt securities on a "when-issued" basis and may
purchase or sell such securities on a "forward commitment" basis in order to
hedge against anticipated changes in interest rates and prices. The price, which
generally is expressed in yield terms, is fixed at the time the commitment is
made, but delivery and payment for the securities take place at a later date.
When-issued securities and forward commitments may be sold prior to the
settlement date, but a Portfolio will purchase or sell when-issued securities or
enter into forward commitments only with the intention of actually receiving or
delivering the securities, as the case may be. No income accrues on securities
that have been purchased pursuant to a forward commitment or on a when-issued
basis prior to delivery to a Portfolio. If a Portfolio disposes of the right to
acquire a when-issued security prior to its acquisition or disposes of its right
to deliver or receive against a forward commitment, it may incur a gain or loss.
At the time a Portfolio enters into a transaction on a when-issued or forward
commitment basis, it will segregate cash or liquid securities equal to the value
of the when-issued or for-
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ward commitment securities with its custodian and will mark to market daily such
assets. There is a risk that the securities may not be delivered and that a
Portfolio may incur a loss.
TEMPORARY DEFENSIVE STRATEGIES
In the interest of preserving shareholders' capital, AIM and/or the
Sub-advisor may employ a temporary defensive investment strategy if it
determines such a strategy to be warranted due to market, economic or political
conditions. During such time, a Portfolio may invest less than 65% of its total
assets in the types of securities covered by its primary investment policy. In
addition, most or all investments of a Portfolio may be made in the United
States and denominated in U.S. dollars. Further, pending investment of proceeds
from new sales of Portfolio shares or to meet its ordinary daily cash needs, a
Portfolio may hold cash (U.S. dollars, foreign currencies or multinational
currency units such as euros) and may invest in high quality foreign or domestic
money market instruments.
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.
OPTIONS AND FUTURES
SPECIAL RISKS OF OPTIONS AND FUTURES
The use of options and futures contracts involves special considerations and
risks, as described below. Risks pertaining to particular instruments are
described in the sections that follow.
(1) Successful use of most of these instruments depends upon AIM's
ability to predict movements of the overall securities markets, which
requires different skills than predicting changes in the prices of
individual securities. While AIM is experienced in the use of these
instruments, there can be no assurance that any particular strategy adopted
will succeed.
(2) There might be imperfect correlation, or even no correlation,
between price movements of an instrument and price movements of the
investments being hedged. For example, if the value of an instrument used
in a short hedge increased by less than the decline in value of the hedged
investment, the hedge would not be fully successful. Such a lack of
correlation might occur due to factors unrelated to the value of the
investments being hedged, such as speculative or other pressures on the
markets in which the hedging instrument is traded. The effectiveness of
hedges using hedging instruments on indices will depend on the degree of
correlation between price movements in the index and price movements in the
investments being hedged.
(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. For example, if a
Portfolio entered into a short hedge because AIM projected a decline in the
price of a security in the Portfolio's securities portfolio, and the price
of that security increased instead, the gain from that increase might be
wholly or partially offset by a decline in the price of the hedging
instrument. Moreover, if the price of the hedging instrument declined by
more than the increase in the price of the security, the Portfolio could
suffer a loss. In either such case, the Portfolio would have been in a
better position had it not hedged at all.
(4) There is no assurance that a liquid secondary market will exist
for any particular option, futures contract or option thereon at any
particular time.
(5) As described below, a Portfolio 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 (i.e., instruments other than purchased options). If the Portfolio
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 Portfolio'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 Portfolio sell a portfolio security at a disadvantageous
time. The Portfolio's ability to close out a position in an instrument
prior to expiration or maturity depends on the existence of a liquid
secondary market or, in the absence of such a market, the ability and
willingness of the other party to the transaction ("contra party") to enter
into a transaction closing out the position. Therefore, there is no
assurance that any position can be closed out at a time and price that is
favorable to a Portfolio.
WRITING CALL OPTIONS
A Portfolio may write (sell) call options on securities and indices. Call
options generally will be written on securities that, in the opinion of AIM, are
not expected to make any major price moves in the near future but that, over the
long term, are deemed to be attractive investments for the Portfolio.
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A call option gives the holder (buyer) the right to purchase a security 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 the writer of a call option continues, he or she may be assigned an exercise
notice, requiring him or her to deliver the underlying security against payment
of the exercise price. This obligation terminates upon the expiration of the
call option, or such earlier time at which the writer effects a closing purchase
transaction by purchasing an option identical to that previously sold.
Portfolio securities on which call options may be written will be purchased
solely on the basis of investment considerations consistent with each
Portfolio's investment objective. When writing a call option, a Portfolio, in
return for the premium, gives up the opportunity for profit from a price
increase in the underlying security above the exercise price, and retains the
risk of loss should the price of the security decline. Unlike one who owns
securities not subject to an option, a Portfolio has no control over when it may
be required to sell the underlying securities, since most options may be
exercised at any time prior to the option's expiration. If a call option that a
Portfolio has written expires, the Portfolio 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 during the option period. If the call option is
exercised, the Portfolio will realize a gain or loss from the sale of the
underlying security, which will be increased or offset by the premium received.
Neither Portfolio considers a security covered by a call option to be "pledged"
as that term is used in the Portfolio's policy that limits the pledging or
mortgaging of its assets.
Writing call options can serve as a limited short hedge because declines in
the value of the hedged investment would be offset to the extent of the premium
received for writing the option. However, if the security appreciates to a price
higher than the exercise price of the call option, it can be expected that the
option will be exercised and a Portfolio will be obligated to sell the security
at less than its market value.
The premium that a Portfolio receives for writing a call option is deemed to
constitute the market value of an option. The premium a Portfolio will receive
from writing a call option will reflect, among other things, the current market
price of the underlying investment, the relationship of the exercise price to
such market price, the historical price volatility of the underlying investment
and the length of the option period. In determining whether a particular call
option should be written, AIM will consider the reasonableness of the
anticipated premium and the likelihood that a liquid secondary market will exist
for those options.
Closing transactions will be effected in order to realize a profit on an
outstanding call option, to prevent an underlying security from being called, or
to permit the sale of the underlying security. Furthermore, effecting a closing
transaction will permit a Portfolio to write another call option on the
underlying security with either a different exercise price or expiration date or
both.
Each Portfolio will pay transaction costs in connection with the writing of
options and in entering into closing purchase contracts. Transaction costs
relating to options activity normally are higher than those applicable to
purchases and sales of portfolio securities.
The exercise price of the options may be below, equal to or above the current
market values of the underlying securities or indices at the time the options
are written. From time to time, a Portfolio may purchase an underlying security
for delivery in accordance with the exercise of an option, rather than
delivering such security from its portfolio. In such cases, additional costs
will be incurred.
A Portfolio will realize a profit or loss from a closing purchase transaction
if the cost of the transaction is less or more, respectively, than the premium
received from writing the option. Because increases in the market price of a
call option generally will reflect increases in the market price of the
underlying security, any loss resulting from the repurchase of a call option is
likely to be offset in whole or in part by appreciation of the underlying
security owned by the Portfolio.
WRITING PUT OPTIONS
The Portfolios may write put options on securities and indices. A put option
gives the purchaser of the option the right to sell, and the writer (seller) the
obligation to buy, the underlying security at the exercise price at any time
until (American style) or on (European style) the expiration date. The operation
of put options in other respects, including their related risks and rewards, is
substantially identical to that of call options.
A Portfolio generally would write put options in circumstances where AIM
wishes to purchase the underlying security for the Portfolio's portfolio at a
price lower than the current market price of the security. In such event, the
Portfolio 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.
Since the Portfolio also would receive interest on debt securities maintained to
cover the exercise price of the option, this technique could be used to enhance
current return during periods of market uncertainty. The risk in such a
transaction would be that the market price of the underlying security would
decline below the exercise price, less the premium received.
Writing put options can serve as a limited long hedge because increases in the
value of the hedged investment would be offset to the extent of the premium
received for writing the option. However, if the security depreciates to a price
lower than the exercise price of the put option, it can be expected that the put
option will be exercised and a Portfolio will be obligated to purchase the
security at greater than its market value.
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PURCHASING PUT OPTIONS
Each Portfolio may purchase put options on securities and indices. As the
holder of a put option, a Portfolio would have the right to sell the underlying
security at the exercise price at any time until (American style) or on
(European style) the expiration date. A Portfolio may enter into closing sale
transactions with respect to such options, exercise such options or permit such
options to expire.
A Portfolio may purchase a put option on an underlying security ("protective
put") owned by the Portfolio in order to protect against an anticipated decline
in the value of the security. Such hedge protection is provided only during the
life of the put option when the Portfolio, as the holder of the put option, is
able to sell the underlying security at the put exercise price regardless of any
decline in the underlying security's market price. The premium paid for the put
option and any transaction costs would reduce any profit otherwise available for
distribution when the security eventually is sold.
A Portfolio also may purchase put options at a time when the Portfolio does
not own the underlying security. By purchasing put options on a security it does
not own, a Portfolio seeks to benefit from a decline in the market price of the
underlying security. If the put option is not sold when it has remaining value,
and if the market price of the underlying security remains equal to or greater
than the exercise price during the life of the put option, the Portfolio will
lose its entire investment in the put option. In order for the purchase of a put
option to be profitable, the market price of the underlying security must
decline sufficiently below the exercise price to cover the premium and
transaction costs, unless the put option is sold in a closing sale transaction.
PURCHASING CALL OPTIONS
Each Portfolio may purchase call options on securities and indices. As the
holder of a call option, a Portfolio would have the right to purchase the
underlying security at the exercise price at any time until (American style) or
on (European style) the expiration date. A Portfolio 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 Portfolio for the purpose of acquiring the
underlying security for its portfolio. Utilized in this fashion, the purchase of
call options would enable a Portfolio to acquire the security at the exercise
price of the call option plus the premium paid. At times, the net cost of
acquiring the security in this manner may be less than the cost of acquiring the
security directly. This technique also may be useful to the Portfolios in
purchasing a large block of securities that would be more difficult to acquire
by direct market purchases. As long as it holds such a call option, rather than
the underlying security itself, a Portfolio is partially protected from any
unexpected decline in the market price of the underlying security 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 Portfolio also may purchase call options on underlying securities it owns
to avoid realizing losses that would result in a reduction of its current
return. For example, where a Portfolio has written a call option on an
underlying security having a current market value below the price at which it
purchased the security, an increase in the market price could result in the
exercise of the call option written by the Portfolio and the realization of a
loss on the underlying security. Accordingly, the Portfolio could purchase a
call option on the same underlying security, which could be exercised to fulfill
the Portfolio's delivery obligations under its written call (if it is
exercised). This strategy could allow the Portfolio to avoid selling the
portfolio security at a time when it has an unrealized loss; however, the
Portfolio would have to pay a premium to purchase the call option plus
transaction costs.
Aggregate premiums paid for put and call options will not exceed 5% of such
Portfolio's total assets at the time of purchase.
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 Portfolio will not purchase an OTC option unless AIM 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.
The staff of the SEC considers purchased OTC options to be illiquid
securities. A Portfolio may also sell OTC options and, in connection therewith,
set aside assets or cover its obligations with respect to OTC options written by
the Portfolio. The assets used as cover for OTC options written by a Portfolio
will be considered illiquid unless the OTC options are sold to qualified dealers
who agree that the Portfolio 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.
A Portfolio's ability to establish and close out positions in exchange-listed
options depends on the existence of a liquid market. A Portfolio intends to
purchase or write only those exchange-listed options for which there appears to
be a liquid secondary market. However, there can be no assurance that such a
market will exist at any particular time. Closing transactions can be made for
OTC options only by negotiating directly with the contra party or by a
transaction in the secondary market if any such market exists. Although a
Portfolio will enter into OTC options only with contra parties that are expected
to be capable of entering into closing transac-
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tions with the Portfolio, there is no assurance that the Portfolio 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 contra party, the Portfolio might
be unable to close out an OTC option position at any time prior to its
expiration.
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. When a Portfolio writes
a call on an index, it receives a premium and agrees that, prior to the
expiration date, the purchaser of the call, upon exercise of the call, will
receive from the Portfolio an amount of cash if the closing level of the index
upon which the call is based is greater than the exercise price of the call. The
amount of cash is equal to the difference between the closing price of the index
and the exercise price of the call times a specified multiple (the
"multiplier"), which determines the total dollar value for each point of such
difference. When a Portfolio buys a call on an index, it pays a premium and has
the same rights as to such call as are indicated above. When a Portfolio buys a
put on an index, it pays a premium and has the right, prior to the expiration
date, to require the seller of the put, upon the Portfolio's exercise of the
put, to deliver to the Portfolio an amount of cash if the closing level of the
index upon which the put is based is less than the exercise price of the put,
which amount of cash is determined by the multiplier, as described above for
calls. When a Portfolio writes a put on an index, it receives a premium and the
purchaser has the right, prior to the expiration date, to require the Portfolio
to deliver to it an amount of cash equal to the difference between the closing
level of the index and the exercise price times the multiplier, if the closing
level is less than the exercise price.
The risks of investment in index options may be greater than options on
securities. Because index options are settled in cash, when a Portfolio writes a
call on an index it cannot provide in advance for its potential settlement
obligations by acquiring and holding the underlying securities. A Portfolio can
offset some of the risk of writing a call index option position by holding a
diversified portfolio of securities similar to those on which the underlying
index is based. However, a Portfolio 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 vary
from the value of the index.
Even if a Portfolio could assemble a securities portfolio that exactly
reproduced the composition of the underlying index, it still would not be fully
covered from a risk standpoint because of the "timing risk" inherent in writing
index options. When an index option is exercised, the amount of cash that the
holder is entitled to receive is determined by the difference between the
exercise price and the closing index level on the date when the option is
exercised. As with other kinds of options, the Portfolio, as the call writer,
will not know that it has been assigned until the next business day at the
earliest. The time lag between exercise and notice of assignment poses no risk
for the writer of a covered call on a specific underlying security, such as
common stock, because there the writer's obligation is to deliver the underlying
security, not to pay its value as of a fixed time in the past. So long as the
writer already owns the underlying security, it can satisfy its settlement
obligations by simply delivering it, and the risk that its value may have
declined since the exercise date is borne by the exercising holder. In contrast,
even if the writer of an index call holds securities that exactly match the
composition of the underlying index, it will not be able to satisfy its
assignment obligations by delivering those securities against payment of the
exercise price. Instead, it will be required to pay cash in an amount based on
the closing index value on the exercise date; and by the time it learns that it
has been assigned, the index may have declined, with a corresponding decline in
the value of its securities portfolio. This "timing risk" is an inherent
limitation on the ability of index call writers to cover their risk exposure by
holding securities positions.
If a Portfolio purchases an index option and exercises it before the closing
index value for that day is available, it runs the risk that the level of the
underlying index may subsequently change. If such a change causes the exercised
option to fall out-of-the-money, the Portfolio will be required to pay the
difference between the closing index value and the exercise price of the option
(times the applicable multiplier) to the assigned writer.
INTEREST RATE AND STOCK INDEX FUTURES CONTRACTS
A Portfolio may enter into interest rate or stock index futures contracts
("Futures" or "Futures Contracts") as a hedge against changes in prevailing
levels of interest rates or stock price levels in order to establish more
definitely the effective return on securities held or intended to be acquired by
the Portfolio. A Portfolio's hedging may include sales of Futures as an offset
against the effect of expected increases in interest rates or decreases in stock
prices, and purchases of Futures as an offset against the effect of expected
declines in interest rates or increases in stock prices.
The Portfolios only will enter into Futures Contracts that are traded 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 by the Commodity Futures Trading
Commission ("CFTC").
Although techniques other than sales and purchases of Futures Contracts could
be used to reduce a Portfolio's exposure to interest rate and stock market
fluctuations, the Portfolio may be able to hedge its exposure more effectively
and at a lower cost through using Futures Contracts.
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A Futures Contract provides for the future sale by one party and purchase by
another party of a specified amount of a specific financial instrument for a
specified price at a designated date, time and place. A stock index Futures
Contract 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 at
which the Futures Contract is originally struck; 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 Futures Contract is outstanding.
Although Futures Contracts typically require future delivery of and payment
for financial instruments, Futures Contracts usually are closed out before the
delivery date. Closing out an open Futures Contract sale or purchase is effected
by entering into an offsetting Futures Contract purchase or sale, respectively,
for the same aggregate amount of the identical financial instrument and the same
delivery date. If the offsetting purchase price is less than the original sale
price, the Portfolio realizes a gain; if it is more, the Portfolio realizes a
loss. Conversely, if the offsetting sale price is more than the original
purchase price, the Portfolio realizes a gain; if it is less, the Portfolio
realizes a loss. The transaction costs also must be included in these
calculations. There can be no assurance, however, that a Portfolio will be able
to enter into an offsetting transaction with respect to a particular Futures
Contract at a particular time. If a Portfolio is not able to enter into an
offsetting transaction, the Portfolio will continue to be required to maintain
the margin deposits on the Futures Contract.
As an example of an offsetting transaction, the contractual obligations
arising from the sale of one September stock index Futures Contract on an
exchange may be fulfilled at any time before delivery under the Futures Contract
is required (i.e., on a specified date in September, the "delivery month") by
the purchase of the same September stock index Futures Contract on the same
exchange. In such instance, the difference between the price at which the
Futures Contract was sold and the price paid for the offsetting purchase, after
allowance for transaction costs, represents the profit or loss to the Portfolio.
Each Portfolio's Futures transactions will be entered into for hedging
purposes only; that is, Futures Contracts will be sold to protect against a
decline in the price of securities that a Portfolio owns, or Futures Contracts
will be purchased to protect a Portfolio against an increase in the price of
securities it has committed to purchase or expects to purchase.
"Margin" with respect to Futures Contracts is the amount of funds that must be
deposited by a Portfolio in order to initiate Futures trading and to maintain
the Portfolio's open positions in Futures Contracts. A margin deposit made when
the Futures Contract is entered into ("initial margin") is intended to ensure
the Portfolio's performance under the Futures Contract. The margin required for
a particular Futures Contract is set by the exchange on which the Futures
Contract 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 the Portfolio entered into the Futures
Contract will be made on a daily basis as the price of the underlying security
or index fluctuates making the Futures Contract more or less valuable, a process
known as marking-to-market.
Risks of Using Futures Contracts. The prices of Futures Contracts are volatile
and are influenced by, among other things, actual and anticipated changes in
interest rates and in stock market movements, which in turn are affected by
fiscal and monetary policies and national and international political and
economic events.
There is a risk of imperfect correlation between changes in prices of Futures
Contracts and prices of the securities in the Portfolio's portfolio being
hedged. The degree of imperfection of correlation depends upon circumstances
such as variations in speculative market demand for Futures and for securities,
including technical influences in Futures trading; and differences between the
financial instruments being hedged and the instruments underlying the standard
Futures Contracts available for trading. A decision of whether, when and how to
hedge involves skill and judgment, and even a well-conceived hedge may be
unsuccessful to some degree because of unexpected market behavior or interest
rate trends.
Because of the low margin deposits required, Futures trading involves an
extremely high degree of leverage. As a result, a relatively small price
movement in a Futures Contract may result in immediate and substantial loss, as
well as gain, to the investor. For example, if at the time of purchase, 10% of
the value of the Futures Contract is deposited as margin, a subsequent 10%
decrease in the value of the Futures Contract would result in a total loss of
the margin deposit, before any deduction for the transaction costs, if the
account were then closed out. A 15% decrease would result in a loss equal to
150% of the original margin deposit, if the Futures Contract were closed out.
Thus, a purchase or sale of a Futures Contract may result in losses in excess of
the amount invested in the Futures Contract.
Most U.S. Futures exchanges limit the amount of fluctuation permitted in
Futures Contract and options on Futures Contract prices during a single trading
day. The daily limit establishes the maximum amount that the price of a Futures
Contract or option may vary either up or down from the previous day's settlement
price at the end of a trading session. Once the daily limit has been reached in
a particular type of Futures Contract or option, no trades may be made on that
day at a price beyond that limit. The daily limit governs only price movement
during a particular trading day and therefore does not limit potential losses,
because the limit may prevent the liquidation of unfavorable positions. Futures
Contract and option prices occasionally have moved to the daily limit for
several consecutive trading days with little or no trading, thereby preventing
prompt liquidation of positions and subjecting some traders to substantial
losses.
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If a Portfolio were unable to liquidate a Futures or option on Futures
position due to the absence of a liquid secondary market or the imposition of
price limits, it could incur substantial losses. The Portfolio would continue to
be subject to market risk with respect to the position. In addition, except in
the case of purchased options, the Portfolio 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.
Certain characteristics of the Futures market might increase the risk that
movements in the prices of Futures Contracts or options on Futures might not
correlate perfectly with movements in the prices of the investments being
hedged. For example, all participants in the Futures and options on Futures
markets are subject to daily variation margin calls and might be compelled to
liquidate Futures or options on Futures positions whose prices are moving
unfavorably to avoid being subject to further calls. These liquidations could
increase price volatility of the instruments and distort the normal price
relationship between the Futures or options and the investments being hedged.
Also, because initial margin deposit requirements in the Futures market are less
onerous than margin requirements in the securities markets, there might be
increased participation by speculators in the Futures markets. This
participation also might cause temporary price distortions. In addition,
activities of large traders in both the Futures and securities markets involving
arbitrage, "program trading" and other investment strategies might result in
temporary price distortions.
OPTIONS ON FUTURES CONTRACTS
Options on Futures Contracts are similar to options on securities, 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, which represents the amount by which the
market price of the Futures Contract, at exercise, exceeds (in the case of a
call) or is less than (in the case of a put) the exercise price of the option on
the Futures Contract. If an option is exercised on the last trading day prior to
the expiration date of the option, the settlement will be made entirely in cash
equal to the difference between the exercise price of the option and the closing
level of the securities or index upon which the Futures Contract is based on the
expiration date. Purchasers of options who fail to exercise their options prior
to the exercise date suffer a loss of the premium paid.
The purchase of call options on Futures can serve as a long hedge, and the
purchase of put options on Futures can serve as a short hedge. Writing call
options on Futures can serve as a limited short hedge, and writing put options
on Futures can serve as a limited long hedge, using a strategy similar to that
used for writing options on securities or indices.
If a Portfolio writes an option on a Futures Contract, it will be required to
deposit initial and variation margin pursuant to requirements similar to those
applicable to Futures Contracts. Premiums received from the writing of an option
on a Futures Contract are included in the initial margin deposit.
A Portfolio may seek to close out an option position by selling an option
covering the same Futures Contract and having the same exercise price and
expiration date. The ability to establish and close out positions on such
options is subject to the maintenance of a liquid secondary market.
LIMITATIONS ON USE OF FUTURES AND OPTIONS ON FUTURES
To the extent that a Portfolio enters into Futures Contracts and options on
Futures Contracts, in each case other than for bona fide hedging purposes (as
defined by the CFTC), the aggregate initial margin and premiums required to
establish these positions (excluding the amount by which options are
"in-the-money") will not exceed 5% of the liquidation value of the Portfolio's
portfolio, after taking into account unrealized profits and unrealized losses on
any contracts the Portfolio has entered into. In general, a call option on a
Futures Contract is "in-the-money" if the value of the underlying Futures
Contract exceeds the strike, i.e., exercise, price of the call; a put option on
a Futures Contract is "in-the-money" if the value of the underlying Futures
Contract is exceeded by the strike price of the put. This guideline may be
modified by Growth Portfolio's Board of Trustees without a shareholder vote.
This limitation does not limit the percentage of a Portfolio's assets at risk to
5%.
COVER
Transactions using Futures Contracts and options (other than options purchased
by a Portfolio) expose the Portfolio to an obligation to another party. A
Portfolio will not enter into any such transactions unless it owns either (1) an
offsetting ("covered") position in securities or other options or Futures
Contracts, or (2) cash, receivables and short-term debt securities with a value
sufficient at all times to cover its potential obligations not covered as
provided in (1) above. Each Portfolio will comply with SEC guidelines regarding
cover for these instruments and, if the guidelines so require, set aside cash or
liquid securities.
Assets used as cover or held in a segregated account cannot be sold while the
position in the corresponding Futures Contract or option is open, unless they
are replaced with other appropriate assets. If a large portion of a Portfolio's
assets are used for cover or otherwise set aside, it could affect portfolio
management or the Portfolio's ability to meet redemption requests or other
current obligations.
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RISK FACTORS
ILLIQUID SECURITIES
A Portfolio may invest up to 15% of its net assets in illiquid securities.
Securities may be considered illiquid if a Portfolio cannot reasonably expect
within seven days to sell the securities for approximately the amount at which
the Portfolio values such securities. See "Investment Limitations." The sale of
illiquid securities, if they can be sold at all, generally will require more
time and result in higher brokerage charges or dealer discounts and other
selling expenses than the sale of liquid securities such as securities eligible
for trading on U.S. securities exchanges or in the OTC markets. Moreover,
restricted securities, which may be illiquid for purposes of this limitation,
often sell, if at all, at a price lower than similar securities that are not
subject to restrictions on resale.
Illiquid securities include those that are subject to restrictions contained
in the securities laws of other countries. However, securities that are freely
marketable in the country where they are principally traded, but would not be
freely marketable in the United States, will not be considered illiquid. Where
registration is required, a Portfolio may be obligated to pay all or part of the
registration expenses and a considerable period may elapse between the time of
the decision to sell and the time the Portfolio may be permitted to sell a
security under an effective registration statement. If, during such a period,
adverse market conditions were to develop, the Portfolio might obtain a less
favorable price than prevailed when it decided to sell.
Not all restricted securities are illiquid. In recent years a large
institutional market has developed for certain securities that are not
registered under the Securities Act of 1933, as amended (the "1933 Act"),
including private placements, repurchase agreements, commercial paper, foreign
securities and corporate bonds and notes. These instruments are often restricted
securities because the securities are sold in transactions not requiring
registration. Institutional investors generally will not seek to sell these
instruments to the general public, but instead will often depend either on an
efficient institutional market in which such unregistered securities can be
readily resold or on an issuer's ability to honor a demand for repayment.
Therefore, the fact that there are contractual or legal restrictions on resale
to the general public or certain institutions is not dispositive of the
liquidity of such investments.
Rule 144A under the 1933 Act establishes a "safe harbor" from the registration
requirements of the 1933 Act for resales of certain securities to qualified
institutional buyers. Institutional markets for restricted securities have
developed as a result of Rule 144A, providing both readily ascertainable values
for restricted securities and the ability to liquidate an investment to satisfy
share redemption orders. Such markets include automated systems for the trading,
clearance and settlement of unregistered securities of domestic and foreign
issuers, such as the PORTAL System sponsored by the National Association of
Securities Dealers, Inc. An insufficient number of qualified institutional
buyers interested in purchasing Rule 144A-eligible restricted securities held by
a Portfolio, however, could affect adversely the marketability of such portfolio
securities and the Portfolio might be unable to dispose of such securities
promptly or at favorable prices.
With respect to liquidity determinations generally, Growth Portfolio's Board
of Trustees has the ultimate responsibility for determining whether specific
securities, including restricted securities eligible for resale to qualified
institutional buyers pursuant to Rule 144A under the 1933 Act, are liquid or
illiquid. That Board of Trustees has delegated the function of making day-to-day
determinations of liquidity to AIM in accordance with procedures approved by
that Board of Trustees. AIM takes into account a number of factors in reaching
liquidity decisions, including: (i) the frequency of trading in the security;
(ii) the number of dealers who make quotes for the security; (iii) the number of
dealers who have undertaken to make a market in the security; (iv) the number of
other potential purchasers; and (v) the nature of the security and how trading
is effected (e.g., the time needed to sell the security, how offers are
solicited, and the mechanics of transfer). AIM monitors the liquidity of
securities in each Portfolio's securities portfolio and periodically reports
such determinations to the Growth Portfolio's Board of Trustees. If the
liquidity percentage restriction of a Portfolio is satisfied at the time of
investment, a later increase in the percentage of illiquid securities held by a
Portfolio resulting from a change in market value or assets will not constitute
a violation of that restriction. If as a result of a change in market value or
assets, the percentage of illiquid securities held by the Portfolio increases
above the applicable limit, AIM will take appropriate steps to bring the
aggregate amount of illiquid assets back within the prescribed limitations as
soon as reasonably practicable, taking into account the effect of any
disposition on that Portfolio.
DEBT SECURITIES
Each Portfolio may invest in U.S. government securities and corporate debt
securities of issuers domiciled in the United States. Each Portfolio limits its
purchases of debt securities to investment grade obligations. The value of debt
securities held by a Portfolio will fluctuate with changes in the perceived
creditworthiness of the issues of such securities and interest rates. In
selecting debt securities for investment, AIM reviews and monitors the
creditworthiness of each issuer and issue and analyzes interest rate trends and
specific developments that may affect individual issuers, in addition to relying
on ratings assigned by S&P, Moody's or another nationally recognized statistical
rating organization ("NRSRO") as indicators of quality. Debt securities rated
Baa by Moody's or BBB by S&P are investment grade, although Moody's considers
securities rated Baa to have speculative characteristics. Changes in economic
conditions or other circumstances are more likely to lead to a weakened capacity
for such securities to make principal and interest payments than is the case for
higher grade debt securities. Each Portfolio is also permitted to purchase debt
securities that are not rated by S&P, Moody's or another NRSRO but that AIM
determines to be of comparable quality to that of rated securities in which the
Portfolio
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may invest. Such securities are included in the computation of any percentage
limitations applicable to the comparable rated securities.
Ratings of debt securities represent the rating agencies' opinions regarding
their quality, are not a guarantee of quality and may be reduced after a
Portfolio has acquired the security. AIM will consider such an event in
determining whether a Portfolio should continue to hold the security but is not
required to dispose of it. Credit ratings attempt to evaluate the safety of
principal and interest payments and do not reflect an assessment of the
volatility of the security's market value or the liquidity of an investment in
the security. Also, NRSROs may fail to make timely changes in credit ratings in
response to subsequent events, so that an issuer's current financial condition
may be better or worse than the rating indicates. For a description of Moody's
and S&P ratings, see "Description of Debt Ratings" herein.
EQUITY SECURITIES
Equity securities, particularly common stocks, generally represent the most
junior position in an issuer's capital structure and entitle holders to an
interest in the assets of an issuer, if any, remaining after all more senior
claims have been satisfied.
SMALL CAP COMPANIES
The Small Cap Portfolio invests primarily in equity securities of U.S. small
cap companies. Small cap companies may be more vulnerable than larger companies
to adverse business, economic or market developments. Small cap companies may
also have more limited product lines, markets or financial resources than
companies with larger capitalizations, and may be more dependent on a relatively
small management group. In addition, small cap companies may not be well-known
to the investing public, may not have institutional ownership and may have only
cyclical, static or moderate growth prospects. Most small cap company stocks pay
low or no dividends. Securities of small cap companies are generally less liquid
and their prices more volatile than those of securities of larger companies. The
securities of some small cap companies may not be widely traded, and the
Portfolio's position in securities of such companies may be substantial in
relation to the market for such securities. Accordingly, it may be difficult for
the Portfolio to dispose of securities of these small cap companies at
prevailing market prices in order to meet redemptions.
INVESTMENT LIMITATIONS
The Small Cap Fund and Basic Value Fund each has the following fundamental
investment policy to enable it to invest in the Small Cap Portfolio and Value
Portfolio, respectively:
Notwithstanding any other investment policy of the Fund, the Fund may invest
all of its investable assets (cash, securities and receivables related to
securities) in an open-end management investment company having substantially
the same investment objective, policies and limitations as the Fund.
All other investment policies and limitations of each Fund and its
corresponding Portfolio are identical. Therefore, although the following
discusses certain investment policies and limitations of each Portfolio and
Growth Portfolio's Board of Trustees, it applies equally to each Fund and the
Trust's Board of Trustees.
Each Portfolio has adopted the following investment limitations as fundamental
policies that (unless otherwise noted) may not be changed without approval by
the affirmative vote of a majority of the outstanding shares of the Portfolio.
Whenever a Fund is requested to vote on a change in the investment limitations
of its corresponding Portfolio, the Fund will hold a meeting of its shareholders
and will cast its votes as instructed by the shareholders. Neither Portfolio
may:
(1) Purchase or sell real estate, except that investments in
securities of issuers that invest in real estate and investments in
mortgage-backed securities, mortgage participations or other instruments
supported by interests in real estate are not subject to this limitation,
and except that a Portfolio may exercise rights under agreements relating
to such securities, including the right to enforce security interests and
to hold real estate acquired by reason of such enforcement until that real
estate can be liquidated in an orderly manner.
(2) Purchase or sell physical commodities, but a Portfolio may
purchase, sell or enter into financial options and futures, forward and
spot currency contracts, swap transactions and other financial contracts or
derivative instruments.
(3) Issue senior securities or borrow money, except as permitted under
the 1940 Act and then not in excess of 33 1/3% of a Portfolio's total
assets (including the amount borrowed but reduced by any liabilities not
constituting borrowings) at the time of the borrowing, except that a
Portfolio may borrow up to an additional 5% of its total assets (not
including the amount borrowed) for temporary or emergency purposes;
(4) Make loans, except through loans of portfolio securities or
through repurchase agreements, provided that for purposes of this
limitation, the acquisition of bonds, debentures, other debt securities or
instruments, or participations or other interests therein and investments
in government obligations, commercial paper, certificates of deposit,
banker's acceptances or similar instruments will not be considered the
making of a loan;
15
<PAGE> 387
(5) Purchase securities of any one issuer if, as a result, more than
5% of a Portfolio's total assets would be invested in securities of that
issuer or the Portfolio would own or hold more than 10% of the outstanding
voting securities of that issuer, except that up to 25% of the Portfolio's
total assets may be invested without regard to this limitation, and except
that this limitation does not apply to securities issued or guaranteed by
the U.S. government, its agencies or instrumentalities or to securities
issued by other investment companies;
(6) Engage in the business of underwriting securities of other
issuers, except to the extent that a Portfolio might be considered an
underwriter under the federal securities laws in connection with its
disposition of portfolio securities; or
(7) Purchase any security if, as a result of that purchase, 25% or
more of a Portfolio's total assets would be invested in securities of
issuers having their principal business activities in the same industry,
except that this limitation does not apply to securities issued or
guaranteed by the U.S. government, its agencies or instrumentalities.
The following investment limitations of each Portfolio are not fundamental
policies and may be changed by vote of Growth Portfolio's Board of Trustees
without shareholder approval. Neither Portfolio may:
(1) Invest more than 15% of its net assets in illiquid securities, a
term which means securities that cannot be disposed of within seven days in
the normal course of business at approximately the amount at which the
Portfolio has valued the securities and includes, among other things,
repurchase agreements maturing in more than seven days;
(2) Borrow money except for temporary or emergency purposes (not for
leveraging) in excess of 33 1/3% of the value of the Portfolio's total
assets;
(3) Enter into a futures contract or an option on a futures contract,
in each case other than for bona fide hedging purposes (as defined by the
CFTC), if the aggregate initial margin and premiums required to establish
all of these positions (excluding the amount by which options are
"in-the-money") exceeds 5% of the liquidation value of the Portfolio's
portfolio, after taking into account unrealized profits and unrealized
losses on any contracts the Portfolio has entered into;
(4) Purchase securities of other investment companies, except to the
extent permitted by the 1940 Act, in the open market at no more than
customary commission rates. This limitation does not apply to securities
received or acquired as dividends, through offers of exchange, or as a
result of reorganization, consolidation, or merger;
(5) Purchase securities on margin, provided that a Portfolio may
obtain short-term credits as may be necessary for the clearance of
purchases and sales of securities, and further provided that a Portfolio
may make margin deposits in connection with its use of financial options
and futures, forward and spot currency contracts, swap transactions and
other financial contracts or derivative instruments; or
(6) Mortgage, pledge, or hypothecate any of its assets, provided that
this shall not apply to the transfer of securities in connection with any
permissible borrowing or to collateral arrangements in connection with
permissible activities.
The approval of the Fund and of other investors in a Portfolio, if any, is not
required to change the investment objective, policies or limitations of that
Portfolio, unless otherwise specified. Written notice shall be provided to
shareholders of a Fund thirty days prior to any changes in a Portfolio's
investment objective.
If a percentage restriction on investment or utilization of assets in an
investment policy or limitation is adhered to at the time an investment is made,
a later change in percentage ownership of a security or kind of securities
resulting from changing market values or a similar type of event will not be
considered a violation of a Portfolio's investment policies or restrictions. A
Portfolio may exchange securities, exercise conversion or subscription rights,
warrants, or other rights to purchase common stock or other equity securities
and may hold, except to the extent limited by the 1940 Act, any such securities
so acquired without regard to the Portfolio's investment policies and
limitations. The original cost of the securities so acquired will be included in
any subsequent determination of a Portfolio's compliance with the investment
percentage limitations referred to above and in the Prospectus.
Investors should refer to each Fund's prospectus for further information with
respect to that particular Fund's investment objective, which may not be changed
without the approval of its shareholders, and other investment policies
techniques and limitations, which may be changed without shareholder approval.
EXECUTION OF PORTFOLIO TRANSACTIONS
Subject to policies established by Growth Portfolio's Board of Trustees, AIM
is responsible for the execution of the Portfolios' securities transactions and
the selection of brokers/dealers who execute such transactions on behalf of the
Portfolios. In executing transactions, AIM seeks the best net results for each
Portfolio, taking into account such factors as the price (including the
applicable brokerage commission or dealer spread), size of the order, difficulty
of execution and operational facilities of the firm involved. Although AIM
generally seeks reasonably competitive commission rates and spreads, payment of
the lowest commission or spread is not necessarily consistent with the best net
results. While the Portfolios may engage in soft dollar arrangements for
research services, as
16
<PAGE> 388
described below, the Portfolios have no obligation to deal with any
broker/dealer or group of broker/dealers in the execution of portfolio
transactions.
Consistent with the interests of the Portfolios, AIM may select brokers to
execute the Portfolios' securities transactions on the basis of the research
services they provide to AIM for its use in managing the Portfolios and its
other advisory accounts. Such services may include furnishing analyses, reports
and information concerning issuers, industries, securities, geographic regions,
economic factors and trends, portfolio strategy, and performance of accounts,
and effecting securities transactions and performing functions incidental
thereto (such as clearance and settlement). Research and brokerage services
received from such broker are in addition to, and not in lieu of, the services
required to be performed by AIM under the applicable investment management and
administration contract. A commission paid to such broker may be higher than
that which another qualified broker would have charged for effecting the same
transaction, provided that AIM determines in good faith that such commission is
reasonable in terms either of that particular transaction or the overall
responsibility of AIM to the Portfolios and its other clients and that the total
commissions paid by each Fund will be reasonable in relation to the benefits
received by the Portfolios over the long term. Research services may also be
received from dealers who execute Portfolio transactions in OTC markets.
AIM may allocate brokerage transactions to broker/dealers who have entered
into arrangements under which the broker/dealer allocates a portion of the
commissions paid by the Portfolio toward payment of its expenses, such as
custodian fees.
Investment decisions for each Portfolio and for other investment accounts
managed by AIM are made independently of each other in light of differing
conditions. However, the same investment decision occasionally may be made for
two or more of such accounts, including one or more Portfolios. In such cases,
simultaneous transactions may occur. Purchases or sales are then allocated as to
price or amount in a manner deemed fair and equitable to all accounts involved.
While in some cases this practice could have a detrimental effect upon the price
or value of the security as far as a Portfolio is concerned, in other cases AIM
believes that coordination and the ability to participate in volume transactions
will be beneficial to the Portfolios.
Under a policy adopted by Growth Portfolio's Board of Trustees, and subject to
the policy of obtaining the best net results, AIM may consider a broker/dealer's
sale of the shares of the Funds and the other funds for which AIM serves as
investment manager and/or administrator in selecting broker/dealers for the
execution of portfolio transactions. This policy does not imply a commitment to
execute portfolio transactions through all broker/dealers that sell shares of
the Funds and such other funds.
Each Portfolio contemplates that, consistent with the policy of obtaining the
best net results, brokerage transactions may be conducted through certain
companies that are affiliated with AIM. Growth Portfolio's Board of Trustees has
adopted procedures in conformity with Rule 17e-1 under the 1940 Act to ensure
that all brokerage commissions paid to such affiliates are reasonable and fair
in the context of the market in which they are operating. Any such transactions
will be effected and related compensation paid only in accordance with
applicable SEC regulations.
The Portfolios may engage in certain principal and agency transactions with
banks and their affiliates that own 5% or more of the outstanding voting
securities of a Portfolio, provided the conditions of an exemptive order
received by the Funds from the SEC are met. In addition, a Portfolio may
purchase or sell a security from or to another AIM Fund provided the Portfolios
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.
For the fiscal years ended December 31, 1998, 1997 and 1996, the Small Cap
Portfolio paid aggregate brokerage commissions of $ , $91,971 and
$54,241, respectively. For the fiscal years ended December 31, 1998, 1997 and
1996, the Value Portfolio paid aggregate brokerage commissions of $ ,
$22,202 and $37,380, respectively.
PORTFOLIO TRADING AND TURNOVER
Although the Portfolios generally do not intend to trade for short-term
profits, the securities held by a Portfolio will be sold whenever AIM believes
it is appropriate to do so, without regard to the length of time a particular
security may have been held. Portfolio turnover rate is calculated by dividing
the lesser of sales or purchases of portfolio securities by each Portfolio's
average month-end portfolio value, excluding short-term investments. The
portfolio turnover rate will not be a limiting factor when AIM deems portfolio
changes appropriate. Higher portfolio turnover involves correspondingly greater
brokerage commissions and other transaction costs that a Portfolio will bear
directly and may result in the realization of net capital gains that are taxable
when distributed to each corresponding Fund's shareholders. For the fiscal years
ended December 31, 1998 and 1997, the Small Cap Portfolio's and Value
Portfolio's portfolio turnover rates were % and 233%, and % and 93%,
respectively.
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<PAGE> 389
MANAGEMENT
The Trust's Board of Trustees has overall responsibility for the operations of
the Funds. The Board of Trustees has approved all significant agreements between
the Trust and persons or companies furnishing services to the Funds including
the investment management and administration agreement with AIM, the agreements
with AIM Distributors regarding distribution of the Funds' shares, the custody
agreement and the transfer agency agreement. The day-to-day operations of the
Funds are delegated to the officers of the Trust, subject always to the
investment objectives and policies of the Funds and to the general supervision
of the Trust's Board.
TRUSTEES AND EXECUTIVE OFFICERS
The Trust's Trustees and Executive Officers are listed below. Unless otherwise
indicated, the address of each Executive Officer is 11 Greenway Plaza, Suite
100, Houston, Texas 77046.
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------
POSITIONS HELD
NAME, ADDRESS AND AGE WITH REGISTRANT PRINCIPAL OCCUPATION DURING PAST 5 YEARS
--------------------- --------------- ----------------------------------------
- ---------------------------------------------------------------------------------------------------------------
<S> <C> <C>
*ROBERT H. GRAHAM (52) Trustee, Chairman of the Director, President and Chief Executive Officer,
Board and 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, AMVESCAP PLC.
- ---------------------------------------------------------------------------------------------------------------
C. DEREK ANDERSON (57) Trustee Mr. Anderson is President, Plantagenet Capital
220 Sansome Street Management, LLC (an investment partnership); Chief
Suite 400 Executive Officer, Plantagenet Holdings, Ltd. (an
San Francisco, CA 94104 investment banking firm); Director, Anderson Capital
Management, Inc. since 1988; Director, PremiumWear,
Inc. (formerly Munsingwear, Inc.) (a casual apparel
company) and Director, "R" Homes, Inc. and various
other companies. Mr. Anderson is also a trustee of
each of the other investment companies registered
under the 1940 Act that is sub-advised or
sub-administered by the Sub-advisor.
- ---------------------------------------------------------------------------------------------------------------
FRANK S. BAYLEY (59) Trustee Mr. Bayley is a partner of the law firm of Baker &
Two Embarcadero Center McKenzie, and serves as a Director and Chairman of
Suite 2400 C.D. Stimson Company (a private investment company).
San Francisco, CA 94111 Mr. Bayley is also a trustee of each of the other
investment companies registered under the 1940 Act
that is sub-advised or sub-administered by the
Sub-advisor.
- ---------------------------------------------------------------------------------------------------------------
ARTHUR C. PATTERSON (55) Trustee Mr. Patterson is Managing Partner of Accel Partners
428 University Avenue (a venture capital firm). He also serves as a
Palo Alto, CA 94301 director of Viasoft and PageMart, Inc. (both public
software companies), as well as several other
privately held software and communications companies.
Mr. Patterson is also a trustee of each of the other
investment companies registered under the 1940 Act
that is sub-advised or sub-administered by the
Sub-advisor.
- ---------------------------------------------------------------------------------------------------------------
RUTH H. QUIGLEY (64) Trustee Miss Quigley is a private investor. From 1984 to
1055 California Street 1986, she was President of Quigley Friedlander & Co.,
San Francisco, CA 94108 Inc. (a financial advisory services firm). Miss
Quigley is also a trustee of each of the other
investment companies registered under the 1940 Act
that is sub-advised or sub-administered by the
Sub-advisor.
- ---------------------------------------------------------------------------------------------------------------
+ JOHN J. ARTHUR (53) Vice President Director and Senior Vice President, A I M Advisors,
Inc.; Vice President and Treasurer, A I M Management
Group Inc.
- ---------------------------------------------------------------------------------------------------------------
</TABLE>
- ---------------
<TABLE>
<S> <C> <C>
* A trustee who is an "interested person" of the Trust and A I M Advisors, Inc. as defined in the 1940 Act.
</TABLE>
<TABLE>
<S> <C> <C>
+ Mr. Arthur and Ms. Relihan are married to each other.
</TABLE>
18
<PAGE> 390
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------
POSITIONS HELD
NAME, ADDRESS AND AGE WITH REGISTRANT PRINCIPAL OCCUPATION DURING PAST 5 YEARS
--------------------- --------------- ----------------------------------------
- ---------------------------------------------------------------------------------------------------------------
<S> <C> <C>
KENNETH W. CHANCEY (52) Vice President and Senior Vice President -- Mutual Fund Accounting,
50 California Street Principal Accounting INVESCO (NY), Inc., since 1997; Vice President --
San Francisco, CA 94111 Officer Mutual Fund Accounting, INVESCO (NY), Inc.
from 1992 to 1997.
- ---------------------------------------------------------------------------------------------------------------
MELVILLE B. COX (54) 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.
- ---------------------------------------------------------------------------------------------------------------
GARY T. CRUM (50) Vice President Director and President, A I M Capital Management,
Inc.; Director and Senior Vice President, A I M
Management Group Inc. and A I M Advisors, Inc.; and
Director, A I M Distributors, Inc. and AMVESCAP PLC.
- ---------------------------------------------------------------------------------------------------------------
SAMUEL D. SIRKO (39) Vice President and Vice President, Assistant General Counsel and
Secretary Assistant Secretary, A I M Advisors, Inc.; and
Assistant General Counsel and Assistant Secretary,
A I M Management Group Inc., A I M Capital
Management, Inc., A I M Distributors, Inc., A I M
Fund Services, Inc. and Fund Management Company.
- ---------------------------------------------------------------------------------------------------------------
+ CAROL F. RELIHAN (43) 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.
- ---------------------------------------------------------------------------------------------------------------
DANA R. SUTTON (39) Vice President and Vice President and Fund Controller, A I M Advisors,
Assistant Treasurer Inc.; and Assistant Vice President and Assistant
Treasurer, Fund Management Company.
- ---------------------------------------------------------------------------------------------------------------
</TABLE>
- ---------------
+ Mr. Arthur and Ms. Relihan are married to each other.
The Board of Trustees has a Nominating and Audit Committee, comprised of Miss
Quigley and Messrs. Anderson, Bayley and Patterson, which is responsible for
nominating persons to serve as Trustees, reviewing audits of the Trust and the
Funds and recommending firms to serve as independent auditors of the Trust. All
of the Trust's Trustees also serve as directors or trustees of some or all of
the other investment companies managed, administered or advised by AIM. All of
the Trust's Executive Officers hold similar offices with some or all of the
other investment companies managed, administered or advised by AIM. Each Trustee
who is not a director, officer or employee of AIM or any affiliated company is
paid aggregate fees of $5,000 a year, plus $300 per Fund for each meeting of the
Board attended, and reimbursed travel and other expenses incurred in connection
with attendance at such meetings. Other Trustees and Officers receive no
compensation or expense reimbursements from the Trust. For the fiscal year ended
December 31, 1998, Mr. Anderson, Mr. Bayley, Mr. Patterson and Miss Quigley, who
are not directors, officers or employees of AIM or any affiliated company,
received total compensation of $ , $ , $ and $ ,
respectively, from the Trust for their services as Trustees. For the year ended
December 31, 1998, Mr. Anderson, Mr. Bayley, Mr. Patterson and Miss Quigley, who
are not directors, officers or employees of AIM or any other affiliated company,
received total compensation of $ , $ , $ and $ ,
respectively, from the investment companies managed or administered by AIM for
which he or she served as a Trustee. Fees and expenses disbursed to the Trustees
contained no accrued or payable pension or retirement benefits. [As of April ,
1999, the Officers and Trustees and their families as a group owned in the
aggregate beneficially or of record less than 1% of the shares of the Basic
Value Fund and less than 1% of the shares of the Small Cap Fund.]
INVESTMENT MANAGEMENT AND ADMINISTRATION SERVICES RELATING TO THE FUNDS AND THE
PORTFOLIOS
AIM serves as each Portfolio's investment manager and administrator under an
investment management and administration contract between the Growth Portfolio
and AIM ("Portfolio Management Contract"). AIM serves as administrator to each
Fund under an administration contract between the Trust and AIM ("Administration
Contract").
The Administration Contracts will not be deemed advisory contracts, as defined
under the 1940 Act. As investment managers and administrators, AIM makes all
investment decisions for each Portfolio and, as administrator, AIM administers
each Portfolio's and Fund's affairs. Among other things, AIM furnishes the
services and pays the compensation and travel expenses of persons who per-
19
<PAGE> 391
form the executive, administrative, clerical and bookkeeping functions of the
Portfolios and the Funds and provide suitable office space and necessary small
office equipment and utilities.
The Portfolio Management Contracts may be renewed with respect to a Portfolio
for one-year terms, provided that any such renewal has been specifically
approved at least annually by: (i) the Portfolio's Board of Trustees or the vote
of a majority of the Portfolio's outstanding voting securities (as defined in
the 1940 Act), and (ii) a majority of the Portfolio's Trustees who are not
parties to the Portfolio Management Contracts or "interested persons" of any
such party (as defined in the 1940 Act), cast in person at a meeting called for
the specific purpose of voting on such approval. The Portfolio Management
Contracts provide that with respect to each Portfolio, and the Administration
Contracts provide that with respect to each Fund, either the Trust, the
Portfolio or AIM may terminate the contracts without penalty upon sixty days'
written notice to the other party. The Portfolio Management Contracts terminate
automatically in the event of its assignment (as defined in the 1940 Act).
[For the fiscal years ended December 31, 1997 and December 31, 1996, the Small
Cap Portfolio and the Value Portfolio paid fees of $120,544 and $73,312; and
$74,372 and $27,487, respectively, to INVESCO (NY), Inc. For the same periods,
the Small Cap Fund and Basic Value Fund paid administration fees of $63,460 and
$39,004; and $39,171 and $14,722, respectively, to INVESCO (NY), Inc. For the
fiscal years ended December 31, 1997 and December 31, 1996, INVESCO (NY), Inc.
reimbursed the Small Cap Portfolio and Value Portfolio for their respective
investment management and administration fees in the amounts of $67,837 and
$73,312; and $74,372 and $27,487, respectively; for the same periods, INVESCO
(NY), Inc. reimbursed the Small Cap Fund and Basic Value Fund for their
respective administration fees in the amounts of $63,460 and $39,004; and
$39,171 and $14,722, respectively. Accordingly, INVESCO (NY), Inc. reimbursed
each Fund and its corresponding Portfolio investment management and
administration fees in the aggregate amounts of $131,297 and $112,316; and
$113,543 and $42,209, respectively.]
[For the fiscal years ended December 31, 1997 and December 31, 1996, INVESCO
(NY), Inc., pursuant to its voluntary expense undertaking, reimbursed the Small
Cap Fund and Basic Value Fund for expenses in the additional amounts of $0 and
$58,269; and $38,419 and $164,683, respectively.]
DISTRIBUTION SERVICES
Each Fund's Advisor Class shares are offered continuously through the Funds'
principal underwriter and distributor, AIM Distributors on a "best efforts"
basis pursuant to a distribution contract between the Trust and AIM Distributors
without a front-end sales charge or a contingent deferred sales charge.
EXPENSES OF THE FUNDS AND THE PORTFOLIOS
Each Fund and each Portfolio pays all expenses not assumed by the AIM, AIM
Distributors and other agents. These expenses include, in addition to the
advisory, distribution, transfer agency, pricing and accounting agency and
brokerage fees discussed above, legal and audit expenses, custodian fees,
trustees' fees, organizational fees, fidelity bond and other insurance premiums,
taxes, extraordinary expenses and expenses of reports and prospectuses sent to
existing investors. The allocation of general Trust expenses, and expenses
shared by the Funds with one another, are made on a basis deemed fair and
equitable, which may be based on the relative net assets of the Funds or the
nature of the services performed and relative applicability to each Fund.
Similarly, the allocation of general Growth Portfolio expenses, and expenses
shared by the Portfolios with each other, are made on a basis deemed fair and
equitable and may be based on the relative net assets of the Portfolios or the
nature of the services performed and relative applicability to each Portfolio.
Expenditures, including costs incurred in connection with the purchase or sale
of portfolio securities, that are capitalized in accordance with generally
accepted accounting principles applicable to investment companies, are accounted
for as capital items and not as expenses.
NET ASSET VALUE DETERMINATION
The net asset value per share of each Fund and Portfolio is normally
determined daily as of the close of trading on the New York Stock Exchange
("NYSE") (generally 4:00 p.m. Eastern time) on each business day of the Fund and
Portfolio. In the event the NYSE closes early (i.e., before 4:00 p.m. Eastern
time) on a particular day, the net asset value of a Fund or Portfolio is
determined as of the close of the NYSE on such day. Net asset value per share is
determined by dividing the value of a Fund's or a Portfolio'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 or a Portfolio's net asset
value per share is made in accordance with generally accepted accounting
principles.
Each equity security held 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 mean between the closing bid and the asked
prices on that day. Each security traded in the over-the-counter market (but not
including securities reported on the NASDAQ National Market System) is valued at
the mean between the last bid and asked prices based upon quotes furnished by
market makers for such securities. 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 mean between the closing bid and asked prices on that
day. Debt securities 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
appropri-
20
<PAGE> 392
ate factors such as institution-size trading in similar groups of securities,
developments related to special securities, 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 specially authorized by the
Growth Portfolio's Board of Trustees. Short-term obligations having 60 days or
less to maturity are valued on the basis of amortized cost. For purposes of
determining net asset value per share, futures and options contracts generally
will be valued 15 minutes after the close of trading of the NYSE.
Generally, trading in 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 or Portfolio'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 NYSE which will not be reflected in the
computation of a Fund's or Portfolio'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 Growth Portfolio's Board of Trustees.
HOW TO PURCHASE AND REDEEM SHARES
A complete description of the manner in which shares of the Funds may be
purchased appears in the Funds' Prospectuses under the headings "How to Purchase
Shares," "Terms and Conditions of Purchase of the AIM Funds" and "Special
Plans."
For purposes of a Letter of Intent entered into prior to June 1, 1998, any
registered investment advisor, trust company or bank trust department which
exercises investment discretion and which intends within thirteen months to
invest $500,000 or more can be treated as a single purchaser, provided further
that such entity places all purchases and redemption orders. Such entities
should be prepared to establish their qualifications for such treatment.
Complete information concerning the method of exchanging shares of the Funds
for shares of the other AIM Funds is set forth in the Prospectuses under the
heading "Exchange Privilege."
Information concerning redemption of the Funds' shares is set forth in the
Prospectuses under the heading "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. AIM intends to redeem all
shares of the Funds in cash. In addition to the Funds' obligation to redeem
shares, AIM Distributors may also repurchase shares as an accommodation to
shareholders. To effect a repurchase, those dealers who have executed Selected
Dealer Agreements with AIM Distributors must phone orders to the order desk of
the Funds at (800) 959-4246 and guarantee delivery of all required documents in
good order. A repurchase is effected at the net asset value per share of the
applicable Fund next determined after the repurchase order is received. Such an
arrangement is subject to timely receipt by A I M Fund Services, Inc. ("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.
The right of redemption may be suspended or the date of payment postponed when
(a) trading on the 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.
BACKUP WITHHOLDING
Accounts submitted without a correct, certified taxpayer identification number
or, alternatively, a completed Internal Revenue Service ("IRS") Form W-8 (for
nonresident aliens) or Form W-9 (certifying exempt status) accompanying the
registration information will 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 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 investors tax return (for reportable
interest and dividends only), or
21
<PAGE> 393
(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
reportable interest, dividend, broker or barter exchange accounts opened
after 1983, or broker accounts considered inactive during 1983.
Except as explained in (5) above, other reportable payments are subject to
backup withholding only if (1) or (2) above applies.
Certain payees and payments are exempt from backup withholding and information
reporting. A complete listing of such exempt entities appears in the
Instructions for the Requester of Form W-9 (which can be obtained from the IRS)
and includes, among others, the following:
- a corporation
- an organization exempt from tax under Section 501(a), an individual
retirement plan (IRA), or a custodial account under Section 403(b)(7)
- the United States or any of its agencies or instrumentalities
- a state, the District of Columbia, a possession of the United States, or any
of their political subdivisions or instrumentalities
- a foreign government or any of its political subdivisions, agencies or
instrumentalities
- an international organization or any of its agencies or instrumentalities
- a foreign central bank of issue
- a dealer in securities or commodities required to register in the U.S. or a
possession of the U.S.
- a futures commission merchant registered with the Commodity Futures Trading
Commission
- a real estate investment trust
- an entity registered at all times during the tax year under the 1940 Act
- a common trust fund operated by a bank under Section 584(a)
- a financial institution
- 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
- 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 distributions. Under applicable treaty law,
residents of treaty countries may qualify for a reduced rate of withholding or a
withholding exemption.
PROGRAMS AND SERVICES FOR SHAREHOLDERS
The Funds provide certain services for shareholders and certain investment or
redemption programs. See "Exchange Privilege" and "How to Redeem Shares" in the
Prospectus. All inquiries concerning these programs should be made directly to
A I M Fund Services, Inc., P.O. Box 4739, Houston, Texas 77210-4739, toll free
at (800) 959-4246.
22
<PAGE> 394
DIVIDEND ORDER
Dividends may be paid to someone other than the registered owner, or sent to
an address other than the address of record. (Please note that signature
guarantees are required to effect this option.) An investor also may direct that
his or her dividends be invested in one of the other AIM Funds and there is no
sales charge for these investments; initial investment minimums apply. See
"Dividends, Distributions and Tax Matters-Dividends and Distributions" in the
Prospectus. To effect this option, please contact your authorized dealer. For
more information concerning AIM Funds other than the Funds, please obtain a
current prospectus by contacting your authorized dealer, by writing to A I M
Fund Services, Inc., P.O. Box 4739, Houston, Texas 77210-4739, or by calling
toll free (800) 959-4246.
TAXES
TAXATION OF THE FUNDS
Each Fund is treated as a separate corporation for federal income tax
purposes. In order to continue to qualify for treatment as a regulated
investment company ("RIC") under the Code, each Fund must distribute to its
shareholders for each taxable year at least 90% of its investment company
taxable income (consisting generally of net investment income and net short-term
capital gain and must meet several additional requirements. With respect to each
Fund, these requirements include the following: (1) the Fund must derive at
least 90% of its gross income each taxable year from dividends, interest,
payments with respect to securities loans and gains from the sale or other
disposition of securities or other income (including gains from options or
Futures) derived with respect to its business of investing in securities
("Income Requirement"); and (2) the Diversification Requirements. Each Fund, as
an investor in its corresponding Portfolio, is deemed to own a proportionate
share of the Portfolio's assets, and to earn a proportionate share of the
Portfolio's income, for purposes of determining whether the Fund satisfies all
of the requirements described above to qualify as a RIC.
Each Fund will be subject to a nondeductible 4% excise tax ("Excise Tax") to
the extent it fails to distribute by the end of any calendar year substantially
all of its ordinary income for that year and capital gain net income for the
one-year period ending on October 31 of that year, plus certain other amounts.
See the next section for a discussion of the tax consequences to each Fund of
hedging transactions engaged in by its corresponding Portfolio.
TAXATION OF THE PORTFOLIOS
The Portfolios and Their Relationship to the Fund. Each Portfolio is treated
as a separate partnership for federal income tax purposes and is not a "publicly
traded partnership." As a result, each Portfolio is not subject to federal
income tax; instead, each Fund, as an investor in its corresponding Portfolio,
is required to take into account in determining its federal income tax liability
its share of the Portfolio's income, gains, losses, deductions and credits,
without regard to whether it has received any cash distributions from the
Portfolio.
Because, as noted above, each Fund is deemed to own a proportionate share of
its corresponding Portfolio's assets, and to earn a proportionate share of its
corresponding Portfolio's income, for purposes of determining whether the Fund
satisfies the requirements to qualify as a RIC, each Portfolio intends to
conduct its operations so that its corresponding Fund will be able to continue
to satisfy all those requirements.
Distributions to each Fund from its corresponding Portfolio (whether pursuant
to a partial or complete withdrawal or otherwise) will not result in the Fund's
recognition of any gain or loss for federal income tax purposes, except that (1)
gain will be recognized to the extent any cash that is distributed exceeds the
Fund's basis for its interest in the Portfolio before the distribution, (2)
income or gain will be recognized if the distribution is in liquidation of the
Fund's entire interest in the Portfolio and includes a disproportionate share of
any unrealized receivables held by the Portfolio, and (3) loss will be
recognized if a liquidation distribution consists solely of cash and/or
unrealized receivables. Each Fund's basis for its interest in its corresponding
Portfolio generally will equal the amount of cash and the basis of any property
the Fund invests in the Portfolio, increased by the Fund's share of the
Portfolio's net income and gains and decreased by (a) the amount of cash and the
basis of any property the Portfolio distributes to the Fund and (b) the Fund's
share of the Portfolio's losses.
Options and Futures Transactions. The Portfolios' use of hedging transactions,
such as selling (writing) and purchasing options and Futures, involves complex
rules that will determine, for federal income tax purposes, the character and
timing of recognition of the gains and losses a Portfolio realizes in connection
therewith. Gains from options and Futures derived by a Portfolio with respect to
its business of investing in securities will qualify as permissible income under
the Income Requirement for its corresponding Fund.
Futures that are subject to Section 1256 of the Code (other than those that
are part of a "mixed straddle") ("Section 1256 Contracts") and that are held by
a Portfolio at the end of its taxable year generally will be deemed to have been
sold at that time at market value for federal income tax purposes. Sixty percent
of any net gain or loss recognized on these deemed sales, and 60% of any net
realized gain or loss from any actual sales of Section 1256 Contracts, will be
treated as long-term capital gain or loss, and the balance will be treated as
short-term capital gain or loss. That 60% portion will qualify for the reduced
maximum tax rates on noncorporate
23
<PAGE> 395
taxpayers' net capital gain (i.e., the excess of net long-term capital gain over
net short-term capital loss) enacted by the Taxpayer Relief Act of 1997 -- 20%
(10% for taxpayers in the 15% marginal tax bracket) for gain recognized on
capital assets held for more than 18 months -- instead of the 28% rate in effect
before that legislation, which now applies to gain on capital assets held for
more than one year but not more than 18 months. However, technical corrections
legislation passed by the House of Representatives late in 1997 would clarify
that the lower rates apply.
If a Portfolio has an "appreciated financial position" -- generally, an
interest (including an interest through an option, Futures Contract or short
sale) with respect to any stock, debt instrument (other than "straight debt") or
partnership interest the fair market value of which exceeds its adjusted
basis -- and enters into a "constructive sale" of the same or substantially
similar property, the Portfolio will be treated as having made an actual sale
thereof, with the result that gain will be recognized at that time. A
constructive sale generally consists of a short sale, an offsetting notional
principal contract or Futures Contract entered into by a Portfolio or a related
person with respect to the same or substantially similar property. In addition,
if the appreciated financial position is itself a short sale or such a contract,
acquisition of the underlying property or substantially similar property will be
deemed a constructive sale.
TAXATION OF THE FUNDS' SHAREHOLDERS
Dividends and distributions declared by a Fund in, and payable to shareholders
of record as of a date in, October, November or December of any year will be
deemed to have been paid by the Fund and received by the shareholders on
December 31 of that year if the distributions are paid by the Fund during the
following January. Accordingly, those distributions will be taxed to
shareholders for the year in which that December 31 falls.
If Fund shares are sold at a loss after being held for six months or less, the
loss will be treated as long-term, instead of short-term, capital loss to the
extent of any capital gain distributions received on those shares. Investors
also should be aware that if shares are purchased shortly before the record date
for any dividend or other distribution, the shareholder will pay full price for
the shares and receive some portion of the price back as a taxable distribution.
Dividends paid by a Fund to a shareholder who, as to the United States, is a
nonresident alien individual, nonresident alien fiduciary of a trust or estate,
foreign corporation or foreign partnership ("foreign shareholder") generally
will be subject to U.S. withholding tax (at a rate of 30% or lower treaty rate).
Withholding will not apply, however, to a dividend paid by a Fund to a foreign
shareholder that is "effectively connected with the conduct of a U.S. trade or
business," in which case the reporting and withholding requirements applicable
to domestic shareholders will apply. A distribution of net capital gain by a
Fund to a foreign shareholder generally will be subject to U.S. federal income
tax (at the rates applicable to domestic persons) only if the distribution is
"effectively connected" or the foreign shareholder is treated as a resident
alien individual for federal income tax purposes.
The foregoing is a general and abbreviated summary of certain federal tax
considerations affecting the Funds, their shareholders and the Portfolios.
Investors are urged to consult their own tax advisors for more detailed
information and for information regarding any foreign, state and local taxes
applicable to distributions received from a Fund.
SHAREHOLDER INFORMATION
This information supplements the discussion in each Fund's Prospectus under
the title "Shareholder Information."
Timing of Purchase Orders. It is the responsibility of the dealer to ensure
that all orders are transmitted on a timely basis to the Transfer Agent. Any
loss resulting from the dealer's failure to submit an order within the
prescribed time frame will be borne by that dealer. If a check used to purchase
shares does not clear, or if any investment order must be canceled due to
nonpayment, the investor will be responsible for any resulting loss to an AIM
Fund or to AIM Distributors.
Share Certificates. AIM Funds will issue share certificates upon written
request to AFS. Otherwise, shares are held on the shareholder's behalf and
recorded on the Fund books. AIM Funds will not issue certificates for shares
held in prototype retirement plans.
Systematic Withdrawal Plan. Under a Systematic Withdrawal Plan, all shares are
to be held by the Transfer Agent and all dividends and distributions are
reinvested in shares of the applicable AIM Fund by the Transfer Agent. To
provide funds for payments made under the Systematic Withdrawal Plan, the
Transfer Agent redeems sufficient full and fractional shares at their net asset
value in effect at the time of each such redemption.
Payments under a Systematic Withdrawal Plan constitute taxable events. Since
such payments are funded by the redemption of shares, they may result in a
return of capital and in capital gains or losses, rather than in ordinary
income. Because sales charges are imposed on additional purchases of shares
(other than Class B or Class C Shares of the AIM Funds and AIM Cash Reserve
Shares of AIM Money Market Fund), it is disadvantageous to effect such purchases
while a Systematic Withdrawal Plan is in effect.
Each AIM Fund bears its share of the cost of operating the Systematic
Withdrawal Plan.
Terms and Conditions of Exchanges. 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.
24
<PAGE> 396
Exchanges by Telephone. AIM Distributors has made arrangements with certain
dealers and investment advisory firms to accept telephone instructions to
exchange shares between any of the AIM Funds. AIM Distributors reserves the
right to impose conditions on dealers or investment advisors who make telephone
exchanges of shares of the funds, including the condition that any such dealer
or investment advisor enter into an agreement (which contains additional
conditions with respect to exchanges of shares) with AIM Distributors. To
exchange shares by telephone, a shareholder, dealer or investment advisor who
has satisfied the foregoing conditions must call AFS at (800) 959-4246. If a
shareholder is unable to reach AFS by telephone, he may also request exchanges
by telegraph or use overnight courier services to expedite exchanges by mail,
which will be effective on the business day received by the Transfer Agent as
long as such request is received prior to NYSE Close. The Transfer Agent and AIM
Distributors may in certain cases be liable for losses due to unauthorized or
fraudulent transactions if they do not follow reasonable procedures for
verification of telephone transactions. Such reasonable procedures may include
recordings of telephone transactions (maintained for six months), requests for
confirmation of the shareholders Social Security Number and current address, and
mailings of confirmations promptly after the transaction.
By signing an account application form, an investor appoints the Transfer
Agent as his true and lawful attorney-in-fact to surrender for redemption any
and all unissued shares held by the Transfer Agent in the designated account(s),
or in any other account with any of the AIM Funds, present or future, which has
the identical registration as the designated account(s), with full power of
substitution in the premises. The Transfer Agent and AIM Distributors are
thereby authorized and directed to accept and act upon any telephone redemptions
of shares held in any of the account(s) listed, from any person who requests the
redemption proceeds to be applied to purchase shares in any one or more of the
AIM Funds, provided that such fund is available for sale and provided that the
registration and mailing address of the shares to be purchased are identical to
the registration of the shares being redeemed. An investor acknowledges by
signing the form that he understands and agrees that the Transfer Agent and AIM
Distributors may not be liable for any loss, expense or cost arising out of any
telephone exchange requests effected in accordance with the authorization set
forth in these instructions if they reasonably believe such request to be
genuine, but may in certain cases be liable for losses due to unauthorized or
fraudulent transactions. The Transfer Agent reserves the right to modify or
terminate the telephone exchange privilege at any time without notice. An
investor may elect not to have this privilege by marking the appropriate box
on the application. Then any exchanges must be effected in writing by the
investor.
Redemptions by Telephone. By signing an account application form, an investor
appoints the Transfer Agent as his true and lawful attorney-in-fact to surrender
for redemption any and all unissued shares held by the Transfer Agent in the
designated account(s), present or future, with full power of substitution in the
premises. The Transfer Agent and AIM Distributors are thereby authorized and
directed to accept and act upon any telephone redemptions of shares held in any
of the account(s) listed, from any person who requests the redemption. An
investor acknowledges by signing the form that he understands and agrees that
the Transfer Agent and AIM Distributors may not be liable for any loss, expense
or cost arising out of any telephone redemption requests effected in accordance
with the authorization set forth in these instructions if they reasonably
believe such request to be genuine, but may in certain cases be liable for
losses due to unauthorized or fraudulent transactions. Procedures for
verification of telephone transactions may include recordings of telephone
transactions (maintained for six months), requests for confirmation of the
shareholders Social Security Number and current address, and mailings of
confirmations promptly after the transactions. The Transfer Agent reserves the
right to cease to act as attorney-in-fact subject to this appointment, and AIM
Distributors reserves the right to modify or terminate the telephone redemption
privilege at any time without notice. An investor may elect not to have this
privilege by marking the appropriate box on the application. Then any
redemptions must be effected in writing by the investor.
Signature Guarantees. In addition to those circumstances listed in the
"Shareholder Information" section of each Fund's prospectus, signature
guarantees are required in the following situations: (1) requests to transfer
the registration of shares to another owner, (2) telephone exchange and
telephone redemption authorization forms; (3) changes in previously designated
wiring or electronic funds transfer instructions; and (4) written redemptions or
exchanges of shares previously reported as lost, whether or not the redemption
amount is under $50,000 or the proceeds are to be sent to the address of record.
AIM Funds may waive or modify any signature guarantee requirements at any time.
Acceptable guarantors include banks, broker-dealers, credit unions, national
securities exchanges, savings associations and any other organization, provided
that such institution or organization qualifies as an "eligible guarantor
institution" as that term is defined in rules adopted by the SEC, and further
provided that such guarantor institution is listed in one of the reference
guides contained in the Transfer Agents current Signature Guarantee Standards
and Procedures, such as certain domestic banks, credit unions, securities
dealers, or securities exchanges. The Transfer Agent will also accept signatures
with either: (1) a signature guaranteed with a medallion stamp of the STAMP
Program, or (2) a signature guaranteed with a medallion stamp of the NYSE
Medallion Signature Program, provided that in either event, the amount of the
transaction involved does not exceed the surety coverage amount indicated on the
medallion. For information regarding whether a particular institution or
organization qualifies as an "eligible guarantor institution," an investor
should contact the Client Services Department of AFS.
Dividends and Distributions. In determining the amount of capital gains, if
any, available for distribution, net capital gains are offset against available
net capital losses, if any, carried forward from previous fiscal periods.
25
<PAGE> 397
For funds that do not declare a dividend daily, such dividends and
distributions will be reinvested at the net asset value per share determined on
the ex-dividend date. For funds that declare a dividend daily, such dividends
and distributions will be reinvested at the net asset value per share determined
on the payable date.
Dividends on Class B and Class C shares are expected to be lower than those
for Class A shares or AIM Cash Reserve Shares because of higher distribution
fees paid by Class B and Class C shares. Dividends on all shares may also be
affected by other class-specific expenses.
Changes in the form of dividend and distribution payments may be made by the
shareholder at any time by notice to the Transfer Agent and are effective as to
any subsequent payment if such notice is received by the Transfer Agent prior to
the record date of such payment. Any dividend and distribution election remains
in effect until the Transfer Agent receives a revised written election by the
shareholder.
Any dividend or distribution paid by a fund which does not declare dividends
daily has the effect of reducing the net asset value per share on the
ex-dividend date by the amount of the dividend or distribution. Therefore, a
dividend or distribution declared shortly after a purchase of shares by an
investor would represent, in substance, a return of capital to the shareholder
with respect to such shares even though it would be subject to income taxes.
MISCELLANEOUS INFORMATION
AIM was organized in 1976, and together with its subsidiaries, manages or
advises over 110 investment portfolios encompassing a broad range of investment
objectives. AIM is a direct, wholly owned subsidiary of A I M Management Group
Inc. ("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, 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 independent investment management
groups that have a significant presence in the institutional and retail segment
of the investment management industry in North America and Europe, and a growing
presence in Asia.
CUSTODIAN
State Street Bank and Trust Company, 225 Franklin Street, Boston, MA 02110,
acts as custodian of the Portfolios' assets.
TRANSFER AGENCY AND ACCOUNTING AGENCY SERVICES
The Transfer Agency and Service Agreement between the Trust and 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 Transfer Agency and Service Agreement became effective on
September 8, 1998. AIM serves as each Fund's pricing and accounting agent. For
the fiscal years ended December 31, 1998, 1997 and December 31, 1996, the Small
Cap Fund and Basic Value Fund paid accounting services fees of $ , $6,379
and $3,900; and $ , $3,938 and $1,472, respectively.
INDEPENDENT ACCOUNTANTS
The Trust's, the Funds' and the Portfolios' independent accountants are
PricewaterhouseCoopers LLP. PricewaterhouseCoopers LLP conducts annual audits of
the Funds and the Portfolios, assists in the preparation of the Funds' and the
Portfolios' federal and state income tax returns and consults with the Trust and
the Funds and Growth Portfolio and the Portfolios as to matters of accounting,
regulatory filings and federal and state income taxation.
The audited financial statements of the Trust and Growth Portfolio included in
this Statement of Additional Information have been examined by
PricewaterhouseCoopers LLP as stated in their opinion appearing herein and are
included in reliance upon such opinion given upon the authority of that firm as
experts in accounting and auditing.
LEGAL MATTERS
The law firm of Kirkpatrick & Lockhart LLP, 1800 Massachusetts Avenue N.W.,
Washington, DC 20036-1800, acts as counsel to the Trust and the Funds.
SHAREHOLDER LIABILITY
Under Delaware law, the shareholders of the Trust enjoy the same limitations
of liability extended to shareholders of private, for-profit corporations. There
is a remote possibility, however, that under certain circumstances shareholders
of the Trust may be held personally liable for the Trust's obligations. However,
the Trust's Agreement and Declaration of Trust disclaims shareholder liability
26
<PAGE> 398
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 a trustee. If a shareholder is held personally liable for the
obligations of the Trust, the Trust Agreement provides that the shareholder
shall be entitled out of the assets belonging to the applicable Fund (or
allocable to the applicable Class), to be held harmless from and indemnified
against all loss and expense arising from such liability in accordance with the
Trust's Bylaws and applicable law. Thus, the risk of a shareholder incurring
financial loss on account of such liability is limited to circumstances in which
the Trust itself would be unable to meet its obligations and where the other
party was held not to be bound by the disclaimer.
NAMES
Prior to May 29, 1998, AIM Small Cap Equity Fund operated under the name of GT
Global America Small Cap Growth Fund, and AIM Basic Value Fund operated under
the name of GT Global American Value Fund.
CONTROL PERSONS AND PRINCIPAL HOLDERS OF SECURITIES
To the best knowledge of the Trust, the names and addresses of the holders of
5% or more of the outstanding shares of any class of each Fund's equity
securities as of April , 1999, and the percentage of the outstanding shares
held by such holders are set forth below.
<TABLE>
<CAPTION>
PERCENT
PERCENT OWNED OF
OWNED OF RECORD AND
FUND NAME AND ADDRESS OF OWNER RECORD* BENEFICIALLY
- ---- ------------------------- -------- ------------
<S> <C> <C> <C>
Basic Value Fund -- Advisor Class INVESCO (NY) Asset Management Inc. % -0-
1166 Avenue of the Americas
New York, New York 10036-2708
Attn: Julio Garcia
Basic Value Fund -- Class B MLPF& S For the Sole Benefits of % -0-
Its Customers, Security #97HX6
Attn: Fund Administration
4800 Deer Lake Drive East, 2nd Fl.
Jacksonville, Florida 32246-6484
Small Cap Fund -- Advisor Class Donaldson Lufkin Jenrette Securities -0-
Corp. Inc. %
P.O. Box 2052
Jersey City, New Jersey 07303-2052
Small Cap Fund -- Class A MLPF& S for the Sole Benefit of % -0-
Its Customers, Security #97HX3
Attn: Fund Administration
4800 Deer Lake Drive East, 2nd Fl.
Jacksonville, Florida 32246-6484
Small Cap Fund -- Class B MLPF& S for the Sole Benefit of % -0-
Its Customers, Security #97HX5
Attn: Fund Administration
4800 Deer Lake Drive East, 2nd Fl.
Jacksonville, Florida 32246-6484
</TABLE>
- ---------------
* The Trust has no knowledge as to whether all or any portion of the shares
owned of record are also owned beneficially.
INVESTMENT RESULTS
TOTAL RETURN QUOTATIONS
The standard formula for calculating total return is as follows:
(n)
P(1+T) =ERV
<TABLE>
<S> <C> <C> <C>
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).
</TABLE>
27
<PAGE> 399
The Standardized Returns for the Advisor Class shares of the Basic Value Fund,
stated as average annualized total returns for the periods shown, were:
<TABLE>
<CAPTION>
BASIC
VALUE FUND
PERIOD (ADVISOR CLASS)
- ------ ---------------
<S> <C>
Fiscal year ended Oct. 31, 1998............................. 7.43%
Oct. 18, 1995 (commencement of operations) through Dec. 31,
1998...................................................... 19.57%
</TABLE>
The standardized returns for the Advisor Class shares of the Small Cap Fund,
stated as average annualized total returns for the periods shown, were:
<TABLE>
<CAPTION>
SMALL CAP
FUND
PERIOD (ADVISOR CLASS)
- ------ ---------------
<S> <C>
Fiscal year ended Dec. 31, 1998............................. 23.38%
Oct. 18, 1995 (commencement of operations) through Dec. 31,
1998...................................................... 17.98%
</TABLE>
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
<TABLE>
<S> <C> <C> <C>
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 stated period.
</TABLE>
Cumulative total return across a stated period may be calculated as follows:
(n)
P(1+V) =ERV
<TABLE>
<S> <C> <C> <C>
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.
</TABLE>
The aggregate non-standardized returns (not taking sales charges into account)
for the Advisor Class shares of the Basic Value Fund, stated as aggregate total
returns for the periods shown, were:
<TABLE>
<CAPTION>
BASIC
VALUE FUND
PERIOD (ADVISOR CLASS)
- ------ ---------------
<S> <C>
Oct. 18, 1995 (commencement of operations) through Dec. 31,
1998...................................................... 77.25%
</TABLE>
The aggregate non-standardized returns (not taking sales charges into account)
for the Advisor Class shares of the Small Cap Fund, stated as aggregate total
returns for the periods shown, were:
<TABLE>
<CAPTION>
SMALL CAP
FUND
PERIOD (ADVISOR CLASS)
- ------ ---------------
<S> <C>
Oct. 18, 1995 (commencement of operations) through Dec. 31,
1998...................................................... 69.82%
</TABLE>
Each Fund's investment results will vary from time to time depending upon
market conditions, the composition of each Fund's portfolio and operating
expenses of each Fund, so that current or past yield or total return should not
be considered representative of what an investment in each Fund may earn in any
future period. These factors and possible differences in the methods used in
calculating investment results should be considered when comparing each Fund's
investment results with those published for other investment companies and other
investment vehicles. Each Fund's results also should be considered relative to
the risks associated with such Fund's investment objective and policies.
28
<PAGE> 400
PERFORMANCE INFORMATION
Total return and yield figures for the Funds are neither fixed nor guaranteed,
and no Fund's principal is insured. Performance quotations reflect historical
information and should not be considered representative of a Fund's performance
for any period in the future. Performance is a function of a number of factors
which can be expected to fluctuate. 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. Such
publications or media entities may include the following, among others:
Advertising Age
Barron's
Best's Review
Broker World
Business Week
Changing Times
Christian Science Monitor
Consumer Reports
Economist
EuroMoney
FACS of the Week
Financial Planning
Financial Product News
Financial World
Forbes
Fortune
Global Finance
Hartford Courant Inc.
Institutional Investor
Insurance Forum
Insurance Week
Investor's Daily
Journal of the American
Society of CLU & ChFC
Kiplinger Letter
Money
Mutual Fund Forecaster
Mutual Fund Magazine
Nation's Business
New York Times
Pension World
Pensions & Investments
Personal Investor
Financial Services Week
Philadelphia Inquirer
Smart Money
USA Today
U.S. News & World Report
Wall Street Journal
Washington Post
CNN
CNBC
PBS
The Funds and AIM Distributors may from time to time, in advertisements, sales
literature and reports furnished to present or prospective shareholders, compare
each Fund with the following, or compare each Fund's performance to performance
data of similar mutual funds as published in the following, among others:
Bank Rate National Monitor Index
Bear Stearns Foreign Bond Index
Bond Buyer Index
CDA/Wiesenberger Investment Company Services
(data and mutual fund rankings and
comparisons)
CNBC/Financial News Composite Index
COFI
Consumer Price Index
Datastream
Donoghue's
Dow Jones Industrial Average
EAFE Index
First Boston High Yield Index
Fitch (publications)
Ibbotson Associates International Bond Index
International Bank for Reconstruction and
Development (publications)
International Finance Corporation Emerging
Markets Database
International Financial Statistics
Lehman Bond Indices
Lipper Analytical Data Services, Inc. (data and
mutual fund rankings and comparisons)
Micropal, Inc. (data and mutual fund rankings
and comparisons)
Moody's Investors Service (publications)
Morgan Stanley Capital International All
Country (AC) World Index
Morgan Stanley Capital International World
Indices
Morningstar, Inc. (data and mutual fund rankings
and comparisons)
NASDAQ
Organization for Economic Cooperation and
Development (publications)
Salomon Brothers Global Telecommunications
Index
Salomon Brothers World Government Bond
Index -- Non-U.S.
Salomon Brothers World Government Bond Index
Standard & Poor's (publications)
Standard & Poor's 500 Composite Stock Price
Index
Stangar
Wilshire Associates
World Bank (publications and reports)
The World Bank Publication of Trends in
Developing Countries
Worldscope
29
<PAGE> 401
Each Fund may also compare its performance to rates on Certificates of Deposit
and other fixed rate investments such as the following:
10-year Treasuries
30-year Treasuries
30-day Treasury Bills
Information relating to foreign market performance, capitalization and
diversification is based on sources believed to be reliable but may be subject
to revision and has not been independently verified by the Funds or AIM
Distributors. Advertising for the Funds may from time to time include
discussions of general economic conditions and interest rates. Advertising for
the Funds may also include reference 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.
30
<PAGE> 402
APPENDIX
DESCRIPTION OF BOND RATINGS
Moody's Investors Service, Inc. ("Moody's") rates the debt securities issued
by various entities from "Aaa" to "C." Investment grade ratings are the first
four categories:
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 edged." Interest payments are protected by a large or by an exceptionally
stable margin and principal is secure. While the various protective elements are
likely to change, such changes as can be visualized are most unlikely to impair
the fundamentally strong position of such issues. Aa -- Bonds which are rated Aa
are judged to be of high quality by all standards. Together with the Aaa group
they comprise what are generally known as high grade bonds. They are rated lower
than the best bonds because margins of protection may not be as large as in Aaa
securities or fluctuation of protective elements may be of greater amplitude or
there may be other elements present which make the long-term 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 some time 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. 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.
Standard & Poor's, a division of the McGraw-Hill Companies, Inc. ("S&P") rates
the securities debt of various entities in categories ranging from "AAA" to "D"
according to quality. Investment grade ratings are the first four categories:
AAA -- An obligation rated "AAA" has the highest rating assigned by S&P. The
obligor's capacity to meet its financial commitment on the obligation is
extremely strong. AA -- An obligation rated "AA" differs from the highest rated
obligations only in a small degree. The obligor's capacity to meet its financial
commitment on the obligation is very strong. A -- An obligation rated "A" is
somewhat more susceptible to the adverse effects of changes in circumstances and
economic conditions than obligations in higher rated categories. BBB -- An
obligation rated "BBB" exhibits adequate protection parameters. However, adverse
economic conditions or changing circumstances are more likely to lead to a
weakened capacity of the obligor to meet its financial commitment on the
obligation. BB, B, CCC, CC, C -- Obligations rated "BB," "B," "CCC," "CC," and
"C" are regarded as having significant speculative characteristics. "BB"
indicates the least degree of speculation and "C" the highest. While such
obligations will likely have some quality and protective characteristics, these
may be outweighed by large uncertainties or major exposures to adverse
conditions. BB -- An obligation rated "BB" is less vulnerable to nonpayment than
other speculative issues. However, it faces major ongoing uncertainties or
exposure to adverse business, financial, or economic conditions which could lead
to the obligor's inadequate capacity to meet its financial commitment on the
obligation. B -- An obligation rated "B" is more vulnerable to nonpayment than
obligations rated "BB," but the obligor currently has the capacity to meet its
financial commitment on the obligation. Adverse business, financial, or economic
conditions will likely impair the obligor's capacity or willingness to meet its
financial commitment on the obligation. CCC -- An obligation rated "CCC" is
currently vulnerable to nonpayment, and is dependent upon favorable business,
financial, and economic conditions for the obligor to meet its financial
commitment on the obligation. In the event of adverse business, financial, or
economic conditions, the obligor is not likely to have the capacity to meet its
financial commitment on the obligation. CC -- An obligation rated "CC" is
currently highly vulnerable to nonpayment. C -- The "C" rating may be used to
cover a situation where a bankruptcy petition has been filed or similar action
has been taken, but payments on this obligation are being continued. D -- An
obligation rated "D" is in payment default. The "D" rating category is used when
payments on an obligation are not made on the date due even if the applicable
grace period has not expired, unless S&P believes that such payments will be
made during such grace period. The "D" rating also will be used upon the filing
of a bankruptcy petition or the taking of a similar action if payments on an
obligation are jeopardized.
PLUS (+) OR MINUS (-): The ratings from "AA" to "CCC" may be modified by the
addition of a plus or minus sign to show relative standing within the major
rating categories.
NR: Indicates that no public rating has been requested, that there is
insufficient information on which to base a rating, or that S&P does not rate a
particular type of obligation as a matter of policy.
31
<PAGE> 403
DESCRIPTION OF COMMERCIAL PAPER RATINGS
Moody's employs the designation "Prime-1" to indicate commercial paper having
a superior ability for repayment of senior short-term debt obligations. Prime-1
repayment ability will often be evidenced by many of the following
characteristics: leading market positions in well-established industries; high
rates of return on funds employed; conservative capitalization structure with
moderate reliance on debt and ample asset protection; broad margins in earnings
coverage of fixed financial charges and high internal cash generation; and
well-established access to a range of financial markets and assured sources of
alternate liquidity. Issues rated Prime-2 have a strong ability for repayment of
senior short-term debt obligations. This normally will be evidenced by many of
the characteristics cited above but to a lesser degree. Earnings trends and
coverage ratios, while sound, may be more subject to variation. Capitalization
characteristics, while still appropriate, may be more affected by external
conditions. Ample alternate liquidity is maintained.
S&P ratings of commercial paper are graded into several categories ranging
from "A-1" for the highest quality obligations to "D" for the lowest. Issues in
the "A" category are delineated with numbers 1, 2, and 3 to indicate the
relative degree of safety. "A-1" -- This highest category indicates that the
degree of safety regarding timely payment is strong. Those issues determined to
possess extremely strong safety characteristics will be denoted with a plus sign
(+) designation. "A-2" -- Capacity for timely payments on issues with this
designation is satisfactory; however, the relative degree of safety is not as
high as for issues designated "A-1."
ABSENCE OF RATING
Where no rating has been assigned or where a rating has been suspended or
withdrawn, it may be for reasons unrelated to the quality of the issue.
Should no rating be assigned, the reason may be one of the following:
1. An application for rating was not received or accepted.
2. The issue or issuer belongs to a group of securities or companies
that are not rated as a matter of policy.
3. There is a lack of essential data pertaining to the issue or
issuer.
4. The issue was privately placed, in which case the rating is not
published in Moody's publications.
Suspension or withdrawal may occur if new and material circumstances arise,
the effects of which preclude satisfactory analysis; if there is no longer
available reasonable up-to-date data to permit a judgment to be formed; if a
bond is called for redemption; or for other reasons.
Note: Moody's applies numerical modifiers, 1, 2 and 3 in each generic rating
classification from Aa to Caa. 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.
32
<PAGE> 404
FINANCIAL STATEMENTS
FS
<PAGE> 405
PART C
OTHER INFORMATION
Item 23. Exhibits:
Exhibit
Number Description
- ------- -----------
a (1) - (a) Agreement and Declaration of Trust of Registrant dated
May 7, 1998 was filed as an Exhibit to Post-Effective
Amendment No. 43 to the Registration Statement on Form N-1A,
filed on June 1, 1998, and is hereby incorporated by
reference.
- (b) First Amendment, dated September 8, 1998, to the
Agreement and Declaration of Trust, dated May 7, 1998, is
filed herewith electronically.
- (c) Form of Second Amendment to the Agreement and
Declaration of Trust is filed herewith electronically.
b - By-Laws of Registrant dated May 7, 1998 were filed as an
Exhibit to Post-Effective Amendment No. 43 to the
Registration Statement on Form N-1A, filed on June 1, 1998,
and are hereby incorporated by reference.
c - Provisions of instruments defining the rights of holders of
Registrant's securities contained in the Agreement and
Declaration of Trust Articles II, VI, VII, VIII and IX and
By-laws Articles IV, V, VI, VII and VIII were filed as
Exhibits to Post-Effective Amendment No. 44 to the
Registration Statement on Form N-1A, filed on July 7, 1998,
and are hereby incorporated by reference.
d (1) - Investment Management and Administration Contract, dated May
29, 1998, between Registrant and A I M Advisors, Inc., was
filed as an Exhibit to Post-Effective Amendment No. 45 to
the Registration Statement on Form N-1A filed on August 26,
1998, and is hereby incorporated by reference.
(2) - Administration Contract, dated May 29, 1998, between
Registrant and A I M Advisors, Inc., was filed as an Exhibit
to Post-Effective Amendment No. 45 to the Registration
Statement on Form N-1A filed on August 26, 1998, and is
hereby incorporated by reference.
(3) - Sub-Administration Contract, dated May 29, 1998, between A I
M Advisors, Inc. and INVESCO (NY), Inc. with respect to
Registrant, was filed as an Exhibit to Post-Effective
Amendment No. 45 to the Registration Statement on Form N-1A
filed on August 26, 1998.
(4) - Sub-Advisory and Sub-Administration Contract, dated May 29,
1998, between A I M Advisors, Inc. and INVESCO (NY), Inc.
with respect to Registrant, was filed as an Exhibit to
Post-Effective Amendment No. 45 to the Registration
Statement on Form N-1A filed on August 26, 1998.
(5) - Form of Sub-Advisory Contract, dated December 14, 1998,
between A I M Advisors, Inc. and INVESCO (NY), Inc. with
respect to Registrant, is filed herewith electronically.
(6) - Form of Sub-Advisory Contract, dated December 14, 1998,
between A I M Advisors, Inc. and INVESCO Asset Management
Limited with respect to Registrant, is filed herewith
electronically.
(7) - Investment Management and Administration Contract, dated May
29, 1998, between Growth Portfolio and A I M Advisors, Inc.,
was filed as an Exhibit to Post-Effective Amendment No. 45
to the Registration Statement on Form N-1A filed on August
26, 1998, is hereby incorporated by reference.
C-1
<PAGE> 406
(8) - Sub-Advisory and Sub-Administration Contract, dated May
29, 1998, between A I M Advisors, Inc. and INVESCO (NY),
Inc. with respect to Growth Portfolio, filed August 26,
1998.
e (1) - Distribution Agreement, dated May 29, 1998, between
Registrant and A I M Distributors, Inc. with respect to
Class A shares, was filed as an Exhibit to Post-Effective
Amendment No. 45 to the Registration Statement on Form N-1A
filed on August 26, 1998, is hereby incorporated by
reference.
(2) - Distribution Agreement, dated May 29, 1998, between
Registrant and A I M Distributors, Inc. with respect to
Class B shares, was filed as an Exhibit to Post-Effective
Amendment No. 45 to the Registration Statement on Form N-1A
filed on August 26, 1998, is hereby incorporated by
reference.
(3) - Distribution Agreement, dated May 29, 1998, between
Registrant and A I M Distributors, Inc. with respect to
Advisor Class shares, was filed as an Exhibit to
Post-Effective Amendment No. 45 to the Registration
Statement on Form N-1A filed on August 26, 1998, is hereby
incorporated by reference.
(4) - Form of Master Distribution Agreement between Registrant
and A I M Distributors, Inc. with respect to Class A and
Class C shares is filed herewith electronically.
(5) - Form of Selected Dealer Agreement between A I M
Distributors, Inc. and selected dealers is filed herewith
electronically.
(6) - Form of Bank Selling Group Agreement between A I M
Distributors, Inc. and banks is filed herewith
electronically.
f - Agreements Concerning Officers and Directors/Trustees
Benefits - None.
g (1) - (a) Custodian Contract, dated September 15, 1988, between
State Street Bank and Trust Company and Registrant is filed
herewith electronically.
- (b) Amendment (1994) to the Custodian Contract, dated
September 15, 1988, between State Street Bank and Trust
Company and Registrant is filed herewith electronically.
- (c) Amendment, dated June 20, 1995, to the Custodian
Contract, dated September 15, 1988, between State Street
Bank and Trust Company and Registrant is filed herewith
electronically.
- (d) Notice of Transfer, dated May 28, 1998, to the
Custodian Contract dated September 15, 1988, between State
Street Bank and Trust Company and Registrant is filed
herewith electronically.
- (e) Amendment, dated January 26, 1999, to the Custodian
Contract, dated September 15, 1988, between State Street
Bank and Trust Company and Registrant is filed herewith
electronically.
h (1) - (a) Transfer Agency and Service Agreement between Registrant
and A I M Fund Services, Inc., dated September 8, 1998, is
filed herewith electronically.
- (b) Form of Amendment No. 1 to the Transfer Agency and
Service Agreement between Registrant and A I M Fund
Services, Inc. is filed herewith electronically.
(2) - (a) Remote Access and Related Services Agreement, dated as
of December 23, 1994, between Registrant and First Data
Investor Services Group, Inc. (formerly, The Shareholder
Services Group, Inc.), was filed as an Exhibit to
Post-Effective Amendment No. 45 to the
C-2
<PAGE> 407
Registration Statement on Form N-1A filed on August 26,
1998, is hereby incorporated by reference.
- (b) Amendment No. 1, dated October 4, 1995, to the Remote
Access and Related Services Agreement, dated as of December
23, 1994, between Registrant and First Data Investor
Services Group, Inc. (formerly, The Shareholder Services
Group, Inc.), was filed as an Exhibit to Post-Effective
Amendment No. 45 to the Registration Statement on Form N-1A
filed on August 26, 1998, is hereby incorporated by
reference.
- (c) Addendum No. 2, dated October 12, 1995, to the Remote
Access and Related Services Agreement, dated as of December
23, 1994, between Registrant and First Data Investor
Services Group, Inc. (formerly, The Shareholder Services
Group, Inc.), was filed as an Exhibit to Post-Effective
Amendment No. 45 to the Registration Statement on Form N-1A
filed on August 26, 1998, is hereby incorporated by
reference.
- (d) Amendment No. 3, dated February 1, 1997, to the Remote
Access and Related Services Agreement, dated December 23,
1994, between Registrant and First Data Investor Services
Group, Inc. (formerly, The Shareholder Services Group,
Inc.), was filed as an Exhibit to Post-Effective Amendment
No. 45 to the Registration Statement on Form N-1A filed on
August 26, 1998, is hereby incorporated by reference.
- (e) Amendment No. 4, dated June 30, 1998, to the Remote
Access and Related Services Agreement, dated December 23,
1994, between Registrant and First Data Investor Services
Group, Inc. (formerly, The Shareholder Services Group, Inc.)
is filed herewith electronically.
- (f) Amendment No. 5, dated July 1, 1998, to the Remote
Access and Related Services Agreement, dated December 23,
1994, between Registrant and First Data Investor Services
Group, Inc. (formerly, The Shareholder Services Group, Inc.)
is filed herewith electronically.
- (g) Exhibit 1, effective as of August 4, 1997, to the Remote
Access and Related Services Agreement, dated December 23,
1994, between Registrant and First Data Investor Services
Group, Inc. (formerly, The Shareholder Services Group,
Inc.), was filed as an Exhibit to Post-Effective Amendment
No. 45 to the Registration Statement on Form N-1A filed on
August 26, 1998, is hereby incorporated by reference.
- (h) Preferred Registration Technology Escrow Agreement,
dated September 10, 1997, between Registrant and First Data
Investor Services Group, Inc. (formerly, The Shareholder
Services Group, Inc.), was filed as an Exhibit to
Post-Effective Amendment No. 45 to the Registration
Statement on Form N-1A filed on August 26, 1998, is hereby
incorporated by reference.
(3) - (a) Form of Fund Accounting and Pricing Agent Agreement
between Registrant and INVESCO (NY), Inc., dated May 29,
1998, was filed as an Exhibit to Post-Effective Amendment
No. 45 to the Registration Statement on Form N-1A filed on
August 26, 1998.
(b) Form of Fund Accounting and Pricing Agent Agreement,
dated June 1, 1998, between A I M Advisors, Inc. and
Registrant is filed herewith electronically.
i (1) - Opinion and Consent of Kirkpatrick & Lockhart LLP was filed
as an Exhibit to Post-Effective Amendment No. 43 to the
Registration Statement on Form N-1A, filed on June 1, 1998,
and is hereby incorporated by reference.
(2) - Opinion and Consent of Delaware Counsel was filed as an
Exhibit to Post-Effective Amendment No. 43 to the
Registration Statement on Form N-1A, filed on June 1, 1998,
and is hereby incorporated by reference.
j - Consent of Kirkpatrick & Lockhart LLP is filed herewith
electronically.
C-3
<PAGE> 408
k - Financial Statements - None.
l - Agreements Concerning Initial Capitalization - None.
m (1) - Distribution Plan adopted pursuant to Rule 12b-1 with
respect to Class A shares is filed herewith electronically.
(2) - Distribution Plan adopted pursuant to Rule 12b-1 with
respect to Class B shares is filed herewith electronically.
(3) - Form of Master Distribution Plan pursuant to Rule 12b-1 with
respect to Class A and Class C shares is filed herewith
electronically.
(4) - Form of Shareholder Service Agreement to be used in
connection with Registrant's Distribution Plans is filed
herewith electronically.
(5) - Form of Bank Shareholder Service Agreement to be used in
connection with Registrant's Distribution Plans is filed
herewith electronically.
(6) - Form of Agency Pricing Agreement (for Class A Shares) to
be used in connection with Registrant's Distribution Plans
is filed herewith electronically.
(7) - Form of Service Agreement for Bank Trust Department and for
Brokers for Bank Trust Departments to be used in connection
with Registrant's Distribution Plans is filed herewith
electronically.
n - Financial Data Schedules were filed as Exhibits to
Post-Effective Amendment No. 41 to the Registration
Statement on Form N-1A, filed on March 10, 1998, and are
hereby incorporated by reference.
o - Rule 18f-3 Multiple Class Plan, was filed as an Exhibit to
Post-Effective Amendment No. 45 to the Registration
Statement on Form N-1A filed on August 26, 1998, and is
hereby incorporated by reference.
Item 24. Persons Controlled by or Under Common Control with Registrant
Provide a list or diagram of all persons directly or indirectly
controlled by or under common control with the Registrants. For any person
controlled by another person, disclose the percentage of voting securities owned
by the immediately controlling person or other basis of that person's control.
For each company, also provide the state or other sovereign power under the laws
of which the company is organized.
None.
Item 25. Indemnification
State the general effect of any contract, arrangements or statute under
which any director, officer, underwriter or affiliated person of the Registrant
is insured or indemnified against any liability incurred in their official
capacity, other than insurance provided by any director, officer, affiliated
person or underwriter for their own protection.
The Registrant's Agreement and Declaration of Trust (the "Agreement"),
dated May 7, 1998, provides, among other things (1) that a Trustee
shall not be liable for any act, omission or obligation of the
Registrant or any Trustee (except for liability to the Registrant or
its
C-4
<PAGE> 409
shareholders by reason of willful misfeasance, bad faith, gross
negligence or reckless disregard of the Trustee's duties); (2) that the
Trustees and Officers shall be indemnified by the Registrant to the
fullest extent permitted by the Delaware Business Trust Act and other
applicable law; and (3) that the shareholders and former shareholders
of the Registrant shall be held harmless by the Registrant (or
applicable portfolio or class) from personal liability arising from
their status as such, and shall be indemnified by the Registrant (or
applicable portfolio or class) against all loss and expense arising
from such personal liability in accordance with the Registrant's
By-Laws and applicable law.
[A I M Advisors, Inc., the Registrant and other investment companies
managed by A I M Advisors, Inc., their respective officers, trustees,
directors and employees (the "Insured Parties") are insured under a
joint Mutual Fund and Investment Advisory Professional and Directors
and Officers Liability Policy, issued by ICI Mutual Insurance Company,
with a $35,000,000 limit of liability.]
Item 26. Business and Other Connections of Investment Advisor
Describe any other business, profession, vocation or employment of a
substantial nature that each investment advisor of the Registrant, and each
director, officer or partner of the advisor, is or has been, engaged within the
last two fiscal years, for his or her own account or in the capacity of
director, officer, employee, partner, or trustee.
See the material under the heading "Management" included in Part A
(Prospectus) of this amendment and the material appearing under the
headings "Trustees and Executive Officers" and "Management" included in
Part B (Statement of Additional Information) of this Amendment.
Information as to the Directors and Officers of A I M Advisors, Inc.
and INVESCO (NY), Inc. is included in Schedule A and Schedule D of Part
I of each entity's Form ADV (File No. 801-12313 and File No. 801-10254,
respectively), filed with the Securities and Exchange Commission, which
are incorporated herein by reference.
Item 27. Principal Underwriters
(a) State the name of each investment company (other than the Registrant) for
which each principal underwriter currently distributing the Registrant's
securities also acts as a principal underwriter, depositor, or investment
advisor.
A I M Distributors, Inc., the Registrant's principal underwriter, also
acts as a principal underwriter to the following investment companies:
AIM Advisor Funds, Inc.
AIM Equity Funds, Inc. (Retail Classes)
AIM Funds Group
AIM International Funds, Inc.
AIM Investment Funds
AIM Investment Portfolios
AIM Investment Securities Funds (Retail Classes)
AIM Series Trust
AIM Special Opportunities Funds
AIM Summit Fund, Inc.
AIM Tax-Exempt Funds, Inc.
AIM Variable Insurance Funds, Inc.
GT Global Floating Rate Fund, Inc. [d/b/a AIM Floating Rate Fund]
(b) Provide the information required by the following tables for each director,
officer, or partner of each principal underwriter named in the Response to Item
20:
<TABLE>
<CAPTION>
Name and Principal Position and Offices Position and Offices
Business Address* with Principal Underwriter with Registrant
- ---------------- -------------------------- ---------------
<S> <C> <C>
Charles T. Bauer Chairman of the Board of Directors None
</TABLE>
- ------------------------------------
* 11 Greenway Plaza, Suite 100, Houston, Texas 77046-1173
C-5
<PAGE> 410
<TABLE>
<CAPTION>
Name and Principal Position and Offices Position and Offices
Business Address* with Principal Underwriter with Registrant
- ---------------- -------------------------- ---------------
<S> <C> <C>
Michael J. Cemo President & Director None
Gary T. Crum Director Vice President
James L. Salners Executive Vice President None
Robert H. Graham Senior Vice President & Director Chairman of the Board
and President
W. Gary Littlepage Senior Vice President & Director None
John Caldwell Senior Vice President None
Marilyn M. Miller Senior Vice President None
Gene L. Needles Senior Vice President None
Gordon J. Sprague Senior Vice President None
Michael C. Vessels Senior Vice President None
B.J. Thompson First Vice President None
James R. Anderson Vice President None
Mary K. Coleman Vice President None
Mary A. Corcoran Vice President None
Melville B. Cox Vice President & Chief Vice President
Compliance Officer
Sidney M. Dilgren Vice President None
Tony D. Green Vice President None
Dawn Hawley Vice President & Treasurer None
Ofelia M. Mayo Vice President, General Counsel Assistant Secretary
& Assistant Secretary
Terri L. Ransdell Vice President None
Carol F. Relihan Vice President Vice President
Kamala C. Sachidanandan Vice President None
Frank V. Serebrin Vice President None
Christopher T. Simutis Vice President None
</TABLE>
- ------------------------------------
* 11 Greenway Plaza, Suite 100, Houston, Texas 77046-1173
C-6
<PAGE> 411
<TABLE>
<CAPTION>
Name and Principal Position and Offices Position and Offices
Business Address* with Principal Underwriter with Registrant
- ---------------- -------------------------- ---------------
<S> <C> <C>
Gary K. Wendler Vice President None
David E. Hessel Assistant Vice President, None
Assistant Treasurer
& Controller
Kathleen J. Pflueger Secretary Assistant Secretary
Luke P. Beausoleil Assistant Vice President None
Tisha B. Christopher Assistant Vice President None
Glenda A. Dayton Assistant Vice President None
Mary E. Gentempo Assistant Vice President None
Kathryn A. Jordan Assistant Vice President None
Mary C. Mangham Assistant Vice President None
Kim T. McAuliffe Assistant Vice President None
Ivy B. McLemore Assistant Vice President None
David B. O'Neil Assistant Vice President None
Rebecca Starling-Klatt Assistant Vice President None
Nicholas D. White Assistant Vice President None
Norman W. Woodson Assistant Vice President None
Nancy L. Martin Assistant General Counsel Assistant Secretary
& Assistant Secretary
Samuel D. Sirko Assistant General Counsel Secretary
& Assistant Secretary
P. Michelle Grace Assistant Secretary None
Lisa A. Moss Assistant Secretary None
Stephen I. Winer Assistant Secretary None
</TABLE>
- ------------------------------------
* 11 Greenway Plaza, Suite 100, Houston, Texas 77046-1173
C-7
<PAGE> 412
(c) Provide the information required by the following table for all commissions
and other compensation received, directly or indirectly, from the Registrant
during the last fiscal year by each principal underwriter who is not an
affiliated person of the Registrant or any affiliated person of an affiliated
person.
Not Applicable
Item 28. Location of Accounts and Records
State the name and address of each person maintaining physical
possession of each such account, book or other document required to be
maintained by section 31(a) [15 U.S.C. 80a-30(a)] and the rules under that
section.
Accounts, books and other records required by Rules 31a-1 and 31a-2
under the Investment Company Act of 1940, as amended, are maintained
and held in the offices of the Registrant and its sub-advisors, INVESCO
(NY), Inc., 50 California Street, 27th Floor, San Francisco, CA 94111
and INVESCO Asset Management Ltd., 11 Devonshire Square, London EC2M
4YR, England, and its custodian, State Street Bank and Trust Company,
225 Franklin Street, Boston, MA 02110.
Records covering shareholder accounts and portfolio transactions are
also maintained and kept by the Registrant's Transfer Agent, A I M Fund
Services, Inc., 11 Greenway Plaza, Suite 100, Houston, Texas 77046, and
by the Registrant's custodian, State Street Bank and Trust Company, 225
Franklin Street, Boston, MA 02110.
Item 29. Management Services
Provide a summary of the substantive provisions of any
management-related service contract not discussed in Part A or Part B,
disclosing the parties to the contract and the total amount paid and by whom for
the Registrant's last three fiscal years.
None.
Item 30. Undertakings
In initial registration statements filed under the Securities Act,
provide an undertaking to file an amendment to the registration statement with
certified financial statements showing the initial capital received before
accepting subscriptions from more than 25 persons if the Registrant intends to
raise its initial capital under section 14(a)(3) [15 U.S.C. 80a-14(a)(3)].
None.
C-8
<PAGE> 413
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933 and the
Investment Company Act of 1940, the Registrant certifies that it meets all of
the requirements for effectiveness of this Registration Statement pursuant to
Rule 485(b) under the Securities Act of 1933 and has duly caused this Amendment
to its Registration Statement to be signed on its behalf by the undersigned,
thereunto duly authorized, in the city of Houston, Texas on the 12th day of
February, 1999.
REGISTRANT: AIM GROWTH SERIES
By: /s/ ROBERT H. GRAHAM
--------------------------------
Robert H. Graham, President
Pursuant to the requirements of the Securities Act of 1933, this
Amendment to the Registration Statement has been signed below by the following
persons in the capacities and on the dates indicated:
<TABLE>
<CAPTION>
SIGNATURES TITLE DATE
---------- ----- ----
<S> <C> <C> <C>
/s/ ROBERT H. GRAHAM Chairman, Trustee & President 2/12/99
------------------------ (Principal Executive Officer)
(Robert H. Graham)
/s/ C. DEREK ANDERSON Trustee 2/12/99
------------------------
(C. Derek Anderson)
/s/ FRANK S. BAYLEY Trustee 2/12/99
------------------------
(Frank S. Bayley)
/s/ ARTHUR C. PATTERSON Trustee 2/12/99
------------------------
(Arthur C. Patterson)
/s/ RUTH H. QUIGLEY Trustee 2/12/99
------------------------
(Ruth H. Quigley)
/s/ KENNETH W. CHANCEY Vice President & 2/12/99
------------------------ Principal Financial
(Kenneth W. Chancey) and Accounting Officer
</TABLE>
<PAGE> 414
SIGNATURES
Growth Portfolio has duly caused this Amendment of the Registration
Statement of AIM Growth Series to be signed on its behalf by the undersigned,
thereunto duly authorized, in the city of Houston, Texas on the 12th day of
February, 1999.
GROWTH PORTFOLIO
By: /s/ ROBERT H. GRAHAM
--------------------------------
Robert H. Graham, President
This Amendment to the Registration Statement of AIM Growth Series has
been signed below by the following persons in the capacities and on the dates
indicated:
<TABLE>
<CAPTION>
SIGNATURES TITLE DATE
---------- ------ ----
<S> <C> <C>
/s/ ROBERT H. GRAHAM Chairman, Trustee & President 2/12/99
------------------------ (Principal Executive Officer)
(Robert H. Graham)
/s/ C. DEREK ANDERSON Trustee 2/12/99
------------------------
(C. Derek Anderson)
/s/ FRANK S. BAYLEY Trustee 2/12/99
------------------------
(Frank S. Bayley)
/s/ ARTHUR C. PATTERSON Trustee 2/12/99
------------------------
(Arthur C. Patterson)
/s/ RUTH H. QUIGLEY Trustee 2/12/99
------------------------
(Ruth H. Quigley)
/s/ KENNETH W. CHANCEY Vice President & 2/12/99
------------------------ Principal Financial
(Kenneth W. Chancey) and Accounting Officer
</TABLE>
<PAGE> 415
INDEX TO EXHIBITS
AIM GROWTH SERIES
<TABLE>
<CAPTION>
Exhibit
Number Description
- ------ -----------
<S> <C>
a(1)(b) First Amendment, dated September 8, 1998, to the Agreement and
Declaration of Trust, dated May 7, 1998
a(1)(c) Form of Second Amendment to the Agreement and Declaration of
Trust
d(5) Form of Sub-Advisory Contract, dated December 14, 1998,
between A I M Advisors, Inc. and INVESCO (NY), Inc. with
respect to Registrant
d(6) Form of Sub-Advisory Contract, dated December 14, 1998,
between A I M Advisors, Inc. and INVESCO Asset Management
Limited with respect to Registrant
e(4) Form of Master Distribution Agreement between Registrant and
A I M Distributors, Inc. with respect to Class A and Class C
shares
e(5) Form of Selected Dealer Agreement between A I M Distributors,
Inc. and selected dealers
e(6) Form of Bank Selling Group Agreement between A I M
Distributors, Inc. and banks
g(1)(a) Custodian Contract, dated September 15, 1988, between State
Street Bank and Trust Company and Registrant
g(1)(b) Amendment (1994) to the Custodian Contract, dated September
15, 1988, between State Street Bank and Trust Company and
Registrant
g(1)(c) Amendment, dated June 20, 1995, to the Custodian Contract,
dated September 15, 1988, between State Street Bank and Trust
Company and Registrant
g(1)(d) Notice of Transfer, dated May 28, 1998, to the Custodian
Contract dated September 15, 1988, between State Street Bank
and Trust Company and Registrant
g(1)(e) Amendment, dated January 26, 1999, to the Custodian Contract,
dated September 15, 1988, between State Street Bank and Trust
Company and Registrant
h(1)(a) Transfer Agency and Service Agreement between Registrant and
A I M Fund Services, Inc., dated September 8, 1998
h(1)(b) Form of Amendment No. 1 to the Transfer Agency and Service
Agreement between Registrant and A I M Fund Services, Inc.
h(2)(e) Amendment No. 4, dated June 30, 1998, to the Remote Access and
Related Services Agreement, dated December 23, 1994, between
Registrant and First Data Investor Services Group, Inc.
(formerly, The Shareholder Services Group, Inc.)
h(2)(f) Amendment No. 5, dated July 1, 1998, to the Remote Access and
Related Services Agreement, dated December 23, 1994, between
Registrant and First Data Investor Services Group, Inc.
(formerly, The Shareholder Services Group, Inc.)
h(3)(b) Form of Fund Accounting and Pricing Agent Agreement dated
June 1, 1998, between A I M Advisors, Inc. and Registrant
j Consent of Kirkpatrick & Lockhart LLP
m(1) Distribution Plan adopted pursuant to Rule 12b-1 with respect
to Class A shares
m(2) Distribution Plan adopted pursuant to Rule 12b-1 with respect
to Class B shares
</TABLE>
<PAGE> 416
<TABLE>
<CAPTION>
<S> <C>
m(3) Form of Master Distribution Plan pursuant to Rule 12b-1 with
respect to Class A and Class C shares
m(4) Form of Shareholder Service Agreement to be used in connection
with Registrant's Distribution Plan
m(5) Form of Bank Shareholder Service Agreement to be used in
connection with Registrant's Distribution Plans
m(6) Form of Agency Pricing Agreement (for Class A Shares) to be
used in connection with Registrant's Distribution Plans
m(7) Form of Service Agreement for Bank Trust Department and for
Brokers for Bank Trust Departments to be used in connection
with Registrant's Distribution Plans
</TABLE>
<PAGE> 1
EXHIBIT a(1)(b)
FIRST AMENDMENT
TO
AGREEMENT AND DECLARATION OF TRUST
OF
AIM GROWTH SERIES
THIS FIRST AMENDMENT TO AGREEMENT AND DECLARATION OF TRUST OF AIM
GROWTH SERIES (the "Amendment") is entered into as of the 8th day of September,
1998, among C. Derek Anderson, Frank S. Bayley, Robert H. Graham, Arthur C.
Patterson and Ruth H. Quigley, as Trustees, and each person who became or
becomes a Shareholder in accordance with the terms set forth in that certain
Agreement and Declaration of Trust of AIM Growth Series entered into as of May
7, 1998, (the "Agreement").
WHEREAS, Sections 2.3 and 9.7 of the Agreement empower the Trustees
without Shareholder action to amend the Agreement in order to change the
designations of the Portfolios; and
WHEREAS, the Trustees on August 12, 1998 approved amending the
Agreement to change certain designations of the Portfolios as hereinafter set
forth.
NOW, THEREFORE, the Trustees hereby amend the Agreement as follows:
1. Capitalized terms not specifically defined in this Amendment shall
have the meanings ascribed to them in the Agreement.
2. Schedule A to the Agreement is hereby deleted in its entirety and a
new Schedule A to the Agreement is substituted as to read in its entirety as
follows:
"SCHEDULE A
AIM Growth Series shall be divided into the following Portfolios, each
of which shall have three Classes (Class A, Class B and Advisor Class):
AIM Europe Growth Fund
AIM International Growth Fund
AIM Japan Growth Fund
AIM New Pacific Growth Fund
AIM Worldwide Growth Fund
AIM Mid Cap Equity Fund
AIM Small Cap Growth Fund
AIM Basic Value Fund
Dated: September 8, 1998"
<PAGE> 2
3. Except for the above change in Schedule A to the Agreement, the
Agreement shall in all other respects remain in full force and effect.
4. This Amendment may be executed in any number of counterparts and by
different parties hereto in separate counterparts, each of which when so
executed shall be deemed to be an original and all of which taken together shall
constitute one and the same Amendment.
IN WITNESS WHEREOF, the undersigned, being all of the Trustees of the
Trust, have executed this First Amendment to Agreement and Declaration of Trust
of AIM Growth Series as of the day first above written.
/s/ C. DEREK ANDERSON /s/ ROBERT H. GRAHAM
- ---------------------------------- ----------------------------------
C. Derek Anderson, Trustee Robert H. Graham, Trustee
/s/ FRANK S. BAYLEY /s/ ARTHUR C. PATTERSON
- ---------------------------------- ----------------------------------
Frank S. Bayley, Trustee Arthur C. Patterson, Trustee
/s/ RUTH H. QUIGLEY
-------------------------
Ruth H. Quigley, Trustee
[THIS IS THE SIGNATURE PAGE FOR
THE FIRST AMENDMENT TO AGREEMENT AND DECLARATION OF TRUST
OF AIM GROWTH SERIES]
<PAGE> 1
EXHIBIT a(1)(c)
SECOND AMENDMENT
TO
AGREEMENT AND DECLARATION OF TRUST
OF
AIM GROWTH SERIES
THIS SECOND AMENDMENT TO AGREEMENT AND DECLARATION OF TRUST OF AIM
GROWTH SERIES (the "Amendment") is entered into the ____ day of ______________,
199__, among C. Derek Anderson, Frank S. Bayley, Robert H. Graham, Arthur C.
Patterson and Ruth H. Quigley, as Trustees, and each person who became or
becomes a Shareholder in accordance with the terms set forth in that certain
Agreement and Declaration of Trust of AIM Growth Series, a Delaware business
trust (the "Trust"), entered into as of May 7, 1998, as amended (the
"Agreement").
WHEREAS, the Trustees of the Trust desire to establish a new Class of
shares of AIM Europe Growth Fund, AIM Japan Growth Fund, AIM New Pacific Growth
Fund, AIM Mid Cap Equity Fund, AIM Small Cap Growth Fund and AIM Basic Value
Fund, Portfolios of the Trust: the Class C Shares; and
WHEREAS, Section 2.3 (b) and Section 2.3.1 of the Agreement permit the
Trustees to establish such Classes and Section 9.7 of the Agreement authorizes
the Trustees to amend or otherwise supplement the Agreement by making an
amendment, all without Shareholder authorization or vote; and
WHEREAS, at a meeting duly called and held on the 10th day of December,
1998, the Trustees have resolved to amend the Agreement as hereinafter set
forth.
NOW, THEREFORE, the Trustees hereby amend the Agreement as herein set
forth below:
1. Capitalized terms not specifically defined in this Amendment shall
have the meanings ascribed to them in the Agreement.
2. Schedule A of the Agreement shall be deleted in its entirety and the
following new Schedule A shall be substituted in lieu thereof:
-1-
<PAGE> 2
"SCHEDULE A
AIM Growth Series shall be divided into the following Portfolios and
Classes:
Class A, Class B, Class C and Advisor Class
AIM Europe Growth Fund
AIM Japan Growth Fund
AIM New Pacific Growth Fund
AIM Mid Cap Equity Fund
AIM Small Cap Growth Fund
AIM Basic Value Fund
Class A, Class B and Advisor Class
AIM International Growth Fund
AIM Worldwide Growth Fund
Date: ______________, 1998"
3. With the exception of the amendment to Schedule A of the Agreement
as set forth in paragraph 2 of this Amendment, the Agreement, as amended, shall
in all other respects remain in full force and effect.
4. This Amendment may be executed in any number of counterparts and by
different parties hereto in separate counterparts, each of which when so
executed shall be deemed to be an original and all of which taken together shall
constitute one and the same Amendment.
-2-
<PAGE> 3
IN WITNESS WHEREOF, the undersigned, being all of the Trustees
of the Trust, have executed this Amendment to Agreement and Declaration of Trust
of AIM Growth Series as of the day and year first above written.
- ----------------------------- ---------------------------------------
C. Derek Anderson, Trustee Frank S. Bayley, Trustee
- ----------------------------- --------------------------------------
Robert H. Graham, Trustee Arthur C. Patterson, Trustee
- -----------------------------
Ruth H. Quigley, Trustee
[THIS IS THE SIGNATURE PAGE FOR
THE FIRST AMENDMENT TO AGREEMENT AND DECLARATION OF TRUST
OF AIM GROWTH SERIES]
<PAGE> 1
EXHIBIT d(5)
AIM GROWTH SERIES
SUB-ADVISORY CONTRACT
BETWEEN
A I M ADVISORS, INC.
AND
INVESCO (NY), INC.
Contract made as of December 14, 1998, between A I M Advisors, Inc., a
Delaware corporation ("Adviser"), and INVESCO (NY), INC., a California
corporation ("Sub-Adviser").
WHEREAS Adviser has entered into an Investment Management and
Administration Contract with AIM Growth Series ("Company"), an open-end
management investment company registered under the Investment Company Act of
1940, as amended ("1940 Act"), with respect to AIM New Pacific Growth Fund and
AIM Japan Growth Fund, each Fund being a series of the Company's shares of
beneficial interest; and
WHEREAS Adviser desires to retain Sub-Adviser as sub-adviser to furnish
certain advisory services to the Funds, and Sub-Adviser is willing to furnish
such services;
NOW THEREFORE, in consideration of the promises and the mutual
covenants herein contained, it is agreed between the parties hereto as follows:
1. Appointment. Adviser hereby appoints Sub-Adviser as sub-adviser of each Fund
for the period and on the terms set forth in this Contract. Sub-Adviser accepts
such appointment and agrees to render the services herein set forth, for the
compensation herein provided.
2. Duties as Sub-Adviser.
(a) Subject to the supervision of the Company's Board of Trustees
("Board") and Adviser, the Sub-Adviser will provide a continuous investment
program for each Fund, including investment research and management, with
respect to all securities and investments and cash equivalents of the Fund. The
Sub-Adviser will determine from time to time what securities and other
investments will be purchased, retained or sold by each Fund, and the brokers
and dealers through whom trades will be executed.
(b) The Sub-Adviser agrees that, in placing orders with brokers and
dealers, it will attempt to obtain the best net result in terms of price and
execution. Consistent with this obligation, the Sub-Adviser may, in its
discretion, purchase and sell portfolio securities from and to brokers and
dealers who sell shares of the Funds or provide the Funds, Adviser's other
clients, or Sub-Adviser's other clients with research, analysis, advice and
similar services. The Sub-Adviser may pay to brokers and dealers, in return for
such research and analysis, a higher commission or spread than may be charged by
other brokers and dealers, subject to the Sub-Adviser determining in good faith
that such commission or spread is reasonable in terms either of the particular
transaction or of the overall
<PAGE> 2
responsibility of the Adviser and the Sub-Adviser to the Funds and their other
clients and that the total commissions or spreads paid by each Fund will be
reasonable in relation to the benefits to the Fund over the long term. In no
instance will portfolio securities be purchased from or sold to the Sub-Adviser,
or any affiliated person thereof, except in accordance with the federal
securities laws and the rules and regulations thereunder and any exemptive
orders currently in effect. Whenever the Sub-Adviser simultaneously places
orders to purchase or sell the same security on behalf of a Fund and one or more
other accounts advised by the Sub-Adviser, such orders will be allocated as to
price and amount among all such accounts in a manner believed to be equitable to
each account.
(c) The Sub-Adviser will maintain all books and records with respect to
the securities transactions of the Funds, and will furnish the Board and Adviser
with such periodic and special reports as the Board or Adviser reasonably may
request. In compliance with the requirements of Rule 31a-3 under the 1940 Act,
the Sub-Adviser hereby agrees that all records which it maintains for the
Company are the property of the Company, agrees to preserve for the periods
prescribed by Rule 31a-2 under the 1940 Act any records which it maintains for
the Company and which are required to be maintained by Rule 31a-1 under the 1940
Act, and further agrees to surrender promptly to the Company any records which
it maintains for the Company upon request by the Company.
3. Further Duties. In all matters relating to the performance of this Contract,
Sub-Adviser will act in conformity with the Agreement and Declaration of Trust,
By-Laws and Registration Statement of the Company and with the instructions and
directions of the Board and will comply with the requirements of the 1940 Act,
the rules thereunder, and all other applicable federal and state laws and
regulations.
4. Services Not Exclusive. The services furnished by Sub-Adviser hereunder are
not to be deemed exclusive and Sub-Adviser shall be free to furnish similar
services to others so long as its services under this Contract are not impaired
thereby. Nothing in this Contract shall limit or restrict the right of any
director, officer or employee of Sub-Adviser, who may also be a Trustee, officer
or employee of the Company, to engage in any other business or to devote his or
her time and attention in part to the management or other aspects of any other
business, whether of a similar nature or a dissimilar nature.
5. Expenses.
(a) During the term of this Contract, each Fund will bear all expenses,
not specifically assumed by Adviser and Sub-Adviser, incurred in its operations
and the offering of its shares.
(b) Expenses borne by each Fund will include but not be limited to the
following: (i) all direct charges relating to the purchase and sale of portfolio
securities, including the cost (including brokerage commissions, if any) of
securities purchased or sold by the Fund and any losses incurred in connection
therewith; (ii) fees payable to and expenses incurred on behalf of the Fund by
Sub-Adviser under this Contract;
<PAGE> 3
(iii) investment consulting fees and related costs; (iv) expenses of organizing
the Company and the Fund; (v) expenses of preparing and filing reports and other
documents with governmental and regulatory agencies; (vi) filing fees and
expenses relating to the registration and qualification of the Fund's shares and
the Company under federal and/or state securities laws and maintaining such
registrations and qualifications; (vii) costs incurred in connection with the
issuance, sale or repurchase of the Fund's shares of beneficial interest; (viii)
fees and salaries payable to the Company's Trustees who are not parties to this
Contract or interested persons of any such party ("Independent Trustees"); (ix)
all expenses incurred in connection with the Independent Trustees' services,
including travel expenses; (x) taxes (including any income or franchise taxes)
and governmental fees; (xi) costs of any liability, uncollectible items of
deposit and other insurance and fidelity bonds; (xii) any costs, expenses or
losses arising out of a liability of or claim for damages or other relief
asserted against the Company or the Fund for violation of any law; (xiii)
interest charges; (xiv) legal, accounting and auditing expenses, including legal
fees of special counsel for the Independent Trustees; (xv) charges of
custodians, transfer agents, pricing agents and other agents; (xvi) expenses of
disbursing dividends and distributions; (xvii) costs of preparing share
certificates; (xviii) expenses of setting in type, printing and mailing
prospectuses and supplements thereto, statements of additional information,
reports, notices and proxy materials for existing shareholders; (xix) any
extraordinary expenses (including fees and disbursements of counsel, costs of
actions, suits or proceedings to which the Company is a party and the expenses
the Company may incur as a result of its legal obligation to provide
indemnification to its officers, Trustees, employees and agents) incurred by the
Company; (xx) fees, voluntary assessments and other expenses incurred in
connection with membership in investment company organizations; (xxi) costs of
mailing and tabulating proxies and costs of meetings of shareholders, the Board
and any committees thereof; (xxii) the cost of investment company literature and
other publications provided by the Company to its Trustees and officers; and
(xxiii) costs of mailing, stationery and communications equipment.
(c) The payment or assumption by Sub-Adviser of any expense of the
Company or any Fund that Sub-Adviser is not required by this Contract to pay or
assume shall not obligate Sub-Adviser to pay or assume the same or any similar
expense of the Company or any Fund on any subsequent occasion.
6. Compensation.
(a) For the services provided to a Fund under this Contract, Adviser
will pay Sub-Adviser a fee, computed weekly and paid monthly, as set forth in
Appendix A hereto.
(b) For the services provided under this Contract to each Fund as
hereafter may be established, Adviser will pay to Sub-Adviser a fee in an amount
to be agreed upon in a written Appendix to this Contract executed by Adviser and
by Sub-Adviser.
(c) The fee shall be computed weekly and paid monthly to Sub-Adviser on
or before the last business day of the next succeeding calendar month.
<PAGE> 4
(d) If this Contract becomes effective or terminates before the end of
any month, the fee for the period from the effective date to the end of the
month or from the beginning of such month to the date of termination, as the
case may be, shall be prorated according to the proportion which such period
bears to the full month in which such effectiveness or termination occurs.
7. Limitation of Liability of Sub-Adviser and Indemnification. Sub-Adviser shall
not be liable for any costs or liabilities arising from any error of judgment or
mistake of law or any loss suffered by the Fund or the Company in connection
with the matters to which this Contract relates except a loss resulting from
willful misfeasance, bad faith or gross negligence on the part of Sub-Adviser in
the performance by Sub-Adviser of its duties or from reckless disregard by
Sub-Adviser of its obligations and duties under this Contract. Any person, even
though also an officer, partner, employee, or agent of Sub-Adviser, who may be
or become a Trustee, officer, employee or agent of the Company, shall be deemed,
when rendering services to a Fund or the Company or acting with respect to any
business of a Fund or the Company to be rendering such service to or acting
solely for the Fund or the Company and not as an officer, partner, employee, or
agent or one under the control or direction of Sub-Adviser even though paid by
it.
8. Duration and Termination.
(a) This Contract shall become effective upon the date hereabove
written, provided that this Contract shall not take effect with respect to any
Fund unless it has first been approved (i) by a vote of a majority of the
Independent Trustees, cast in person at a meeting called for the purpose of
voting on such approval, and (ii) by vote of a majority of that Fund's
outstanding voting securities, when required by the 1940 Act.
(b) Unless sooner terminated as provided herein, this Contract shall
continue in effect for two years from the above written date. Thereafter, if not
terminated, with respect to each Fund, this Contract shall continue
automatically for successive periods not to exceed twelve months each, provided
that such continuance is specifically approved at least annually (i) by a vote
of a majority of the Independent Trustees, cast in person at a meeting called
for the purpose of voting on such approval, and (ii) by the Board or by vote of
a majority of the outstanding voting securities of that Fund.
(c) Notwithstanding the foregoing, with respect to any Fund this
Contract may be terminated at any time, without the payment of any penalty, by
vote of the Board or by a vote of a majority of the outstanding voting
securities of the Fund on sixty days' written notice to Sub-Adviser or by
Sub-Adviser at any time, without the payment of any penalty, on sixty days'
written notice to the Company. Termination of this Contract with respect to one
Fund shall not affect the continued effectiveness of this Contract with respect
to any other Fund. This Contract will automatically terminate in the event of
its assignment.
<PAGE> 5
9. Amendment. No provision of this Contract may be changed, waived, discharged
or terminated orally, but only by an instrument in writing signed by the party
against which enforcement of the change, waiver, discharge or termination is
sought, and no amendment of this Contract shall be effective until approved by
vote of a majority of the Fund's outstanding voting securities, when required by
the 1940 Act.
10. Governing Law. This Contract shall be construed in accordance with the laws
of the State of Delaware (without regard to Delaware conflict or choice of law
provisions) and the 1940 Act. To the extent that the applicable laws of the
State of Delaware conflict with the applicable provisions of the 1940 Act, the
latter shall control.
11. Miscellaneous. The captions in this Contract are included for convenience of
reference only and in no way define or delimit any of the provisions hereof or
otherwise affect their construction or effect. If any provision of this Contract
shall be held or made invalid by a court decision, statute, rule or otherwise,
the remainder of this Contract shall not be affected thereby. This Contract
shall be binding upon and shall inure to the benefit of the parties hereto and
their respective successors. As used in this Contract, the terms "majority of
the outstanding voting securities," "interested person," "assignment," "broker,"
"dealer," "investment adviser," "national securities exchange," "net assets,"
"prospectus," "sale," "sell" and "security" shall have the same meaning as such
terms have in the 1940 Act, subject to such exemption as may be granted by the
Securities and Exchange Commission by any rule, regulation or order. Where the
effect of a requirement of the 1940 Act reflected in any provision of this
Contract is made less restrictive by a rule, regulation or order of the
Securities and Exchange Commission, whether of special or general application,
such provision shall be deemed to incorporate the effect of such rule,
regulation or order.
IN WITNESS WHEREOF, the parties hereto have caused this instrument to
be executed by their officers designated as of the day and year first above
written.
A I M ADVISORS, INC.
Attest: By:
----------------------- ------------------------------
Name:
Title:
INVESCO (NY), INC.
Attest: By:
----------------------- ------------------------------
Name:
Title:
<PAGE> 6
APPENDIX A
TO
AIM GROWTH SERIES
SUB-ADVISORY CONTRACT
BETWEEN
A I M ADVISORS, INC.
AND
INVESCO (NY), INC.
AIM JAPAN GROWTH FUND, AIM NEW PACIFIC GROWTH FUND
<TABLE>
<CAPTION>
NET ASSETS ANNUAL RATE
- ---------- -----------
<S> <C>
First $ 500 million....................................... 0.39%
Next $ 500 million........................................ 0.38%
Next $ 500 million........................................ 0.37%
On amounts thereafter..................................... 0.36%
</TABLE>
<PAGE> 1
EXHIBIT d(6)
AIM GROWTH SERIES
SUB-ADVISORY CONTRACT
BETWEEN
A I M ADVISORS, INC.
AND
INVESCO ASSET MANAGEMENT LIMITED
Contract made as of December 14, 1998, between A I M Advisors, Inc., a
Delaware corporation ("Adviser"), and INVESCO Asset Management Limited, a
company organized under the laws of England and Wales ("Sub-Adviser").
WHEREAS Adviser has entered into an Investment Management and
Administration Contract with AIM Growth Series ("Company"), an open-end
management investment company registered under the Investment Company Act of
1940, as amended ("1940 Act"), with respect to AIM Worldwide Growth Fund, AIM
International Growth Fund and AIM Europe Growth Fund, each Fund being a series
of the Company's shares of beneficial interest; and
WHEREAS Adviser desires to retain Sub-Adviser as sub-adviser to furnish
certain advisory services to the Funds, and Sub-Adviser is willing to furnish
such services;
NOW THEREFORE, in consideration of the promises and the mutual
covenants herein contained, it is agreed between the parties hereto as follows:
1. Appointment. Adviser hereby appoints Sub-Adviser as sub-adviser of each Fund
for the period and on the terms set forth in this Contract. Sub-Adviser accepts
such appointment and agrees to render the services herein set forth, for the
compensation herein provided.
2. Duties as Sub-Adviser.
(a) Subject to the supervision of the Company's Board of Trustees
("Board") and Adviser, the Sub-Adviser will provide a continuous investment
program for each Fund, including investment research and management, with
respect to all securities and investments and cash equivalents of the Fund. The
Sub-Adviser will determine from time to time what securities and other
investments will be purchased, retained or sold by each Fund, and the brokers
and dealers through whom trades will be executed.
(b) The Sub-Adviser agrees that, in placing orders with brokers and
dealers, it will attempt to obtain the best net result in terms of price and
execution. Consistent with this obligation, the Sub-Adviser may, in its
discretion, purchase and sell portfolio securities from and to brokers and
dealers who sell shares of the Funds or provide the Funds, Adviser's other
clients, or Sub-Adviser's other clients with research, analysis, advice and
similar services. The Sub-Adviser may pay to brokers and dealers, in return for
such research and analysis, a higher commission or spread than may be charged by
other brokers and dealers, subject to the Sub-Adviser determining in good faith
that such commission or
<PAGE> 2
spread is reasonable in terms either of the particular transaction or of the
overall responsibility of the Adviser and the Sub-Adviser to the Funds and their
other clients and that the total commissions or spreads paid by each Fund will
be reasonable in relation to the benefits to the Fund over the long term. In no
instance will portfolio securities be purchased from or sold to the Sub-Adviser,
or any affiliated person thereof, except in accordance with the federal
securities laws and the rules and regulations thereunder and any exemptive
orders currently in effect. Whenever the Sub-Adviser simultaneously places
orders to purchase or sell the same security on behalf of a Fund and one or more
other accounts advised by the Sub-Adviser, such orders will be allocated as to
price and amount among all such accounts in a manner believed to be equitable to
each account.
(c) The Sub-Adviser will maintain all books and records with respect to
the securities transactions of the Funds, and will furnish the Board and Adviser
with such periodic and special reports as the Board or Adviser reasonably may
request. In compliance with the requirements of Rule 31a-3 under the 1940 Act,
the Sub-Adviser hereby agrees that all records which it maintains for the
Company are the property of the Company, agrees to preserve for the periods
prescribed by Rule 31a-2 under the 1940 Act any records which it maintains for
the Company and which are required to be maintained by Rule 31a-1 under the 1940
Act, and further agrees to surrender promptly to the Company any records which
it maintains for the Company upon request by the Company.
3. Further Duties. In all matters relating to the performance of this Contract,
Sub-Adviser will act in conformity with the Agreement and Declaration of Trust,
By-Laws and Registration Statement of the Company and with the instructions and
directions of the Board and will comply with the requirements of the 1940 Act,
the rules thereunder, and all other applicable federal and state laws and
regulations.
4. Services Not Exclusive. The services furnished by Sub-Adviser hereunder are
not to be deemed exclusive and Sub-Adviser shall be free to furnish similar
services to others so long as its services under this Contract are not impaired
thereby. Nothing in this Contract shall limit or restrict the right of any
director, officer or employee of Sub-Adviser, who may also be a Trustee, officer
or employee of the Company, to engage in any other business or to devote his or
her time and attention in part to the management or other aspects of any other
business, whether of a similar nature or a dissimilar nature.
5. Expenses.
(a) During the term of this Contract, each Fund will bear all expenses,
not specifically assumed by Adviser and Sub-Adviser, incurred in its operations
and the offering of its shares.
(b) Expenses borne by each Fund will include but not be limited to the
following: (i) all direct charges relating to the purchase and sale of portfolio
securities, including the cost (including brokerage commissions, if any) of
securities purchased or sold by the Fund and any losses incurred in connection
therewith; (ii) fees payable to and
<PAGE> 3
expenses incurred on behalf of the Fund by Sub-Adviser under this Contract;
(iii) investment consulting fees and related costs; (iv) expenses of organizing
the Company and the Fund; (v) expenses of preparing and filing reports and other
documents with governmental and regulatory agencies; (vi) filing fees and
expenses relating to the registration and qualification of the Fund's shares and
the Company under federal and/or state securities laws and maintaining such
registrations and qualifications; (vii) costs incurred in connection with the
issuance, sale or repurchase of the Fund's shares of beneficial interest; (viii)
fees and salaries payable to the Company's Trustees who are not parties to this
Contract or interested persons of any such party ("Independent Trustees"); (ix)
all expenses incurred in connection with the Independent Trustees' services,
including travel expenses; (x) taxes (including any income or franchise taxes)
and governmental fees; (xi) costs of any liability, uncollectible items of
deposit and other insurance and fidelity bonds; (xii) any costs, expenses or
losses arising out of a liability of or claim for damages or other relief
asserted against the Company or the Fund for violation of any law; (xiii)
interest charges; (xiv) legal, accounting and auditing expenses, including legal
fees of special counsel for the Independent Trustees; (xv) charges of
custodians, transfer agents, pricing agents and other agents; (xvi) expenses of
disbursing dividends and distributions; (xvii) costs of preparing share
certificates; (xviii) expenses of setting in type, printing and mailing
prospectuses and supplements thereto, statements of additional information,
reports, notices and proxy materials for existing shareholders; (xix) any
extraordinary expenses (including fees and disbursements of counsel, costs of
actions, suits or proceedings to which the Company is a party and the expenses
the Company may incur as a result of its legal obligation to provide
indemnification to its officers, Trustees, employees and agents) incurred by the
Company; (xx) fees, voluntary assessments and other expenses incurred in
connection with membership in investment company organizations; (xxi) costs of
mailing and tabulating proxies and costs of meetings of shareholders, the Board
and any committees thereof; (xxii) the cost of investment company literature and
other publications provided by the Company to its Trustees and officers; and
(xxiii) costs of mailing, stationery and communications equipment.
(c) The payment or assumption by Sub-Adviser of any expense of the
Company or any Fund that Sub-Adviser is not required by this Contract to pay or
assume shall not obligate Sub-Adviser to pay or assume the same or any similar
expense of the Company or any Fund on any subsequent occasion.
6. Compensation.
(a) For the services provided to a Fund under this Contract, Adviser
will pay Sub-Adviser a fee, computed weekly and paid monthly, as set forth in
Appendix A hereto.
(b) For the services provided under this Contract to each Fund as
hereafter may be established, Adviser will pay to Sub-Adviser a fee in an amount
to be agreed upon in a written Appendix to this Contract executed by Adviser and
by Sub-Adviser.
<PAGE> 4
(c) The fee shall be computed weekly and paid monthly to Sub-Adviser on
or before the last business day of the next succeeding calendar month.
(d) If this Contract becomes effective or terminates before the end of
any month, the fee for the period from the effective date to the end of the
month or from the beginning of such month to the date of termination, as the
case may be, shall be prorated according to the proportion which such period
bears to the full month in which such effectiveness or termination occurs.
7. Limitation of Liability of Sub-Adviser and Indemnification. Sub-Adviser shall
not be liable for any costs or liabilities arising from any error of judgment or
mistake of law or any loss suffered by the Fund or the Company in connection
with the matters to which this Contract relates except a loss resulting from
willful misfeasance, bad faith or gross negligence on the part of Sub-Adviser in
the performance by Sub-Adviser of its duties or from reckless disregard by
Sub-Adviser of its obligations and duties under this Contract. Any person, even
though also an officer, partner, employee, or agent of Sub-Adviser, who may be
or become a Trustee, officer, employee or agent of the Company, shall be deemed,
when rendering services to a Fund or the Company or acting with respect to any
business of a Fund or the Company to be rendering such service to or acting
solely for the Fund or the Company and not as an officer, partner, employee, or
agent or one under the control or direction of Sub-Adviser even though paid by
it.
8. Duration and Termination.
(a) This Contract shall become effective upon the date hereabove
written, provided that this Contract shall not take effect with respect to any
Fund unless it has first been approved (i) by a vote of a majority of the
Independent Trustees, cast in person at a meeting called for the purpose of
voting on such approval, and (ii) by vote of a majority of that Fund's
outstanding voting securities, when required by the 1940 Act.
(b) Unless sooner terminated as provided herein, this Contract shall
continue in effect for two years from the above written date. Thereafter, if not
terminated, with respect to each Fund, this Contract shall continue
automatically for successive periods not to exceed twelve months each, provided
that such continuance is specifically approved at least annually (i) by a vote
of a majority of the Independent Trustees, cast in person at a meeting called
for the purpose of voting on such approval, and (ii) by the Board or by vote of
a majority of the outstanding voting securities of that Fund.
(c) Notwithstanding the foregoing, with respect to any Fund this
Contract may be terminated at any time, without the payment of any penalty, by
vote of the Board or by a vote of a majority of the outstanding voting
securities of the Fund on sixty days' written notice to Sub-Adviser or by
Sub-Adviser at any time, without the payment of any penalty, on sixty days'
written notice to the Company. Termination of this Contract with respect to one
Fund shall not affect the continued effectiveness of this Contract with respect
to any other Fund. This Contract will automatically terminate in the event of
its assignment.
<PAGE> 5
9. Amendment. No provision of this Contract may be changed, waived, discharged
or terminated orally, but only by an instrument in writing signed by the party
against which enforcement of the change, waiver, discharge or termination is
sought, and no amendment of this Contract shall be effective until approved by
vote of a majority of the Fund's outstanding voting securities, when required by
the 1940 Act.
10. Governing Law. This Contract shall be construed in accordance with the laws
of the State of Delaware (without regard to Delaware conflict or choice of law
provisions) and the 1940 Act. To the extent that the applicable laws of the
State of Delaware conflict with the applicable provisions of the 1940 Act, the
latter shall control.
11. Miscellaneous. The captions in this Contract are included for convenience of
reference only and in no way define or delimit any of the provisions hereof or
otherwise affect their construction or effect. If any provision of this Contract
shall be held or made invalid by a court decision, statute, rule or otherwise,
the remainder of this Contract shall not be affected thereby. This Contract
shall be binding upon and shall inure to the benefit of the parties hereto and
their respective successors. As used in this Contract, the terms "majority of
the outstanding voting securities," "interested person," "assignment," "broker,"
"dealer," "investment adviser," "national securities exchange," "net assets,"
"prospectus," "sale," "sell" and "security" shall have the same meaning as such
terms have in the 1940 Act, subject to such exemption as may be granted by the
Securities and Exchange Commission by any rule, regulation or order. Where the
effect of a requirement of the 1940 Act reflected in any provision of this
Contract is made less restrictive by a rule, regulation or order of the
Securities and Exchange Commission, whether of special or general application,
such provision shall be deemed to incorporate the effect of such rule,
regulation or order.
IN WITNESS WHEREOF, the parties hereto have caused this instrument to
be executed by their officers designated as of the day and year first above
written.
A I M ADVISORS, INC.
Attest: By:
---------------------------- ------------------------------
Name:
Title:
INVESCO ASSET MANAGEMENT LIMITED
Attest: By:
---------------------------- ------------------------------
Name:
Title:
<PAGE> 6
APPENDIX A
TO
AIM GROWTH SERIES
SUB-ADVISORY CONTRACT
BETWEEN
A I M ADVISORS, INC.
AND
INVESCO ASSET MANAGEMENT LIMITED
AIM EUROPE GROWTH FUND, AIM INTERNATIONAL GROWTH FUND, AIM WORLDWIDE
GROWTH FUND
<TABLE>
<CAPTION>
NET ASSETS ANNUAL RATE
- ---------- -----------
<S> <C> <C>
First $ 500 million................................................. 0.39%
Next $ 500 million.................................................. 0.38%
Next $ 500 million.................................................. 0.37%
On amounts thereafter............................................... 0.36%
</TABLE>
<PAGE> 1
EXHIBIT e(4)
MASTER DISTRIBUTION AGREEMENT
BETWEEN
AIM GROWTH SERIES
(CLASS A AND C SHARES)
AND
A I M DISTRIBUTORS, INC.
THIS AGREEMENT made as of the _____ day of ________________, 1999, by
and between AIM GROWTH SERIES, a Delaware business trust (the "Company"), with
respect to each of the Class A and Class C shares (the "Class A and C shares")
of each series of shares of beneficial interest set forth on Appendix A to this
Agreement (the "Portfolios") and A I M DISTRIBUTORS, INC., a Delaware
corporation (the "Distributor").
W I T N E S S E T H:
In consideration of the mutual covenants herein contained and other
good and valuable consideration, the receipt whereof is hereby acknowledged, the
parties hereto agree as follows:
FIRST: The Company on behalf of the Class A and Class C Shares hereby
appoints the Distributor as its exclusive agent for the sale of the Class A and
Class C Shares to the public directly and through investment dealers and
financial institutions in the United States and throughout the world in
accordance with the terms of the current prospectuses applicable to the
Portfolios.
SECOND: The Company shall not sell any Class A and Class C Shares
except through the Distributor and under the terms and conditions set forth in
paragraph FOURTH below. Notwithstanding the provisions of the foregoing
sentence, however:
(A) the Company may issue Class A and Class C Shares to any other
investment company or personal holding company, or to the shareholders thereof,
in exchange for all or a majority of the shares or assets of any such company;
and
(B) the Company may issue Class A and Class C Shares at their net asset
value in connection with certain classes of transactions or to certain
categories of persons, in accordance with Rule 22d-1 under the Investment
Company Act of 1940, as amended (the "1940 Act"), provided that any such
category is specified in the then current prospectus of the applicable Class A
and Class C Shares.
THIRD: The Distributor hereby accepts appointment as exclusive agent
for the sale of the Class A and Class C Shares and agrees that it will use its
best efforts to sell such shares; provided, however, that:
(A) the Distributor may, and when requested by the Company on behalf of
the Class A and Class C Shares shall, suspend its efforts to effectuate such
sales at any time when, in the opinion of the Distributor or of the Company, no
sales should be made because of market or other economic considerations or
abnormal circumstances of any kind; and
1
<PAGE> 2
(B) the Company may withdraw the offering of the Class A and Class C
Shares (i) at any time with the consent of the Distributor, or (ii) without such
consent when so required by the provisions of any statute or of any order, rule
or regulation of any governmental body having jurisdiction. It is mutually
understood and agreed that the Distributor does not undertake to sell any
specific amount of the Class A and Class C Shares. The Company shall have the
right to specify minimum amounts for initial and subsequent orders for the
purchase of Class A and Class C Shares.
FOURTH:
(A) The public offering price of Class A Shares (the "offering price")
shall be the net asset value per share plus a sales charge, if any. Net asset
value per share shall be determined in accordance with the provisions of the
then current prospectus and statement of additional information of the
Portfolios. The sales charge shall be established by the Distributor. The
Distributor may establish a schedule of contingent deferred sales charges to be
imposed at the time of redemption of certain Class A Shares and such schedule of
contingent deferred sales charges shall be disclosed in the current prospectus
or statement of additional information for each Portfolio. The sales charges and
contingent deferred sales charges may reflect scheduled variations in, or the
elimination of, sales charges on sales of Class A Shares or redemption of Class
A Shares either generally to the public, or to any specified class of investors
or in connection with any specified class of transactions, in accordance with
Rule 22d-1 and as set forth in the then current prospectus and statement of
additional information of the Portfolios. The Distributor shall apply any
scheduled variation in, or elimination of, the selling commission or contingent
deferred sales charge uniformly to all offerees in the class specified.
The public offering price of the Class C shares shall be the net asset
value per share of the applicable Class C shares. Net asset value per share
shall be determined in accordance with the provisions of the then current
prospectus and statement of additional information of the applicable Portfolio.
The Distributor may establish a schedule of contingent deferred sales charges to
be imposed at the time of redemption of the Shares, and such schedule shall be
disclosed in the current prospectus or statement of additional information of
each Portfolio. Such schedule of contingent deferred sales charges may reflect
variations in or waivers of such charges on redemptions of Class C shares,
either generally to the public or to any specified class of shareholders and/or
in connection with any specified class of transactions, in accordance with
applicable rules and regulations and exemptive relief granted by the Securities
and Exchange Commission, and as set forth in the Portfolios' current
prospectus(es) or statement(s) of additional information. The Distributor and
the Company shall apply any then applicable scheduled variation in or waiver of
contingent deferred sales charges uniformly to all shareholders and/or all
transactions belonging to a specified class.
(B) The Portfolios shall allow directly to investment dealers and other
financial institutions through whom Class A Shares are sold such portion of the
sales charge as may be payable to them and specified by the Distributor up to
but not exceeding the amount of the total sales charge. The difference between
any commissions so payable and the total sales charges included in the offering
price shall be paid to the Distributor.
2
<PAGE> 3
The Distributor may pay to investment dealers and other financial
institutions through whom Class C shares are sold, such sales commission as the
Distributor may specify from time to time. Payment of any such sales commissions
shall be the sole obligation of the Distributor.
(C) No provision of this Agreement shall be deemed to prohibit any
payments by a Portfolio to the Distributor or by a Portfolio or the Distributor
to investment dealers, financial institutions and 401(k) plan service providers
where such payments are made under a distribution plan adopted by the Company on
behalf of each Portfolio pursuant to Rule 12b-1 under the 1940 Act.
(D) The Company shall redeem Class A and Class C Shares from
shareholders in accordance with the terms set forth from time to time in the
current prospectus and statement of additional information of each Portfolio.
The price to be paid to a shareholder to redeem Class A and Class C Shares shall
be equal to the net asset value of the Class A and Class C Shares being
redeemed, less any applicable contingent deferred sales charge. The Distributor
shall be entitled to receive the amount of any applicable contingent deferred
sales charge that has been subtracted from gross redemption proceeds. The
Company shall pay or cause the Company's transfer agent to pay the applicable
contingent deferred sales charge to the Distributor on the date net redemption
proceeds are payable to the redeeming shareholder.
FIFTH: The Distributor shall act as agent of the Company on behalf of
each Portfolio in connection with the sale and repurchase of Class A and Class C
Shares. Except with respect to such sales and repurchases, the Distributor shall
act as principal in all matters relating to the promotion or the sale of Class A
and Class C Shares and shall enter into all of its own engagements, agreements
and contracts as principal on its own account. The Distributor shall enter into
agreements with investment dealers and financial institutions selected by the
Distributor, authorizing such investment dealers and financial institutions to
offer and sell Class A and Class C Shares to the public upon the terms and
conditions set forth therein, which shall not be inconsistent with the
provisions of this Agreement. Each agreement shall provide that the investment
dealer and financial institution shall act as a principal, and not as an agent,
of the Company on behalf of the Portfolios. The Distributor or such other
investment dealers or financial institutions will be deemed to have performed
all services required to be performed in order to be entitled to receive the
asset based sales charge portion of any amounts payable with respect to Class C
Shares to the Distributor pursuant to a distribution plan adopted by the Company
on behalf of each Portfolio pursuant to Rule 12b-1 under the 1940 Act upon the
settlement of each sale of a Class C Share (or a share of another portfolio from
which the Class C Share derives).
SIXTH: The Portfolios shall bear:
(A) the expenses of qualification of Class A and Class C Shares for
sale in connection with such public offerings in such states as shall be
selected by the Distributor, and of continuing the qualification therein until
the Distributor notifies the Company that it does not wish such qualification
continued; and
(B) all legal expenses in connection with the foregoing.
SEVENTH:
(A) The Distributor shall bear the expenses of printing from the final
proof and distributing the Portfolios' prospectuses and statements of additional
information (including supplements
3
<PAGE> 4
thereto) relating to public offerings made by the Distributor pursuant to this
Agreement (which shall not include those prospectuses and statements of
additional information, and supplements thereto, to be distributed to
shareholders of each Portfolio), and any other promotional or sales literature
used by the Distributor or furnished by the Distributor to dealers in connection
with such public offerings, and expenses of advertising in connection with such
public offerings.
(B) The Distributor may be reimbursed for all or a portion of such
expenses, or may receive reasonable compensation for distribution related
services, to the extent permitted by a distribution plan adopted by the Company
on behalf of the Portfolios pursuant to Rule 12b-1 under the 1940 Act.
EIGHTH: The Distributor will accept orders for the purchase of Class A
and Class C Shares only to the extent of purchase orders actually received and
not in excess of such orders, and it will not avail itself of any opportunity of
making a profit by expediting or withholding orders. It is mutually understood
and agreed that the Company may reject purchase orders where, in the judgment of
the Company, such rejection is in the best interest of the Company.
NINTH: The Company, on behalf of the Portfolios, and the Distributor
shall each comply with all applicable provisions of the 1940 Act, the Securities
Act of 1933 and of all other federal and state laws, rules and regulations
governing the issuance and sale of Class A and Class C Shares.
TENTH:
(A) In the absence of willful misfeasance, bad faith, gross negligence
or reckless disregard of obligations or duties hereunder on the part of the
Distributor, the Company on behalf of the Portfolios agrees to indemnify the
Distributor against any and all claims, demands, liabilities and expenses which
the Distributor may incur under the Securities Act of 1933, or common law or
otherwise, arising out of or based upon any alleged untrue statement of a
material fact contained in any registration statement or prospectus of the
Portfolios, or any omission to state a material fact therein, the omission of
which makes any statement contained therein misleading, unless such statement or
omission was made in reliance upon, and in conformity with, information
furnished to the Company or Portfolio in connection therewith by or on behalf of
the Distributor. The Distributor agrees to indemnify the Company and the
Portfolios against any and all claims, demands, liabilities and expenses which
the Company or the Portfolios may incur arising out of or based upon any act or
deed of the Distributor or its sales representatives which has not been
authorized by the Company or the Portfolios in its prospectus or in this
Agreement.
(B) The Distributor agrees to indemnify the Company and the Portfolios
against any and all claims, demands, liabilities and expenses which the Company
or the Portfolios may incur under the Securities Act of 1933, or common law or
otherwise, arising out of or based upon any alleged untrue statement of a
material fact contained in any registration statement or prospectus of the
Portfolios, or any omission to state a material fact therein if such statement
or omission was made in reliance upon, and in conformity with, information
furnished to the Company or the Portfolios in connection therewith by or on
behalf of the Distributor.
(C) Notwithstanding any other provision of this Agreement, the
Distributor shall not be liable for any errors of the Portfolios' transfer
agent(s), or for any failure of any such transfer agent to perform its duties.
4
<PAGE> 5
ELEVENTH: Nothing herein contained shall require the Company to take
any action contrary to any provision of its Agreement and Declaration of Trust,
or to any applicable statute or regulation.
TWELFTH: This Agreement shall become effective as of the date hereof,
shall continue in force and effect until June 30, 1999, and shall continue in
force and effect from year to year thereafter, provided, that such continuance
is specifically approved at least annually (a)(I) by the Board of Trustees of
the Company or (ii) by the vote of a majority of the Portfolios' outstanding
voting securities (as defined in Section 2(a)(42) of the 1940 Act), and (b) by
vote of a majority of the Company's trustees who are not parties to this
Agreement or "interested persons" (as defined in Section 2(a)(19) of the 1940
Act) of any party to this Agreement cast in person at a meeting called for such
purpose.
THIRTEENTH:
(A) This Agreement may be terminated at any time, without the payment
of any penalty, by vote of the Board of Trustees of the Company or by vote of a
majority of the outstanding voting securities of each Portfolio, or by the
Distributor, on sixty (60) days' written notice to the other party.
(B) This Agreement shall automatically terminate in the event of its
assignment, the term "assignment" having the meaning set forth in Section
2(a)(4) of the 1940 Act.
FOURTEENTH: Any notice under this Agreement shall be in writing,
addressed and delivered, or mailed postage prepaid, to the other party at such
address as the other party may designate for the receipt of notices. Until
further notice to the other party, it is agreed that the addresses of both the
Company and the Distributor shall be 11 Greenway Plaza, Suite 100, Houston,
Texas 77046.
FIFTEENTH: Notice is hereby given that, as provided by applicable law,
the obligations of or arising out of this Agreement are not binding upon any of
the shareholders of the Company individually, but are binding only upon the
assets and property of the Company and that the shareholders shall be entitled,
to the fullest extent permitted by applicable law, to the same limitation on
personal liability as stockholders of private corporations for profit.
SIXTEENTH: This Agreement shall be governed by and construed in
accordance with the laws (without reference to conflicts of law provisions) of
the State of Delaware.
5
<PAGE> 6
IN WITNESS WHEREOF, the parties have caused this Agreement to be
executed in duplicate on the day and year first above written.
AIM GROWTH SERIES
Attest:
By:
-----------------------------------
- ------------------------------ Name: Robert H. Graham
Name: Title: President
Title:
A I M DISTRIBUTORS, INC.
Attest:
By:
-----------------------------------
- ------------------------------ Name: Michael J. Cemo
Name: Title: President
Title:
6
<PAGE> 7
APPENDIX A
TO
MASTER DISTRIBUTION AGREEMENT
OF
AIM GROWTH SERIES
CLASS A SHARES
AIM Basic Value Fund
AIM Europe Growth Fund
AIM International Growth Fund
AIM Japan Growth Fund
AIM Mid Cap Equity Fund
AIM New Pacific Growth Fund
AIM Small Cap Growth Fund
AIM Worldwide Growth Fund
CLASS C SHARES
AIM Basic Value Fund
AIM Europe Growth Fund
AIM Japan Growth Fund
AIM Mid Cap Equity Fund
AIM New Pacific Growth Fund
AIM Small Cap Growth Fund
7
<PAGE> 1
EXHIBIT e(5)
[LOGO]
A I M Distributors, Inc.
SELECTED DEALER AGREEMENT
FOR INVESTMENT COMPANIES MANAGED
BY A I M ADVISORS, INC.
To the Undersigned Selected Dealer:
Gentlemen:
A I M Distributors, Inc., as the exclusive national distributor of shares (the
"Shares") of the registered investment companies for which we now or in the
future act as underwriter, as disclosed in each Fund's prospectus, which may be
amended from time to time by us (the "Funds"), understands that you are a member
in good standing of the National Association of Securities Dealers, Inc.
(""NASD"), or, if a foreign dealer, that you agree to abide by all of the rules
and regulations of the NASD for purposes of this Agreement (which you confirm by
your signature below). In consideration of the mutual covenants stated below,
you and we hereby agree as follows:
1. Sales of Shares through you will be at the public offering price of such
Shares (the net asset value of the Shares plus any sales charge
applicable to such Shares (the "Sales Charge")), as determined in
accordance with the then effective prospectus or Statement of Additional
Information used in connection with the offer and sale of Shares
(collectively, the "Prospectus"), which public offering price may reflect
scheduled variations in, or the elimination of, the Sales Charge on sales
of the Funds' Shares either generally to the public or in connection with
special purchase plans, as described in the Prospectus. You agree that
you will apply any scheduled variation in, or elimination of, the Sales
Charge uniformly to all offerees in the class specified in the
Prospectus.
2. You agree to purchase Shares solely through us and only for the purpose
of covering purchase orders already received from customers or for your
own bona fide investment. You agree not to purchase for any other
securities dealer unless you have an agreement with such other dealer or
broker to handle clearing arrangements and then only in the ordinary
course of business for such purpose and only if such other dealer has
executed a Selected Dealer Agreement with us. You also agree not to
withhold any customer order so as to profit therefrom.
3. The procedures relating to the handling of orders shall be subject to
instructions which we will forward from time to time to all selected
dealers with whom we have entered into a Selected Dealer Agreement. The
minimum initial order shall be specified in the Funds' then current
Prospectuses. All purchase orders are subject to receipt of Shares by us
from the Funds concerned and to acceptance of such orders by us. We
reserve the right in our sole discretion to reject any order.
4. With respect to the Funds the Shares of which are indicated in that
Fund's Prospectus as being sold with a Sales Charge (the "Load Funds"),
you will be allowed the concessions from the public offering price
provided in the Load Funds' Prospectus and/or periodic instruction from
us. With respect to the Funds, the Shares of which are indicated in that
Fund's Prospectus as being sold with a contingent deferred sales charge
or early withdrawal charge (the "CDSC Funds"), you will be paid a
commission as disclosed in the CDSC Fund's Prospectus and/or periodic
instructions from us. With respect to the Funds whose Shares are
indicated as being sold without a Sales Charge or a contingent deferred
sales charge (the "No-Load Funds"), you may charge a reasonable
administrative fee. For the purposes of this Agreement the term Dealer
Commission means commissions or concessions
5/98
<PAGE> 2
Page 2
payable to you as disclosed in the Funds' Prospectuses and the terms
"Sales Charge" and "Dealer Commission" apply only to the Load Funds and
the CDSC Funds. All Dealer Commissions are subject to change without
notice by us and will comply with any changes in regulatory requirements.
You agree that you will not combine customer orders to reach breakpoints
in commissions for any purpose whatsoever unless authorized by the
Prospectus or by us in writing.
5. You agree that your transactions in Shares of the Funds will be limited
to (a) the purchase of Shares from us for resale to your customers at the
public offering price then in effect or for your own bona fide
investment, (b) exchanges of Shares between Funds, as permitted by the
Funds' then current registration statement (which includes the
Prospectus) and in accordance with procedures as they may be modified by
us from time to time, and (c) transactions involving the redemption of
Shares by a Fund or the repurchase of Shares by us as an accommodation to
shareholders or where applicable, through tender offers. Redemptions by a
Fund and repurchases by us will be effected in the manner and upon the
terms described in the Prospectus. We will, upon your request, assist you
in processing such orders for redemptions or repurchases. To facilitate
prompt payment following a redemption or repurchase of Shares, the
owner's signature shall appear as registered on the Funds' records and,
as described in the Prospectus, it may be required to be guaranteed by a
commercial bank, trust company or a member of a national securities
exchange.
6. Sales and exchanges of Shares may only be made in those states and
jurisdictions where the Shares are registered or qualified for sale to
the public. We agree to advise you currently of the identity of those
states and jurisdictions in which the Shares are registered or qualified
for sale, and you agree to indemnify us and/or the Funds for any claim,
liability, expense or loss in any way arising out of a sale of Shares in
any state or jurisdiction in which such Shares are not so registered or
qualified.
7. We shall accept orders only on the basis of the then current offering
price. You agree to place orders in respect of Shares immediately upon
the receipt of orders from your customers for the same number of Shares.
Orders which you receive from your customers shall be deemed to be placed
with us when received by us. Orders which you receive prior to the close
of business, as defined in the Prospectus, and placed with us within the
time frame set forth in the Prospectus shall be priced at the offering
price next computed after they are received by you. We will not accept
from you a conditional order on any basis. All orders shall be subject to
confirmation by us.
8. Your customer will be entitled to a reduction in the Sales Charge on
purchases made under a Letter of Intent or Right of Accumulation
described in the Prospectus. In such case, your Dealer Commission will be
based upon such reduced Sales Charge; however, in the case of a Letter of
Intent signed by your customer, an adjustment to a higher Dealer
Commission will thereafter be made to reflect actual purchases by your
customer if he should fail to fulfill his Letter of Intent. When placing
wire trades, you agree to advise us of any Letter of Intent signed by
your customer or of any Right of Accumulation available to him of which
he has made you aware. If you fail to so advise us, you will be liable to
us for the return of any Dealer Commission plus interest thereon.
9. You and we agree to abide by the Conduct Rules of the NASD and all other
federal and state rules and regulations that are now or may become
applicable to transactions hereunder. Your expulsion from the NASD will
automatically terminate this Agreement without notice. Your suspension
from the
5/98
<PAGE> 3
Page 3
NASD or a violation by you of applicable state and federal laws and rules
and regulations of authorized regulatory agencies will terminate this
Agreement effective upon notice received by you from us. You agree that
it is your responsibility to determine the suitability of any Shares as
investments for your customers, and that AIM Distributors has no
responsibility for such determination.
10. With respect to the Load Funds and the CDSC Funds, and unless otherwise
agreed, settlement shall be made at the offices of the Funds' transfer
agent within three (3) business days after our acceptance of the order.
With respect to the No-Load Funds, settlement will be made only upon
receipt by the Fund of payment in the form of federal funds. If payment
is not so received or made within ten (10) business days of our
acceptance of the order, we reserve the right to cancel the sale or, at
our option, to sell the Shares to the Funds at the then prevailing net
asset value. In this event, or in the event that you cancel the trade for
any reason, you agree to be responsible for any loss resulting to the
Funds or to us from your failure to make payments as aforesaid. You shall
not be entitled to any gains generated thereby.
11. If any Shares of any of the Load Funds sold to you under the terms of
this Agreement are redeemed by the Fund or repurchased for the account of
the Funds or are tendered to the Funds for redemption or repurchase
within seven (7) business days after the date of our confirmation to you
of your original purchase order therefore, you agree to pay forthwith to
us the full amount of the Dealer Commission allowed to you on the
original sale and we agree to pay such amount to the Fund when received
by us. We also agree to pay to the Fund the amount of our share of the
Sales Charge on the original sale of such Shares.
12. Any order placed by you for the repurchase of Shares of a Fund is subject
to the timely receipt by the Fund's 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, in which case you agree to be responsible for any loss
resulting to the Fund or to us from such cancellation.
13. We reserve the right in our discretion without notice to you to suspend
sales or withdraw any offering of Shares entirely, to change the offering
prices as provided in the Prospectus or, upon notice to you, to amend or
cancel this Agreement. You agree that any order to purchase Shares of the
Funds placed by you after notice of any amendment to this Agreement has
been sent to you shall constitute your agreement to any such amendment.
14. In every transaction, we will act as agent for the Fund and you will act
as principal for your own account. You have no authority whatsoever to
act as our agent or as agent for the Funds, any other Selected Dealer or
the Funds' transfer agent and nothing in this Agreement shall serve to
appoint you as an agent of any of the foregoing in connection with
transactions with your customers or otherwise.
15. No person is authorized to make any representations concerning the Funds
or their Shares except those contained in the Prospectus and any such
information as may be released by us as information supplemental to the
Prospectus. If you should make such unauthorized representation, you
agree to indemnify the Funds and us from and against any and all claims,
liability, expense or loss in any way arising out of or in any way
connected with such representation.
5/98
<PAGE> 4
Page 4
16. We will supply you with copies of the Prospectuses of the Funds
(including any amendments thereto) in reasonable quantities upon request.
You will provide all customers with a prospectus prior to or at the time
such customer purchases Shares. You will provide any customer who so
requests a copy of the Statement of Additional Information within the
time dictated by regulatory requirements, as they may be amended from
time to time.
17. You shall be solely responsible for the accuracy, timeliness and
completeness of any orders transmitted by you on behalf of your customers
by wire or telephone for purchases, exchanges or redemptions, and shall
indemnify us against any claims by your customers as a result of your
failure to properly transmit their instructions.
18. No advertising or sales literature, as such terms are defined by the
NASD, of any kind whatsoever will be used by you with respect to the
Funds or us unless first provided to you by us or unless you have
obtained our prior written approval.
19. All expenses incurred in connection with your activities under this
Agreement shall be borne by you.
20. This Agreement shall not be assignable by you. This Agreement shall be
constructed in accordance with the laws of the State of Texas.
21. Any notice to you shall be duly given if mailed or telegraphed to you at
your address as registered from time to time with the NASD.
22. This Agreement constitutes the entire agreement between the undersigned
and supersedes all prior oral or written agreements between the parties
hereto.
5/98
<PAGE> 5
Page 5
A I M DISTRIBUTORS, INC.
Date: By: X
------------------------------ ------------------------------------
The undersigned accepts your invitation to become a Selected Dealer and agrees
to abide by the foregoing terms and conditions. The undersigned acknowledges
receipt of Prospectuses for use in connection with offers and sales of the
Funds.
Date By:X
------------------------------ ------------------------------------
Signature
------------------------------------
Print Name Title
------------------------------------
Dealer's Name
------------------------------------
Address
------------------------------------
City State Zip
------------------------------------
Telephone
Please sign both copies and return one copy of each to:
A I M Distributors, Inc.
11 Greenway Plaza, Suite 100
Houston, Texas 77046-1173
5/98
<PAGE> 1
EXHIBIT e(6)
[LOGO]
A I M Distributors, Inc.--Registered Trademark--
BANK ACTING AS AGENT
FOR ITS CUSTOMERS
AGREEMENT RELATING TO SHARES
OF THE AIM FAMILY OF FUNDS--Registered Trademark--
(CONFIRMATION AND PROSPECTUS TO BE SENT
BY A I M DISTRIBUTORS, INC. TO CUSTOMER)
A I M Distributors, Inc. is the exclusive national distributor of the shares of
the registered investment companies for which we now or in the future act as
underwriter, as disclosed in each Fund's prospectus, which may be amended from
time to time (the "Funds"). As exclusive agent for the Funds, we are offering to
make available shares of the Funds (the "Shares") for purchase by your customers
on the following terms:
1. In all sales of Shares you shall act as agent for your customers, and
in no transaction shall you have any authority to act as agent for any
Fund or for us.
2. The customers in question are, for all purposes, your customers and not
customers of A I M Distributors, Inc. In receiving orders from your
customers who purchase Shares, A I M Distributors, Inc. is not
soliciting such customers and, therefore, has no responsibility for
determining whether Shares are suitable investments for such customers.
3. It is hereby understood that in all cases in which you place orders
with us for the purchase of Shares (a) you are acting as agent for the
customer; (b) the transactions are without recourse against you by the
customer; (c) as between you and the customer, the customer will have
full beneficial ownership of the securities; (d) each such transaction
is initiated solely upon the order of the customer; and (e) each such
transaction is for the account of the customer and not for your
account.
4. Orders received from you will be accepted by us only at the public
offering price applicable to each order, as established by the then
current prospectus or Statement of Additional Information,
(collectively, the "Prospectus") of the appropriate Fund, subject to
the discounts (defined below) provided in such Prospectus. Following
receipt from you of any order to purchase Shares for the account of a
customer, we shall confirm such order to you in writing. We shall be
responsible for sending your customer a written confirmation of the
order with a copy of the appropriate Fund's current Prospectus. We
shall send you a copy of such confirmation. Additional instructions may
be forwarded to you from time to time. All orders are subject to
acceptance or rejection by us in our sole discretion.
5. Members of the general public, including your customers, may purchase
Shares only at the public offering price determined in the manner
described in the current Prospectus of the appropriate Fund. With
respect to the Funds, the Shares of which are indicated in that Fund's
Prospectus as being sold with a sales charge (i.e. the "Load Funds"),
you will be allowed to retain a commission or concession from the
public offering price provided in such Load Funds' current Prospectus
and/or periodic instructions from us. With respect to the Funds, the
Shares of which are indicated in that Fund's Prospectus as being sold
with a contingent deferred sales charge or early withdrawal charge (the
5/98
<PAGE> 2
Bank Acting as Agent for its Customers Page 2
"CDSC Funds"), you will be paid a commission or concession as disclosed
in the CDSC Fund's then current Prospectus and/or periodic instructions
from us. With respect to the Funds whose Shares are indicated on the
attached Schedule as being sold without a sales charge or a contingent
deferred sales charge, (i.e. the "No-Load Funds"), you will not be
allowed to retain any commission or concession. All commissions or
concessions set forth in any of the Load Funds' or CDSC Funds'
Prospectus are subject to change without notice by us and will comply
with any changes in regulatory requirements.
6. The tables of sales charges and discounts set forth in the current
Prospectus of each Fund are applicable to all purchases made at any one
time by any "purchaser", as defined in the current Prospectus. For this
purpose, a purchaser may aggregate concurrent purchases of securities
of any of the Funds.
7. Reduced sales charges may also be available as a result of quantity
discounts, rights of accumulation or letters of intent. Further
information as to such reduced sales charges, if any, is set forth in
the appropriate Fund Prospectus. In such case, your discount will be
based upon such reduced sales charge; however, in the case of a letter
of intent signed by your customer, an adjustment to a higher discount
will thereafter be made to reflect actual purchases by your customer if
he should fail to fulfill his letter of intent. You agree to advise us
promptly as to the amounts of any sales made by you to your customers
qualifying for reduced sales charges. If you fail to so advise us of
any letter of intent signed by your customer or of any right of
accumulation available to him of which he has made you aware, you will
be liable to us for the return of any discount plus interest thereon.
8. By accepting this Agreement you agree:
a. that you will purchase Shares only from us;
b. that you will purchase Shares from us only to cover purchase orders
already received from your customers; and
c. that you will not withhold placing with us orders received from
your customers so as to profit yourself as a result of such
withholdings.
9. We will not accept from you a conditional order for Shares on any
basis.
10. Payment for Shares ordered from us shall be in the form of a wire
transfer or a cashiers check mailed to us. Payment shall be made within
three (3) business days after our acceptance of the order placed on
behalf of your customer. Payment shall be equal to the public offering
price less the discount retained by you hereunder.
11. If payment is not received within ten (10) business days of our
acceptance of the order, we reserve the right to cancel the sale or, at
our option, to sell Shares to the Fund at the then prevailing net asset
value. In this event you agree to be responsible for any loss resulting
to the Fund from the failure to make payment as aforesaid.
5/98
<PAGE> 3
Bank Acting as Agent for its Customers Page 3
12. Shares sold hereunder shall be available in book-entry form on the
books of the Funds' Transfer Agent unless other instructions have been
given.
13. No person is authorized to make any representations concerning Shares
of any Fund except those contained in the applicable current Prospectus
and printed information subsequently issued by the appropriate Fund or
by us as information supplemental to such Prospectus. You agree that
you will not make Shares available to your customers except under
circumstances that will result in compliance with the applicable
Federal and State Securities and Banking Laws and that you will not
furnish to any person any information contained in the then current
Prospectus or cause any advertisement to be published in any newspaper
or posted in any public place without our consent and the consent of
the appropriate Fund.
14. Sales and exchanges of Shares may only be made in those states and
jurisdictions where Shares are registered or qualified for sale to the
public. We agree to advise you currently of the identity of those
states and jurisdictions in which the Shares are registered or
qualified for sales, and you agree to indemnify us and/or the Funds for
any claim, liability, expense or loss in any way arising out of a sale
of Shares in any state or jurisdiction not identified by us as a state
or jurisdiction in which such Shares are so registered or qualified. We
agree to indemnify you for any claim, liability, expense or loss in any
way arising out of a sale of shares in any state or jurisdiction
identified by us as a state or jurisdiction in which shares are so
registered or qualified.
15. You shall be solely responsible for the accuracy, timeliness and
completeness of any orders transmitted by you on behalf of your
customers by wire or telephone for purchases, exchanges or redemptions,
and shall indemnify us against any claims by your customers as a result
of your failure to properly transmit their instructions.
16. All sales will be made subject to our receipt of Shares from the
appropriate Fund. We reserve the right, in our discretion, without
notice, to modify, suspend or withdraw entirely the offering of any
Shares and, upon notice, to change the sales charge or discount or to
modify, cancel or change the terms of this Agreement. You agree that
any order to purchase Shares of the Funds placed by you after any
notice of amendment to this Agreement has been sent to you shall
constitute your agreement to any such agreement.
17. The names of your customers shall remain your sole property and shall
not be used by us for any purpose except for servicing and information
mailings in the normal course of business to Fund Shareholders.
18. Your acceptance of this Agreement constitutes a representation that you
are a "Bank" as defined in Section 3 (a) (6) of the Securities Exchange
Act of 1934, as amended, and are duly authorized to engage in the
transactions to be performed hereunder.
5/98
<PAGE> 4
Bank Acting as Agent for its Customers Page 4
All communications to us should be sent to A I M Distributors, Inc.,
Eleven Greenway Plaza, Suite 100, Houston, Texas 77046. Any notice to
you shall be duly given if mailed or telegraphed to you at the address
specified by you below or to such other address as you shall have
designated in writing to us. This Agreement shall be construed in
accordance with the laws of the State of Texas.
A I M DISTRIBUTORS, INC.
Date: By: X
-------------------------- -----------------------------
The undersigned agrees to abide by the foregoing terms and conditions.
Date: By: X
-------------------------- -----------------------------
Signature
-----------------------------
Print Name Title
-----------------------------
Dealer's Name
-----------------------------
Address
-----------------------------
City State Zip
Please sign both copies and return one copy of each to:
A I M Distributors, Inc.
11 Greenway Plaza, Suite 100
Houston, Texas 77046-1173
5/98
<PAGE> 1
EXHIBIT g(1)(a)
CUSTODIAN CONTRACT
Between
G.T. GLOBAL INCOME SERIES, INC.
and
STATE STREET BANK AND TRUST COMPANY
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C> <C>
1. Employment of Custodian and Property to be Held By It ................1
2. Duties of the Custodian with Respect to Property
of the Fund Held by the Custodian in the United States ...............3
2.1 Holding Securities .........................................3
2.2 Delivery of Securities .....................................3
2.3 Registration of Securities..................................8
2.4 Bank Accounts ..............................................9
2.5 Availability of Federal Funds .............................10
2.6 Collection of Income ......................................10
2.7 Payment of Fund Monies ....................................11
2.8 Liability for Payment in Advance of Receipt of Securities
Purchased .................................................14
2.9 Appointment of Agents .....................................14
2.10 Deposit of Fund Assets in Securities System ...............15
2.10A Fund Assets Held in the Custodian's Direct Paper System....18
2.11 Segregated Account ........................................20
2.12 Ownership Certificates for Tax Purposes ...................21
2.13 Proxies ...................................................21
2.14 Communications Relating to Portfolio Securities............22
3. Duties of the Custodian with Respect to Property of
the Fund Held Outside of the United States ..........................22
3.1 Appointment of Foreign Sub-Custodians .....................22
3.2 Assets to be Held .........................................23
3.3 Foreign Securities Depositories ...........................23
3.4 Segregation of Securities .................................24
3.5 Agreements with Foreign Banking Institutions ..............24
3.6 Access of Independent Accountants of the Fund .............25
3.7 Reports by Custodian ......................................25
3.8 Transactions in Foreign Custody Account ...................26
3.9 Liability of Foreign Sub-Custodians........................27
3.10 Liability of Custodian ....................................27
3.11 Reimbursement for Advances ................................28
3.12 Monitoring Responsibilities................................29
3.13 Branches of U.S. Banks ....................................30
4. Payments for Sales or Repurchase or Redemptions of Shares of the
Fund ................................................................30
5. Proper Instructions..................................................31
6. Actions Permitted Without Express Authority .........................32
7. Evidence of Authority ...............................................33
8. Duties of Custodian With Respect to the Books of Account and
Calculation of Net Asset Value and Net Income .......................33
</TABLE>
<PAGE> 3
<TABLE>
<CAPTION>
<S> <C> <C>
9. Records .............................................................34
10. Opinion of Fund's Independent Accountants............................35
11. Reports to Fund by Independent Public Accountants ...................35
12. Compensation of Custodian ...........................................35
13. Responsibility of Custodian .........................................36
14. Effective Period, Termination and Amendment .........................37
15. Successor Custodian .................................................39
16. Interpretive and Additional Provisions ..............................4l
17. Additional Funds.....................................................41
18. Massachusetts Law to Apply ..........................................41
19. Prior Contracts......................................................42
</TABLE>
<PAGE> 4
CUSTODIAN CONTRACT
This Contract between G.T. Global Income Series, Inc., a corporation
organized and existing under the laws of Maryland, having its principal place of
business at 50 California Street, San Francisco, California 94111 hereinafter
called the "Fund", and State Street Bank and Trust Company, a Massachusetts
trust company, having its principal place of business at 225 Franklin Street,
Boston, Massachusetts, 02110, hereinafter called the "Custodian",
WITNESSETH:
WHEREAS, the Fund is authorized to issue shares in separate series, with
each such series representing interests in a separate portfolio of securities
and other assets; and
WHEREAS, the Fund intends to initially offer shares in two series, the G.T.
Global Bond Fund and G.T. Government Income Fund (such series together with all
other series subsequently established by the Fund and made subject to this
Contract in accordance with paragraph 17, being herein referred to as the
"Portfolio(s)");
NOW THEREFOR, in consideration of the mutual covenants and agreements
hereinafter contained, the parties hereto agree as follows:
1. Employment of Custodian and Property to be Held by It
The Fund hereby employs the Custodian as the custodian of the assets of the
Portfolios of the Fund, including securities which the Fund, on behalf of the
applicable Portfolio desires to be held in places within the United States
("domestic
<PAGE> 5
securities") and securities it desires to be held outside the United States
("foreign securities") pursuant to the provisions of the Articles of
Incorporation. The Fund on behalf of the Portfolio(s) agrees to deliver to the
Custodian all securities and cash of the Portfolios, and all payments of income,
payments of principal or capital distributions received by it with respect to
all securities owned by the Portfolio(s) from time to time, and the cash
consideration received by it for such new or treasury shares of beneficial
interest of the Fund representing interests in the Portfolios, ("Shares") as may
be issued or sold from time to time. The Custodian shall not be responsible for
any property of a Portfolio held or received by the Portfolio and not delivered
to the Custodian.
Upon receipt of "Proper Instructions" (within the meaning of Article 5),
the Custodian shall on behalf of the applicable Portfolio(s) from time to time
employ one or more sub-custodians, located in the United States but only in
accordance with an applicable vote by the Board of Directors of the Fund on
behalf of the applicable Portfolio(s), and provided that the Custodian shall
have no more or less responsibility or liability to the Fund on account of any
actions or omissions of any sub-custodian so employed than any such
sub-custodian has to the Custodian. The Custodian may employ as sub-custodian
for the Fund's foreign securities on behalf of the applicable Portfolio(s) the
foreign banking institutions and foreign securities depositories designated in
Schedule A hereto but only in accordance with the provisions of Article 3.
-2-
<PAGE> 6
2. Duties of the Custodian with Respect to Property of the Fund Held By the
Custodian in the United States
2.1 Holding Securities. The Custodian shall hold and physically segregate for
the account of each Portfolio all non-cash property, to be held by it in
the United States including all domestic securities owned by such
Portfolio, other than (a) securities which are maintained pursuant to
Section 2.10 in a clearing agency which acts as a securities depository or
in a book-entry system authorized by the U.S. Department of the Treasury,
collectively referred to herein as "Securities System" and (b) commercial
paper of an issuer for which State Street Bank and Trust Company acts as
issuing and paying agent ("Direct Paper") which is deposited and/or
maintained in the Direct Paper System of the Custodian pursuant to Section
2.10A.
2.2 Delivery of Securities. The Custodian shall release and deliver domestic
securities owned by a Portfolio held by the Custodian or in a Securities
System account of the Custodian or in the Custodian's Direct Paper book
entry system account ("Direct Paper System Account") only upon receipt of
Proper Instructions from the Fund on behalf of the applicable Portfolio,
which may be continuing instructions when deemed appropriate by the
parties, and only in the following cases:
1) Upon sale of such securities for the account of the Portfolio
and receipt of payment therefor;
-3-
<PAGE> 7
2) Upon the receipt of payment in connection with any repurchase
agreement related to such securities entered into by the
Portfolio;
3) In the case of a sale effected through a Securities System, in
accordance with the provisions of Section 2.10 hereof;
4) To the depository agent in connection with tender or other
similar offers for securities of the Portfolio;
5) To the issuer thereof or its agent when such securities are
called, redeemed, retired or otherwise become payable; provided
that, in any such case, the cash or other consideration is to be
delivered to the Custodian;
6) To the issuer thereof, or its agent, for transfer into the name
of the Portfolio or into the name of any nominee or nominees of
the Custodian or into the name or nominee name of any agent
appointed pursuant to Section 2.9 or into the name or nominee
name of any sub-custodian appointed pursuant to Article 1; or for
exchange for a different number of bonds, certificates or other
evidence representing the same aggregate face amount or number of
units; provided that, in any such case, the new securities are to
be delivered to the Custodian;
-4-
<PAGE> 8
7) Upon the sale of such securities for the account of the
Portfolio, to the broker or its clearing agent, against a
receipt, for examination in accordance with "street delivery"
custom; provided that in any such case, the Custodian shall have
no responsibility or liability for any loss arising from the
delivery of such securities prior to receiving payment for such
securities except as may arise from the Custodian's own
negligence or willful misconduct;
8) For exchange or conversion pursuant to any plan of merger,
consolidation, recapitalization, reorganization or readjustment
of the securities of the issuer of such securities, or pursuant
to provisions for conversion contained in such securities, or
pursuant to any deposit agreement; provided that, in any such
case, the new securities and cash, if any, are to be delivered to
the Custodian;
9) In the case of warrants, rights or similar securities, the
surrender thereof in the exercise of such warrants, rights or
similar securities or the surrender of interim receipts or
temporary securities for
-5-
<PAGE> 9
definitive securities; provided that, in any such case, the new
securities and cash, if any, are to be delivered to the
Custodian;
10) For delivery in connection with any loans of securities made by
the Portfolio, but only against receipt of adequate collateral as
agreed upon from time to time by the Custodian and the Fund on
behalf of the Portfolio, which may be in the form of cash or
obligations issued by the United States government, its agencies
or instrumentalities, except that in connection with any loans
for which collateral is to be credited to the Custodian's account
in the book-entry system authorized by the U.S. Department of the
Treasury, the Custodian will not be held liable or responsible
for the delivery of securities owned by the Portfolio prior to
the receipt of such collateral;
11) For delivery as security in connection with any borrowings by the
Fund on behalf of the Portfolio requiring a pledge of assets by
the Fund on behalf of the Portfolio, but only against receipt of
amounts borrowed;
12) For delivery in accordance with the provisions of any agreement
among the Fund on behalf of the Portfolio, the Custodian and a
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<PAGE> 10
broker-dealer registered under the Securities Exchange Act of
1934 (the "Exchange Act") and a member of The National
Association of Securities Dealers, Inc. ("NASD"), relating to
compliance with the rules of The Options Clearing Corporation and
of any registered national securities exchange, or of any similar
organization or organizations, regarding escrow or other
arrangements in connection with transactions by the Portfolio of
the Fund;
13) For delivery in accordance with the provisions of any agreement
among the Fund on behalf of the Portfolio, the Custodian, and a
Futures Commission Merchant registered under the Commodity
Exchange Act, relating to compliance with the rules of the
Commodity Futures Trading Commission and/or any Contract Market,
or any similar organization or organizations, regarding account
deposits in connection with transactions by the Portfolio of the
Fund;
14) Upon receipt of instructions from the transfer agent ("Transfer
Agent") for the Fund, for delivery to such Transfer Agent or to
the holders of shares in connection with distributions in kind,
as may be described
-7-
<PAGE> 11
from time to time in the currently effective prospectus and
statement of additional information of the Fund, related to the
Portfolio ("Prospectus"), in satisfaction of requests by holders
of Shares for repurchase or redemption; and
15) For any other proper corporate purpose, but only upon receipt of,
in addition to Proper Instructions from the Fund on behalf of the
applicable Portfolio, a certified copy of a resolution of the
Board of Directors or of the Executive Committee signed by an
officer of the Fund and certified by the Secretary or an
Assistant Secretary, specifying the securities of the Portfolio
to be delivered, setting forth the purpose for which such
delivery is to be made, declaring such purpose to be a proper
corporate purpose, and naming the person or persons to whom
delivery of such securities shall be made.
2.3 Registration of Securities. Domestic securities held by the Custodian
(other than bearer securities) shall be registered in the name of the
Portfolio or in the name of any nominee of the Fund on behalf of the
Portfolio or of any nominee of the Custodian which nominee shall be
assigned exclusively to the Portfolio, unless the Fund has authorized in
writing the appointment of a nominee to
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<PAGE> 12
be used in common with other registered investment companies having the
same investment adviser as the Portfolio, or in the name or nominee name of
any agent appointed pursuant to Section 2.9 or in the name or nominee name
of any sub-custodian appointed pursuant to Article 1. All securities
accepted by the Custodian on behalf of the Portfolio under the terms of
this Contract shall be in "street name" or other good delivery form.
2.4 Bank Accounts. The Custodian shall open and maintain a separate bank
account or accounts in the United States in the name of each Portfolio of
the Fund, subject only to draft or order by the Custodian acting pursuant
to the terms of this Contract, and shall hold in such account or accounts,
subject to the provisions hereof, all cash received by it from or for the
account of the Portfolio, other than cash maintained by the Portfolio in a
bank account established and used in accordance with Rule 17f-3 under the
Investment Company Act of 1940. Funds held by the Custodian for a Portfolio
may be deposited by it to its credit as Custodian in the Banking Department
of the Custodian or in such other banks or trust companies as it may in its
discretion deem necessary or desirable; provided, however, that every such
bank or trust company shall be qualified to act as a custodian under the
Investment Company Act of 1940 and that each such bank or trust company and
the funds to be deposited with each such bank or trust company shall on
behalf of
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<PAGE> 13
each applicable Portfolio be approved by vote of a majority of the Board of
Directors of the Fund. Such funds shall be deposited by the Custodian in
its capacity as Custodian and shall be withdrawable by the Custodian only
in that capacity.
2.5 Availability of Federal Funds. Upon mutual agreement between the Fund on
behalf of each applicable Portfolio and the Custodian, the Custodian shall,
upon the receipt of Proper Instructions from the Fund on behalf of a
Portfolio, make federal funds available to such Portfolio as of specified
times agreed upon from time to time by the Fund and the Custodian in the
amount of checks received in payment for Shares of such Portfolio which are
deposited into the Portfolio's account.
2.6 Collection of Income. The Custodian shall collect on a timely basis all
income and other payments with respect to registered domestic securities
held hereunder to which each Portfolio shall be entitled either by law or
pursuant to custom in the securities business, and shall collect on a
timely basis all income and other payments with respect to bearer domestic
securities if, on the date of payment by the issuer, such securities are
held by the Custodian or its agent thereof and shall credit such income, as
collected, to such Portfolio's custodian account. Without limiting the
generality of the foregoing, the Custodian shall detach and present for
payment all coupons and other income items requiring
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<PAGE> 14
presentation as and when they become due and shall collect interest when
due on securities held hereunder. Income due each Portfolio on securities
loaned pursuant to the Provisions of Section 2.2 (10) shall be the
responsibility of the Fund. The Custodian will have no duty or
responsibility in connection therewith, other than to provide the Fund with
such information or data as may be necessary to assist the Fund in
arranging for the timely delivery to the Custodian of the income to which
the Portfolio is properly entitled.
2.7 Payment of Fund Monies. Upon receipt of Proper Instructions from the Fund
on behalf of the applicable Portfolio, which may be continuing instructions
when deemed appropriate by the parties, the Custodian shall pay out monies
of a Portfolio in the following cases only:
1) Upon the purchase of domestic securities, options, futures
contracts or options on futures contracts for the account of the
Portfolio but only (a) against the delivery of such securities or
evidence of title to such options, futures contracts or options
on futures contracts to the Custodian (or any bank, banking firm
or trust company doing business in the United States or abroad
which is qualified under the Investment Company Act of 1940 as
amended, to act as a custodian and has been designated by the
Custodian as
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<PAGE> 15
its agent for this purpose) registered in the name of the
Portfolio or in the name of a nominee of the Custodian referred
to in Section 2.3 hereof or in proper form for transfer; (b) in
the case of a purchase effected through a Securities System, in
accordance with the conditions set forth in Section 2.10 hereof;
(c) in the case of a purchase involving the Direct Paper System,
in accordance with the conditions set forth in Section 2.10A; (d)
in the case of repurchase agreements entered into between the
Fund on behalf of the Portfolio and the Custodian, or another
bank, or a broker-dealer which is a member of NASD, (i) against
delivery of the securities either in certificate form or through
an entry crediting the Custodian's account at the Federal Reserve
Bank with such securities or (ii) against delivery of the receipt
evidencing purchase by the Portfolio of securities owned by the
Custodian along with written evidence of the agreement by the
Custodian to repurchase such securities from the Portfolio or (e)
for transfer to a time deposit account of the Fund in any bank,
whether domestic or foreign; such transfer
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<PAGE> 16
may be effected prior to receipt of a confirmation from a broker
and/or the applicable bank pursuant to Proper Instructions from
the Fund as defined in Article 5;
2) In connection with conversion, exchange or surrender of
securities owned by the Portfolio as set forth in Section 2.2
hereof;
3) For the redemption or repurchase of Shares issued by the
Portfolio as set forth in Article 4 hereof;
4) For the payment of any expense or liability incurred by the
Portfolio, including but not limited to the following payments
for the account of the Portfolio: interest, taxes, management,
accounting, transfer agent and legal fees, and operating expenses
of the Fund whether or not such expenses are to be in whole or
part capitalized or treated as deferred expenses;
5) For the payment of any dividends on Shares of the Portfolio
declared pursuant to the governing documents of the Fund;
6) For payment of the amount of dividends received in respect of
securities sold short;
7) For any other proper purpose, but only upon receipt of, in
addition to Proper
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<PAGE> 17
Instructions from the Fund on behalf of the Portfolio, a
certified copy of a resolution of the Board of Directors or of
the Executive Committee of the Fund signed by an officer of the
Fund and certified by its Secretary or an Assistant Secretary,
specifying the amount of such payment, setting forth the purpose
for which such payment is to be made, declaring such purpose to
be a proper purpose, and naming the person or persons to whom
such payment is to be made.
2.8 Liability for Payment in Advance of Receipt of Securities Purchased. Except
as specifically stated otherwise in this Contract, in any and every case
where payment for purchase of domestic securities for the account of a
Portfolio is made by the Custodian in advance of receipt of the securities
purchased in the absence of specific written instructions from the Fund on
behalf of such Portfolio to so pay in advance, the Custodian shall be
absolutely liable to the Fund for such securities to the same extent as if
the securities had been received by the Custodian.
2.9 Appointment of Agents. The Custodian may at any time or times in its
discretion appoint (and may at any time remove) any other bank or trust
company which is itself qualified under the Investment Company Act of 1940,
as amended, to act as a custodian, as its agent to carry out
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<PAGE> 18
such of the provisions of this Article 2 as the Custodian may from
time to time direct; provided, however, that the appointment of any agent
shall not relieve the Custodian of its responsibilities or liabilities
hereunder.
2.10 Deposit of Fund Assets in Securities Systems. The Custodian may deposit
and/or maintain securities owned by a Portfolio in a clearing agency
registered with the Securities and Exchange Commission under Section 17A
of the Securities Exchange Act of 1934, which acts as a securities
depository, or in the book-entry system authorized by the U.S. Department
of the Treasury and certain federal agencies, collectively referred to
herein as "Securities System" in accordance with applicable Federal
Reserve Board and Securities and Exchange Commission rules and
regulations, if any, and subject to the following provisions:
1) The Custodian may keep securities of the Portfolio in a
Securities System provided that such securities are represented
in an account ("Account") of the Custodian in the Securities
System which shall not include any assets of the Custodian other
than assets held as a fiduciary, custodian or otherwise for
customers;
2) The records of the Custodian with respect to securities of the
Portfolio which are maintained in a Securities System shall
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<PAGE> 19
identify by book-entry those securities belonging to the
Portfolio;
3) The Custodian shall pay for securities purchased for the account
of the Portfolio upon (i) receipt of advice from the Securities
System that such securities have been transferred to the Account,
and (ii) the making of an entry on the records of the Custodian
to reflect such payment and transfer for the account of the
Portfolio. The Custodian shall transfer securities sold for the
account of the Portfolio upon (i) receipt of advice from the
Securities System that payment for such securities has been
transferred to the Account, and (ii) the making of an entry on
the records of the Custodian to reflect such transfer and payment
for the account of the Portfolio. Copies of all advices from the
Securities System of transfers of securities for the account of
the Portfolio shall identify the Portfolio, be maintained for the
Portfolio by the Custodian and be provided to the Fund at its
request. Upon request, the Custodian shall furnish the Fund on
behalf of the Portfolio confirmation of each transfer to or from
the account of the Portfolio in the form
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of a written advice or notice and shall furnish to the Fund on
behalf of the Portfolio copies of daily transaction sheets
reflecting each day's transactions in the Securities System for
the account of the Portfolio.
4) The Custodian shall provide the Fund for the Portfolio with any
report obtained by the Custodian on the Securities System's
accounting system, internal accounting control and procedures for
safeguarding securities deposited in the Securities System;
5) The Custodian shall have received from the Fund on behalf of the
Portfolio the initial or annual certificate, as the case may be,
required by Article 14 hereof;
6) Anything to the contrary in this Contract notwithstanding, the
Custodian shall be liable to the Fund for the benefit of the
Portfolio for any loss or damage to the Portfolio resulting from
use of the Securities System by reason of any negligence,
misfeasance or misconduct of the Custodian or any of its agents
or of any of its or their employees or from failure of the
Custodian or any such agent to enforce effectively such rights as
it may have
-17-
<PAGE> 21
against the Securities System; at the election of the Fund, it
shall be entitled to be subrogated to the rights of the Custodian
with respect to any claim against the Securities System or any
other person which the Custodian may have as a consequence of any
such loss or damage if and to the extent that the Portfolio has
not been made whole for any such loss or damage.
2.10A Fund Assets Held in the Custodian Direct Paper System. The Custodian may
deposit and/or maintain securities owned by a Portfolio in the Direct
Paper System of the Custodian subject to the following provisions:
1) No transaction relating to securities in the Direct Paper System
will be effected in the absence of Proper Instructions from the
Fund on behalf of the Portfolio;
2) The Custodian may keep securities of the Portfolio in the Direct
Paper System only if such securities are represented in an
account ("Account") of the Custodian in the Direct Paper System
which shall not include any assets of the Custodian other than
assets held as a fiduciary, custodian or otherwise for customers;
3) The records of the Custodian with respect to securities of the
Portfolio which are
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<PAGE> 22
maintained in the Direct Paper System shall identify by
book-entry those securities belonging to the Portfolio;
4) The Custodian shall pay for securities purchased for the account
of the Portfolio upon the making of an entry on the records of
the Custodian to reflect such payment and transfer of securities
to the account of the Portfolio. The Custodian shall transfer
securities sold for the account of the Portfolio upon the making
of an entry on the records of the Custodian to reflect such
transfer and receipt of payment for the account of the Portfolio;
5) The Custodian shall furnish the Fund on behalf of the Portfolio
confirmation of each transfer to or from the account of the
Portfolio, in the form of a written advice or notice, of Direct
Paper on the next business day following such transfer and shall
furnish to the Fund on behalf of the Portfolio copies of daily
transaction sheets reflecting each day's transaction in the
Securities System for the account of the Portfolio;
6) The Custodian shall provide the Fund on behalf of the Portfolio
with any report on its system of internal accounting control as
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the Fund may reasonably request from time to time.
2.11 Segregated Account. The Custodian shall upon receipt of Proper
Instructions from the Fund on behalf of each applicable Portfolio
establish and maintain a segregated account or accounts for and on behalf
of each such Portfolio, into which account or accounts may be transferred
cash and/or securities, including securities maintained in an account by
the Custodian pursuant to Section 2.10 hereof, (i) in accordance with the
provisions of any agreement among the Fund on behalf of the Portfolio,
the Custodian and a broker-dealer registered under the Exchange Act and a
member of the NASD (or any futures commission merchant registered under
the Commodity Exchange Act), relating to compliance with the rules of The
Options Clearing Corporation and of any registered national securities
exchange (or the Commodity Futures Trading Commission or any registered
contract market), or of any similar organization or organizations,
regarding escrow or other arrangements in connection with transactions by
the Portfolio, (ii) for purposes of segregating cash or government
securities in connection with options purchased, sold or written by the
Portfolio or commodity futures contracts or options thereon purchased or
sold by the Portfolio, (iii) for the purposes of compliance by the
Portfolio with the procedures required by Investment Company Act Release
No.
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<PAGE> 24
10666, or any subsequent release or releases of the Securities and
Exchange Commission relating to the maintenance of segregated accounts
by registered investment companies and (iv) for other proper corporate
purposes, but only, in the case of clause (iv), upon receipt of, in
addition to Proper Instructions from the Fund on behalf of the
applicable Portfolio, a certified copy of a resolution of the Board of
Directors or of the Executive Committee signed by an officer of the Fund
and certified by the Secretary or an Assistant Secretary, setting forth
the purpose or purposes of such segregated account and declaring such
purposes to be proper corporate purposes.
2.12 Ownership Certificate for Tax Purposes. The Custodian shall execute
ownership and other certificates and affidavits for all federal and
state tax purposes in connection with receipt of income or other
payments with respect to domestic securities of each Portfolio held by
it and in connection with transfers of securities.
2.13 Proxies. The Custodian shall, with respect to the domestic securities
held hereunder, cause to be promptly executed by the registered holder
of such securities, if the securities are registered otherwise than in
the name of the Portfolio or a nominee of the Portfolio, all proxies,
without indication of the manner in which such proxies are to be voted,
and shall promptly deliver to the Portfolio such proxies, all proxy
soliciting materials and all notices relating to such securities.
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<PAGE> 25
2.14 Communications Relating to Portfolio Securities.
The Custodian shall transmit promptly to the Fund for each Portfolio all
written information (including, without limitation, pendency of calls
and maturities of domestic securities and expirations of rights in
connection therewith and notices of exercise of call and put options
written by the Fund on behalf of the Portfolio and the maturity of
futures contracts purchased or sold by the Portfolio) received by the
Custodian from issuers of the securities being held for the Portfolio.
With respect to tender or exchange offers, the Custodian shall transmit
promptly to the Portfolio all written information received by the
Custodian from issuers of the securities whose tender or exchange is
sought and from the party (or his agents) making the tender or exchange
offer. If the Portfolio desires to take action with respect to any
tender offer, exchange offer or any other similar transaction, the
Portfolio shall notify the Custodian at least three business days prior
to the date on which the Custodian is to take such action.
3. Duties of the Custodian with Respect to Property of the Fund Held
Outside of the United States
3.1 Appointment of Foreign Sub-Custodians.
The Fund hereby authorizes and instructs the Custodian to employ as
sub-custodians for the Portfolio's securities and other assets
maintained outside the United States the foreign banking institutions
and foreign securities
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<PAGE> 26
depositories designated on Schedule A hereto ("foreign sub-custodians").
Upon receipt of "Proper Instructions", as defined in Section 5 of this
Contract, together with a certified resolution of the Fund's Board of
Directors, the Custodian and the Fund may agree to amend Schedule A
hereto from time to time to designate additional foreign banking
institutions and foreign securities depositories to act as
sub-custodian. Upon receipt of Proper Instructions, the Fund may
instruct the Custodian to cease the employment of any one or more such
sub-custodians for maintaining custody of the Portfolio's assets.
3.2 Assets to be Held. The Custodian shall limit the securities and other
assets maintained in the custody of the foreign sub-custodians to: (a)
"foreign securities", as defined in paragraph (c)(1) of Rule 17f-5 under
the Investment Company Act of 1940, and (b) cash and cash equivalents in
such amounts as the Custodian or the Fund may determine to be reasonably
necessary to effect the Portfolio's foreign securities transactions.
3.3 Foreign Securities Depositories. Except as may otherwise be agreed upon
in writing by the Custodian and the Fund, assets of the Portfolios
shall be maintained in foreign securities depositories only through
arrangements implemented by the foreign banking institutions serving as
sub-custodians pursuant to the terms hereof. Where possible, such
arrangements shall include entry into
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<PAGE> 27
agreements containing the provisions set forth in Section 3.5 hereof.
3.4 Segregation of Securities
The Custodian shall identify on its books as belonging to each
applicable Portfolio of the Fund, the foreign securities of such
Portfolios held by each foreign sub-custodian. Each agreement
pursuant to which the Custodian employs a foreign banking institution
shall require that such institution establish a custody account for the
Custodian on behalf of the Fund for each applicable Portfolio of the
Fund and physically segregate in each account, securities and other
assets of the Portfolios, and, in the event that such institution
deposits the securities of one or more of the Portfolios in a foreign
securities depository, that it shall identify on its books as belonging
to the Custodian, as agent for each applicable Portfolio, the securities
so deposited.
3.5 Agreement with Foreign Banking Institutions. Each agreement with a
foreign banking institution shall be substantially in the form act forth
in Exhibit 1 hereto and shall provide that: (a) the assets of each
Portfolio will not be subject to any right, charge, security interest,
lien or claim of any kind in favor of the foreign banking institution or
its creditors or agent, except a claim of payment for their safe custody
or administration; (b) beneficial ownership for the assets
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<PAGE> 28
of each Portfolio will be freely transferable without the payment of
money or value other than for custody or administration; (c) adequate
records will be maintained identifying the assets as belonging to each
applicable Portfolio; (d) officers of or auditors employed by, or other
representatives of the Custodian, including to the extent permitted
under applicable law the independent public accountants for the Fund,
will be given access to the books and records of the foreign banking
institution relating to its actions under its agreement with the
Custodian; and (e) assets of the Portfolios held by the foreign
sub-custodian will be subject only to the instructions of the Custodian
or its agents.
3.6 Access of Independent Accountants of the Fund. Upon request of the Fund,
the Custodian will use its best efforts to arrange for the independent
accountants of the Fund to be afforded access to the books and records
of any foreign banking institution employed as a foreign sub-custodian
insofar as such books. and records relate to the performance of such
foreign banking institution under its agreement with the Custodian.
3.7 Reports by Custodian. The Custodian will supply to the Fund from time
to time, as mutually agreed upon, statements in respect of the
securities and other assets of the Portfolio(s) held by foreign
sub-custodians, including but not limited to an identification of
entities having possession of the Portfolio(s) securities
-25-
<PAGE> 29
and other assets and advices or notifications of any transfers of
securities to or from each custodial account maintained by a foreign
banking institution for the Custodian on behalf of each applicable
Portfolio indicating, as to securities acquired for a Portfolio, the
identity of the entity having physical possession of such securities.
3.8 Transactions in Foreign Custody Account.
(a) Except as otherwise provided in paragraph (b) of this Section 3.8,
the provision of Sections 2.2 and 2.7 of this Contract shall apply,
mutatis mutandis to the foreign securities of the Fund held outside the
United States by foreign sub-custodians.
(b) Notwithstanding any provision of this Contract to the contrary,
settlement and payment for securities received for the account of each
applicable Portfolio and delivery of securities maintained for the
account of each applicable Portfolio may be effected in accordance with
the customary established securities trading or securities processing
practices and procedures in the jurisdiction or market in which the
transaction occurs, including, without limitation, delivering securities
to the purchaser thereof or to a dealer therefor (or an agent for such
purchaser or dealer) against a receipt with the expectation of receiving
later payment for such securities from such purchaser or dealer.
(c) Securities maintained in the custody of a foreign
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<PAGE> 30
sub-custodian may be maintained in the name of such entity's nominee to
the same extent as set forth in Section 2.3 of this Contract, and the
Fund agrees to hold any such nominee harmless from any liability as a
holder of record of such securities.
3.9 Liability of Foreign Sub-Custodians. Each agreement pursuant to which
the Custodian employs a foreign banking institution as a foreign
sub-custodian shall require the institution to exercise reasonable care
in the performance of its duties and to indemnify, and hold harmless,
the Custodian and each Fund from and against any loss, damage, cost,
expense, liability or claim arising out of or in connection with the
institution's performance of such obligations. At the election of the
Fund, it shall be entitled to be subrogated to the rights of the
Custodian with respect to any claims against a foreign banking
institution as a consequence of any such loss, damage, cost, expense,
liability or claim if and to the extent that the Fund has not been made
whole for any such loss, damage, cost, expense, liability or claim.
3.10 Liability of Custodian. The Custodian shall be liable for the acts or
omissions of a foreign banking institution to the same standard of care
as set forth in Exhibit 1 and, regardless of whether assets are
maintained in the custody of a foreign banking institution, a foreign
securities depository or a branch of a U.S. bank as contemplated by
paragraph 3.13 hereof.
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<PAGE> 31
The Custodian shall not be liable for any loss, damage, cost, expense,
liability or claim resulting from nationalization, expropriation,
currency restrictions, or acts of war or terrorism or any loss where the
sub-custodian has otherwise exercised reasonable care. Notwithstanding
the foregoing provisions of this paragraph 3.10, in delegating custody
duties to State Street London Ltd., the Custodian shall not be relieved
of any responsibility to the Fund for any loss due to such delegation,
except such loss as may result from (a) political risk (including, but
not limited to, exchange control restrictions, confiscation,
expropriation, nationalization, insurrection, civil strife or armed
hostilities) or (b) other losses (excluding a bankruptcy or insolvency
of State Street London Ltd. not caused by political risk) due to Acts of
God, nuclear incident or other losses under circumstances where the
Custodian and State Street London Ltd. have exercised reasonable care.
3.11 Reimbursement for Advances. If the Fund requires the Custodian to
advance cash or securities for any purpose for the benefit of a
Portfolio including the purchase or sale of foreign exchange or of
contracts for foreign exchange, or in the event that the Custodian or
its nominee shall incur or be assessed any taxes (excluding any
corporate tax liability of the Custodian), charges, expenses,
assessments, claims or liabilities in
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<PAGE> 32
connection with the performance of this Contract, except such as may
arise from its or its nominee's own negligent action, negligent failure
to act or willful misconduct, any property at any time held for the
account of the applicable Portfolio shall be security therefor and
should the Fund fail to repay the Custodian promptly, the Custodian
shall after five business days written notice be entitled to utilize
available cash and to dispose of such Portfolio's assets to the extent
necessary to obtain reimbursement.
3.12 Monitoring Responsibilities. The Custodian shall furnish annually to the
Fund, during the month of June, information concerning the foreign
sub-custodians employed by the Custodian. Such information shall be
similar in kind and scope to that furnished to the Fund in connection
with the initial approval of this Contract. In addition, the Custodian
will promptly inform the Fund in the event that the Custodian learns of
a material adverse change in the financial condition of a foreign
sub-custodian or any material loss of the assets of the Fund or in the
case of any foreign sub-custodian not the subject of an exemptive order
from the Securities and Exchange Commission is notified by such foreign
sub-custodian that there appears to be a substantial likelihood that its
shareholders' equity will decline below $200 million (U.S. dollars or
the equivalent thereof) or that its shareholders' equity has declined
-29-
<PAGE> 33
below $200 million (in each case computed in accordance with generally
accepted U.S. accounting principles).
3.13 Branches of U.S. Banks.
(a) Except as otherwise set forth in this Contract, the provisions
hereof shall not apply where the custody of the Portfolio's assets are
maintained in a foreign branch of a banking institution which is a
"bank" as defined by Section 2(a)(5) of the Investment Company Act of
1940 meeting the qualification set forth in Section 26(a) of said Act.
The appointment of any such branch as a sub-custodian shall be governed
by paragraph 1 of this Contract.
(b) cash held for each Portfolio of the Fund in the United Kingdom shall
be maintained in an interest bearing account established for the Fund
with the Custodian's London branch, which account shall be subject to
the direction of the Custodian, State Street London Ltd. or both.
4. Payments for Sales or Repurchases or Redemptions of Shares of the Fund.
The Custodian shall receive from the distributor for the Shares or from
the Transfer Agent of the Fund and deposit into the account of the
appropriate Portfolio such payments as are received for Shares of that
Portfolio issued or sold from time to time by the Fund. The Custodian
will provide timely notification to the Fund on behalf of each such
Portfolio and the Transfer Agent of any receipt by it of payments for
Shares of such Portfolio.
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<PAGE> 34
From such funds as may be available for the purpose but subject to the
limitations of the Articles of Incorporation and any applicable votes of the
Board of Directors of the Fund pursuant thereto, the Custodian shall, upon
receipt of instructions from the Transfer Agent, make funds available for
payment to holders of Shares who have delivered to the Transfer Agent a request
for redemption or repurchase of their Shares. In connection with the redemption
or repurchase of Shares of a Portfolio, the Custodian is authorized upon receipt
of instructions from the Transfer Agent to wire funds to or through a commercial
bank designated by the redeeming shareholders. In connection with the redemption
or repurchase of Shares of the Fund, the Custodian shall honor checks drawn on
the Custodian by a holder of Shares, which checks have been furnished by the
Fund to the holder of Shares, when presented to the Custodian in accordance with
such procedures and controls as are mutually agreed upon from time to time
between the Fund and the Custodian.
5. Proper Instructions. Proper Instructions as used throughout this
Contract means a writing signed or initialed by one or more person or persons as
the Board of Directors shall have from time to time authorized. Each such
writing shall set forth the specific transaction or type of transaction
involved, including a specific statement of the purpose for which such action is
requested. Oral instructions will be considered Proper Instructions if the
Custodian reasonably believes them to have been given by a person authorized to
give such instructions with respect to the transaction involved. The Fund shall
cause all
-31-
<PAGE> 35
oral instructions to be confirmed in writing. Upon receipt of a certificate of
the Secretary or an Assistant Secretary as to the authorization by the Board of
Directors of the Fund accompanied by a detailed description of procedures
approved by the Board of Directors, Proper Instructions may include
communications effected directly between electro-mechanical or electronic
devices provided that the Board of Directors and the Custodian are satisfied
that such procedures afford adequate safeguards for the Portfolios' assets. For
purposes of this Section, Proper Instructions shall include instructions
received by the Custodian pursuant to any three - party agreement which requires
a segregated asset account in accordance with Section 2.11.
6. Actions Permitted without Express Authority. The Custodian may in its
discretion, without express authority from the Fund on behalf of each applicable
Portfolio:
1) make payments to itself or others for minor expenses of handling
securities or other similar items relating to its duties under this Contract,
provided that all such payments shall be accounted for to the Fund on behalf of
the Portfolio;
2) surrender securities in temporary form for securities in definitive
form;
3) endorse for collection, in the name of the Portfolio, checks,
drafts and other negotiable instruments; and
4) in general, attend to all non-discretionary details in connection
with the sale, exchange, substitution, purchase, transfer and other dealings
with the securities and property of
-32-
<PAGE> 36
the Portfolio except as otherwise directed by the Board of Directors of the
Fund.
7. Evidence of Authority.
The Custodian shall be protected in acting upon any instructions, notice,
request, consent, certificate or other instrument or paper believed by it to be
genuine and to have been properly executed by or on behalf of the Fund. The
Custodian may receive and accept a certified copy of a vote of the Board of
Directors of the Fund as conclusive evidence (a) of the authority of any person
to act in accordance with such vote or (b) of any determination or of any action
by the Board of Directors pursuant to the Articles of Incorporation as described
in such vote, and such vote may be considered as in full force and effect until
receipt by the Custodian of written notice to the contrary.
8. Duties of Custodian with Respect to the Books of Account and
Calculation of Net Asset Value and Net Income.
The Custodian shall cooperate with and supply necessary information to the
entity or entities appointed by the Board of Directors of the Fund to keep the
books of account of each Portfolio and/or compute the net asset value per share
of the outstanding shares of each Portfolio or, if directed in writing to do so
by the Fund on behalf of the Portfolio, shall itself keep such books of account
and/or compute such net asset value per share. If so directed, the Custodian
shall also calculate daily the net income of the Portfolio as described in the
Fund's currently effective prospectus related to such Portfolio and shall advise
the Fund and the Transfer Agent daily of the total
-33
<PAGE> 37
amounts of such net income and, if instructed in writing by an officer of the
Fund to do so, shall advise the Transfer Agent periodically of the division of
such net income among its various components. The calculations of the net asset
value per share and the daily income of each Portfolio shall be made at the time
or times described from time to time in the Fund's currently effective
prospectus related to such Portfolio.
9. Records.
The Custodian shall with respect to each Portfolio create and maintain all
records relating to its activities and obligations under this Contract in such
manner as will meet the obligations of the Fund under the Investment Company Act
of 1940, with particular attention to Section 31 thereof and Rules 31a-1 and
31a-2 thereunder, applicable federal and state tax laws and any other law or
administrative rules or procedures which may be applicable to the Fund. All such
records shall be the property of the Fund and shall at all times during the
regular business hours of the Custodian be open for inspection by duly
authorized officers, employees or agents of the Fund and employees and agents of
the Securities and Exchange Commission. The Custodian shall, at the Fund's
request, supply the Fund with a tabulation of securities owned by each Portfolio
and held by the Custodian and shall, when requested to do so by the Fund and for
such compensation as shall be agreed upon between the Fund and the Custodian,
include certificate numbers in such tabulations.
-34-
<PAGE> 38
10. Opinion of Fund's Independent Accountant.
The Custodian shall take all reasonable action, as the Fund on behalf of
each applicable Portfolio may from time to time request, to obtain from year to
year favorable opinions from the Fund's independent accountants with respect to
its activities hereunder in connection with the preparation of the Fund's Form
N-1A, and Form N-SAR or other annual reports to the Securities and Exchange
Commission and with respect to any other requirements of such Commission.
11. Reports to Fund by Independent Public Accountants.
The Custodian shall provide the Fund, on behalf of each of the Portfolios
at such times as the Fund may reasonably require, with reports by independent
public accountants on the accounting system, internal accounting control and
procedures for safeguarding securities, futures contracts and options on futures
contracts, including securities deposited and/or maintained in a Securities
System, relating to the services provided by the Custodian under this Contract;
such reports, shall be of sufficient scope and in sufficient detail, as may
reasonably be required by the Fund to provide reasonable assurance that any
material inadequacies would be disclosed by such examination, and, if there are
no such inadequacies, the reports shall so state.
12. Compensation of Custodian.
The Custodian shall be entitled to reasonable compensation for its services
and expenses as Custodian, as agreed upon from time to time between the Fund on
behalf of each applicable Portfolio and the Custodian.
-35-
<PAGE> 39
13. Responsibility of Custodian.
So long as and to the extent that it is in the exercise of reasonable care,
the Custodian shall not be responsible for the title, validity or genuineness of
any property or evidence of title thereto received by it or delivered by it
pursuant to this Contract and shall be held harmless in acting upon any notice,
request, consent, certificate or other instrument reasonably believed by it to
be genuine and to be signed by the proper party or parties, including any
futures commission merchant acting pursuant to the terms of a three - party
futures or options agreement. The Custodian shall be held to the exercise of
reasonable care in carrying out the provisions of this Contract, but shall be
kept indemnified by and shall be without liability to the Fund for any action
taken or omitted by it in good faith without negligence. It shall be entitled to
rely on and may act upon advice of counsel (who may be counsel for the Fund) on
all matters, and shall be without liability for any action reasonably taken or
omitted pursuant to such advice. Notwithstanding the foregoing, the
responsibility of the Custodian with respect to redemptions effected by check
shall be in accordance with a separate Agreement entered into between the
Custodian and the Fund.
If the Fund on behalf of a Portfolio requires the Custodian to take any
action with respect to securities, which action involves the payment of money or
which action may, in the opinion of the Custodian, result in the Custodian or
its nominee assigned to the Fund or the Portfolio being liable for the
-36-
<PAGE> 40
payment of money or incurring liability of some other form, the Fund on behalf
of the Portfolio, as a prerequisite to requiring the Custodian to take such
action, shall provide indemnity to the Custodian in an amount and form
satisfactory to it.
If the Fund requires the Custodian to advance cash or securities for any
purpose for the benefit of a Portfolio including the purchase or sale of foreign
exchange or of contracts for foreign exchange or in the event that the Custodian
or its nominee shall incur or be assessed any taxes (excluding any corporate tax
liability of the Custodian), charges, expenses, assessments, claims or
liabilities in connection with the performance of this Contract, except such as
may arise from its or its nominee's own negligent action, negligent failure to
act or willful misconduct, any property at any time held for the account of the
applicable Portfolio shall be security therefor and should the Fund fail to
repay the Custodian promptly, the Custodian shall upon five business days
written notice be entitled to utilize available cash and to dispose of such
Portfolio's assets to the extent necessary to obtain reimbursement. Parties
hereby agree that any use of the term reasonable care shall be given the same
meaning as ordinary negligence under Massachusetts law.
14. Effective Period, Termination and Amendment
This Contract shall become effective as of its execution, shall continue in
full force and effect until terminated as hereinafter provided, may be amended
at any time by mutual agreement of the parties hereto and may be terminated by
either
-37-
<PAGE> 41
party by an instrument in writing delivered or mailed, postage prepaid to the
other party, such termination to take effect not sooner than ninety (90) days
after the date of such delivery or mailing; provided, however that the Custodian
shall not with respect to a Portfolio act under Section 2.10 hereof in the
absence of receipt of an initial certificate of the Secretary or an Assistant
Secretary that the Board of Directors of the Fund has approved the initial use
of a particular Securities System by such Portfolio and the receipt of an annual
certificate of the Secretary or an Assistant Secretary that the Board of
Directors has reviewed the use by such Portfolio of such Securities System, as
required in each case by Rules 17f-4 and 17f-5 under the Investment Company Act
of 1940, as amended and that the Custodian shall not with respect to a Portfolio
act under Section 2.10A hereof in the absence of receipt of an initial
certificate of the Secretary or an Assistant Secretary that the Board of
Directors has approved the initial use of the Direct Paper System by such
Portfolio and the receipt of an annual certificate of the Secretary or an
Assistant Secretary that the Board of Directors has reviewed the use by such
Portfolio of the Direct Paper System; provided further, however, that the Fund
shall not amend or terminate this Contract in contravention of any applicable
federal or state regulations, or any provision of the Articles of Incorporation,
and further provided, that the Fund on behalf of one or more of the Portfolios
may at any time by action of its Board of Directors (i) substitute another bank
or trust company for the Custodian by giving notice as described above to the
-38-
<PAGE> 42
Custodian, or (ii) immediately terminate this Contract in the event of the
appointment of a conservator or receiver for the Custodian by the Comptroller of
the Currency or upon the happening of a like event at the direction of an
appropriate regulatory agency or court of competent jurisdiction.
Upon termination of the Contract, the Fund on behalf of each applicable
Portfolio shall pay to the Custodian such compensation as may be due as of the
date of such termination and shall likewise reimburse the Custodian for its
costs, expenses and disbursements.
15. Successor Custodian
If a successor custodian for the Fund, of one or more of the Portfolios
shall be appointed by the Board of Directors of the Fund, the Custodian shall,
upon termination, deliver to such successor custodian at the office of the
Custodian, duly endorsed and in the form for transfer, all securities of each
applicable Portfolio then held by it hereunder and shall transfer to an account
of the successor custodian all of the securities of each such Portfolio held in
a Securities System.
If no such successor custodian shall be appointed, the Custodian shall, in
like manner, upon receipt of a certified copy of a vote of the Board of
Directors of the Fund, deliver at the office of the Custodian and transfer such
securities, funds and other properties in accordance with such vote.
In the event that no written order designating a successor custodian or
certified copy of a vote of the Board of Directors shall have been delivered to
the Custodian on or before
-39-
<PAGE> 43
the date when such termination shall become effective, then the Custodian shall
have the right to deliver to a bank or trust company, which is a "bank" as
defined in the Investment Company Act of 1940, doing business in Boston,
Massachusetts, of its own selection, having an aggregate capital, surplus, and
undivided profits, as shown by its last published report, of not less than
$25,000,000, all securities, funds and other properties held by the Custodian on
behalf of each applicable Portfolio and all instruments held by the Custodian
relative thereto and all other property held by it under this Contract on behalf
of each applicable Portfolio and to transfer to an account of such successor
custodian all of the securities of each such Portfolio held in any Securities
System. Thereafter, such bank or trust company shall be the successor of the
Custodian under this Contract.
In the event that securities, funds and other properties remain in the
possession of the Custodian after the date of termination hereof owing to
failure of the Fund to procure the certified copy of the vote referred to or of
the Board of Directors to appoint a successor custodian, the Custodian shall be
entitled to fair compensation for its services during such period as the
Custodian retains possession of such securities, funds and other properties and
the provisions of this Contract relating to the duties and obligations of the
Custodian shall remain in full force and effect.
-40-
<PAGE> 44
16. Interpretive and Additional Provisions
In connection with the operation of this Contract, the Custodian and the
Fund on behalf of each of the Portfolios, may from time to time agree on such
provisions interpretive of or in addition to the provisions of this Contract as
may in their joint opinion be consistent with the general tenor of this
Contract. Any such interpretive or additional provisions shall be in a writing
signed by both parties and shall be annexed hereto, provided that no such
interpretive or additional provisions shall contravene any applicable federal or
state regulations or any provision of the Articles of Incorporation of the Fund.
No interpretive or additional provisions made as provided in the preceding
sentence shall be deemed to be an amendment of this Contract.
17. Additional Fund
In the event that the Fund establishes one or more series of Shares in
addition to G.T. Global Bond Fund and G.T. Government Income Fund with respect
to which it desires to have the Custodian render services as custodian under the
terms hereof, it shall so notify the Custodian in writing, and if the Custodian
agrees in writing to provide such services, such series of Shares shall become a
Portfolio hereunder.
18. Massachusetts Law to Apply
This Contract shall be construed and the provisions thereof interpreted
under and in accordance with laws of The Commonwealth of Massachusetts.
-41-
<PAGE> 45
19. Prior Contracts
This Contract supersedes and terminates, as of the date hereof, all prior
contracts between the Fund on behalf of each of the Portfolios and the Custodian
relating to the custody of the Fund's assets.
IN WITNESS WHEREOF, each of the parties has caused this instrument to be
executed in its name and behalf by its duly authorized representative and its
seal to be hereunder affixed as of the day of , 1988.
ATTEST G.T. GLOBAL INCOME SERIES, INC.
/s/ [ILLEGIBLE] By /s/ [ILLEGIBLE]
- ----------------------------------- ------------------------------------
Vice President
ATTEST STATE STREET BANK AND TRUST COMPANY
/s/ [ILLEGIBLE] By /s/ [ILLEGIBLE]
- ----------------------------------- ------------------------------------
Assistant Secretary Vice President
-42-
<PAGE> 46
SCHEDULE A
The following foreign banking institutions and foreign securities depositories
have been approved by the Board of Directors for use as sub-custodians for the
Fund's securities and other assets:
Securities Depository or
Country Bank Clearing Agency
- ------- ------------------- ------------------------
Australia Australia and None
New Zealand Banking
Group Limited
Austria Girozentrale und None
Bank der Osterreichischen
Belgium Banque Bruxelles C.I.K.
Lambert
Canada Canada Trust Company Canadian Depository
for Securities, Ltd.
Denmark Den Danske Bank None
Finland Kansallis - Osake - None
Pankki
France Credit Commerciale De SICOVAM
France
Germany Berliner Frankfurter Kassenverein
Handals -- Und AG (Frankfurt Central
Frankfurter Bank Depository)
Hong Kong The Chartered Bank None
Italy Credito Italiano None
Japan Sumitomo Trust and None
Banking Co. Ltd.
Luxembourg None Cedel
Malaysia Standard Chartered Bank
Mexico Citibank, Mexico INDEVAL
(Bank of Citibank, N.A.) (Institute Nationel de
Valares)
<PAGE> 47
Schedule A
Page Two
Securities Depository or
Country Bank Clearing Agency
- ------- ------------------- ------------------------
Netherlands Bank Mees and Hope; NECIGEF
subsidiary of Algemene (Netherlands Clearing
Bank Nederland, N.V. Institute for Giro
Securities Deliveries)
New Zealand Westpac Banking Corp. None
Norway Christiania Bank Og None
Kreditkasse
Philippines Standard Chartered Bank
Singapore DBS Trustee Limited; None
Subsidiary of DBS
Bank Ltd.
Spain Banco Hispano Americano
Sweden Skandinaviska None
Enskilda Banken
Switzerland Union Bank of Switzerland SEGA
Thailand Standard Chartered Bank
United Kingdom State Street London Limited;
Subsidiary of State Street
Boston Corporation
Transnational The Euroclear
System
<PAGE> 48
EXHIBIT 1
CUSTODIAN AGREEMENT
TO:
Gentlemen:
The undersigned ("State Street") hereby requests that you (the "Bank")
establish a custody account and a cash account for each State Street client
whose account is identified to this Agreement. Each such custody or cash
account as applicable will be referred to herein as the "Account" and will be
subject to the following terms and conditions:
1. The Bank shall hold as agent for State Street and shall physically
segregate in the Account such cash, bullion, coin, stocks, shares, bonds,
debentures, notes and other securities and other property which is delivered to
the Bank for that State Street Account (the "Property").
2. (a) Without the prior approval of State Street it will not deposit
securities in any securities depository or utilize a clearing agency,
incorporated or organized under the laws of a country other than the United
States, unless such depository or clearing house operates the central system
for handling of securities or equivalent book-entries in that country or
operates a transnational system for the central handling of securities or
equivalent book-entries.
(b) When Securities held for an Account are deposited in a securities
depository or clearing agency by the Bank, the Bank shall identify on its books
as belonging to State Street as agent for such Account, the Securities so
deposited.
The Bank represents that either:
3. (a) It currently has stockholders' equity in excess of $200 million
(US dollars or the equivalent of US dollars computed in accordance with
generally accepted US accounting principles) and will promptly inform State
Street in the event that there appears to be a substantial likelihood that its
stockholders' equity will decline below $200 million, or in any event, at such
time as its stockholders' equity in fact declines below $200 million; or
(b) It is the subject of an exemptive order issued by the United
States Securities and Exchange Commission, which such order permits State Street
to employ the Bank as a subcustodian, notwithstanding the fact that the Bank's
stockholders' equity is currently below $200 million or may in the future
decline below $200 million due to currency fluctuation.
4. Upon the written instructions of State Street as permitted by
Section 8, the Bank is authorized to pay out cash from the Account and to sell,
assign, transfer, deliver or exchange, or to purchase for the Account,
<PAGE> 49
any and all stocks, shares, bonds, debentures, notes and other securities
("Securities"), bullion, coin and other property, but only as provided in such
written instructions. The Bank shall not be held liable for any act or omission
to act on instructions given or purported to be given should there be any error
in such instructions.
5. Unless the Bank receives written instructions of State Street to the
contrary, the Bank is authorized:
a. To promptly receive and collect all income and principal with
respect to the Property and to credit cash receipts to the Account;
b. To promptly exchange Securities where the exchange is purely
ministerial (including, without limitation, the exchange of
temporary Securities for those in definitive form and the exchange
of warrants, or other documents of entitlement to Securities, for
the Securities themselves);
c. To promptly surrender Securities at maturity or when called for
redemption upon receiving payment therefor;
d. Whenever notification of a rights entitlement or a fractional
interest resulting from a rights issue, stock dividend or stock
split is received for the Account and such rights entitlement or
fractional interest bears an expiration date, the Bank will endeavor
to obtain State Street's instructions, but should these not be
received in time for the Bank to take timely action, the Bank is
authorized to sell such rights entitlement or fractional interest
and to credit the Account;
e. To hold registered in the name of the nominee of the Bank or its
agents such Securities as are ordinarily held in registered form;
f. To execute in State Street's name for the Account, whenever the Bank
deems it appropriate, such ownership and other certificates as may
be required to obtain the payment of income from the Property; and
g. To pay or cause to be paid from the Account any and all taxes and
levies in the nature of taxes imposed on such assets by any
governmental authority, and shall use reasonable efforts to promptly
reclaim any foreign withholding tax relating to the Account.
6. If the Bank shall receive any proxies, notices, reports, or other
communications relative to any of the Securities of the Account in connection
with tender offers, reorganizations, mergers, consolidations, or similar events
which may have an impact upon the issuer thereof, the Bank shall promptly
transmit any such communication to State Street by means as will permit State
Street to take timely action with respect thereto.
7. The Bank is authorized in its discretion to appoint brokers and
agents in connection with the Bank's handling of transactions relating to the
Property provided that any such appointment shall not relieve the Bank of any of
its responsibilities or liabilities hereunder,
<PAGE> 50
8. Written instructions shall include (i) instructions in writing signed
by such persons as are designated in writing by State Street (ii) telex or
tested telex instructions of State Street, (iii) other forms of instruction in
computer readable form as shall be customarily utilized for the transmission of
like information and (iv) such other forms of communication as from time to
time shall be agreed upon by State Street and the Bank.
9. The Bank shall supply periodic reports with respect to the
safekeeping of assets held by it under this Agreement. The content of such
reports shall include but not be limited to any transfer to or from any Account
held by the Bank hereunder and such other information as State Street may
reasonably request.
10. In addition to its obligations under Section 2 hereof, the Bank shall
maintain such other records as may be necessary to identify the assets
hereunder as belonging to each State Street client identified to this Agreement
from time to time.
11. The Bank agrees that its books and records relating to its actions
under this Agreement shall be opened to the physical, on-premises inspection
and audit at reasonable times by officers of, auditors employed by or other
representatives of State Street (including to the extent permitted under
______________ law the independent public accountants for any entity whose
Property is being held hereunder) and shall be retained for such period as
shall be agreed by State Street and the Bank.
12. The Bank shall be entitled to reasonable compensation for its services
and expenses as custodian under this Agreement, as agreed upon from time to time
by the Bank and State Street.
13. The Bank shall exercise reasonable care in the performance of its
duties as are set forth or contemplated herein or contained in instructions
given to the Bank which are not contrary to this Agreement, and shall maintain
adequate insurance and agrees to indemnify and hold State Street and each
Account from and against any loss, damage, cost, expense, liability or claim
arising out of or in connection with the Bank's performance of its obligations
hereunder.
14. The Bank agrees that (i) the Property is not subject to any right,
charge, security interest, lien or claim of any kind in favor of the Bank or
any of its agents or its creditors except a claim of payment for their safe
custody and administration and (ii) the beneficial ownership of the Property
shall be freely transferable without the payment of money or other value other
than for safe custody or administration.
15. This Agreement may be terminated by the Bank or State Street by at
least 60 days' written notice to the other, sent by registered mail or express
courier. The Bank, upon the date this Agreement terminates pursuant to notice
which has been given in a timely fashion, shall deliver the Property in
accordance with written instructions of State Street specifying the name(s) of
the person(s) to whom the Property shall be delivered.
<PAGE> 51
16. The Bank and State Street shall each use its best efforts to maintain
the confidentiality of the Property in each Account, subject, however, to the
provisions of any laws requiring the disclosure of the Property.
17. The Bank agrees to follow such Operating Requirements as State Street
may require from time to time. A copy of the current State Street Operating
Requirements is attached as an exhibit to this Agreement.
18. Unless otherwise specified in this Agreement, all notices with respect
to matters contemplated by this Agreement shall be deemed duly given when
received in writing or by tested telex by the Bank or State Street at their
respective addresses set forth below, or at such other address as specified in
each case in a notice similarly given:
To State Street: Global Custody Services Division
STATE STREET BANK AND TRUST COMPANY
P.O. Box 470
Boston, Massachusetts 02102
To the Bank:
19. This Agreement shall be governed by and construed in accordance with
the laws of __________________.
Please acknowledge your agreement to the foregoing by executing a copy of
this letter.
Very truly yours,
STATE STREET BANK AND TRUST COMPANY
By
------------------------------------
Agreed to by:
By
------------------------------
Date
----------------------------
scust/
<PAGE> 1
EXHIBIT g(1)(b)
AMENDMENT TO THE CUSTODIAN CONTRACT
AGREEMENT made by and between STATE STREET BANK AND TRUST COMPANY (the
"Custodian") and G.T. GLOBAL GROWTH SERIES (the "Fund").
WHEREAS, the Custodian and the Fund are parties to a custodian contract
dated September 15, 1988 (the "Custodian Contract") governing the terms and
conditions under which the Custodian maintains custody of the securities and
other assets of the Fund; and
WHEREAS, the Custodian and the Fund desire to amend the Custodian Contract;
NOW THEREFORE, the Custodian and the Fund hereby amend Section 5 of the
Custodian Contract entitled "Proper Instructions" to read:
"Proper Instructions" as used throughout this Contract means a writing
signed in the name of the Fund by any two of the President, any Vice
President, the Secretary, the Assistant Secretary, the Treasurer or the
Assistant Treasurer of the Fund or any other persons duly authorized to
sign such writing by the Board of Trustees of the Fund. Each such writing
shall set forth the specific transaction or type of transaction involved,
including a specific statement of the purpose for which such action is
requested. The Custodian may act and rely upon oral instructions if the
Custodian reasonably believes them to have been given by a person
authorized to give instructions with respect to the transactions involved.
Oral Instructions shall be promptly confirmed in writing by Proper
Instructions. Upon receipt of a certificate of the Secretary or an
Assistant Secretary as to the authorization by the Board of Trustees,
Proper Instructions may include communications effected directly between
electro-mechanical or electronic devices provided that the Board of
Trustees and the Custodian are satisfied that such procedures afford
adequate safeguards for the Portfolios' assets. For purposes of this
Section, Proper Instructions shall include instructions received by the
Custodian pursuant to any three-party agreement which requires a segregated
asset account in accordance with Section 2.12."
Except as specifically superseded or modified herein, the terms and
provisions of the Custodian Contract shall continue to apply with full force and
effect.
<PAGE> 2
IN WITNESS WHEREOF, each of the parties has caused this instrument to be
executed in its name and behalf by its duly authorized representative as of the
________ day of ________ 1994.
STATE STREET BANK AND TRUST COMPANY
By: /s/ [ILLEGIBLE]
--------------------------------
Executive Vice President
G.T. GLOBAL GROWTH SERIES
By: /s/ [ILLEGIBLE]
-------------------------------
Vice President
<PAGE> 1
EXHIBIT g(1)(c)
AMENDMENT TO CUSTODIAN CONTRACT
Agreement made by and between State Street Bank and Trust Company (the
"Custodian") and G.T. Global Growth Series (the "Fund").
WHEREAS, the Custodian and the Fund are parties to a custodian contract
dated September 15, 1988 (the "Custodian Contract") governing the terms and
conditions under which the Custodian maintains custody of the securities and
other assets of the Fund; and
WHEREAS, the Custodian and the Fund desire to amend the terms and
conditions under which the Custodian maintains the Fund's securities and other
non-cash property in the custody of certain foreign sub-custodians in conformity
with the requirements of Rule 17f-5 under the Investment Company Act of 1940, as
amended;
NOW THEREFORE, in consideration of the premises and covenants contained
herein, the Custodian and the Fund hereby amend the Custodian Contract by the
addition of the following terms and provisions;
1. Notwithstanding any provisions to the contrary set forth in the
Custodian Contract, the Custodian may hold securities and other non-cash
property for all of its customers, including the Fund, with a foreign
sub-custodian in a single account that is identified as belonging to the
Custodian for the benefit of its customers, provided however, that (i) the
records of the Custodian with respect to securities and other non-cash property
of the Fund which are maintained in such account shall identify by book-entry
those securities and other non-cash property belonging to the Fund and (ii) the
Custodian shall require that securities and other non-cash property so held by
the foreign sub-custodian be held separately from any assets of the foreign
sub-custodian or of others.
2. Except as specifically superseded or modified herein, the terms and
provisions of the Custodian Contract shall continue to apply with full force and
effect.
IN WITNESS WHEREOF, each of the parties has caused this instrument to be
executed as a sealed instrument in its name and behalf by its duly authorized
representative this 20th day of June, 1995,
G.T. GLOBAL GROWTH SERIES
By: /s/ [ILLEGIBLE]
--------------------------------
Title: Vice President
--------------------------------
STATE STREET BANK AND TRUST COMPANY
By: /s/ [ILLEGIBLE]
--------------------------------
Title: Vice President
--------------------------------
<PAGE> 1
EXHIBIT g(1)(d)
May 29, 1998
Mr. Scott Corrick
State Street Bank and Trust Company
225 Franklin Street
Boston, Massachusetts 02110
Dear Scott:
We are writing to inform you about the proposed reorganization of G.T.
Global Growth Series (the "Company") into a newly organized Delaware business
trust, AIM Growth Series (the "Trust"). In connection with this transaction,
which is scheduled to close on May 29, 1998, it is anticipated that each
series of the Company listed on Schedule A to this letter (each an "Old Fund")
will transfer all of its assets to the corresponding series listed on
Schedule A (each a "New Fund") in exchange solely for shares of beneficial
interest in such New Fund and such New Fund's assumption of such Old Fund's
liabilities.
Consistent with the "Effective Period, Termination and Amendment"
provision in Section 14 of the Custodian Contract of September 15, 1998, as
amended from time to time (the "Contract"), between the Company and State
Street Bank and Trust Company, the Company hereby requests that, as of the
close of business on May 29, 1998, you act under the terms of the Contract,
including the fee schedule relating thereto, as Custodian for each New
Fund, which shall be deemed to have succeeded to the corresponding Old Fund's
obligations, rights, and duties under the Contract.
The Company hereby further requests that you agree that the obligations
of the Trust under the Contract shall not be binding upon any of the Trust's
trustees, shareholders, nominees, officers, agents, or employees of the Trust
personally, but shall be binding only upon the assets and property of the
New Fund or New Funds to which such obligations relate.
Please indicate your acceptance of the foregoing by executing two
copies of this Letter Agreement, returning one copy to the Company and
retaining one for your records.
Sincerely,
G.T. Global Growth Series
By: HELGE K. LEE
------------------------------------
Helge K. Lee
Vice President and Secretary
Acknowledged and Accepted:
State Street Bank and Trust Company
By: RONALD E. LOGUE
-------------------------------
Name: Ronald E. Logue
Title: Executive Vice President
<PAGE> 2
SCHEDULE A
- --------------------------------------------------------------------------------
G.T. GLOBAL GROWTH SERIES AIM GROWTH SERIES
- --------------------------------------------------------------------------------
GT Global America Mid Cap Growth Fund AIM Mid Cap Growth Fund
- --------------------------------------------------------------------------------
GT Global America Small Cap Growth Fund AIM Small Cap Equity Fund
- --------------------------------------------------------------------------------
GT Global America Value Fund AIM America Value Fund
- --------------------------------------------------------------------------------
GT Global Europe Growth Fund AIM Europe Growth Fund
- --------------------------------------------------------------------------------
GT Global International Growth Fund AIM International Growth Fund
- --------------------------------------------------------------------------------
GT Global Japan Growth Fund AIM Japan Growth Fund
- --------------------------------------------------------------------------------
GT Global New Pacific Growth Fund AIM New Pacific Growth Fund
- --------------------------------------------------------------------------------
GT Global Worldwide Growth Fund AIM Worldwide Growth Fund
<PAGE> 1
g(1)(e)
AMENDMENT TO CUSTODIAN CONTRACT
This Amendment to the Custodian Contract is made as of January 26, 1999
by and between AIM Growth Series (formerly G.T. Global Growth Series, the
"Fund") and State Street Bank and Trust Company (the "Custodian"). Capitalized
terms used in this Amendment without definition shall have the respective
meanings ascribed to such terms in the Custodian Contract referred to below.
WHEREAS, the Fund and the Custodian entered into a Custodian Contract
dated as of September 15, 1988 (as amended and in effect from time to time, the
"Contract"); and
WHEREAS, the Fund is authorized to issue shares in separate series,
with each such series representing interests in a separate portfolio of
securities and other assets, and the Fund has made AIM New Pacific Growth Fund,
AIM Europe Growth Fund, AIM Japan Growth Fund, AIM International Growth Fund,
AIM Worldwide Growth Fund, AIM Mid Cap Equity Fund, AIM Small Cap Growth Fund
and AIM Basic Value Fund subject to the Contract (each such series, together
with all other series subsequently established by the Fund and made subject to
the Contract in accordance with the terms thereof, shall be referred to as a
"Portfolio", and, collectively, the "Portfolios"); and
WHEREAS, the Fund and the Custodian desire to amend certain provisions
of the Contract to reflect revisions to Rule 17f-5 ("Rule 17f-5") promulgated
under the Investment Company Act of 1940, as amended (the "1940 Act"); and
WHEREAS, the Fund and the Custodian desire to amend and restate certain
other provisions of the Contract relating to the terms and conditions of the
custody of assets of each of the Portfolios held outside of the United States.
NOW THEREFORE, in consideration of the foregoing and the mutual
covenants and agreements hereinafter contained, the parties hereby agree to
amend the Contract, pursuant to the terms thereof, as follows:
I. Article 3 of the Contract is hereby deleted, and Articles 4 through 19
of the Contract are hereby amended, as of the effective date of this
Amendment, by renumbering same as Articles 5 through 20, respectively.
II. New Articles 3 and 4 of the Contract are hereby added, as of the
effective date of this Amendment, as set forth below.
<PAGE> 2
3. THE CUSTODIAN AS FOREIGN CUSTODY MANAGER.
3.1. DEFINITIONS.
Capitalized terms in this Article 3 of the Contract shall have the following
meanings:
"Country Risk" means all factors reasonably related to the systemic risk of
holding Foreign Assets in a particular country including, but not limited to,
such country's political environment; economic and financial infrastructure
(including any Mandatory Securities Depositories operating in the country);
prevailing or developing custody and settlement practices; laws and regulations
applicable to the safekeeping and recovery of Foreign Assets held in custody in
that country; and factors comprising the "prevailing country risk", including
the effects of foreign law on the safekeeping of Portfolio assets, the
likelihood of expropriation, nationalization, freezing, or confiscation of a
Portfolio's assets and any reasonably foreseeable difficulties in repatriating a
Portfolio's assets.
"Eligible Foreign Custodian" has the meaning set forth in section (a)(1) of Rule
17f-5, including a majority-owned or indirect subsidiary of a U.S. Bank (as
defined in Rule 17f-5), a bank holding company meeting the requirements of an
Eligible Foreign Custodian (as set forth in Rule 17f-5 or by other appropriate
action of the SEC, or a foreign branch of a Bank (as defined in Section 2(a)(5)
of the 1940 Act) meeting the requirements of a custodian under Section 17(f) of
the 1940 Act, except that the term does not include Mandatory Securities
Depositories.
"Foreign Assets" means any of the Portfolio's investments (including foreign
currencies) for which the primary market is outside the United States, currency
contracts that are settled outside the United States and such cash and cash
equivalents as are reasonably necessary to effect the Portfolio's transactions
in such investments.
"Foreign Custody Manager" has the meaning set forth in section (a)(2) of Rule
17f-5.
"Mandatory Securities Depository" means a foreign securities depository or
clearing agency that, either as a legal or practical matter, must be used if the
Fund determines to place Foreign Assets in a country outside the United States
(i) because required by law or regulation; (ii) because securities cannot be
withdrawn from such foreign securities depository or clearing agency; or (iii)
because maintaining or effecting trades in securities outside the foreign
securities depository or clearing agency is not consistent with prevailing or
developing custodial or market practices.
3.2. DELEGATION TO THE CUSTODIAN AS FOREIGN CUSTODY MANAGER.
The Fund, by resolution adopted by its Board of Trustees (the "Board"), hereby
delegates to the Custodian, subject to Section (b) of Rule 17f-5, the
responsibilities set forth in this Article 3 with RESPECT to Foreign Assets held
outside the United States, and the Custodian hereby accepts such delegation, as
Foreign Custody Manager of each Portfolio.
<PAGE> 3
In performing its delegated responsibilities as Foreign Custody Manager to place
or maintain the Foreign Assets with an Eligible Foreign Custodian, the Foreign
Custody Manager shall determine that the Foreign Assets will be subject to
reasonable care, based on the standards applicable to custodians in the country
in which the Foreign Assets will be held by that Eligible Foreign Custodian,
after considering all factors relevant to the safekeeping of such assets,
including, without limitation, the factors specified in Rule 17f-5(c)(1).
3.4.2. Contracts With Eligible Foreign Custodians.
The Foreign Custody Manager shall determine that the contract (or the rules or
established practices or procedures in the case of an Eligible Foreign Custodian
that is a foreign securities depository or clearing agency) governing the
foreign custody arrangements with each Eligible Foreign Custodian Selected by
the Foreign Custody Manager will satisfy the requirements of Rule 17F-5(c)(2).
3.4.3. Monitoring.
In each case in which the Foreign Custody Manager maintains Foreign Assets with
an Eligible Foreign Custodian, selected by the Foreign Custody Manager, the
Foreign Custody Manager shall maintain a system to monitor (i) the
appropriateness of maintaining the Foreign Assets with such Eligible Foreign
Custodian, and (ii) the contract governing the custody arrangements established
by the Foreign Custody Manager with the Eligible Foreign Custodian (or the rules
or established practices and procedures in the case of an Eligible Foreign
Custodian selected by the Foreign Custody Manager which is a foreign securities
depository or clearing agency that is not a Mandatory Securities Depository).
The Foreign Custody Manager shall provide the Board with information at least
annually as to the factors used in such monitoring system. In the event the
Foreign Custody Manager determines that the custody arrangements with an
Eligible Foreign Custodian that it has selected are no longer appropriate, the
Foreign Custody Manager shall promptly transfer the Fund's Foreign Assets to
another Eligible Foreign Custodian in the market and shall notify the Board in
accordance with Section 3.7 hereunder.
3.5. GUIDELINES FOR THE EXERCISE OF DELEGATED AUTHORITY.
For purposes of this Article 3, the Board shall be deemed to have considered and
determined to accept such Country Risk as is incurred by placing and maintaining
the Foreign Assets in each country for which the Custodian is serving as Foreign
Custody Manager of a Portfolio, and the Board shall be deemed to be monitoring
on a continuing basis such Country Risk to the extent that the Board considers
necessary or appropriate.
Notwithstanding any provision of this Contract to the contrary, the Fund on
behalf of the Portfolios and the Custodian expressly acknowledge and agree that
the Foreign Custody Manager shall not be delegated any responsibilities under
this Article 3 with respect to Mandatory Securities Depositories, and that the
determination by or on behalf of the
<PAGE> 4
Board to place the Foreign Assets in a particular country shall be deemed to
include the determination to place such Foreign Assets eligible for any
Mandatory Securities Depository with such Mandatory Securities Depository,
whether the Mandatory Securities Depository exists at the time the Foreign
Assets are acquired, or after the acquisition thereof.
3.6. STANDARD OF CARE AS FOREIGN CUSTODY MANAGER OF A PORTFOLIO.
In performing the responsibilities delegated to it, the Foreign Custody Manager
shall exercise reasonable care, prudence and diligence such as a person having
responsibility for the safekeeping of assets of management investment companies
registered under the 1940 Act would exercise.
3.7. REPORTING REQUIREMENTS.
The Foreign Custody Manager shall report at least quarterly on the Foreign
Assets held with each Eligible Foreign Custodian and in connection therewith if
applicable, provide to the Board amended Schedules A or B at the end of the
calendar quarter in which an amendment to either Schedule has occurred. The
Foreign Custody Manager will make written reports notifying the Board of any
other material change in the foreign custody arrangements of the Portfolios
described in this Article 3 promptly after the occurrence of the material
change.
3.8. REPRESENTATIONS WITH RESPECT TO RULE 17f-5.
The Foreign Custody Manager represents to the Fund that it is a U.S. Bank as
defined in section (a)(7) of Rule 17f-5.
The Fund represents to the Custodian that the Board has determined that it is
reasonable for the Board to rely on the Custodian to perform the
responsibilities delegated pursuant to this Contract to the Custodian as the
Foreign Custody Manager of each Portfolio.
3.9. EFFECTIVE DATE AND TERMINATION OF THE CUSTODIAN AS FOREIGN CUSTODY MANAGER.
The Board's delegation to the Custodian as Foreign Custody Manager of a
Portfolio shall be effective as of the date hereof and shall remain in effect
until terminated at any time, without penalty, by written notice from the
terminating party to the non-terminating party. Termination will become
effective thirty days after receipt by the non-terminating party of such notice.
The provisions of Section 3.3 hereof shall govern the delegation to and
termination of the Custodian as Foreign Custody Manager of the Fund with respect
to designated countries.
<PAGE> 5
3.10 Future Negotiations.
If at any time prior to termination of this Amendment the Custodian as a matter
of standard business practice, accepts delegation as Foreign Custody Manager for
its U.S. mutual fund clients on terms materially different than set forth in
this Amendment, the Custodian hereby agrees to negotiate with the fund in good
faith with respect thereto.
4. Duties of the Custodian with Respect to Property of the Portfolios Held
Outside the United States.
4.1 DEFINITIONS.
Terms used in this Article 4 and not defined below shall have the meanings
ascribed them in the Contract or in this Amendment:
"Foreign Securities System" means either a clearing agency or a securities
depository which is listed on Schedule A hereto or a Mandatory Securities
Depository.
"Foreign Sub-Custodian" means a foreign banking institution serving as an
Eligible Foreign Custodian.
4.2. HOLDING SECURITIES.
The Custodian shall identify on its books as belonging to the Portfolios the
foreign securities held by each Foreign Sub-Custodian or Foreign Securities
System. The Custodian may hold foreign securities for all of its customers,
including the Portfolios, with any Foreign Sub-Custodian in an account that is
identified as belonging to the Custodian for the benefit of its customers,
provided however, that (i) the records of the
Custodian with respect to foreign securities of the Portfolios which are
maintained in such account shall identify those securities as belonging to the
Portfolios and (ii), to the extent permitted and customary in the market in
which the account is maintained, the Custodian shall require that securities so
held by the Foreign Sub-Custodian be held separately from any assets of such
Foreign Sub-Custodian or of other customers of such Foreign Sub-Custodian.
4.3. FOREIGN SECURITIES SYSTEMS.
Foreign securities shall be maintained in a Foreign Securities System in a
designated country only through arrangements implemented by the Foreign
Sub-Custodian in such country pursuant to the terms of this Contract.
<PAGE> 6
4.4. TRANSACTIONS IN FOREIGN CUSTODY ACCOUNT.
4.4.1. Delivery of Foreign Assets.
The Custodian or a Foreign Sub-Custodian shall release and deliver foreign
securities of a Portfolio held by such Foreign Sub-Custodian, or in a Foreign
Securities System account, only upon receipt of Proper Instructions, which may
be continuing instructions when deemed appropriate by the parties, and only in
the following cases:
(i) upon sale of such foreign securities for the Portfolio in
accordance with reasonable market practice in the country
where such Foreign Assets are held or traded, including,
without limitation: (A) delivery against expectation of
receiving later payment; or (B), in the case of a sale
effected through a Foreign Securities System, in accordance
with the rules governing the operation of the Foreign
Securities System;
(ii) in connection with any repurchase agreement related to foreign
securities;
(iii) to the depository agent in connection with tender or other
similar offers for foreign securities of the Portfolio;
(iv) to the issuer thereof or its agent when such foreign
securities are called, redeemed, retired or otherwise become
payable;
(v) to the issuer thereof, or its agent, for transfer into the
name of the Custodian (or the name of the respective Foreign
Sub-Custodian or of any nominee of the Custodian (or such
Foreign Sub-Custodian)) or for exchange for a different number
of bonds, certificates or other evidence representing the same
aggregate face amount or number of units;
(vi) to brokers, clearing banks or other clearing agents for
examination or trade execution in accordance with reasonable
market practices in the country where such securities are held
or traded; provided that in any such case the Sub-Custodian
shall have no responsibility or liability for any loss arising
from the delivery of such securities prior to receiving
payment for such securities except as may arise from the
Sub-Custodian's own negligence or willful misconduct;
(vii) for exchange or conversion pursuant to any plan of merger,
consolidation, recapitalization, reorganization or
readjustment of the securities of the issuer of such
securities, or pursuant to provisions for conversion contained
in such securities, or pursuant to any deposit agreement;
(viii) in the case of warrants, rights or similar foreign securities,
the surrender thereof in the exercise of such warrants, rights
or similar securities or the surrender of interim receipts or
temporary securities for definitive securities;
<PAGE> 7
(ix) for delivery as security in connection with any borrowing by
the Fund requiring a pledge of assets by the Portfolio;
(x) in connection with trading in options and futures contracts,
including delivery as original margin and variation margin;
(xi) in connection with the lending of foreign securities; and
(xii) for any other proper corporate purpose, but only upon receipt
of, in addition to Proper Instructions, a copy of a resolution
of the Board or of an Executive Committee of the Board so
authorized by the Board, signed by an officer of the Fund and
certified by its Secretary or an Assistant Secretary that the
resolution was duly adopted and is in full force and effect (a
"Certified Resolution") specifying the Foreign Assets to be
delivered, setting forth the purpose for which such delivery
is to be made, declaring such purpose to be a proper corporate
purpose, and naming the person or persons to whom delivery of
such Foreign Assets shall be made.
4.4.2. PAYMENT OF PORTFOLIO MONIES.
Upon receipt of Proper Instructions, which may be continuing instructions when
deemed appropriate by the parties, the Custodian shall pay out, or direct the
respective Foreign Sub-Custodian or the respective Foreign Securities System to
pay out, moneys of a Portfolio in the following cases only:
(i) upon the purchase of foreign securities for the Portfolio,
unless otherwise directed by Proper Instructions, in
accordance with reasonable market settlement practice in the
country where such foreign securities are held or traded,
including, without limitation: (A) delivering money to the
seller thereof or to a dealer therefor (or an agent for such
seller or dealer) against expectation of receiving later
delivery of such foreign securities; or (B) in the case of a
purchase effected through a Foreign Securities System, in
accordance with the rules governing the operation of such
Foreign Securities System;
(ii) in connection with the conversion, exchange or surrender of
foreign securities of the Portfolio;
(iii) for the payment of any expense or liability of the Portfolio
including but not limited to the following payments: interest,
taxes, investment advisory fees, transfer agency fees, fees
under this Contract, legal fees, accounting fees, and other
operating expenses;
<PAGE> 8
(iv) for the purchase or sale of foreign exchange or foreign
exchange contracts for the Portfolio, including transactions
executed with or through the Custodian or its Foreign
Sub-Custodians;
(v) in connection with trading in options and futures contracts,
including delivery as original margin and variation margin;
(vii) in connection with the borrowing or lending of foreign
securities; and
(viii) for any other proper purpose, but only upon receipt of, in
addition to Proper Instructions, a Certified Resolution
specifying the amount of such payment, setting forth the
purpose for which such payment is to be made, declaring such
purpose to be a proper purpose, and naming the person or
persons to whom such payment is to be made.
4.4.3. MARKET CONDITIONS: MARKET INFORMATION.
Notwithstanding any provision of this Contract to the contrary, settlement and
payment for Foreign Assets received for the account of a Portfolio and delivery
of Foreign Assets maintained for the account of a Portfolio may be effected in
accordance with the customary established securities trading or processing
practices and procedures in the country or market in which the transaction
occurs generally accepted by Institutional Clients, including, without
limitation, delivering Foreign Assets to the purchaser thereof or to a dealer
therefor (or an agent for such purchaser or dealer) against a receipt with the
expectation of receiving later payment for such Foreign Assets from such
purchaser or dealer. For purposes of this Contract, "Institutional Clients"
means U.S. registered investment companies or major U.S. based commercial banks,
insurance companies, pension funds or substantially similar institutions which,
as a part of their ordinary business operations, purchase or sell securities and
make use of global custody services.
The Custodian shall provide to the Board the information with respect to custody
and settlement practices in countries in which the Custodian employs a Foreign
Sub-Custodian, including without limitation information relating to Foreign
Securities Systems, described on Schedule C hereto at the time or times set
forth on such Schedule. The Custodian may revise Schedule C from time to time,
provided that no such revision shall result in the Board being provided with
substantively less information than had been previously provided hereunder and,
provided further, that the Custodian shall in any event provide to the Board and
to A I M Advisors, Inc. annually the following information and opinions with
respect to the Board-approved countries listed on Schedule A:
(i) legal opinions relating to whether local law restricts with
respect to U.S. registered mutual funds (a) access of a fund's
independent public accountants to books and records of a
Foreign Sub-Custodian or Foreign Securities System, (b) a
fund's ability to recover in the event of bankruptcy or
insolvency of a Foreign Sub-Custodian or Foreign Securities
System, (c) a fund's ability to recover in the event of a loss
by
<PAGE> 9
a Foreign Sub-Custodian or Foreign Securities System, and (d)
the ability of a foreign investor to convert cash and cash
equivalents to U.S. dollars;
(ii) summary of information regarding Foreign Securities Systems;
and
(iii) country profile information containing market practice for (a)
delivery versus payment, (b) settlement method, (c) currency
restrictions, (d) buy-in practices, (e) foreign ownership
limits, and (f) unique market arrangements.
4.5. REGISTRATION OF FOREIGN SECURITIES.
The foreign securities maintained in the custody of a Foreign Custodian (other
than bearer securities) shall be registered in the name of the Fund (on behalf
of the applicable Portfolio) or in the name of the Custodian or in the name of
any Foreign Sub-Custodian or in the name of any nominee of the foregoing, and
the Fund agrees to hold any such nominee harmless from any liability as a holder
of record of such foreign securities, except to the extent that the Fund incurs
loss or damage due to failure of such nominee to meet its standard of care as
set forth in the Contract. The Custodian or a Foreign Sub-Custodian shall not be
obligated to accept securities on behalf of the Fund (on behalf of the
applicable Portfolio) under the terms of this Contract unless the form of such
securities and the manner in which they are delivered are in accordance with
reasonable market practice.
4.6. BANK ACCOUNTS.
The Custodian shall identify on its books as belonging to a Portfolio cash
(including cash denominated in foreign currencies) deposited with the Custodian.
Where the Custodian is unable to maintain, or market practice does not
facilitate the maintenance of, cash on the books of the Custodian, a bank
account or bank accounts opened and maintained outside the United States on
behalf of a Portfolio with a Foreign Sub-Custodian shall be subject only to
draft or order by the Custodian or such Foreign Sub-Custodian, acting pursuant
to the terms of this Contract to hold cash received by or from or for the
account of the Portfolio.
4.7. COLLECTION OF INCOME.
The Custodian shall use reasonable commercial efforts to collect all dividends,
income and other payments with respect to the Foreign Assets held hereunder to
which a Portfolio shall be entitled and shall credit such income, as collected,
to the Portfolio. In the event the Custodian or a Foreign Sub-Custodian must use
measures beyond those which are customary in a particular country to collect
such payments, the Fund and the Custodian shall consult as to such measures and
as to the compensation and expenses of the Custodian attendant thereto.
<PAGE> 10
4.8. SHAREHOLDER RIGHTS.
With respect to the foreign securities held under this Article 4, the Custodian
will use commercially reasonable efforts to facilitate the exercise by the Fund
on behalf of the Portfolios of voting and other shareholder rights, subject
always to the laws, regulations and practical constraints that may obtain in the
country where such securities are issued. The Fund acknowledges that local
conditions, including lack of regulation, onerous procedural obligations, lack
of notice and other factors may have the effect of severely limiting the ability
of the Fund to exercise shareholder rights.
4.9. COMMUNICATIONS RELATING TO FOREIGN SECURITIES.
The Custodian shall transmit promptly to the Fund written information
(including, without limitation, pendency of calls and maturities of foreign
securities and expirations of rights in connection therewith) received by the
Custodian via the Foreign Sub-Custodians from issuers of the foreign securities
being held for the account of a Portfolio. With respect to tender or exchange
offers, the Custodian shall transmit promptly to the Fund written information so
received by the Custodian from issuers of the foreign securities whose tender or
exchange is sought or from the party (or its agents) making the tender or
exchange offer. Subject to the standard of care to which the Custodian is held
under this Contract, the Custodian shall not be liable for any untimely exercise
of any tender, exchange or other right or power in connection with foreign
securities or other property of the Portfolio at any time held by it unless (i)
the Custodian or the respective Foreign Sub-Custodian is in actual possession of
such foreign securities or property and (ii) the Custodian receives Proper
Instructions with regard to the exercise of any such right or power, and both
(i) and (ii) occur at least two New York business days prior to the date on
which the Custodian is to take action to exercise such right or power.
4.10. LIABILITY OF FOREIGN SUB-CUSTODIANS AND FOREIGN SECURITIES SYSTEMS.
Each agreement pursuant to which the Custodian employs a Foreign Sub-Custodian
shall, to the extent possible consistent with prevailing market practice,
require the Foreign Sub-Custodian to exercise reasonable care in the performance
of its duties and to indemnify, and hold harmless, the Custodian from and
against any loss, damage, cost, expense, liability or claim arising out of or in
connection with such Foreign Sub-Custodian's performance of such obligations. At
the election of the Fund, the Fund shall be entitled to be subrogated to the
rights of the Custodian with respect to any claims against a Foreign
Sub-Custodian as a consequence of any such loss, damage, cost, expense,
liability or claim if and to the extent that the Fund and any applicable
Portfolio has not been made whole for any such loss, damage, cost, expense,
liability or claim.
4.11. TAX LAW.
The Custodian shall have no responsibility or liability for any obligations now
or hereafter imposed on the Fund or the Custodian as custodian of the Portfolios
by the tax law of the United States or of any state or political subdivision
thereof. With respect to jurisdictions other than the United States, the sole
responsibility of the Custodian with
<PAGE> 11
regard to the tax law of any such jurisdiction shall be to use reasonable
efforts to (a) notify the Fund of the obligations imposed on the Fund with
respect to the Portfolios or the Custodian as custodian of such Portfolios by
the tax law of such jurisdictions, including responsibility for withholding and
other taxes, assessment or other governmental charges, certifications and
government reporting and (b) perform such ministerial steps as are required to
collect any tax refund, to ascertain the appropriate rate of tax withholding and
to provide such documents as may be required to enable each Fund to receive
appropriate tax treatment under applicable tax laws and any applicable treaty
provisions. The Custodian, in performance of its duties under this Section,
shall be entitled to treat each Fund as a Delaware business trust which is
"registered investment company" under the laws of the United States, and it
shall be the duty of each Fund to inform the Custodian of any change in the
organization, domicile or, to the extent within the knowledge of the Fund, other
relevant facts concerning tax treatment of the Fund and further to inform the
Custodian if the Fund is or becomes the beneficiary of any special ruling or
treatment not applicable to the general nationality and category of entity of
which the Fund is a part under general laws and treaty provisions. The Custodian
shall be entitled to rely on any information supplied by the Fund. The Custodian
may engage reasonable professional advisors disclosed to the Fund by the
Custodian, which may include attorneys, accountants or financial institutions in
the regular business of investment administration and may rely upon advice
received therefrom.
4.12. LIABILITY OF CUSTODIAN.
Except as may arise from the Custodian's own negligence or willful misconduct or
the negligence or willful misconduct of a Sub-Custodian, the Custodian shall be
without liability to the Fund for any loss, liability, claim or expense
resulting from or caused by Country Risk (as such term is defined in Article 3
hereof), regardless of whether assets are maintained in the custody of a Foreign
Sub-Custodian or a Foreign Securities Depository, the Custodian shall be without
liability for any loss, damage, cost, expense, liability or claim resulting from
nationalization, expropriation, currency restrictions, or acts of war or
terrorism, or any other similar loss beyond the reasonable control of the
Custodian or the Sub-Custodian.
The Custodian shall be liable to the Fund on account of any actions or omissions
of any Foreign Sub-Custodian to the same extent as such Foreign Sub-Custodian
shall be liable to the Custodian.
4.13 USE OF TERM "FUND"; ASSETS AND LIABILITIES
All references in this Article 4 or in Article 3 of this Agreement to "Fund"
shall mean the Fund, or a Portfolio of the Fund, as the context requires or as
applicable.
The Custodian shall maintain separate and distinct records for each Portfolio
and the assets allocated solely with such Portfolio shall be held and accounted
for separately from the assets of the Fund associated solely with any other
Portfolio. The debts, liabilities, obligations and expenses incurred, contracted
for or otherwise existing with respect to a
<PAGE> 12
particular Portfolio shall be enforceable against the assets of such Portfolio
only, and not against the assets of the Fund generally or the assets of any
other Portfolio.
III. Except as specifically superseded or modified herein, the terms and
provisions of the Contract shall continue to apply with full force and effect.
In the event of any conflict between the terms of the Contract prior to this
Amendment and this Amendment. the terms of this Amendment shall prevail. If the
Custodian is delegated the responsibilities of Foreign Custody Manager pursuant
to the terms of Article 3 hereof, in the event of any conflict between the
provisions of Articles 3 and 4 hereof, the provisions of Article 3 shall
prevail.
<PAGE> 13
IN WITNESS WHEREOF, each of the parties has caused this Amendment to be
executed in its name and behalf by its duly authorized representative as of the
date first ABOVE written.
WITNESSED BY: STATE STREET BANK AND TRUST
COMPANY
/s/ MARC L. PARSONS
- --------------------------------- By: /s/ RONALD E. LOGUE
Marc L. Parsons ---------------------------------
Associate Counsel Name: Ronald E. Logue
Title: Executive Vice President
WITNESSED BY: AIM GROWTH SERIES
/s/ SAMUEL D. SIRKO By: /s/ CAROL F. RELIHAN
- --------------------------------- ---------------------------------
Name: Samuel D. SIRKO NAME: Carol F. Relihan
Title: Assistant SECRETARY Title: Vice President
<PAGE> 14
SCHEDULE A
STATE STREET
GLOBAL CUSTODY NETWORK
SUBCUSTODIANS AND NON-MANDATORY DEPOSITORIES
<TABLE>
<CAPTION>
COUNTRY SUBCUSTODIAN NON-MANDATORY DEPOSITORIES
<S> <C> <C>
Argentina Citibank, N.A. --
Australia Westpac Banking Corporation --
Austria Erste Bank der Oesterreichischen --
Sparkassen AG
Bahrain British Bank of the Middle East --
(as delegate of The Hongkong and
Shanghai Banking Corporation Limited)
Bangladesh Standard Chartered Bank --
Belgium Generale de Banque --
Bermuda The Bank of Bermuda Limited --
Bolivia Banco Boliviano Americano S.A. --
Botswana Barclays Bank of Botswana Limited --
Brazil Citibank. N.A. --
Bulgaria ING Bank N.V. --
Canada Canada Trustco Mortgage Company --
Chile Citibank, N.A. Deposito Central de Valores S.A.
People's Republic The Hongkong and Shanghai --
of China Banking Corporation Limited,
Shanghai and Shenzhen branches
Colombia Cititrust Colombia S.A. --
Sociedad Fiduciaria
</TABLE>
12/31/98 1
<PAGE> 15
SCHEDULE A
STATE STREET
GLOBAL CUSTODY NETWORK
SUBCUSTODIANS AND NON-MANDATORY DEPOSITORIES
<TABLE>
<CAPTION>
COUNTRY SUBCUSTODIAN NON-MANDATORY DEPOSITORIES
<S> <C> <C>
Costa Rica Banco BCT S.A. --
Croatia Privredna Banka Zagreb d.d --
CYPRUS Barclays Bank Plc. --
Cyprus Offshore Banking Unit
Czech Republic Ceskoslovenska Obchodni --
Banka, A.S.
Denmark Den Danske Bank
Ecuador Citibank, N.A. --
Egypt National Bank of Egypt --
Estonia Hansabank --
Finland Merita Bank Limited --
France Banque Paribas --
Germany Dresdner Bank AG --
Ghana Barclays Bank of Ghana Limited --
Greece National Bank of Greece S.A. The Bank of Greece,
System for Monitoring Transactions in
Securities in Book-Entry Form
Hong Kong Standard Chartered Bank --
Hungary Citibank Budapest Rt. --
</TABLE>
12/31/98 2
<PAGE> 16
SCHEDULE A
STATE STREET
GLOBAL CUSTODY NETWORK
SUBCUSTODIANS AND NON-MANDATORY DEPOSITORIES
<TABLE>
<CAPTION>
COUNTRY SUBCUSTODIAN NON-MANDATORY DEPOSITORIES
<S> <C> <C>
Iceland Icebank Ltd. --
India Deutsche Bank AG --
The Hongkong and Shanghai
Banking Corporation Limited
Indonesia Standard Chartered Bank --
Ireland Bank OF Ireland --
Israel Bank Hapoalim B.M. --
Italy Banque Paribas --
Ivory Coast Societe Generale de Banques --
en Cote d'Ivoire
Jamaica Scotiabank Jamaica Trust and Merchant --
Bank Ltd.
Japan The Daiwa Bank, Limited Japan Securities Depository
Center
The Fuji Bank, Limited
Jordan British Bank of the Middle East --
(as delegate of The Hongkong and
Shanghai Banking Corporation Limited)
Kenya Barclays Bank of Kenya Limited --
Republic of Korea The Hongkong and Shanghai Banking
Corporation Limited
Latvia JSC Hansabank-Latvija --
</TABLE>
12/31/98 3
<PAGE> 17
SCHEDULE A
STATE STREET
GLOBAL CUSTODY NETWORK
SUBCUSTODIANS AND NON-MANDATORY DEPOSITORIES
<TABLE>
<CAPTION>
COUNTRY SUBCUSTODIAN NON-MANDATORY DEPOSITORIES
<S> <C> <C>
Lebanon British Bank of the Middle East
(as delegate of The Hongkong and
Shanghai Banking Corporation Limited)
Lithuania Vilniaus Bankas AB --
Malaysia Standard Chartered Bank --
Malaysia Berhad
Mauritius The Hongkong and Shanghai --
Banking Corporation Limited
Mexico Citibank Mexico, S.A. --
Morocco Banque Commerciale du Maroc --
Namibia (via) Standard Bank of South Africa --
The Netherlands MeesPierson N.V. --
New Zealand ANZ Banking Group --
(New Zealand) Limited
Norway Christiania Bank og Kreditkasse --
Oman British Bank of the Middle East --
(as delegate of The Hongkong and
Shanghai Banking Corporation Limited)
Pakistan Deutsche Bank AG --
Peru Citibank, N.A. --
Philippines Standard Chartered Bank --
</TABLE>
12/31/98 4
<PAGE> 18
SCHEDULE A
STATE STREET
GLOBAL CUSTODY NETWORK
SUBCUSTODIANS AND NON-MANDATORY DEPOSITORIES
<TABLE>
<CAPTION>
COUNTRY SUBCUSTODIAN NON-MANDATORY DEPOSITORIES
<S> <C> <C>
POLAND Citibank (Poland) S.A. --
Bank Polska Kasa Opieki S.A.
Portugal Banco Comercial Portugues --
Romania ING Bank N.V. --
Russia Credit Suisse First Boston AO, Moscow --
(as delegate of Credit Suisse
First Boston, Zurich)
Singapore The Development Bank --
of Singapore Limited
Slovak Republic Ceskoslovenska Obchodna --
Banka, A.S.
Slovenia Bank Austria d.d. Ljubljana --
South Africa Standard Bank of South Africa Limited --
Spain Banco Santander, S.A. --
Sri Lanka The Hongkong and Shanghai --
Banking Corporation Limited
Swaziland Standard Bank Swaziland Limited --
Sweden Skandinaviska Enskilda Banken --
Switzerland UBS AG --
Taiwan - R.O.C. Central Trust of China --
Thailand Standard Chartered Bank --
</TABLE>
12/31/98 5
<PAGE> 19
SCHEDULE A
STATE STREET
GLOBAL CUSTODY NETWORK
SUBCUSTODIANS AND NON-MANDATORY DEPOSITORIES
<TABLE>
<CAPTION>
COUNTRY SUBCUSTODIAN NON-MANDATORY DEPOSITORIES
<S> <C> <C>
Trinidad & Tobago Republic Bank Limited --
Tunisia Banque Internationale Arabe de Tunisie --
Turkey Citibank, N.A. --
Ottoman Bank
Ukraine ING Bank, Ukraine --
United Kingdom State Street Bank and Trust Company, --
London Branch
Uruguay Citibank, N.A. --
Venezuela Citibank, N.A. --
Zambia Barclays Bank of Zambia Limited --
Zimbabwe Barclays Bank of Zimbabwe Limited --
</TABLE>
Euroclear (The Euroclear System)/State Street London Limited
CEDEL, S.A. (Cedel Bank, societe anonyme)/State Street London Limited
INTERSETTLE (for EASDAQ Securities)
12/31/98 6
<PAGE> 20
SCHEDULE B
STATE STREET
GLOBAL CUSTODY NETWORK
MANDATORY* DEPOSITORIES
<TABLE>
<CAPTION>
COUNTRY MANDATORY DEPOSITORIES
<S> <C>
Argentina Caja de Valores S.A.
Australia Austraclear Limited
Reserve Bank Information and
Transfer System
Oesterreichische Kontrollbank Ag
(Wertpapiersammelbank Division)
Austria
Caisse Interprofessionnelle de Depot et
de Virement de Titres S.A.
Belgium Banque Nationale De Belgique
Brazil Companhia Brasileira de Liquidacao e
Custodia (CBLC)
Bolsa de Valores de Rio de Janeiro
All SSB clients presently use CBLC
Central de Custodia e de Liquidacao Financeira
de Titulos
Bulgaria Central Depository AD
Bulgarian National Bank
Canada The Canadian Depository
for Securities Limited
People's Republic Shanghai Securities Central Clearing and
Of China Registration Corporation
Shenzhen Securities Central Clearing
Co., Ltd.
Costa Rica Central de Valores S.A. (CEVAL)
</TABLE>
* Mandatory depositories include entities for which use is mandatory as a matter
of law or effectively mandatory as a matter of market practice.
11/20/98 1
<PAGE> 21
SCHEDULE B
STATE STREET
GLOBAL CUSTODY NETWORK
MANDATORY* DEPOSITORIES
<TABLE>
<CAPTION>
COUNTRY MANDATORY DEPOSITORIES
<S> <C>
Croatia Ministry of Finance
National Bank of Croatia
Czech Republic Stredisko cennych papiru
Czech National Bank
Denmark Vaerdipapircentralen (the Danish
Securities Center)
Egypt Misr Company for Clearing, Settlement,
and Central Depository
Estonia Eesti Vaatpaberite Keskdepositoorium
Finland The Finnish Central Securities
Depository
France Societe Interprofessionnelle
pour la Compensation des
Valeurs Mobiliees (SICOVAM)
Germany Deutsche Borse Clearing AG
Greece The Central Securities Depository
(Apothetirion Titlon AE)
Hong Kong The Central Clearing and
Settlement System
Central Money Markets Unit
Hungary The Central Depository and Clearing
House (Budapest) Ltd. (KELER)
[Mandatory for Gov't Bonds only;
SSB does not use for other securities]
India The National Securities Depository Limited
</TABLE>
* Mandatory depositories include entities for which use is mandatory as a matter
of law or effectively mandatory as a matter of market practice.
11/20/98 2
<PAGE> 22
SCHEDULE B
STATE STREET
GLOBAL CUSTODY NETWORK
MANDATORY* DEPOSITORIES
<TABLE>
<CAPTION>
COUNTRY MANDATORY DEPOSITORIES
<S> <C>
Indonesia Bank Indonesia
Ireland Central Bank of Ireland
Securities Settlement Office
Israel The Tel Aviv Stock Exchange Clearing
House Ltd.
Bank of Israel
Italy Monte Titoli S.p.A.
Banca d'Italia
Ivory Coast Depositaire Central - Banque de Reglement
Jamaica The Jamaican Central Securities Depository
Japan Bank of Japan Net System
Kenya Central Bank of Kenya
Republic of Korea Korea Securities Depository Corporation
Latvia The Latvian Central Depository
Lebanon The Custodian and Clearing Center of
Financial Instruments for Lebanon
and the Middle East (MIDCLEAR) S.A.L.
The Central Bank of Lebanon
</TABLE>
* Mandatory depositories include entities for which use is mandatory as a matter
of law or effectively mandatory as a matter of market practice.
11/20/98 3
<PAGE> 23
SCHEDULE B
STATE STREET
GLOBAL CUSTODY NETWORK
MANDATORY* DEPOSITORIES
<TABLE>
<CAPTION>
COUNTRY MANDATORY DEPOSITORIES
<S> <C>
Lithuania The Central Securities Depository of Lithuania
Malaysia The Malaysian Central Depository Sdn. Bhd.
Bank Negara. Malaysia,
Scripless Securities Trading and Safekeeping
System
Mauritius The Central Depository & Settlement
Co. Ltd.
Mexico S.D. INDEVAL, S.A. de C.V.
(Instituto para el Deposito de Valores)
Morocco Maroclear
The Netherlands Nederlands Centraal Instituut voor
Giraal Effectenverkeer B.V. (NECIGEF)
De Nederlandsche Bank N.V.
New Zealand New Zealand Central Securities
Depository Limited
Norway Verdipapirsentralen (the Norwegian
Registry of Securities)
Oman Muscat Securities Market
Pakistan Central Depository Company of Pakistan Limited
PERU Caja de Valores y Liquidaciones S.A.
(CAVALI)
</TABLE>
* Mandatory depositories include entities for which use is mandatory as a matter
of law or effectively mandatory as a matter of market practice.
11/20/98 4
<PAGE> 24
SCHEDULE B
STATE STREET
GLOBAL CUSTODY NETWORK
MANDATORY* DEPOSITORIES
<TABLE>
<CAPTION>
COUNTRY MANDATORY DEPOSITORIES
<S> <C>
Philippines The Philippines Central Depository, Inc.
The Registry of Scripless Securities
(ROSS) of the Bureau of the Treasury
Poland The National Depository of Securities
(Krajowy Depozyt Papierow Wartosciowych)
Central Treasury Bills Registrar
Portugal Central de Valores; Mobiliarios (Central)
Romania National Securities Clearing, Settlement and
Depository Co.
Bucharest Stock Exchange Registry Division
Singapore The Central Depository (Pte)
Limited
Monetary Authority of Singapore
Slovak Republic Stredisko Cennych Papierov
National Bank of Slovakia
Slovenia Klrinsko Depotna Druzba d.d.
South Africa The Central Depository Limited
Spain Servicio de Compensacion y
Liquidacion de Valores, S.A.
Banco de Espana,
Central de Anotaciones en Cuenta
</TABLE>
* Mandatory depositories include entities for which use is mandatory as a matter
of law or effectively mandatory as a matter of market practice.
11/20/98 5
<PAGE> 25
SCHEDULE B
STATE STREET
GLOBAL CUSTODY NETWORK
MANDATORY* DEPOSITORIES
<TABLE>
<CAPTION>
COUNTRY MANDATORY DEPOSITORIES
<S> <C>
Sri Lanka Central Depository System
(Pvt) Limited
Sweden Vardepapperscentralen AB
(the Swedish Central Securities Depository)
Switzerland Schweizerische Effekten - Giro AG
Taiwan - R.O.C. The Taiwan Securities Central
Depository Co., Ltd.
Thailand Thailand Securities Depository
Company Limited
Tunisia Societe Tunisienne Interprofessionelle de
Compensation et de Depot de
Valeurs Mobilieres
Central Bank of Tunisia
Tunisian Treasury
Turkey Takas ve Saklama Bankasi A.S.
(TAKASBANK)
Central Bank of Turkey
Ukraine The National Bank of Ukraine
United Kingdom The Bank of England,
The Central Gilts Office and
The Central Moneymarkets Office
Uruguay Central Bank of Uruguay
</TABLE>
* Mandatory depositories include entities for which use is mandatory as a matter
of law or effectively mandatory as a matter of market practice.
11/20/98 6
<PAGE> 26
SCHEDULE B
STATE STREET
GLOBAL CUSTODY NETWORK
MANDATORY* DEPOSITORIES
<TABLE>
<CAPTION>
COUNTRY MANDATORY DEPOSITORIES
<S> <C>
Venezuela Central Bank of Venezuela
Zambia Lusaka Central Depository Limited
Bank of Zambia
</TABLE>
* Mandatory depositories include entities for which use is mandatory as a matter
of law or effectively mandatory as a matter of market practice.
11/20/98 7
<PAGE> 27
SCHEDULE C
MARKET INFORMATION
<TABLE>
<CAPTION>
PUBLICATION/TYPE OF INFORMATION BRIEF DESCRIPTION
- ------------------------------- -----------------
(Frequency)
<S> <C>
The Guide to Custody in World Markets An overview of safekeeping and settlement practices and
- ------------------------------------- procedures in each market in which State Street Bank and
(annually) Trust Company offers custodial services.
Global Custody Network Review Information relating to the operating history and structure of
- ----------------------------- depositories and Sub-Custodians located in the markets in
(annually) which State Street Bank and Trust Company offers custodial
services, including transnational depositories.
Global Legal Survey With respect to each market in which State Street Bank and
- ------------------- Trust Company offers custodial services, opinions relating to
(annually) whether local law restricts (i) access of a fund's independent
public accountants to books and records of a Foreign Sub-
Custodian or Foreign Securities System, (ii) the Fund's ability
to recover in the event of bankruptcy or insolvency of a
Foreign Sub-Custodian or Foreign Securities System, (iii) the
Fund's ability to recover in the event of a loss by a Foreign
Sub-Custodian or Foreign Securities System, and (iv) the
ability of a foreign investor to convert cash and cash
equivalents to U.S. dollars.
Subcustodian Agreements Copies of the subcustodian contracts State Street Bank and
- ----------------------- Trust Company has entered into with each subcustodian in the
(annually) markets in which State Street Bank and Trust Company offers
subcustody services to its US mutual fund clients.
Network Bulletins (weekly): Developments of interest to investors in the markets in which
State Street Bank and Trust Company offers custodial services.
Foreign Custody Advisories (as
necessary): With respect to markets in which State Street Bank and Trust
Company offers custodial services which exhibit special
custody risks, developments which may impact State Street's
ability to deliver expected levels of service.
</TABLE>
<PAGE> 1
EXHIBIT h(1)(a)
TRANSFER AGENCY AND SERVICE AGREEMENT
BETWEEN
AIM GROWTH SERIES
AND
A I M FUND SERVICES, INC.
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C> <C>
ARTICLE 1 TERMS OF APPOINTMENT; DUTIES OF THE TRANSFER AGENT..........1
ARTICLE 2 FEES AND EXPENSES...........................................2
ARTICLE 3 REPRESENTATIONS AND WARRANTIES OF THE TRANSFER AGENT........3
ARTICLE 4 REPRESENTATIONS AND WARRANTIES OF THE FUND..................3
ARTICLE 5 INDEMNIFICATION.............................................4
ARTICLE 6 COVENANTS OF THE FUND AND THE TRANSFER AGENT................5
ARTICLE 7 TERMINATION OF AGREEMENT....................................6
ARTICLE 8 ADDITIONAL FUNDS............................................6
ARTICLE 9 ASSIGNMENT..................................................6
ARTICLE 10 AMENDMENT...................................................7
ARTICLE 11 TEXAS LAW TO APPLY..........................................7
ARTICLE 12 MERGER OF AGREEMENT.........................................7
ARTICLE 13 COUNTERPARTS................................................7
ARTICLE 14 LIMITATION OF SHAREHOLDER LIABILITY.........................7
</TABLE>
<PAGE> 3
TRANSFER AGENCY AND SERVICE AGREEMENT
AGREEMENT made as of the eighth day of September, 1998, by and between
AIM GROWTH SERIES, a Delaware business trust, having its principal office and
place of business at 11 Greenway Plaza, Suite 100, Houston, Texas 77046 (the
"Fund"), and A I M Fund Services, Inc., a Delaware corporation having its
principal office and place of business at 11 Greenway Plaza, Suite 100, Houston,
Texas 77046 (the "Transfer Agent").
WHEREAS, the Transfer Agent is registered as such with the Securities
and Exchange Commission (the "SEC"); and
WHEREAS, the Fund is authorized to issue shares in separate series and
classes, with each such series representing interests in a separate portfolio of
securities and other assets and each such class having different distribution
arrangements; and
WHEREAS, the Fund on behalf of each portfolio thereof (the
"Portfolios") desires to appoint the Transfer Agent as its transfer agent, and
agent in connection with certain other activities, with respect to the
Portfolios, and the Transfer Agent desires to accept such appointment;
NOW, THEREFORE, in consideration of the mutual covenants herein
contained, the parties hereto agree as follows:
ARTICLE 1
TERMS OF APPOINTMENT; DUTIES OF THE TRANSFER AGENT
1.01 Subject to the terms and conditions set forth in this Agreement,
the Fund hereby employs and appoints the Transfer Agent to act as, and the
Transfer Agent agrees to act as, its transfer agent for the authorized and
issued shares of beneficial interest of the Fund representing interests of each
of the respective Portfolios ("Shares"), dividend disbursing agent, and agent in
connection with any accumulation or similar plans provided to shareholders of
each of the Portfolios (the "Shareholders"), including without limitation any
periodic investment plan or periodic withdrawal program, as provided in the
currently effective prospectus and statement of additional information (the
"Prospectus") of the Fund on behalf of the Portfolios.
1.02 The Transfer Agent agrees that it will perform the following
services:
(a) The Transfer Agent shall, in accordance with procedures established
from time to time by agreement between the Fund on behalf of each of the
Portfolios, as applicable, and the Transfer Agent:
(i) receive for acceptance, orders for the purchase of
Shares, and promptly deliver payment and appropriate
documentation thereof to the Custodian of the Fund
authorized pursuant to the Agreement and Declaration
of Trust and Bylaws of the Fund (the "Custodian");
(ii) pursuant to purchase orders, issue the appropriate
number of Shares and hold such Shares in the
appropriate Shareholder account;
1
<PAGE> 4
(iii) receive for acceptance redemption requests and
redemption directions and deliver the appropriate
documentation thereof to the Custodian;
(iv) at the appropriate time as and when it receives
monies paid to it by the Custodian with respect to
any redemption, pay over or cause to be paid over in
the appropriate manner such monies as instructed by
the Fund;
(v) effect transfers of Shares by the registered owners
thereof upon receipt of appropriate instructions;
(vi) prepare and transmit payments for dividends and
distributions declared by the Fund on behalf of the
Shares;
(vii) maintain records of account for and advise the Fund
and its Shareholders as to the foregoing; and
(viii) record the issuance of Shares of the Fund and
maintain pursuant to SEC Rule 17Ad-10(e) a record of
the total number of Shares which are authorized,
based upon data provided to it by the Fund, and
issued and outstanding.
The Transfer Agent shall also provide the Fund on a regular basis with
the total number of Shares which are authorized and issued and outstanding and
shall have no obligation, when recording the issuance of Shares, to monitor the
issuance of such Shares or to take cognizance of any laws relating to the issue
or sale of such Shares, which function shall be the sole responsibility of the
Fund.
(b) In addition to the services set forth in the above paragraph (a),
the Transfer Agent shall perform the customary services of a transfer agent,
including but not limited to: maintaining all Shareholder accounts, mailing
Shareholder reports and prospectuses to current Shareholders, preparing and
mailing confirmation forms and statements of accounts to Shareholders for all
purchases and redemptions of Shares and other confirmable transactions in
Shareholder accounts, preparing and mailing activity statements for
Shareholders, and providing Shareholder account information.
(c) Procedures as to who shall provide certain of these services in
Article 1 may be established from time to time by agreement between the Fund on
behalf of each Portfolio and the Transfer Agent. The Transfer Agent may at times
perform only a portion of these services and the Fund or its agent may perform
these services on the Fund's behalf.
ARTICLE 2
FEES AND EXPENSES
2.01 For performance by the Transfer Agent pursuant to this Agreement,
the Fund agrees on behalf of each of the Portfolios to pay the Transfer Agent
fees as set out in the initial fee schedule attached hereto. Such fees and
out-of-pocket expenses and advances identified under Section 2.02 below may be
changed from time to time subject to mutual written agreement between the Fund
and the Transfer Agent.
2
<PAGE> 5
2.02 In addition to the fee paid under Section 2.01 above, the Fund
agrees to reimburse the Transfer Agent for out-of-pocket expenses or advances
incurred by the Transfer Agent for the items set out in the fee schedule
attached hereto. In addition, any other expenses incurred by the Transfer Agent
at the request or with the consent of the Fund, will be reimbursed by the Fund
on behalf of the applicable Shares.
2.03 The Fund agrees on behalf of each of the Portfolios to pay all
fees and reimbursable expenses following the mailing of the respective billing
notice. Postage for mailing of dividends, proxies, Fund reports and other
mailings to all Shareholder accounts shall be advanced to the Transfer Agent by
the Fund at least seven (7) days prior to the mailing date of such materials.
ARTICLE 3
REPRESENTATIONS AND WARRANTIES OF THE TRANSFER AGENT
The Transfer Agent represents and warrants to the Fund that:
3.01 It is a corporation duly organized and existing and in good
standing under the laws of the state of Delaware.
3.02 It is duly qualified to carry on its business in Delaware and in
Texas.
3.03 It is empowered under applicable laws and by its Charter and
By-Laws to enter into and perform this Agreement.
3.04 All requisite corporate proceedings have been taken to authorize
it to enter into and perform this Agreement.
3.05 It has and will continue to have access to the necessary
facilities, equipment and personnel to perform its duties and obligations under
this Agreement.
3.06 It is registered as a Transfer Agent as required by the federal
securities laws.
3.07 This Agreement is a legal, valid and binding obligation to it.
ARTICLE 4
REPRESENTATIONS AND WARRANTIES OF THE FUND
The Fund represents and warrants to the Transfer Agent that:
4.01 It is a business trust duly organized and existing and in good
standing under the laws of Delaware.
4.02 It is empowered under applicable laws and by its Agreement and
Declaration of Trust and Bylaws to enter into and perform this Agreement.
4.03 All corporate proceedings required by said Agreement and
Declaration of Trust and Bylaws have been taken to authorize it to enter into
and perform this Agreement.
3
<PAGE> 6
4.04 It is an open-end, diversified management investment company
registered under the Investment Company Act of 1940, as amended.
4.05 A registration statement under the Securities Act of 1933, as
amended on behalf of each of the Portfolios is currently effective and will
remain effective, with respect to all Shares of the Fund being offered for sale.
ARTICLE 5
INDEMNIFICATION
5.01 The Transfer Agent shall not be responsible for, and the Fund
shall on behalf of the applicable Portfolio, indemnify and hold the Transfer
Agent harmless from and against, any and all losses, damages, costs, charges,
counsel fees, payments, expenses and liability arising out of or attributable
to:
(a) all actions of the Transfer Agent or its agents or subcontractors
required to be taken pursuant to this Agreement, provided that such actions are
taken in good faith and without negligence or willful misconduct;
(b) the Fund's lack of good faith, negligence or willful misconduct
which arise out of the breach of any representation or warranty of the Fund
hereunder;
(c) the reliance on or use by the Transfer Agent or its agents or
subcontractors of information, records and documents or services which (I) are
received or relied upon by the Transfer Agent or its agents or subcontractors
and/or furnished to it or performed by on behalf of the Fund, and (ii) have been
prepared, maintained and/or performed by the Fund or any other person or firm on
behalf of the Fund; provided such actions are taken in good faith and without
negligence or willful misconduct;
(d) the reliance on, or the carrying out by the Transfer Agent or its
agents or subcontractors of any instructions or requests of the Fund on behalf
of the applicable Portfolio; provided such actions are taken in good faith and
without negligence or willful misconduct; or
(e) the offer or sale of Shares in violation of any requirement under
the federal securities laws or regulations or the securities laws or regulations
of any state that such Shares be registered in such state or in violation of any
stop order or other determination or ruling by any federal agency or any state
with respect to the offer or sale of such Shares in such state.
5.02 The Transfer Agent shall indemnify and hold the Fund harmless from
and against any and all losses, damages, costs, charges, counsel fees, payments,
expenses and liability arising out of or attributable to any action or failure
or omission to act by the Transfer Agent as result of the Transfer Agent's lack
of good faith, negligence or willful misconduct.
5.03 At any time the Transfer Agent may apply to any officer of the
Fund for instructions, and may consult with legal counsel with respect to any
matter arising in connection with the services to be performed by the Transfer
Agent under this Agreement, and the Transfer Agent and its agents or
subcontractors shall not be liable to and shall be indemnified by the Fund on
behalf of the applicable Portfolio for any action taken or omitted by it in
reliance upon such instructions or upon the opinion of such counsel. The
Transfer Agent shall be protected and indemnified in acting upon
4
<PAGE> 7
any paper or document furnished by or on behalf of the Fund, reasonably believed
to be genuine and to have been signed by the proper person or persons, or upon
any instruction, information, data, records or documents provided to the
Transfer Agent or its agents or subcontractors by machine readable input, telex,
CRT data entry or other similar means authorized by the Fund, and shall not be
held to have notice of any change of authority of any person, until receipt of
written notice thereof from the Fund.
5.04 In the event either party is unable to perform its obligations
under the terms of this Agreement because of acts of God, strikes, equipment or
transmission failure or damage reasonably beyond its control, or other causes
reasonably beyond its control, such party shall not be liable for damages to the
other for any damages resulting from such failure to perform or otherwise from
such causes.
5.05 Neither party to this Agreement shall be liable to the other party
for consequential damages under any provision of this Agreement or for any
consequential damages arising out of any act or failure to act hereunder.
5.06 In order that the indemnification provisions contained in this
Article 5 shall apply, upon the assertion of a claim for which either party may
be required to indemnify the other, the party seeking indemnification shall
promptly notify the other party of such assertion, and shall keep the other
party advised with respect to all developments concerning such claim. The party
who may be required to indemnify shall have the option to participate with the
party seeking indemnification in the defense of such claim. The party seeking
indemnification shall in no case confess any claim or make any compromise in any
case in which the other party may be required to indemnify it except with the
other party's prior written consent.
ARTICLE 6
COVENANTS OF THE FUND AND THE TRANSFER AGENT
6.01 The Fund shall, upon request, on behalf of each of the Portfolios
promptly furnish to the Transfer Agent the following:
(a) a certified copy of the resolution of the Board of Trustees of the
Fund authorizing the appointment of the Transfer Agent and the execution and
delivery of this Agreement; and
(b) a copy of the Agreement and Declaration of Trust and Bylaws of the
Fund and all amendments thereto.
6.02 The Transfer Agent shall keep records relating to the services to
be performed hereunder, in the form and manner as it may deem advisable. To the
extent required by Section 31 of the Investment Company Act of 1940, as amended,
and the Rules thereunder, the Transfer Agent agrees that all such records
prepared or maintained by the Transfer Agent relating to the services to be
performed by the Transfer Agent hereunder are the property of the Fund and will
be preserved, maintained and made available in accordance with such Section and
Rules, and will be surrendered promptly to the Fund on and in accordance with
its request.
6.03 The Transfer Agent and the Fund agree that all books, records,
information and data pertaining to the business of the other party which are
exchanged or received pursuant to the
5
<PAGE> 8
negotiation or the carrying out of this Agreement shall remain confidential, and
shall not be voluntarily disclosed to any other person, except as may be
required by law.
6.04 In case of any requests or demands for the inspection of the
Shareholder records of the Fund, the Transfer Agent will endeavor to notify the
Fund and to secure instructions from an authorized officer of the Fund as to
such inspection. The Transfer Agent reserves the right, however, to exhibit the
Shareholder records to any person whenever it is advised by its counsel that it
may be held liable for the failure to exhibit the Shareholder records to such
person.
ARTICLE 7
TERMINATION OF AGREEMENT
7.01 This Agreement may be terminated by either party upon sixty (60)
days written notice to the other.
7.02 Should the Fund exercise its right to terminate this Agreement,
all out-of-pocket expenses associated with the movement of records and material
will be borne by the Fund on behalf of the applicable Portfolios. Additionally,
the Transfer Agent reserves the right to charge the Fund or the applicable
Portfolios for any other reasonable expenses associated with such termination,
not to exceed a charge equivalent to the average of three (3) months' fees;
provided, however, the Transfer Agent shall not be entitled to such expenses in
the event of the merger and/or liquidation of the applicable Portfolios.
ARTICLE 8
ADDITIONAL FUNDS
8.01 In the event that the Fund establishes one or more series of
Shares in addition to the Portfolios with respect to which it desires to have
the Transfer Agent render services as transfer agent under the terms hereof, it
shall so notify the Transfer Agent in writing, and if the Transfer Agent agrees
in writing to provide such services, such series of Shares shall become a
Portfolio hereunder.
ARTICLE 9
ASSIGNMENT
9.01 Except as provided in Section 9.03 below, neither this Agreement
nor any rights or obligations hereunder may be assigned by either party without
the written consent of the other party.
9.02 This Agreement shall inure to the benefit of and be binding upon
the parties and their respective permitted successors and assigns.
9.03 The Transfer Agent may, without further consent on the part of the
Fund, subcontract for the performance hereof with any entity which is duly
registered as a transfer agent pursuant to Section 17A(c)(1) of the Securities
Exchange Act of 1934 as amended ("Section 17A(c)(1)"); provided, however, that
the Transfer Agent shall be as fully responsible to the Fund for the acts and
omissions of any subcontractor as it is for its own acts and omissions.
6
<PAGE> 9
ARTICLE 10
AMENDMENT
10.01 This Agreement may be amended or modified by a written agreement
executed by both parties and authorized or approved by a resolution of the Board
of Trustees of the Fund.
ARTICLE 11
TEXAS LAW TO APPLY
11.01 This Agreement shall be construed and the provisions thereof
interpreted under and in accordance with the laws of the State of Texas.
ARTICLE 12
MERGER OF AGREEMENT
12.01 This Agreement constitutes the entire agreement between the
parties hereto and supersedes any prior agreement with respect to the subject
matter hereof whether oral or written.
ARTICLE 13
COUNTERPARTS
13.01 This Agreement may be executed by the parties hereto on any
number of counterparts, and all of said counterparts taken together shall be
deemed to constitute one and the same instrument.
ARTICLE 14
LIMITATION OF SHAREHOLDER LIABILITY
14.01 Notice is hereby given that this Agreement is being executed by
the Fund by a duly authorized officer thereof acting as such and not
individually. The obligations of this Agreement are not binding upon any of the
Trustees, officers, shareholders or the investment advisor of the Fund
individually but are binding only upon the assets and property belonging to the
Fund, on its own behalf or on behalf of a Portfolio, for the benefit of which
the Trustees or officers have caused this Agreement to be executed.
7
<PAGE> 10
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed in their names and on their behalf by and through their duly authorized
officers, as of the day and year first above written.
AIM GROWTH SERIES
By:
/s/ ROBERT H. GRAHAM
-----------------------------
President
ATTEST:
/s/ SAMUEL D. SIRKO
- --------------------------------
Assistant Secretary
A I M FUND SERVICES, INC.
By:
/s/ JOHN CALDWELL
-----------------------------
President
ATTEST:
/s/ SAMUEL D. SIRKO
- --------------------------------
Assistant Secretary
8
<PAGE> 11
FEE SCHEDULE
1. For performance by the Transfer Agent pursuant to this Agreement, the Fund
agrees on behalf of each of the Portfolios to pay the Transfer Agent an
annualized fee for shareholder accounts that are open during any monthly
period as set forth below, and an annualized fee of $.70 per shareholder
account that is closed during any monthly period. Both fees shall be billed
by the Transfer Agent monthly in arrears on a prorated basis of 1/12 of the
annualized fee for all such accounts.
<TABLE>
<CAPTION>
Per Account Fee
Fund Type Annualized
--------- ---------------
<S> <C>
Class A Annual/Semi-Annual Dividends $24.85*
Class A Quarterly & Monthly Dividend 24.85*
Class A Daily Accrual 24.85*
Class B 24.85*
Advisor Class 24.85*
</TABLE>
* This fee includes all out of pocket expenses, the annualized credit,
Consumer Price Index increase, Balance Credit and Remote Services Fee
discussed below. Currently, therefore, paragraphs 2,3, and 5 below do not
apply. Paragraph 4 does not apply for 1998, however the IRA Annual
Maintenance Fee will be charged beginning in 1999.
2. The Transfer Agent shall provide the various mutual funds that are advised
by A I M Advisors, Inc. or its affiliates and distributed by A I M
Distributors, Inc. (the "AIM Funds") with an annualized credit to the
monthly billings of (a) $1.50 for each open account in excess of 100,000
open AIM Funds Accounts up to and including 125,000 open AIM Funds
Accounts; (b) $1.75 for each open account in excess of 125,000 open AIM
Funds Accounts up to and including 150,000 open AIM Funds Accounts; (c)
$2.00 for each open AIM Funds Account in excess of 150,000 open AIM Funds
Accounts up to and including 200,000 open AIM Funds Accounts; (d) $2.25 for
each open AIM Funds Account in excess of 200,000 open AIM Funds Accounts up
to and including 500,000 open AIM Funds Accounts; (e) $2.50 for each open
AIM Funds Account in excess of 500,000 open AIM Funds Accounts up to and
including 1,000,000 open AIM Funds Accounts; and (f) $3.00 for each open
AIM Funds Account in excess of 1,000,000 open AIM Funds Accounts.
3. In addition, beginning on the anniversary date of the execution of the
Remote Services Agreement with The Shareholder Services Group, Inc., and on
each subsequent anniversary date, the per account fees shall each be
increased by a percentage amount equal to the percentage increase in the
then current Consumer Price Index (all urban consumers) or its successor
index, though in no event shall such increase be greater than a 7% increase
over the previous fees.
4. Other Fees
<TABLE>
<S> <C>
IRA Annual Maintenance Fee $10 per IRA account per year (paid by investor
per tax I.D. number).
</TABLE>
9
<PAGE> 12
Balance Credit The total fees due to the Transfer Agent from all
funds affiliated with the Fund shall be reduced
by an amount equal to one half of investment
income earned by the Transfer Agent on the DDA
balances of the disbursement accounts for those
funds.
Remote Services Fee $3.60 per open account per year, payable monthly
and $1.80 per closed account per year, payable
monthly.
5. OUT-OF-POCKET EXPENSES
The Fund shall reimburse the Transfer Agent monthly for applicable
out-of-pocket expenses, including, but not limited to the following items:
- Microfiche/microfilm production & equipment
- Magnetic media tapes and freight
- Printing costs, including, without limitation, certificates,
envelopes, checks, stationery, confirmations and statements
- Postage (bulk, pre-sort, ZIP+4, bar coding, first class) direct pass
through to the Fund
- Due diligence mailings
- Telephone and telecommunication costs, including all lease,
maintenance and line costs
- Ad hoc reports
- Proxy solicitations, mailings and tabulations
- Daily & Distribution advice mailings
- Shipping, Certified and Overnight mail and insurance
- Year-end form production and mailings
- Terminals, communication lines, printers and other equipment and any
expenses incurred in connection with such terminals and lines
- Duplicating services
- Courier services
- Banking charges, including without limitation incoming and outgoing
wire charges @ $8.00 per wire
- Rendering fees as billed
- Federal Reserve charges for check clearance
- Record retention, retrieval and destruction costs, including, but not
limited to exit fees charged by third party record keeping vendors
- Third party audit reviews
- All client specific Systems enhancements will be at the Funds' cost.
- Certificate Insurance
- Such other miscellaneous expenses reasonably incurred by the Transfer
Agent in performing its duties and responsibilities under this
Agreement
- Check writing fee of $.75 per check redemption.
The Fund agrees that postage and mailing expenses will be paid on the day
of or prior to mailing. In addition, the Fund will promptly reimburse the
Transfer Agent for any other unscheduled expenses incurred by the Transfer
Agent whenever the Fund and the Transfer Agent mutually agree that such
expenses are not otherwise properly borne by the Transfer Agent as part of
its duties and obligations under the Agreement.
10
<PAGE> 1
EXHIBIT h(1)(b)
AMENDMENT NO. 1
TRANSFER AGENCY AND SERVICE AGREEMENT
The Transfer Agency and Service Agreement (the "Agreement"), dated as
of September 8, 1998, by and between AIM Growth Series, a Delaware business
trust, and A I M Fund Services, Inc., a Delaware corporation, is hereby amended
as follows (terms used herein but not otherwise defined herein have the meaning
ascribed them in the Agreement):
1) Section 1. of the Fee Schedule to the Agreement is hereby deleted in
its entirety and replaced with the following:
"1. For performance by the Transfer Agent pursuant to this
Agreement, the Fund agrees on behalf of each of the Portfolios to pay the
Transfer Agent an annualized fee for shareholder accounts that are open
during any monthly period as set forth below, and an annualized fee of $.70
per shareholder account that is closed during any monthly period. Both fees
shall be billed by the Transfer Agent monthly in arrears on a prorated
basis of 1/12 of the annualized fee for all such accounts.
Per Account Fee
Fund Type Annualized
- --------- ---------------
Class A Annual/Semi-Annual Dividends $24.85*
Class A Quarterly & Monthly Dividend 24.85*
Class A Daily Accrual 24.85*
Class B 24.85*
Class C 24.85*
Advisor Class 24.85*
* This fee includes all out of pocket expenses, the annualized
credit, Consumer Price Index increase, Balance Credit and Remote Services
Fee discussed below. Currently, therefore, paragraphs 2,3, and 5 below do
not apply. Paragraph 4 does not apply for 1998, however the IRA Annual
Maintenance Fee will be charged beginning in 1999."
All other terms and provisions of the Agreement not amended herein shall
remain in full force and effect.
Dated: , 1999
---------------------
AIM GROWTH SERIES
Attest: By:
------------------- -----------------------------------
Assistant Secretary Robert H. Graham
President
(SEAL)
A I M FUND SERVICES, INC.
Attest: By:
------------------- ----------------------------------
Assistant Secretary John Caldwell
President
(SEAL)
<PAGE> 1
EXHIBIT (h)(2)(e)
AMENDMENT NUMBER 4 TO THE REMOTE
ACCESS AND RELATED SERVICES AGREEMENT
THIS AMENDMENT, dated as of June 30, 1998 is made to the Remote Access
and Related Services Agreement dated December 23, 1994, as amended (the
"Agreement") between each registered investment company listed on Exhibit 1 of
the Agreement (the "Fund") and First Data Investor Services Group, Inc,
("FDISG").
WITNESSETH
WHEREAS, the Fund and FDISG desire to further amend the Agreement to
reflect certain changes thereto.
NOW THEREFORE, in consideration of the mutual covenants contained
herein, the parties agree that as of the date first referenced above, the
Agreement shall be amended as follows:
1. Section 14(a) of the Agreement (as amended by Amendment Number 3) is
hereby deleted in its entirety and replaced with the following new Section
14(a):
"(a) This Agreement which became effective as of December 23, 1994 is
hereby extended and shall continue through December 31, 2002 (the
"Initial Term"). Upon the expiration of the Initial Term, this
Agreement shall automatically renew for successive terms of one
(1) year ("Renewal Terms") each, unless the Fund or FDISG
provides written notice to the other of its intent not to renew.
Such notice must be received not less than one-hundred and eighty
(180) days prior to the expiration of the Initial Term or the
then current Renewal Term."
2. Effective January 1, 1999, Section I "Shareholder Account Fees" of
Schedule C "Fee Schedule" (as amended by Amendment Number 3) is amended by
deleting Section I in its entirety and adding the following new Section I:
"I. SHAREHOLDER ACCOUNT FEES. The Fund shall pay the following
fees:
For the period beginning on January 1, 1999, and continuing through
December 31, 2002, the Fund shall pay FDISG an annualized fee for
shareholder accounts open during any monthly period ("Open Account
Fee") as follows:
<TABLE>
<CAPTION>
Account Volume Fee per shareholder account
-------------- ---------------------------
<S> <C> <C>
1-1.5 million $3.50
1.5-3 million $2.40
3-4 million $2.00
4-5 million $1.90
Exceeding 5 million $1.80
</TABLE>
<PAGE> 2
The Fund also shall pay FDISG Group an annualized fee of $1.60 per
shareholder account that is closed during any monthly period (Closed
Account Fee")(The Open Account Fees and Closed Account Fees hereafter
collectively referred to as "Shareholder Account Fees"). The
Shareholder Account Fees shall be billed by FDISG monthly in arrears on
a prorated basis of 1/12 of the annualized fee, for all such accounts.
In addition, on January 1 of the years 2001 and 2002 the Shareholder
Account fees may be increased by FDISG in an amount equal to the lesser
of (i) the cumulative percentage increase in the Consumer Price Index
for all Urban Consumers (CPI-U) U.S. City Average, All Items
(unadjusted = (1982-84 + 100). published by the U.S. Department of
Labor, or (ii) seven percent (7%) of the Shareholder Account Fees
charged by FDISG to the Fund for the preceding twelve (12) month
period.
In return for the Shareholder Account Fees, FDISG agrees to provide the
following to the Fund:
o Remote Access to FDISG's FSR System
o License for 512 IMPRESS Plus seats. Includes six weeks of
technical training (Completed)
o Conversion of the GT Global Funds into the AIM Family of Funds.
Conversion estimated at 4500 hours of systems development
o License for up to 15 copies of FDISG's ACE+ (Automate Control
Environment) software as further defined in Schedule H
o Dedicated Programming Support equivalent to 1 Systems Manager, 4
Programmers, and 2 Business Systems Analysts
o Separate FSR processing cycle
o Implementation of a Separate FSR processing cycle by September
15, 1997, as more fully described in the attached Exhibit 3 of
this Schedule C (Completed)
o Implementation of the core TA system functionality identified in
Exhibit 1 of this Schedule C (Completed)
o Implementation of IWT Release 5.x functionality as identified in
Exhibit 2 of this Schedule C (Completed)
o Continued use of FDISG's Price/Rate Transmission (PRAT)
application. The PRAT Application will accept prices and dividend
rates from the Fund Accounting Department of the Fund
electronically and post them to the FDISG Pricing System. The
PRAT application will run interconnected via Local Area Network
hardware and software."
The Agreement, as previously amended and as amended by this Amendment,
("Modified Agreement") constitutes the entire agreement between the parties with
respect to the subject matter hereof. The Modified Agreement supersedes all
prior and contemporaneous agreements between the parties in connection with the
subject matter hereof. No officer, employee, servant
<PAGE> 3
or other agent of either party is authorized to make any representation,
warranty, or other promises not expressly contained herein with respect to the
subject matter hereof.
IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be
executed by their duly authorized officers, as of the day and year first above
written.
On behalf of the Funds and respective Portfolios and Classes set forth in
Exhibit 1 of the Agreement, as amended and as may be amended in the future from
time to time.
By: /s/ [ILLEGIBLE]
--------------------------------------
Title: AIM Fund Services, Inc.
-----------------------------------
FIRST DATA INVESTOR SERVICES GROUP, INC
By: /s/ [ILLEGIBLE]
--------------------------------------
Title: Executive VP
-----------------------------------
<PAGE> 1
EXHIBIT (h)(2)(f)
AMENDMENT NUMBER 5 TO THE REMOTE
ACCESS AND RELATED SERVICES AGREEMENT
THIS AMENDMENT, dated as of July 1, 1998 is made to the Remote Access
and Related Services Agreement dated December 23, 1994, as amended (the
"Agreement") between each registered investment company listed on Exhibit 1 of
the Agreement (the "Fund") and First Data Investor Services Group, Inc.
("FDISG").
WITNESSETH
WHEREAS, the Fund and FDISG desire to further amend the Agreement to
reflect certain changes thereto.
NOW THEREFORE, in consideration of the mutual covenants contained
herein, the parties agree that as of the date first referenced above, the
Agreement shall be amended as follows:
1. Exhibit 1 of the Agreement is hereby deleted and replaced with the
Attached revised Exhibit 1.
2. Section III "Additional Fees" of Schedule C "Fee Schedule" is hereby
amended to add the following new subsection h:
"h. Fees for IMPRESS Plus COLD:
(i) IMPRESS Plus COLD Software License Fees - The Fund shall pay an
initial license fee of $302,469 (the "License Fee) based on 512
IMPRESS Plus COLD seats licensed, which includes the use of the
INSCI Software. The initial License Fee shall be financed over a
period of 36 months and be payable monthly in arrears in amounts of
$8,401.66. Thereafter, the then current monthly License Fee
payments shall continue so long as the Fund continues to license
and use the IMPRESS Plus COLD Software. License Fee payments shall
commence on the earlier of a) first production usage of IMPRESS
Plus COLD software or b) September 1, 1998.
(ii) IMPRESS Plus Software Usage Fees. In addition to the License
Fee set forth above, the Fund shall pay a monthly usage fee of
$9,728.00 (the "Usage Fee") based on 512 IMPRESS Plus COLD seats
licensed, which includes the use of the INSCI Software. The Usage
Fee shall commence on the earlier of a) first production usage of
IMPRESS Plus COLD software or b) September 1, 1998.
(iii) IMPRESS Plus COLD Installation Fees. - Thirty (30) days
following the execution of Amendment Number 4 to the Agreement and
receipt of an invoice, the Fund shall pay to FDISG one-time
installation fee of $140,000. Installation
<PAGE> 2
covers 3 line data application and 1 Intelligent Data Stream
application. Installation activities include:
o Hardware installation at FDISG site
o IMPRESS Plus COLD application installation
o IMPRESS Plus COLD third party software installation
o Network Design Assistance
o Project Management
o Post Installation Support
(iv) Additional IMPRESS Plus COLD Fees:
o One-time fee for each additional Line Data Application - $10,000
o One-time fee for each additional Intelligent Data Stream
Application - $20,000
o Application Enhancements - $150/hr
(v) Maintenance and Support for IMPRESS Plus COLD includes items
listed in Section III.b above and the following:
o Report conversion to Express Delivery/IMPRESS Plus COLD
o Hardware support and maintenance
(v) IMPRESS Plus COLD License and Usage and IMPRESS Plus COLD
Installation Fees do not include the following:
o Hardware
o Network and Server Software not listed in Exhibit 1 of
Schedule G
o Customization or application integration
o Support for IMPRESS Plus COLD applications customized or built
by the Fund (see Section 3 of Exhibit 3 of Schedule G)
o Installation, Integration and On-going Support of hardware,
network, and software components not included in Schedule G
o Travel Expenses for install and support staff for on-site
visits (billed separately per Schedule D)
o Application Source Code
(vi) IMPRESS Plus COLD Hardware and Network Fees:
<TABLE>
<CAPTION>
One-time* Monthly Support Fee*
--------- --------------------
(Due Upon Execution)
<S> <C> <C>
Hardware $308,729.52 $3276.27
</TABLE>
* Fee is subject to change based on actual vendor costs"
<PAGE> 3
3. Section 1.3 of Schedule G is amended by adding the following:
"Notwithstanding the foregoing provisions of this Section 1.3 to the
contrary, FDISG shall install and maintain the equipment associated
with FDISG's IMPRESS Plus COLD product set forth in Exhibit 2.3 of this
Schedule G at its facility for the fees set forth in Section III.h. of
Schedule C. At the expense of the Fund, upon termination of the
Agreement or at the request of the Funds FDISG shall deliver to the
Fund such equipment."
4. Exhibit 1 of Schedule G is hereby amended as follows:
(a) Section 1.1 is amended by adding "IMPRESS Plus COLD Release 6.0" to
the list of IMPRESS Plus software products.
(b) Section 2.1 "FDISG Provided Third Party Software" is amended by
adding the following new section 2.1.3:
"2.1.3 INSCI Software. The following Third Party Software is
licensed directly to the Fund by FDISG subject to the terms and
conditions set forth in this Agreement:
Advanced COINSERV Software w/Hierarchical Storage Mgr.
WINCOINS Software
Vector Forms Software
Jukebox Driver Software, Two, 12" Drives
Metacode Server License
CDP Metacode Viewer, 300 Concurrent Users
Metacode Desktop & Converter
Operating Kit (Includes Dial-In for Trouble Shooting)"
5. Exhibit 1.1 of Schedule G "Specifications" is hereby amended to add the
IMPRESS Plus COLD Specifications attached hereto as Exhibit 1.1a of Schedule G.
The Agreement, as previously amended and as amended by this Amendment,
("Modified Agreement") constitutes the entire agreement between the parties with
respect to the subject matter hereof. The Modified Agreement supersedes all
prior and contemporaneous agreements between the parties in connection with the
subject matter hereof. No officer, employee, servant or other agent of either
party is authorized to make any representation, warranty, or other promises not
expressly contained herein with respect to the subject matter hereof.
<PAGE> 4
IN WITNESS WHEREOF, the parties hereto have caused this Amendment to
be executed by their duly authorized officers, as of the day and year first
above written.
On behalf of the Funds and respective Portfolios and Classes set forth in
Exhibit 1 attached hereto as may be amended from time to time.
By: /s/ [ILLEGIBLE]
-----------------------------------
Title: Senior Vice President
--------------------------------
FMT DATA INVESTOR SERVICES GROUP, INC.
By: /s/ [ILLEGIBLE]
-----------------------------------
Title: Executive VP
--------------------------------
<PAGE> 5
EXHIBIT 1
List of Funds
<TABLE>
<CAPTION>
Fund# Fund Name
<S> <C>
1 AIM WEINGARTEN FUND - CLASS A
2 AIM CONSTELLATION FUND - CLASS A
6 AIM BALANCED FUND - CLASS A
7 AIM LIMITED MATURITY TREASURY FUND - CL
8 AIM TAX-FREE INTERMEDIATE SHARES
10 AIM CHARTER FUND - CLASS A
16 AIM INTERNATIONAL EQUITY FUND - CLASS A
17 AIM HIGH INCOME MUNICIPAL FUND - CLASS
30 AIM EUROPEAN DEVELOPMENT FUND - CLASS A
31 AIM ASIAN GROWTH FUND - CLASS A
34 AIM SMALL CAP OPPORTUNITIES FUND - CLASS
81 AIM GLOBAL AGGRESSIVE GROWTH FUND - CLASS
82 AIM GLOBAL GROWTH FUND - CLASS A
83 AIM GLOBAL INCOME FUND - CLASS A
301 AIM WEINGARTEN FUND - CLASS C
302 AIM CONSTELLATION FUND - CLASS C
303 AIM MUNICIPAL BOND FUND - CLASS C
305 AIM VALUE FUND - CLASS C
306 AIM BALANCED FUND - CLASS C
308 AIM GLOBAL UTILITIES FUND - CLASS C
310 AIM CHARTER FUND - CLASS C
314 AIM CAPITAL DEVELOPMENT FUND - CLASS C
315 AIM BLUE CHIP FUND - CLASS C
316 AIM INTERNATIONAL EQUITY FUND - CLASS C
317 AIM HIGH INCOME MUNICIPAL FUND - CLASS
320 AIM ADVISOR LARGE CAP VALUE FUND - CLASS
321 AIM ADVISOR INCOME FUND - CLASS C
322 AIM ADVISOR FLEX FUND - CLASS C
323 AIM ADVISOR CASH MANAGEMENT FUND - CLASS
324 AIM ADVISOR MULTIFLEX FUND - CLASS C
325 AIM ADVISOR REAL ESTATE FUND - CLASS C
326 AIM ADVISOR INTERNATIONAL VALUE FUND -
330 AIM EUROPEAN DEVELOPMENT FUND - CLASS C
331 AIM ASIAN GROWTH FUND - CLASS C
350 AIM SELECT GROWTH FUND - CLASS C
360 AIM INTERMEDIATE GOVERNMENT FUND - CLASS
365 AIM INCOME FUND - CLASS C
375 AIM HIGH YIELD FUND - CLASS C
380 AIM MONEY MARKET FUND - CLASS C
381 AIM GLOBAL AGGRESSIVE GROWTH FUND - CLASS
382 AIM GLOBAL GROWTH FUND - CLASS C
383 AIM GLOBAL INCOME FUND - CLASS C
384 AIM NEW DIMENSION FUND - CLASS C
401 AIM MONEY MARKET FUND - CLASS A
402 AIM INCOME FUND - CLASS A
403 AIM MUNICIPAL BOND FUND - CLASS A
404 AIM INTERMEDIATE GOVERNMENT FUND - CLASS
405 AIM VALUE FUND - CLASS A
</TABLE>
Page 1
<PAGE> 6
EXHIBIT 1
List of Funds
<TABLE>
<S> <C>
406 AIM SELECT GROWTH FUND - CLASS A
407 AIM AGGRESSIVE GROWTH FUND - CLASS A
408 AIM GLOBAL UTILITIES FUND - CLASS A
421 AIM CASH RESERVE SHARES
422 AIM TAX-EXEMPT CASH FUND
425 AIM HIGH YIELD FUND - CLASS A
430 CG GUARANTEED ACCT 71-73
431 CG GUARANTEED ACCT 74-77
432 CG GUARANTEED ACCT 1978
433 CG GUARANTEED ACCT 1979
434 CG GUARANTEED ACCT 1980
435 CG GUARANTEED ACCT 1981
436 CG GUARANTEED ACCT 1982
437 CG GUARANTEED ACCT 1983
438 CG GUARANTEED ACCT 1984
439 CG GUARANTEED ACCT 1985
440 CG GUARANTEED ACCT 1985A
441 CG GUARANTEED ACCT 1985B
442 CG GUARANTEED ACCT 1986
443 CG GUARANTEED ACCT 1986A
444 CG GUARANTEED ACCT 1987
445 CG GUARANTEED ACCT 1988
446 CG GUARANTEED ACCT 1989
447 CG GUARANTEED ACCT 1990
448 CG GUARANTEED ACCT 1991
449 CG GUARANTEED ACCT 1992
460 AIM TAX-EXEMPT BOND FUND OF CONNECTICUT
514 AIM CAPITAL DEVELOPMENT FUND - CLASS A
515 AIM BLUE CHIP FUND - CLASS A
520 AIM ADVISOR LARGE CAP VALUE FUND - CLASS
521 AIM ADVISOR INCOME FUND - CLASS A
522 AIM ADVISOR FLEX FUND - CLASS A
523 AIM ADVISOR CASH MANAGEMENT FUND - CLASS
524 AIM ADVISOR MULTIFLEX FUND - CLASS A
525 AIM ADVISOR REAL ESTATE FUND - CLASS A
526 AIM ADVISOR INTERNATIONAL VALUE FUND -
541 AIM DOLLAR FUND CLASS A
542 AIM NEW PACIFIC GROWTH FUND CLASS A
543 AIM EUROPE GROWTH FUND CLASS A
544 AIM JAPAN GROWTH FUND CLASS A
546 AIM MID CAP GROWTH FUND CLASS A
547 AIM WORLDWIDE GROWTH FUND CLASS A
548 AIM STRATEGIC INCOME FUND CLASS A
549 AIM GLOBAL GOVERNMENT INCOME FUND CLASS
551 AIM GLOBAL HEALTH CARE FUND CLASS A
553 AIM LATIN AMERICAN GROWTH FUND CLASS A
556 AIM EMERGING MARKETS FUND CLASS A
557 AIM FINANCIAL SERVICES FUND CLASS A
558 AIM GLOBAL HIGH INCOME - CLASS A
</TABLE>
Page 2
<PAGE> 7
EXHIBIT 1
List of Funds
<TABLE>
<S> <C>
559 AIM GLOBAL INFRASTRUCTURE - CLASS A
561 AIM GLOBAL RESOURCES - CLASS A
562 AIM GLOBAL CONSUMER PRODUCTS & SERVICES
563 AIM AMERICA VALUE FUND - CLASS A
564 AIM SMALL CAP EQUITY FUND - CLASS A
576 AIM DEVELOPING MARKETS FUND - CLASS A
577 AIM INTERNATIONAL GROWTH FUND - CLASS A
578 AIM GLOBAL GROWTH AND INCOME FUND - CLASS
579 AIM GLOBAL TELECOMMUNICATIONS FUND - CLASS
584 AIM NEW DEVELOPING MARKETS FUND - CLASS
602 AIM CONSTELLATION FUND - CLASS B
614 AIM CAPITAL DEVELOPMENT FUND - CLASS B
615 AIM BLUE CHIP FUND - CLASS B
617 AIM HIGH INCOME MUNICIPAL FUND - CLASS
620 AIM ADVISOR LARGE CAP VALUE FUND - CLASS
622 AIM ADVISOR FLEX FUND - CLASS B
624 AIM ADVISOR MULTIFLEX FUND - CLASS B
625 AIM ADVISOR REAL ESTATE FUND - CLASS B
626 AIM ADVISOR INTERNATIONAL VALUE FUND - CLASS
630 AIM EUROPEAN DEVELOPMENT FUND - CLASS B
631 AIM ASIAN GROWTH FUND - CLASS B
634 AIM SMALL CAP OPPORTUNITIES - CLASS B
640 AIM WEINGARTEN FUND - CLASS B
641 AIM DOLLAR FUND CLASS B
642 AIM NEW PACIFIC GROWTH FUND CLASS B
643 AIM EUROPE GROWTH FUND CLASS B
644 AIM JAPAN GROWTH FUND CLASS B
645 AIM CHARTER FUND - CLASS B
646 AIM MID CAP GROWTH FUND CLASS B
647 AIM WORLDWIDE GROWTH FUND CLASS B
648 AIM STRATEGIC INCOME FUND CLASS B
649 AIM GLOBAL GOVERNMENT INCOME FUND CLASS
650 AIM SELECT GROWTH FUND - CLASS B
651 AIM GLOBAL HEALTH CARE FUND CLASS B
653 AIM LATIN AMERICAN GROWTH FUND CLASS B
655 AIM GLOBAL UTILITIES FUND - CLASS B
656 AIM EMERGING MARKETS FUND CLASS B
657 AIM GLOBAL FINANCIAL SERVICES FUND CLASS
658 AIM GLOBAL HIGH INCOME FUND CLASS B
659 AIM GLOBAL INFRASTRUCTURE FUND CLASS B
660 AIM INTERMEDIATE GOVERNMENT FUND - CLASS
661 AIM GLOBAL RESOURCES FUND CLASS B
662 AIM GLOBAL CONSUMER PRODUCTS AND SERVICE
663 AIM AMERICA VALUE FUND CLASS B
664 AIM SMALL CAP EQUITY FUND CLASS B
665 AIM INCOME FUND - CLASS B
670 AIM MUNICIPAL BOND FUND - CLASS B
675 AIM HIGH YIELD FUND - CLASS B
676 AIM DEVELOPING MARKETS FUND CLASS B
</TABLE>
Page 3
<PAGE> 8
EXHIBIT I
List of Funds
<TABLE>
<S> <C>
677 AIM INTERNATIONAL GROWTH FUND CLASS B
678 AIM GLOBAL GROWTH AND INCOME FUND CLASS
679 AIM GLOBAL TELECOMMUNICATIONS FUND CLASS
680 AIM MONEY MARKET FUND - CLASS B
684 AIM NEW DIMENSION FUND CLASS B
685 AIM BALANCED FUND - CLASS B
690 AIM VALUE FUND - CLASS B
691 AIM GLOBAL AGGRESSIVE GROWTH FUND - CLASS
692 AIM GLOBAL GROWTH FUND - CLASS B
693 AIM GLOBAL INCOME FUND - CLASS B
694 AIM INTERNATIONAL EQUITY FUND. - CLASS B
695 AIM FLOATING RATE FUND
800 SHORT-TERM INVESTMENTS TRUST - TREASURY
841 AIM DOLLAR FUND ADVISOR CLASS
842 AIM NEW PACIFIC GROWTH ADVISOR CLASS
843 AIM EUROPE GROWTH ADVISOR CLASS
844 AIM JAPAN GROWTH ADVISOR CLASS
846 AIM MID CAP GROWTH ADVISOR CLASS
847 AIM WORLDWIDE GROWTH ADVISOR CLASS
848 AIM STRATEGIC INCOME ADVISOR CLASS
849 AIM GLOBAL GOVT INCOME ADVISOR CLASS
851 AIM GLOBAL HEALTH CARE ADVISOR CLASS
853 AIM LATIN AMERICAN GROWTH ADVISOR CLASS
856 AIM EMERGING MARKETS ADVISOR CLASS
857 AIM GLOBAL FINANCIAL SERVICES ADVISOR CLASS
858 AIM GLOBAL HIGH INCOME ADVISOR CLASS
859 AIM GLOBAL INFRASTRUCTURE ADVISOR CLASS
861 AIM GLOBAL RESOURCES ADVISOR CLASS
862 AIM GLOBAL CONSUMER PRODUCTS & SERVICES
863 AIM AMERICAN VALUE FUND ADVISOR CLASS
864 AIM SMALL CAP EQUITY ADVISOR CLASS
876 AIM DEVELOPING MARKETS ADVISOR CLASS
877 AIM INTERNATIONAL GROWTH ADVISOR CLASS
878 AIM GLOBAL GROWTH & INCOME ADVISOR CLASS
879 AIM GLOBAL TELECOMMUNICATIONS ADVISOR CLASS
884 AIM NEW DIMENSION ADVISOR CLASS
</TABLE>
Page 4
<PAGE> 9
EXHIBIT 1.1a OF SCHEDULE G
SPECIFICATIONS
TABLE OF CONTENTS
III. HIGH LEVEL OVERVIEW OF IMPRESS PLUS FUNCTIONALITY
E. Computer Output to Laser Disc (COLD)
This item is the property of First Data Investor Services Group (First Data) of
Boston, Massachusetts, and contains confidential and trade secret information.
This Item may not be transferred from the custody or control of First Data
except as authorized by, and then only by way of loan for limited purposes. It
must be returned to First Data upon request and, in all events, upon completion
of the purpose of the loan. Neither this item nor the information it contains
may be used or disclosed to persons not having a need for such use or disclosure
consistent with the purpose of the loan, without the prior written consent of
First Data.
Copyright First Data Investor Services Group
1994,1995,1996,1997
ALL RIGHTS RESERVED
This media contains unpublished, confidential, and proprietary information of
First Data Investor Services Group. No disclosure or use of any portion of these
materials may be made without the express written consent of First Data Investor
Services Group.
<PAGE> 10
COMPUTER OUTPUT TO LASER DISC (COLD)
IMPRESS PLUS COMPUTER OUTPUT TO LASER DISC (COLD)
The IMPRESS Plus COLD module is a client/server based, graphical user interface
(GUI) system designed to provide an intelligent real-time application to enable
clients to improve the quality of the service provided to both shareholders and
broker dealers. This system provides functionality in the following areas:
STATEMENTS AND TAX FORMS
IMPRESS Plus COLD provides the client with on-line access to shareholder and
broker statements and tax forms. The print mail output stream is stored on
optical platters for retrieval and printing later. The forms and statements can
be searched for on-line through a common browse window integrated with the
IMPRESS Plus Imaging application. Daily output journals can also be migrated to
on-line access eliminating microfiche.
TECHNICAL OVERVIEW
IMPRESS Plus Cold is a high-speed, electronic document storage and retrieval
system which utilizes the high-density, low-cost storage capabilities of optical
and RAID disks. IMPRESS Plus COLD operates in a true client-server environment
and has the capability to simultaneously store multiple document types in a
single system. Among these document types are traditional Line Data; AFP;
Metacode; DJDE; Scanned Images, etc. Each of these data types can be stored on a
single system and are all viewed with a common viewer.
IMPRESS Plus utilizes third-party Metacode composition software from Gentext,
Inc. and third-party viewing software from CDP for local viewing and Adobe
Intranet/Internet viewing.
<PAGE> 11
EXHIBIT 2.3 OF SCHEDULE C
IMPRESS PLUS COLD
EQUIPMENT LIST AND NETWORK CONFIGURATION
<TABLE>
<CAPTION>
QUANTITY CATEGORY DESCRIPTION
=================================================================================
<S> <C> <C>
1 JUKEBOX Phillips 12Gb Tower Drive w/onsite installation
- ---------------------------------------------------------------------------------
2 JUKEBOX Phillips 6000 series media (10 to a box)
- ---------------------------------------------------------------------------------
1 JUKEBOX Cygnet 1802-2 with Philips Drives and SCSI Robotics
- ---------------------------------------------------------------------------------
1 JUKEBOX COLD Feet
- ---------------------------------------------------------------------------------
1 SUN CPU SUN Ultra 3000 base, CD-ROM, Solaris license, Cooling
package, (2) 25OMHZ Cpu's 4mb Cache, (1) CPU/Memory
Board/SharedApp
- ---------------------------------------------------------------------------------
2 SUN CPU SUN Sbus I/0 Board
- ---------------------------------------------------------------------------------
2 SUN CPU SUN 256Mb RAM Kit
- ---------------------------------------------------------------------------------
2 SUN CPU SUN 7200 RPM 9.1Gb Internal Hard Drive
- ---------------------------------------------------------------------------------
2 SUN CPU Enterprise Power/Cooling Module 300W
- ---------------------------------------------------------------------------------
1 SUN CPU Second Peripheral Power Supply
- ---------------------------------------------------------------------------------
2 SUN CPU X1052A Fast Differential/Buffered E-Net Card (SCSI
Controller)
- ---------------------------------------------------------------------------------
2 SUN CPU X1062A fast Wide Differential Sbus Card (SCSI Controller)
- ---------------------------------------------------------------------------------
1 SUN CPU SUN 17" Color Monitor and TGX Card
- ---------------------------------------------------------------------------------
1 SUN CPU SUN DLT7000 35-7OGb External Tape Drive w/50-68 pin
cable
- ---------------------------------------------------------------------------------
1 IBM Netfiniity Rack Cabinet with Power Supply
- ---------------------------------------------------------------------------------
1 DISK SUB Data General Clarion 2900D Raid Array w/2 SPs, and 3 PS's
(20) Drive Chassis
- ---------------------------------------------------------------------------------
1 DISK SUB DG Clarion 64mb mirrored cache upgrade
- ---------------------------------------------------------------------------------
2 DISK SUB Solaris Interface Kit
- ---------------------------------------------------------------------------------
5 DISK SUB Data General 7200 RPM 18Gb Disk Drives
- ---------------------------------------------------------------------------------
1 UPS Exide Electronics Powerware Plus 12 10 Kva UPS for SUN
CPU, DISK SUB and JUKEBOX
- ---------------------------------------------------------------------------------
1 UPS Exide Power Distribution Module for Powerware Plus 12
W/(1) L5.30 and (3) 5-15 receptacles
- ---------------------------------------------------------------------------------
1 NDM NOM TCP-IP 2 Concurrent Sessions SUN
- ---------------------------------------------------------------------------------
3 PREPRO PC Config #1
- ---------------------------------------------------------------------------------
1 SUPPORT PC Config #1/software/modem
- ---------------------------------------------------------------------------------
2 CABLES 25' Differential SCSI Cables (M) HD68 Thumbscrews (M)
- ---------------------------------------------------------------------------------
2 CABLES Active Differential Terminators Min DB-50
=================================================================================
</TABLE>
<PAGE> 1
EXHIBIT h(3)(b)
FUND ACCOUNTING AND PRICING AGENT AGREEMENT
This Fund Accounting and Pricing Agent Agreement (the "Agreement") is
made as of June 1, 1998, by and between AIM Growth Series (the "Company") and
A I M Advisors, Inc. ("AIM").
WHEREAS, the Company is registered under the Investment Company Act of
1940, as amended (the "1940 Act"), as an open-end management investment company;
WHEREAS, the Company currently operates eight separate mutual funds,
each organized as a separate and distinct series of the Company's shares (such
existing funds and such funds as may hereafter be established being referred to
in this Agreement as the "Funds" and singly as a "Fund");
WHEREAS, the Company is part of a complex of investment companies that
are advised and administered by AIM, and such complex is currently comprised of
the following investment companies: AIM Growth Series, AIM Investment Funds,
Inc., AIM Investment Portfolios, Inc., AIM Series Trust, GT Global Variable
Investment Series and GT Global Variable Investment Trust (the "AIM Funds");
WHEREAS, the Company desires to retain AIM to act as its accounting and
pricing agent, and AIM is willing to act in such capacities.
NOW, THEREFORE, in consideration of the foregoing and the terms and
conditions hereinafter set forth, the Company and AIM hereby agree as follows:
SECTION 1. APPOINTMENT. The Company hereby appoints AIM to act as the accounting
and pricing agent for each Fund for the period and on the terms and conditions
set forth in this Agreement. AIM hereby accepts such appointment and agrees to
render the services set forth for the compensation herein provided.
SECTION 2. DEFINITIONS. As used in this Agreement and in addition to the terms
defined elsewhere herein, the following terms shall have the meanings assigned
to them in this Section:
(a) "Authorized Person" means any officer of the Company and any other
person, whether or not any such person is an officer or employee of the Company,
duly authorized by the Board of Directors/Trustees (the "Board"), the President
or any Vice President of the Fund to give Oral and/or Written Instructions on
behalf of the Company or any Fund.
(b) "Commission" means the Securities and Exchange Commission.
(c) "Custodian" means the custodian or custodians employed by the
Company to maintain custody of the Funds' assets.
<PAGE> 2
(d) "Governing Documents" means the Agreement and Declaration of Trust,
Articles of Incorporation, By-Laws and/or other applicable charter documents of
the Company, all as they may be amended from time to time.
(e) "Oral Instruction" means oral instructions actually received by AIM
from an Authorized Person or from a person reasonably believed by AIM to be an
Authorized Person, provided that, any Oral Instruction shall be promptly
confirmed by Written Instructions.
(f) "Prospectus" means the current prospectus and statement of
additional information of a Fund, taken together.
(g) "Shares" means shares of beneficial interest of any of the Funds.
(h) "Shareholder" means any owner of Shares.
(i) "Written Instructions" means written instructions delivered by
hand, mail, tested telegram or telex, cable or facsimile sending device received
by AIM and signed by an Authorized Person.
SECTION 3. COMPLIANCE WITH LAWS, ETC. In performing its responsibilities
hereunder, AIM shall comply with all terms and provisions of the Governing
Documents, the Prospectus and all applicable state and federal laws including,
without limitation, the 1940 Act and the rules and regulations promulgated by
the Commission thereunder.
SECTION 4. SERVICES. In consideration of the compensation payable hereunder and
subject to the supervision and control of the Company's Boards, AIM shall
provide the following services to the Funds:
(a) PRICING AGENT. As pricing agent, AIM shall:
(1) Obtain security market quotes from services approved by
AIM or, if such quotes are unavailable, from such sources as may be designated
in procedures adopted by AIM and approved by the Company's Board, and, in either
case, calculate the market value of the Funds' investments; and
(2) Value the assets of the Funds and compute the net asset
value per Share of the Funds at such dates and times and in the manner specified
in the then currently effective Prospectus and transmit to the Funds' portfolio
manager.
(b) ACCOUNTING AGENT. As fund accounting agent, AIM shall:
(1) Calculate the net income of each Fund;
(2) Calculate capital gains or losses for each Fund from the
sale or disposition of assets, if any;
<PAGE> 3
(3) Maintain the general ledger and other accounts, books and
financial records of the Company, as required under Section 31(a) of the 1940
Act and the rules promulgated by the Commission thereunder in connection with
the services provided by AIM;
(4) Perform the following functions on a daily basis:
(A) journalize each Fund's investment, capital share and
income and expense activities;
(B) reconcile cash and investment balances of each Fund
with the Custodian and provide the Funds' portfolio
manager(s) with the beginning cash balance available for
investment purposes and update the cash availability
throughout the day as necessary;
(C) verify investment buy/sell trade tickets received from
a Fund's portfolio manager(s) and transmit trades to a
Fund's Custodian for proper settlement;
(D) maintain individual ledgers for investment securities;
(E) maintain historical tax lots for investment
securities;
(F) calculate various contractual expenses (e.g., advisory
and custody fees);
(G) post to and prepare the Funds' statements of assets
and liabilities and statements of operations; and
(H) monitor expense accruals and notify an Authorized
Person of any proposed adjustments;
(5) Receive and act upon notices, Oral and Written
Instructions, certificates, instruments or other communications from a Fund's
shareholder servicing and transfer agent;
(6) Assist in the preparation of financial statements
semiannually which will include the following items:
(A) schedule of investments;
(B) statement of assets and liabilities;
(C) statement of operations; and
(D) changes in net assets;
<PAGE> 4
(7) Prepare monthly security transaction listings;
(8) Prepare quarterly broker security transactions
summaries; and
(9) At the reasonable request of the Company, assist in the
preparation of various reports or other financial documents required by federal,
state and other appropriate laws and regulations.
SECTION 5. COMPENSATION. As compensation for the services rendered by AIM
hereunder during the term of the Agreement, each Fund shall pay to AIM monthly
such fees as shall be agreed to from time to time by the Company and AIM, in
writing and attached hereto as Schedule A. In addition, as may be agreed to from
time to time in writing by the Company and AIM, each Fund shall reimburse AIM
for certain expenses that it incurs in rendering services with respect to that
Fund under this Agreement.
SECTION 6. RELIANCE BY AIM ON INSTRUCTIONS. Unless otherwise provided in this
Agreement, AIM shall act only upon Oral or Written Instructions. AIM shall be
entitled to rely upon any such Instructions actually received by it under this
Agreement. The Company agrees that AIM shall incur no liability to the Company
or any of the Funds in acting upon Oral or Written Instructions given to AIM
hereunder, provided that, such Instructions reasonably appear to have been
received from an Authorized Person.
SECTION 7. COOPERATION WITH AGENTS OF THE COMPANY. AIM shall cooperate with the
Company's agents and employees, including, without limitation, their independent
accountants, and shall take all reasonable action in the performance of its
obligations under this Agreement to assure that all necessary information is
made available to such agents to the extent necessary in the performance of
their duties to the Company.
SECTION 8. CONFIDENTIALITY. AIM, on behalf of itself and its employees, agrees
to treat confidentially all records and other information relating to the
Company and the Funds except when requested to divulge such information by duly
constituted authorities provided that notification and prior approval is
obtained from the Company, which approval shall not be unreasonably withheld and
may not be withheld if AIM, in its judgment, may be subject to civil or criminal
contempt proceedings for failure to comply.
SECTION 9. STANDARD OF CARE. In the performance of its responsibilities
hereunder, AIM shall exercise care and diligence in the performance of its
duties and act in good faith and use its best efforts to ensure the accuracy and
completeness of all services under this Agreement.
In performing services hereunder, AIM:
(a) shall be under no duty to take any action on behalf of the Company
or the Funds except as specifically set forth herein or as may be specifically
agreed to by AIM in writing, and in computing the net asset value per Share of a
Fund, AIM may rely upon any information furnished to it including, without
limitation, information (1) as to the accrual of liabilities of a Fund and as to
liabilities of a Fund not appearing on the books of account kept by AIM, (2) as
to the existence, status and proper treatment of reserves, if any, authorized by
a Fund, (3) as to the
<PAGE> 5
sources of quotations to be used in computing net asset value, (4) as to the
fair value to be assigned to any securities or other property for which price
quotations are not readily available and (5) as to the sources of information
with respect to "corporate actions" affecting portfolio securities of a Fund
(information as to "corporate actions" shall include information as to
dividends, distributions, interest payments, prepayments, stock splits, stock
dividends, rights offerings, conversions, exchanges, recapitalizations, mergers,
redemptions, calls, maturity dates and similar actions, including ex-dividend
and record dates and the amounts and terms thereof);
(b) shall be responsible and liable for all losses, damages and costs
(including reasonable attorneys' fees) incurred by the Company or any Fund which
is due to or caused by AIM's negligence in the performance of its duties under
this Agreement or for AIM's negligent failure to perform such duties as are
specifically assumed by AIM in this Agreement, provided that, to the extent that
duties, obligations and responsibilities are not expressly set forth in this
Agreement, AIM shall not be liable for any act or omission that does not
constitute willful misfeasance, bad faith or negligence on the part of AIM or
reckless disregard by AIM of such duties, obligations and responsibilities; and
(c) without limiting the generality of the foregoing, AIM shall not, in
connection with AIM's duties under this Agreement, be under any duty or
obligation to inquire into and shall not be liable for or in respect of:
(1) the validity or invalidity or authority or lack of
authority of any Oral or Written Instruction, notice or other instrument which
conforms to the applicable requirements of this Agreement, if any, and that AIM
reasonably believes to be genuine; and
(2) delays or errors or loss of data occurring by reason of
circumstances beyond AIM's control including, without limitation, acts of civil
or military authorities, national emergencies, labor difficulties, fire,
mechanical breakdown, denial of access, earthquake, flood or catastrophe, acts
of God, insurrection, war, riots, or failure of the mails, transportation,
communication or power supply.
Notwithstanding any other provisions of this Agreement, the following provisions
shall apply with respect to AIM's computation of a Fund's net asset value: AIM
shall be held to the exercise of reasonable care in computing and determining
net asset value as provided in Section 4(a), above, but shall not be held
accountable or liable for any losses, damages or expenses of a Fund or any
Shareholder or former Shareholder may incur arising from or based upon errors or
delays in the determination of such net asset value unless such error or delay
was due to AIM's negligence or willful misfeasance in the computation and
determination of such net asset value. The parties hereto acknowledge, however,
that AIM causing an error or delay in the determination of net asset value may,
but does not in an of itself, constitute negligence or willful misfeasance. In
no event shall AIM be liable or responsible to the Company or a Fund or any
other party for any error or delay which continued or was undetected after the
date of an audit of the Company or any Fund performed by the certified public
accountants employed by the Company if, in the exercise of reasonable care in
accordance with generally accepted accounting principles, such accountants
should have become aware of such error or delay in the course of performing such
audit. AIM's liability for any such negligence or willful misfeasance which
<PAGE> 6
results in an error in determination of such net asset value be limited to the
direct out-of-pocket loss a Fund and/or any Shareholder or former Shareholder
shall actually incur.
Without limiting the generality of the foregoing, AIM shall not be held
accountable or liable to a Fund, a Shareholder or former Shareholder or any
other person for any delays or losses, damages or expenses any of them may
suffer or incur resulting from (1) AIM's failure to receive timely and suitable
notification concerning quotations, corporate actions or similar matters
relating to or affecting portfolio securities of a Fund or (2) any errors in the
computation of a net asset value based upon or arising out of quotations or
information as to corporate actions if received by AIM from a source that AIM
was authorized to rely upon. Nevertheless, AIM will use its best judgment in
determining whether to verify through other sources any information that it has
received as to quotations or corporate actions if AIM has reason to believe that
any such information is incorrect.
SECTION 10. RECEIPT OF ADVICE. If AIM is in doubt as to any action to be taken
or omitted by it, AIM may request, and shall be entitled to rely upon,
directions and advice from the Company, including Oral or Written Instructions
where appropriate, or from counsel of its own choosing (who may also be counsel
for the Company or any Fund), with respect to any question of law. In case of
conflict between directions, advice or Oral and Written Instructions received by
AIM pursuant to this Section, AIM shall be entitled to rely on and follow the
advice received from counsel as described above. AIM shall be protected in any
action or in action that it takes in reliance on any directions, advice or Oral
or Written Instructions received pursuant to this Section that AIM, after the
receipt of the same, in good faith believes to be consistent with such
directions, advice or Oral or Written Instructions, as the case may be.
Notwithstanding the foregoing, nothing in this Section shall be construed as
imposing on AIM any obligation to seek such directions, advice or Oral or
Written Instruction, or to act in accordance with them when received, unless the
same is a condition to AIM's properly taking or omitting to take such action
under the terms of this Agreement.
SECTION 11. INDEMNIFICATION OF AIM. The Company agrees to indemnify and hold
harmless AIM and its officers, directors, employees, nominees and
subcontractors, if any, from all taxes, charges, expenses, assessments, claims
and liabilities, including, without limitation, liabilities arising under the
1940 Act, the Securities Act of 1933, as amended, the Securities Exchange Act of
1934, as amended, the Commodities Exchange Act and any state or foreign
securities or blue sky laws, and expenses, including, without limitation,
reasonable attorneys' fees and disbursements, arising directly or indirectly
from any action or thing that AIM takes or omits to take or do:
(a) at the request or on the direction of or in reliance upon the
advice of the Company;
(b) upon Oral or Written Instructions; or
(c) in the performance by AIM of its responsibilities under this
Agreement;
provided that, AIM shall not be indemnified against any liability to the Company
or the Funds, or
<PAGE> 7
any expenses incident thereto, arising out of AIM's own willful misfeasance, bad
faith or negligence or reckless disregard of its duties in connection with the
performance of its duties and obligations specifically described in this
Agreement.
SECTION 12. INDEMNIFICATION OF THE COMPANY. AIM agrees to indemnify and hold
harmless the Company and its officers, trustees, directors and employees, from
all taxes, charges, expenses, assessments, claims and liabilities, including,
without limitation, liabilities arising under the 1940 Act, the Securities Act
of 1933, as amended, the Securities Exchange Act of 1934, as amended, the
Commodities Exchange Act and any state or foreign securities or blue sky laws,
and expenses, including, without limitation, reasonable attorneys' fees and
disbursements, arising directly or indirectly from any action or omission of AIM
that does not meet the standard of care to which AIM is subject under Section 9,
above.
SECTION 13. LIMITATION OF LIABILITY OF SHAREHOLDERS AND TRUSTEES OF
THE COMPANY. It is expressly agreed that the obligations of the Company
hereunder shall not be binding upon any of the shareholders, trustees,
directors, officers, nominees, agents or employees of the Company personally,
but shall only bind the assets and property of the applicable Funds, as provided
in the Governing Documents. The execution and delivery of this Agreement has
been authorized by the Board of the Company, and this Agreement has been
executed and delivered by an authorized officer of the Company acting as such,
and neither such authorization by the Board nor such execution and delivery by
such officer shall be deemed to have been made by any of them individually or to
impose any liability on any of them personally, but shall bind only the assets
and property of the applicable Fund as provided in the Governing Documents.
SECTION 14. DURATION AND TERMINATION. This Agreement shall continue with respect
to the Company and each Fund until termination with respect to the Company, or
with respect to one or more Funds, is effected by the Company or AIM upon sixty
days' prior written notice to the other. In the event of the "assignment" of
this Agreement within the meaning of the 1940 Act, this Agreement shall
terminate automatically.
SECTION 15. NOTICES. All notices and other communications hereunder, including
Written Instructions, shall be in writing or by confirming telegram, cable,
telex or facsimile sending device. Notices with respect to a party shall be
directed to such address as may from time to time be designated by that party to
the other.
SECTION 16. FURTHER ACTIONS. The Company and AIM agree to perform such further
acts and to execute such further documents as may be necessary or appropriate to
effect the purposes of this Agreement.
SECTION 17. AMENDMENTS. This Agreement, or any part thereof, may be amended
only by an instrument in writing signed by the Company and AIM.
SECTION 18. COUNTERPARTS. This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original, but all of which
together constitute one and the same instrument.
<PAGE> 8
SECTION 19. MISCELLANEOUS. This Agreement embodies the entire agreement and
understanding between the Company and AIM and supersedes all prior agreements
and understandings relating to the subject matter hereof, provided that the
Company and AIM may embody in one or more separate documents their agreement or
agreements with respect to such matters that this Agreement provides may be
later agreed to by and between the Company and AIM from time to time. The
captions in this Agreement are included for convenience of reference only and in
no way define or delimit any of the provisions hereof or otherwise affect their
construction or effect. This Agreement shall be governed by and construed in
accordance with the laws of the State of Delaware. If any provision of this
Agreement shall be held or made invalid by a court decision, statute, rule or
otherwise, the remainder of this Agreement shall not be affected thereby. This
Agreement shall be binding upon and shall inure to the benefit of the Company
and AIM and their respective successors.
<PAGE> 9
IN WITNESS WHEREOF, the Company and AIM have caused this Agreement to
be executed by their officers designated below as of this day, month and year
first above written.
AIM GROWTH SERIES
By:
----------------------------------
Robert H. Graham
President
Attest:
------------------------------
Samuel D. Sirko
Assistant Secretary
A I M ADVISORS, INC.
By:
----------------------------------
Carol F Relihan
Senior Vice President,
General Counsel and Secretary
Attest:
------------------------------
Samuel D. Sirko
Assistant Secretary
<PAGE> 10
SCHEDULE A
TO
FUND ACCOUNTING
AND
PRICING AGENT AGREEMENT
FOR
AIM GROWTH SERIES
FUND ACCOUNTING AND PRICING AGENT FEES
Each Fund shall pay a Fee to AIM determined as a percentage of the
Fund's net assets. The annualized rate at which the fee is paid (the Fee Rate)
and the Fee shall be calculated as set forth below:
o An Asset Multiplier is determined by multiplying 0.0003 times the first $5
billion in average net assets of the AIM Funds plus 0.0002 times such net
assets over $5 billion.
o The Fee Rate is determined by dividing the Asset Multiplier by the net
assets of the AIM Funds.
o The Monthly Fee is determined then by multiplying the average daily Fee
Rate by the number of days in the month and by the Fund's average daily net
assets then dividing by 365/or 366, as appropriate.
Example: For Fund X having $100 million in average net assets during December
1997, in which the AIM Funds have average net assets of $8 billion:
Asset Multiplier = (0.0003) ($5 billion) + (0.0002) ($3 billion) = $2.1
million
Fee Rate = $2.1 million = 0.0002625
------------
$8 billion
Monthly Fee = (31) (0.0002625) ($100 million) = $2,229.45
----
(365)
<PAGE> 1
EXHIBIT j
[LETTERHEAD OF KIRKPATRICK & LOCKHART LLP]
February 12, 1999
AIM Growth Series
11 Greenway Plaza, Suite 100
Houston, Texas 77046
Ladies and Gentlemen:
We hereby consent to the reference to our firm in the statements of
additional information that are being filed as part of Post-Effective Amendment
No. 46 to the registration statement of AIM Growth Series on Form N-1A (File No.
2-57526).
Very truly yours,
KIRKPATRICK & LOCKHART LLP
By: /s/ R. DARRELL MOUNTS
R. Darrell Mounts
<PAGE> 1
EXHIBIT m(1)
DISTRIBUTION PLAN
OF
AIM GROWTH SERIES
(Class A Shares)
SECTION 1. AIM Growth Series, a Delaware business trust (the "Fund"), on
behalf of the series of shares of beneficial interest set forth in Schedule A to
this plan (the "Portfolios"), may act as a distributor of the Class A Shares of
such Portfolios as described in Schedule A to this plan (the "Shares") of which
the Fund is the issuer, pursuant to Rule l2b-1 under the Investment Company Act
of 1940 (the "1940 Act"), according to the terms of this Distribution Plan (the
"Plan").
SECTION 2. The Fund may incur as a distributor of the Shares, expenses at
the rates set forth in Schedule A per annum of the average daily net assets of
the Fund attributable to the Shares, subject to any applicable limitations
imposed from time to time by applicable rules of the NASD Regulation, Inc.
SECTION 3. Amounts set forth in Schedule A may be expended when and if
authorized in advance by the Fund's Board of Trustees. Such amounts may be used
to finance any activity which is primarily intended to result in the sale of the
Shares, including, but not limited to, expenses of organizing and conducting
sales seminars, advertising programs, finders fees, printing prospectuses and
statements of additional information (and supplements thereto) and reports for
other than existing shareholders, preparation and distribution of advertising
material and sales literature, supplemental payments to dealers and other
institutions as asset-based sales charges. Amounts set forth on Schedule A may
also be used to finance payments of service fees under a shareholder service
arrangement to be established by A I M Distributors, Inc. ("Distributors") as
the Fund's distributor in accordance with Section 4, and the costs of
administering the Plan. To the extent that amounts paid hereunder are not used
specifically to reimburse Distributors for any such expense, such amounts may be
treated as compensation for distribution-related services of Distributors or the
Fund's former distributor, GT Global, Inc. All amounts expended pursuant to the
Plan shall be paid to Distributors and are the legal obligation of the Fund and
not of Distributors. That portion of the amounts paid under the Plan that is not
paid or advanced by Distributors to dealers or other institutions that provide
personal continuing shareholder service as a service fee pursuant to Section 4
shall be deemed an asset-based sales charge. No provision of this Plan shall be
interpreted to prohibit any payments by the Fund during periods when the Fund
has suspended or otherwise limited sales.
<PAGE> 2
SECTION 4.
(a) Amounts expended by the Fund under the Plan shall be used in part for
the implementation by Distributors of shareholder service
arrangements. The maximum service fee paid to any service provider
shall be twenty-five one-hundredths of one percent (0.25%), or such
lower rate for the Portfolio and Class as is specified on Schedule A,
per annum of the average daily net assets of the Fund attributable to
the Shares owned by the customers of such service provider.
(b) Pursuant to this program, Distributors may enter into agreements
substantially in the form attached hereto as Exhibit A ("Service
Agreements") with such broker-dealers ("Dealers") as may be selected
from time to time by Distributors for the provision of
distribution-related personal shareholder services in connection with
the sale of Shares to the Dealers' clients and customers ("Customers")
who may from time to time directly or beneficially own Shares. The
distribution-related personal continuing shareholder services to be
rendered by Dealers under the Service Agreements may include, but
shall not be limited to, the following: (i) distributing sales
literature; (ii) answering routine Customer inquiries concerning the
Fund and the Shares; (iii) assisting Customers in changing dividend
options, account designations and addresses, and in enrolling into any
of several retirement plans offered in connection with the purchase of
the Shares; (iv) assisting in the establishment and maintenance of
customer accounts and records, and in the processing of purchase and
redemption transactions; (v) investing dividends and capital gains
distributions automatically in Shares; and (vi) providing such other
information and services as the Fund or the Customer may reasonably
request.
(c) Distributors may also enter into Bank Shareholder Service Agreements
substantially in the form attached hereto as Exhibit B ("Bank
Agreements") with selected banks acting in an agency capacity for
their customers ("Banks"). Banks acting in such capacity will provide
some or all of the shareholder services to their customers as set
forth in the Bank Agreements from time to time.
(d) Distributors may also enter into Agency Pricing Agreements
substantially in the form attached hereto as Exhibit C ("Pricing
Agreements") with selected retirement plan service providers acting in
an agency capacity for their customers ("Retirement Plan Providers").
Retirement Plan Providers acting in such a capacity will provide some
or all of the shareholders services to their customers as set forth in
the Pricing Agreements from time to time.
<PAGE> 3
(e) Distributors may also enter into Shareholder Service Agreements
substantially in the form attached hereto as Exhibit D ("Bank Trust
Department Agreements and Brokers for Bank Trust Department
Agreements") with selected bank trust departments and brokers for bank
trust departments. Such bank trust departments and brokers for bank
trust departments will provide some or all of the shareholder services
to their customers as set forth in the Bank Trust Department
Agreements and Brokers for Bank Trust Department Agreements.
SECTION 5. Any amendment to this Plan that requires the approval of the
shareholders of a Class pursuant to Rule l2b-1 under the 1940 Act shall become
effective as to such Class upon approval of such amendment by a "majority of the
outstanding voting securities" (as defined in the 1940 Act) of such Class,
provided that the Board of Trustees of the Fund has approved such amendment in
accordance with the provisions of Section 6 of this Plan.
SECTION 6. This Plan, any amendment to this Plan and any agreements related
to this Plan shall become effective with respect to any Class of any Portfolio
immediately upon receipt by the Fund of both (a) the affirmative vote of a
majority of the Board of Trustees of the Fund, and (b) the affirmative vote of a
majority of those trustees of the Fund who are not "interested persons" of the
Fund (as defined in the 1940 Act) and have no direct or indirect financial
interest in the operation of this Plan or any agreements related to it (the
"Disinterested Trustees"), cast in person at a meeting called for the purpose of
voting on this Plan or such agreements. Notwithstanding the foregoing, no such
amendment that requires the approval of the shareholders of a Class of a
Portfolio shall become effective as to such Class until such amendment has been
approved by the shareholders of such Class in accordance with the provisions of
Section 5 of this Plan.
SECTION 7. Unless sooner terminated pursuant to Section 9, this Plan shall
continue in effect until May 29, 1999 and thereafter shall continue in effect so
long as such continuance is specifically approved, at least annually, in the
manner provided for approval of this Plan in Section 6.
SECTION 8. Distributors shall provide to the Fund's Board of Trustees and
the Board of Trustees shall review, at least quarterly, a written report of the
amounts so expended and the purposes for which such expenditures were made.
SECTION 9. This Plan may be terminated with respect to the shares of any
Class of any Portfolio at any time by vote of a majority of the Disinterested
Trustees, or by a vote of a majority of the outstanding voting securities of
such Class of such Portfolio. Upon termination of this Plan with respect to any
or all such Classes, the obligation of the Fund to make payments pursuant to
this Plan with respect to such Classes shall terminate, and the Fund shall not
be required to make payments hereunder beyond such termination date with respect
to expenses incurred in connection with shares of such Classes sold prior to
such termination date.
<PAGE> 4
SECTION 10. Any agreement related to this Plan shall be made in writing,
and shall provide:
(a) that such agreement may be terminated with respect to the shares of
any Class of any Portfolio at any time, without payment of any
penalty, by vote of a majority of the Disinterested Trustees or by a
vote of the outstanding voting securities of such Class of such
Portfolio, on not more than sixty (60) days' written notice to any
other party to the agreement; and
(b) that such agreement shall terminate automatically in the event of its
assignment.
SECTION 11. This Plan may not be amended with respect to the shares of any
Class of any Portfolio to increase materially the amount of distribution
expenses provided for in Section 2 hereof unless such amendment is approved by
such Class in the manner provided in Section 5 hereof, and no material amendment
to the Plan with respect to the shares of any Class of any Portfolio shall be
made unless approved in the manner provided for in Section 6 hereof.
AIM GROWTH SERIES
(on behalf of its Class A Shares)
Attest: /s/ MICHAEL A. SILVER By: /s/ WILLIAM J. GUILFOYLE
----------------------------- ---------------------------------
Michael A. Silver William J. Guilfoyle
Assistant Secretary President
Effective as of May 29, 1998.
<PAGE> 5
SCHEDULE A
TO
DISTRIBUTION PLAN
OF
AIM GROWTH SERIES
The Fund shall pay the Distributor as full compensation for all services
rendered and all facilities furnished under the Distribution Plan for each
Portfolio (or Class thereof) designated below, a Distribution Fee* determined by
applying the annual rate set forth below as to each Portfolio (or Class thereof)
to the average daily net assets of the Portfolio (or Class thereof) for the plan
year, computed in a manner used for the determination of the offering price of
shares of the Portfolio.
<TABLE>
<CAPTION>
MAXIMUM
ASSET-BASED MAXIMUM MAXIMUM
PORTFOLIO (CLASS A SHARES) SALES CHARGE SERVICE FEE AGGREGATE FEE
- -------------------------- ------------ ----------- -------------
<S> <C> <C> <C>
AIM Worldwide Growth Fund 0.10% 0.25% 0.35%
AIM International Growth Fund 0.10% 0.25% 0.35%
AIM New Pacific Growth Fund 0.10% 0.25% 0.35%
AIM Europe Growth Fund 0.10% 0.25% 0.35%
AIM Japan Growth Fund 0.10% 0.25% 0.35%
AIM Small Cap Equity Fund 0.10% 0.25% 0.35%
AIM Mid Cap Growth Fund 0.10% 0.25% 0.35%
AIM America Value Fund 0.10% 0.25% 0.35%
</TABLE>
The Distributor will waive part or all of its Distribution Fee as to a
Portfolio (or Class thereof) to the extent that the ordinary business expenses
of the Portfolio exceed the expense limitation as to the Portfolio (if any) as
contained in the Master Investment Advisory Agreement between the Company and
A I M Advisors, Inc.
THIS PLAN REFERS TO EXHIBITS A-D, WHICH RELATE TO AGREEMENTS THAT THE
DISTRIBUTOR MAY ENTER INTO WITH THIRD PARTIES. FORMS OF THESE AGREEMENTS HAVE
NOT BEEN INCLUDED WITH THIS PLAN.
- ----------
* The Distribution Fee is payable apart from the sales charge, if any,
as stated in the current prospectus for the applicable Portfolio (or
Class thereof).
<PAGE> 1
EXHIBIT m(2)
DISTRIBUTION PLAN
OF
AIM GROWTH SERIES
(Class B Shares)
SECTION 1. AIM Growth Series, a Delaware business trust (the "Fund"), on behalf
of the series of beneficial interest set forth in Schedule A to this plan (the
"Portfolios"), may pay for distribution of the Class B Shares of such Portfolios
(the "Shares") which the Fund issues from time to time, pursuant to Rule 12b-1
under the Investment Company Act of 1940 (the "1940 Act"), according to the
terms of this Distribution Plan (the "Plan").
SECTION 2. The Fund may incur expenses for and pay any institution selected to
act as the Fund's agent for distribution of the Shares of any portfolio from
time to time (each, a "Distributor") at the rates set forth in Schedule A hereto
based on the average daily net assets of each class of Shares subject to any
applicable limitations imposed by the Conduct Rules of the NASD Regulation, Inc.
in effect from time to time (the "Conduct Rules"). All such payments are the
legal obligation of the Fund and not of any Distributor or its designee.
SECTION 3.
(a) Amounts set forth in Section 2 may be used to finance any activity
which is primarily intended to result in the sale of the Shares, including, but
not limited to, expenses of organizing and conducting sales seminars and running
advertising programs, payment of finders fees, printing of prospectuses and
statements of additional information (and supplements thereto) and reports for
other than existing shareholders, preparation and distribution of advertising
material and sales literature, payment of overhead and supplemental payments to
dealers and other institutions as asset-based sales charges. Amounts set forth
in Section 2 may also be used to finance payments of service fees under a
shareholder service arrangement, which may be established by each Distributor in
accordance with Section 4, and the costs of administering the Plan. To the
extent that amounts paid hereunder are not used specifically to reimburse the
Distributor for any such expense, such amounts may be treated as compensation
for the Distributor's distribution-related services. No provision of this Plan
shall be interpreted to prohibit any payments by the Fund during periods when
the Fund has suspended or otherwise limited sales.
(b) Subject to the provisions in Sections 8 and 9 hereof, amounts payable
pursuant to Section 2 in respect of Shares of each Portfolio shall be paid by
the Fund to the Distributor in respect of such Shares or, if more than one
institution has acted or is acting as Distributor in respect of such Shares,
then amounts payable pursuant to Section 2 in respect of such Shares shall be
paid to each such Distributor in proportion to the number of such Shares sold by
or attributable to such Distributor's distribution efforts
<PAGE> 2
in respect of such Shares in accordance with allocation provisions of each
Distributor's distribution agreement (the "Distributor's 12b-1 Share")
notwithstanding that such Distributor's distribution agreement with the fund may
have been terminated. The Distributor's l2b-1 Share shall include amounts
payable pursuant to Section 2 in respect of Shares sold by or attributable to
distribution efforts of GT Global, Inc. That portion of the amounts paid under
the Plan that is not paid or advanced by the Distributor to dealers or other
institutions that provide personal continuing shareholder service as a service
fee pursuant to Section 4 shall be deemed an asset-based sales charge.
(c) Any Distributor may assign, transfer or pledge ("Transfer") to one or
more designees (each an "Assignee"), its rights to all or a designated portion
of its Distributor's l2b-1 Share from time to time (but not such Distributor's
duties and obligations pursuant hereto or pursuant to any distribution agreement
in effect from time to time, if any, between such Distributor and the Fund),
free and clear of any offsets or claims the Fund may have against such
Distributor. Each such Assignee's ownership interest in a Transfer of a specific
designated portion of a Distributor's l2b-1 Share is hereafter referred to as an
"Assignee's l2b-1 Portion." A Transfer pursuant to this Section 3(c) shall not
reduce or extinguish any claims of the Fund against the Distributor.
(d) Each Distributor shall promptly notify the Fund in writing of each such
Transfer by providing the Fund with the name and address of each such Assignee.
(e) A Distributor may direct the Fund to pay an Assignee's 12b-1 Portion
directly to such Assignee. In such event, the Distributor shall provide the Fund
with a monthly calculation of the amount of (i) the Distributor's 12b-1 Share,
and (ii) each Assignee's 12b-1 Portion, if any, for such month (the "Monthly
Calculation"). In such event, the Fund shall, upon receipt of such notice and
Monthly Calculation from the Distributor, make all payments required under such
distribution agreement directly to the Assignee in accordance with the
information provided in such notice and Monthly Calculation upon the same terms
and conditions as if such payments were to be paid to the Distributor.
(f) Alternatively, in connection with a Transfer, a Distributor may direct
the Fund to pay all of such Distributor's 12b-1 Share from time to time to a
depository or collection agent designated by any Assignee, which depository or
collection agent may be delegated the duty of dividing such Distributor's 12b-1
Share between the Assignee's 12b-1 Portion and the balance of the Distributor's
12b-1 Share (such balance, when distributed to the Distributor by the depository
or collection agent, the "Distributor's 12b-1 Portion"), in which case only the
Distributor's 12b-1 Portion may be subject to offsets or claims the Fund may
have against such Distributor.
<PAGE> 3
SECTION 4.
(a) Amounts expended by the Fund under the Plan shall be used in part for
the implementation by the Distributor of shareholder service arrangements with
respect to the Shares. The maximum service fee payable to any provider of such
shareholder service shall be twenty-five one-hundredths of one percent (0.25%)
per annum of the daily net assets of the Shares attributable to the customers of
such service provider. All such payments are the legal obligation of the Fund
and not of any Distributor or its designee.
(b) Pursuant to this Plan, the Distributor may enter into agreements
substantially in the form attached hereto as Exhibit A ("Service Agreements")
with such broker-dealers ("Dealers") as may be selected from time to time by the
Distributor for the provision of continuing shareholder services in connection
with Shares held by such Dealers' clients and customers ("Customers") who may
from time to time directly or beneficially own Shares. The personal continuing
shareholder services to be rendered by Dealers under the Service Agreements may
include, but shall not be limited to, some or all of the following: (i)
distributing sales literature; (ii) answering routine Customer inquiries
concerning the Fund and the Shares; (iii) assisting Customers in changing
dividend options, account designations and addresses, and in enrolling in any of
several retirement plans offered in connection with the purchase of Shares; (iv)
assisting in the establishment and maintenance of Customer accounts and records,
and in the processing of purchase and redemption transactions; (v) investing
dividends and capital gains distributions automatically in Shares; (vi)
performing sub-accounting; (vii) providing periodic statements showing a
Customer's shareholder account balance and the integration of such statements
with those of other transactions and balances in the Customer's account serviced
by such institution; (viii) forwarding applicable prospectuses, proxy
statements, reports and notices to Customers who hold Shares; and (ix) providing
such other information and administrative services as the Fund or the Customer
may reasonably request.
(c) The Distributor may also enter into Bank Shareholder Service Agreements
substantially in the form attached hereto as Exhibit B ("Bank Agreements") with
selected banks and financial institutions acting in an agency capacity for their
customers ("Banks"). Banks acting in such capacity will provide some or all of
the shareholder services to their customers as set forth in the Bank Agreements
from time to time.
(d) The Distributor may also enter into Agency Pricing Agreements
substantially in the form attached hereto as Exhibit C ("Pricing Agreements")
with selected retirement plan service providers acting in an agency capacity for
their customers ("Retirement Plan Providers"). Retirement Plan Providers acting
in such capacity will provide some or all of the shareholder services to their
customers as set forth in the Pricing Agreements from time to time.
<PAGE> 4
(e) The Distributor may also enter into Shareholder Service Agreements
substantially in the form attached hereto as Exhibit D ("Bank Trust Department
Agreements and Brokers for Bank Trust Department Agreements") with selected bank
trust departments and brokers for bank trust departments. Such bank trust
departments and brokers for bank trust departments will provide some or all of
the shareholder services to their customers as set forth in the Bank Trust
Department Agreements and Brokers for Bank Trust Department Agreements from time
to time.
SECTION 5. This Plan shall not take effect with respect to any Shares of any
Portfolio until (i) it has been approved, together with any related agreements,
by votes of the majority of both (a) the Board of Trustees of the Fund, and (b)
those trustees of the Fund who are not "interested persons" of the Fund (as
defined in the 1940 Act) and have no direct or indirect financial interest in
the operation of this Plan or any agreements related to it (the "Disinterested
Trustees"), cast in person at a meeting called for the purpose of voting on this
Plan or such agreements, and (ii) the execution by the Fund and A I M
Distributors, Inc. of a Master Distribution Agreement in respect of the Shares
of such Portfolio.
SECTION 6. Unless sooner terminated pursuant to Section 8, this Plan shall
continue in effect until May 29, 1999 and thereafter shall continue in effect so
long as such continuance is specifically approved, at least annually, in the
manner provided for approval of this Plan in Section 5.
SECTION 7. Each Distributor shall provide the Fund's Board of Trustees and the
Board of Trustees shall review, at least quarterly, a written report of the
amounts expended for distribution of the Shares and the purposes for which such
expenditures were made.
SECTION 8. This Plan may be terminated with respect to the Shares of any
Portfolio at any time by vote of a majority of the Disinterested Trustees, or by
a vote of a majority of outstanding Shares of such Portfolio. Upon termination
of this Plan with respect to any or all such classes, the obligation of the Fund
to make payments pursuant to this Plan with respect to such classes shall
terminate, and the Fund shall not be required to make payments hereunder beyond
such termination date with respect to expenses incurred in connection with
Shares sold prior to such termination date, provided, in each case that each of
the requirements of a Complete Termination of the Plan in respect of such class,
as defined below, are met. A termination of this Plan with respect to any or all
Shares of any or all Portfolios shall not affect the obligation of the Fund to
withhold and pay to any Distributor contingent deferred sales changes to which
such distributor is entitled pursuant to any distribution agreement. For
purposes of this Section 8, a "Complete Termination" of this Plan in respect of
any Portfolio shall mean a termination of this Plan in respect of such
Portfolio, provided that: (i) the Disinterested Trustees of the Fund shall have
acted in good faith and shall have determined that such termination is in the
best interest of the Fund and the shareholders of such Portfolio; (ii) the Fund
does not alter the terms of the contingent deferred sales charges applicable to
Shares outstanding at the time of such termination; and (iii) unless the
applicable Distributor at the time of such termination was
<PAGE> 5
in material breach under the distribution agreement in respect of such
Portfolio, the Fund shall not, in respect of such Portfolio, pay to any person
or entity, other than such Distributor or its designee, either the asset-based
sales charge or the service fee (or any similar fee) in respect of the Shares
sold by such Distributor prior to such termination.
SECTION 9. Any agreement related to this Plan shall be made in writing, and
shall provide:
(a) that such agreement may be terminated with respect to the Shares of any
or all Portfolios at any time, without payment of any penalty, by vote of a
majority of the Disinterested Trustees or by a vote of the majority of the
outstanding Shares of such Portfolio, on not more than sixty (60) days' written
notice to any other party to the agreement; and
(b) that such agreement shall terminate automatically in the event of its
assignment; provided, however, that, subject to the provisions of Section 8
hereof, if such agreement is terminated for any reason, the obligation of the
Fund to make payments of (i) the Distributor's 12b-1 Share in accordance with
the directions of the Distributor pursuant to Section 3(e) or (f) hereof if
there exist Assignees for all or any portion of such Distributor's 12b-1 Share,
and (ii) the remainder of such Distributor's l2b-1 Share to such Distributor if
there are no Assignees for such Distributor's Share, pursuant to such agreement
and this Plan will continue with respect to the Shares until such Shares are
redeemed or automatically converted into another class of shares of the Fund.
SECTION 10. This Plan may not be amended with respect to the shares of any
Portfolio to increase materially the amount of distribution expenses provided
for in Section 2 hereof unless such amendment is approved by a vote of at least
a "majority of the outstanding voting securities" (as defined in the 1940 Act)
of the Shares of such Portfolio, and no material amendment to the Plan with
respect to the shares of any Portfolio shall be made unless approved in the
manner provided for in Section 5 hereof.
AIM GROWTH SERIES
(on behalf of its Class B Shares)
Attest: /s/ MICHAEL A. SILVER By: /s/ WILLIAM J. GUILFOYLE
----------------------------- ---------------------------------
Michael A. Silver William J. Guilfoyle
Assistant Secretary President
Effective as of May 29, 1998.
<PAGE> 6
SCHEDULE A
TO
DISTRIBUTION PLAN
OF
AIM GROWTH SERIES
<TABLE>
<CAPTION>
MAXIMUM
ASSET-BASED MAXIMUM MAXIMUM
CLASS B SHARES SALES CHARGE SERVICE FEE AGGREGATE FEE
- -------------- ------------ ----------- -------------
<S> <C> <C> <C>
AIM Worldwide Growth Fund 0.75% 0.25% 1.00%
AIM International Growth Fund 0.75% 0.25% 1.00%
AIM New Pacific Growth Fund 0.75% 0.25% 1.00%
AIM Europe Growth Fund 0.75% 0.25% 1.00%
AIM Japan Growth Fund 0.75% 0.25% 1.00%
AIM Small Cap Equity Fund 0.75% 0.25% 1.00%
AIM Mid Cap Growth Fund 0.75% 0.25% 1.00%
AIM America Value Fund 0.75% 0.25% 1.00%
</TABLE>
<PAGE> 1
EXHIBIT m(3)
MASTER DISTRIBUTION PLAN
OF
AIM GROWTH SERIES
(CLASS A AND CLASS C SHARES)
SECTION 1. AIM Growth Series (the "Fund") on behalf of the series of
the Shares of beneficial interest set forth in Appendix A attached hereto (the
"Portfolios") may act as a distributor of the Class A shares and Class C shares
of such Portfolios (the "Shares") of which the Fund is the issuer, pursuant to
Rule 12b-1 under the Investment Company Act of 1940, as amended (the "1940
Act"), according to the terms of this Distribution Plan (the "Plan").
SECTION 2. The Fund may incur pursuant to the terms of this Master
Distribution Plan expenses at the rates set forth in Appendix A per annum of the
average daily net assets of the Fund attributable to the Shares, subject to any
applicable limitations imposed from time to time by applicable rules of the
National Association of Securities Dealers, Inc.
SECTION 3. Amounts set forth in Appendix A may be used to finance any
activity which is primarily intended to result in the sale of the Shares,
including, but not limited to, expenses of organizing and conducting sales
seminars, advertising programs, finders fees, printing of prospectuses and
statements of additional information (and supplements thereto) and reports for
other than existing shareholders, preparation and distribution of advertising
material and sales literature, overhead, supplemental payments to dealers and
other institutions as asset-based sales charges. Amounts set forth in Appendix A
may also be used to finance payments of service fees under a shareholder service
arrangement to be established by A I M Distributors, Inc. ("Distributors") as
the Fund's distributor in accordance with Section 4, and the costs of
administering the Plan. To the extent that amounts paid hereunder are not used
specifically to reimburse Distributors for any such expense, such amounts may be
treated as compensation for Distributors' distribution-related services. All
amounts expended pursuant to the Plan shall be paid to Distributors and are the
legal obligation of the Fund and not of Distributors. That portion of the
amounts paid under the Plan that is not paid or advanced by Distributors to
dealers or other institutions that provide personal continuing shareholder
service as a service fee pursuant to Section 4 shall be deemed an asset-based
sales charge. The distribution agreement with any Distributor shall provide that
the portion of the amounts set forth in Appendix A that is an asset based sales
charge with respect to Class C Shares shall be deemed to be paid for services
rendered by the Distributor or any Dealers in placing the Class C Shares, which
services are fully performed upon the settlement of each sale of a Class C Share
(or share of another portfolio from which the Class C Share derives). No
provision of this Plan shall be interpreted to prohibit any payments by the Fund
during periods when the Fund has suspended or otherwise limited sales.
SECTION 4.
(a) Amounts expended by the Fund under the Plan shall
be used in part for the implementation by Distributors of
shareholder service arrangements with respect to the Shares.
The maximum service fee paid to any service provider shall be
twenty-five one-hundredths of one percent (0.25%) per annum of
the average daily net assets of the Fund attributable to the
Shares owned by the customers of such service provider.
<PAGE> 2
(b) Pursuant to this program, Distributors may enter
into agreements substantially in the form attached hereto as
Exhibit A ("Service Agreements") with such broker-dealers
("Dealers") as may be selected from time to time by
Distributors for the provision of distribution-related
personal shareholder services in connection with the sale of
Shares to the Dealers' clients and customers ("Customers") who
may from time to time directly or beneficially own Shares. The
distribution-related personal continuing shareholder services
to be rendered by Dealers under the Service Agreements may
include, but shall not be limited to, the following: (i)
distributing sales literature; (ii) answering routine Customer
inquiries concerning the Fund and the Shares; (iii) assisting
Customers in changing dividend options, account designations
and addresses, and in enrolling into any of several retirement
plans offered in connection with the purchase of Shares; (iv)
assisting in the establishment and maintenance of customer
accounts and records, and in the processing of purchase and
redemption transactions; (v) investing dividends and capital
gains distributions automatically in Shares; and (vi)
providing such other information and services as the Fund or
the Customer may reasonably request.
(c) Distributors may also enter into Bank Shareholder
Service Agreements substantially in the form attached hereto
as Exhibit B ("Bank Agreements") with selected banks acting in
an agency capacity for their customers ("Banks"). Banks acting
in such capacity will provide some or all of the shareholder
services to their customers as set forth in the Bank
Agreements from time to time.
(d) Distributors may also enter into Agency Pricing
Agreements substantially in the form attached hereto as
Exhibit C ("Pricing Agreements") with selected retirement plan
service providers acting in an agency capacity for their
customers ("Retirement Plan Providers"). Retirement Plan
Providers acting in such capacity will provide some or all of
the shareholder services to their customers as set forth in
the Pricing Agreements from time to time.
(e) Distributors may also enter into Shareholder
Service Agreements substantially in the form attached hereto
as Exhibit D ("Bank Trust Department Agreements and Brokers
for Bank Trust Department Agreements") with selected bank
trust departments and brokers for bank trust departments. Such
bank trust departments and brokers for bank trust departments
will provide some or all of the shareholder services to their
customers as set forth in the Bank Trust Department Agreements
and Brokers for Bank Trust Department Agreements from time to
time.
SECTION 5. Any amendment to this Plan that requires the approval of the
shareholders of a Class pursuant to Rule 12b-1 under the 1940 Act shall become
effective as to such Class upon the approval of such amendment by a "majority of
the outstanding voting securities" (as defined in the 1940 Act) of such Class,
provided that the Board of Trustees of the Fund has approved such amendment in
accordance with the provisions of Section 6 of this Plan.
SECTION 6. This Plan, any amendment to this Plan and any agreements
related to this Plan shall become effective immediately upon the receipt by the
Fund of both (a) the affirmative vote of a majority of the Board of Trustees of
the Fund, and (b) the affirmative vote of a majority of those trustees of the
Fund who are not "interested persons" of the Fund (as defined in the 1940 Act)
and have no direct or indirect financial interest in the operation of this Plan
or any agreements related to it (the "Dis-interested Trustees"), cast in person
at a meeting called for the purpose of voting on
-2-
<PAGE> 3
this Plan or such agreements. Notwithstanding the foregoing, no such amendment
that requires the approval of the shareholders of a Class of a Fund shall become
effective as to such Class until such amendment has been approved by the
shareholders of such Class in accordance with the provisions of Section 5 of
this Plan.
SECTION 7. Unless sooner terminated pursuant to Section 9, this Plan
shall continue in effect until June 30, 1999 and thereafter shall continue in
effect so long as such continuance is specifically approved, at least annually,
in the manner provided for approval of this Plan in Section 6.
SECTION 8. Distributors shall provide to the Fund's Board of Trustees
and the Board of Trustees shall review, at least quarterly, a written report of
the amounts so expended and the purposes for which such expenditures were made.
SECTION 9. This Plan may be terminated at any time by vote of a
majority of the Dis-interested Trustees, or by vote of a majority of the
outstanding voting securities of the Shares . If this Plan is terminated, the
obligation of the Fund to make payments pursuant to this Plan will also cease
and the Fund will not be required to make any payments beyond the termination
date even with respect to expenses incurred prior to the termination date.
SECTION 10. Any agreement related to this Plan shall be made in
writing, and shall provide:
(a) that such agreement may be terminated at any
time, without payment of any penalty, by vote of a majority of
the Dis-interested Trustees or by a vote of the outstanding
voting securities of the Fund attributable to the Shares, on
not more than sixty (60) days' written notice to any other
party to the agreement; and
(b) that such agreement shall terminate automatically
in the event of its assignment.
SECTION 11. This Plan may not be amended to increase materially the
amount of distribution expenses provided for in Section 2 hereof unless such
amendment is approved in the manner provided in Section 5 hereof, and no
material amendment to the Plan shall be made unless approved in the manner
provided for in Section 6 hereof.
AIM GROWTH SERIES
(on behalf of its Class A and Class C Shares)
Attest: By:
------------------- -----------------------------------------
Assistant Secretary President
Effective as of , 1999
---------------------
-3-
<PAGE> 4
APPENDIX A
TO
MASTER DISTRIBUTION PLAN
OF
AIM GROWTH SERIES
(CLASS A AND CLASS C SHARES)
(DISTRIBUTION FEE)
The Fund shall pay the Distributor as full compensation for all
services rendered and all facilities furnished under the Distribution Plan for
each Portfolio as designated below, a Distribution Fee* determined by applying
the annual rate set forth below as to each Portfolio (or Class A or Class C
thereof) to the average daily net assets of the Portfolio (or Class A or Class C
thereof) for the plan year, computed in a manner used for the determination of
the offering price of shares of the Portfolio (or Class A or Class C thereof).
<TABLE>
<CAPTION>
MAXIMUM
ASSET-BASED SERVICE AGGREGATE
FUND SALES CHARGE FEE ANNUAL FEE
---- ------------ -------- ----------
Class A Shares
--------------
<S> <C> <C> <C>
AIM Basic Value Fund 0.10% 0.25% 0.35%
AIM Europe Growth Fund 0.10% 0.25% 0.35%
AIM International Growth Fund 0.10% 0.25% 0.35%
AIM Japan Growth Fund 0.10% 0.25% 0.35%
AIM Mid Cap Equity Fund 0.10% 0.25% 0.35%
AIM New Pacific Growth Fund 0.10% 0.25% 0.35%
AIM Small Cap Growth Fund 0.10% 0.25% 0.35%
AIM Worldwide Growth Fund 0.10% 0.25% 0.35%
Class C Shares
--------------
AIM Basic Value Fund 0.75% 0.25% 1.00%
AIM Europe Growth Fund 0.75% 0.25% 1.00%
AIM Japan Growth Fund 0.75% 0.25% 1.00%
AIM Mid Cap Equity Fund 0.75% 0.25% 1.00%
AIM New Pacific Growth Fund 0.75% 0.25% 1.00%
AM Small Cap Growth Fund 0.75% 0.25% 1.00%
</TABLE>
- --------
* The Distribution Fee is payable apart from the sales charge, if
any, as stated in the current prospectus for the applicable
Class and the applicable Portfolio.
-4-
<PAGE> 1
EXHIBIT m(4)
[LOGO ONLY]
A I M DISTRIBUTORS, INC.
SHAREHOLDER SERVICE AGREEMENT
FOR SALE OF SHARES
OF THE AIM MUTUAL FUNDS
This Shareholder Service Agreement (the "Agreement") has been adopted pursuant
to Rule 12b-1 under the Investment Company Act of 1940, by each of the
AIM-managed mutual funds (or designated classes of such funds) listed in
Schedule A, which may be amended from time to time by AIM Distributors, Inc.
("Distributors") to this Agreement (the "Funds"), under a Distribution Plan (the
"Plan") adopted pursuant to said Rule. This Agreement, being made between
Distributors, solely as agent for such Funds and the undersigned authorized
dealer, defines the services to be provided by the authorized dealer for which
it is to receive payments pursuant to the Plan adopted by each of the Funds. The
Plan and the Agreement have been approved by a majority of the directors of each
of the Funds, including a majority of the directors who are not interested
persons of such Funds, and who have no direct or indirect financial interest in
the operation of the Plan or related agreements (the "Dis-interested
Directors"), by votes cast in person at a meeting called for the purpose of
voting on the Plan. Such approval included a determination that in the exercise
of their reasonable business judgement and in light of their fiduciary duties,
there is a reasonable likelihood that the Plan will benefit such Fund and its
shareholders.
1. To the extent that you provide distribution-related and continuing
personal shareholder services to customers who may, from time to time,
directly or beneficially own shares of the Funds, including but not
limited to, distributing sales literature, answering routine customer
inquiries regarding the Funds, assisting customers in changing dividend
options, account designations and addresses, and in enrolling into 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 capital
gains distributions automatically in shares and providing such other
services as the Funds or the customer may reasonably request, we,
solely as agent for the Funds, shall pay you a fee periodically or
arrange for such fee to be paid to you.
2. The fee paid with respect to each Fund will be calculated at the end of
each payment period (as indicated in Schedule A) for each business day
of the Fund during such payment period at the annual rate set forth in
Schedule A as applied to the average net asset value of the shares of
such Fund purchased or acquired through exchange on or after the Plan
Calculation Date shown for such Fund on Schedule A. Fees calculated in
this manner shall be paid to you only if your firm is the dealer of
record at the close of business on the last business day of the
applicable payment period, for the account in which such shares are
held (the "Subject Shares"). In cases where Distributors has advanced
payment to you of the first year's fee for shares sold at net asset
value and subject to a contingent deferred sales charge, no additional
payments will be made to you during the first year the Subject Shares
are held.
1/99
<PAGE> 2
3. The total of the fees calculated for all of the Funds listed on
Schedule A for any period with respect to which calculations are made
shall be paid to you within 45 days after the close of such period.
4. We reserve the right to withhold payment with respect to the Subject
Shares purchased by you and redeemed or repurchased by the Fund or by
us as Agent within seven (7) business days after the date of our
confirmation of such purchase. We reserve the right at any time to
impose minimum fee payment requirements before any periodic payments
will be made to you hereunder.
5. This Agreement and Schedule A does not require any broker-dealer to
provide transfer agency and recordkeeping related services as nominee
for its customers.
6. You shall furnish us and the Funds with such information as shall
reasonably be requested either by the directors of the Funds or by us
with respect to the fees paid to you pursuant to this Agreement.
7. We shall furnish the directors of the Funds, for their review on a
quarterly basis, a written report of the amounts expended under the
Plan by us and the purposes for which such expenditures were made.
8. Neither you nor any of your employees or agents are authorized to make
any representation concerning shares of the Funds except those
contained in the then current Prospectus or Statement of Additional
Information for the Funds, and you shall have no authority to act as
agent for the Funds or for Distributors.
9. We may enter into other similar Shareholder Service Agreements with any
other person without your consent.
10. This Agreement may be amended at any time without your consent by
Distributors mailing a copy of an amendment to you at address set forth
below. Such amendment shall become effective on the date specified in
such amendment unless you elect to terminate this Agreement within
thirty (30) days of your receipt of such amendment.
11. This Agreement may be terminated with respect to any Fund at any time
without payment of any penalty by the vote of a majority of the
directors of such Fund who are Dis-interested Directors or by a vote of
a majority of the Fund's outstanding shares, on sixty (60) days'
written notice. It will be terminated by any act which terminates
either the Selected Dealer Agreement between your firm and us or the
Fund's Distribution Plan, and in any event, it shall terminate
automatically in the event of its assignment as that term is defined in
the 1940 Act.
12. The provisions of the Distribution Agreement between any Fund and us,
insofar as they relate to the Plan, are incorporated herein by
reference. This Agreement shall become effective upon execution and
delivery hereof and shall continue in full force and effect as long as
the continuance of the Plan and this related Agreement are approved at
least annually by a vote of the directors, including a majority of the
Dis-interested Directors, cast in person at a meeting called for the
purpose of voting thereon. All communications to us should be sent to
the address of Distributors as shown at the bottom of this
1/99
<PAGE> 3
Agreement. Any notice to you shall be duly given if mailed or
telegraphed to you at the address specified by you below.
13. You represent that you provide to your customers who own shares of the
Funds personal services as defined from time to time in applicable
regulations of the National Association of Securities Dealers, Inc.,
and that you will continue to accept payments under this Agreement only
so long as you provide such services.
14. This Agreement shall be construed in accordance with the laws of the
State of Texas.
A I M DISTRIBUTORS, INC.
Date: By:
----------------------- --------------------------------------------
The undersigned agrees to abide by the foregoing terms and conditions.
Date: By:
----------------------- --------------------------------------------
Signature
--------------------------------------------
Print Name Title
--------------------------------------------
Dealer's Name
--------------------------------------------
Address
--------------------------------------------
City State Zip
--------------------------------------------
Telephone
Please sign both copies and return one copy of each to:
A I M Distributors, Inc.
11 Greenway Plaza, Suite 100
Houston, Texas 77046-1173
1/99
<PAGE> 4
SCHEDULE "A" TO
SHAREHOLDER SERVICE AGREEMENT
<TABLE>
<CAPTION>
Fund Fee Rate* Plan Calculation Date
---- -------- ---------------------
<S> <C> <C>
AIM Advisor Flex Fund A Shares 0.25 August 4, 1997
AIM Advisor Flex Fund B Shares 0.25 March 3, 1998
AIM Advisor Flex Fund C Shares 1.00** August 4, 1997
AIM Advisor International Value Fund A Shares 0.25 August 4, 1997
AIM Advisor International Value Fund B Shares 0.25 March 3, 1998
AIM Advisor International Value Fund C Shares 1.00** August 4, 1997
AIM Advisor Large Cap Value Fund A Shares 0.25 August 4, 1997
AIM Advisor Large Cap Value Fund B Shares 0.25 March 3, 1998
AIM Advisor Large Cap Value Fund C Shares 1.00** August 4, 1997
AIM Advisor MultiFlex Fund A Shares 0.25 August 4, 1997
AIM Advisor MultiFlex Fund B Shares 0.25 March 3, 1998
AIM Advisor MultiFlex Fund C Shares 1.00** August 4, 1997
AIM Advisor Real Estate Fund A Shares 0.25 August 4, 1997
AIM Advisor Real Estate Fund B Shares 0.25 March 3, 1998
AIM Advisor Real Estate Fund C Shares 1.00** August 4, 1997
AIM Aggressive Growth Fund A Shares 0.25 July 1, 1992
AIM Aggressive Growth Fund B Shares 0.25 March 1, 1999
AIM Aggressive Growth Fund C Shares 1.00** March 1, 1999
AIM Asian Growth Fund A Shares 0.25 November 1, 1997
AIM Asian Growth Fund B Shares 0.25 November 1, 1997
AIM Asian Growth Fund C Shares 1.00** November 1, 1997
AIM Balanced Fund A Shares 0.25 October 18, 1993
AIM Balanced Fund B Shares 0.25 October 18, 1993
AIM Balanced Fund C Shares 1.00** August 4, 1997
AIM Blue Chip Fund A Shares 0.25 June 3, 1996
AIM Blue Chip Fund B Shares 0.25 October 1, 1996
AIM Blue Chip Fund C Shares 1.00** August 4, 1997
AIM Capital Development Fund A Shares 0.25 June 17, 1996
AIM Capital Development Fund B Shares 0.25 October 1, 1996
AIM Capital Development Fund C Shares 1.00** August 4, 1997
AIM Charter Fund A Shares 0.25 November 18, 1986
AIM Charter Fund B Shares 0.25 June 15, 1995
AIM Charter Fund C Shares 1.00** August 4, 1997
AIM Constellation Fund A Shares 0.25 September 9, 1986
AIM Constellation Fund B Shares 0.25 November 3, 1997
AIM Constellation Fund C Shares 1.00** August 4, 1997
AIM European Development Fund A Shares 0.25 November 1, 1997
AIM European Development Fund B Shares 0.25 November 1, 1997
AIM European Development Fund C Shares 1.00** November 1, 1997
AIM Global Aggressive Growth Fund A Shares 0.50** September 15, 1994
AIM Global Aggressive Growth Fund B Shares 0.25 September 15, 1994
AIM Global Aggressive Growth Fund C Shares 1.00** August 4, 1997
AIM Global Growth Fund A Shares 0.50** September 15, 1994
AIM Global Growth Fund B Shares 0.25 September 15, 1994
</TABLE>
1/99
<PAGE> 5
<TABLE>
<CAPTION>
Fund Fee Rate* Plan Calculation Date
---- -------- ---------------------
<S> <C> <C>
AIM Global Growth Fund C Shares 1.00** August 4, 1997
AIM Global Income Fund A Shares 0.50** September 15, 1994
AIM Global Income Fund B Shares 0.25 September 15, 1994
AIM Global Income Fund C Shares 1.00** August 4, 1997
AIM Global Utilities Fund A Shares 0.25 July 1, 1992
AIM Global Utilities Fund B Shares 0.25 September 1, 1993
AIM Global Utilities Fund C Shares 1.00** August 4, 1997
AIM High Income Municipal Fund A Shares 0.25 December 22, 1997
AIM High Income Municipal Fund B Shares 0.25 December 22, 1997
AIM High Income Municipal Fund C Shares 1.00** December 22, 1997
AIM High Yield Fund A Shares 0.25 July 1, 1992
AIM High Yield Fund B Shares 0.25 September 1, 1993
AIM High Yield Fund C Shares 1.00** August 4, 1997
AIM High Yield Fund II A Shares 0.25 October 1, 1998
AIM High Yield Fund II B Shares 0.25 November 20, 1998
AIM High Yield Fund II C Shares 1.00** November 20, 1998
AIM Income Fund A Shares 0.25 July 1, 1992
AIM Income Fund B Shares 0.25 September 1, 1993
AIM Income Fund C Shares 1.00** August 4, 1997
AIM Intermediate Government Fund A Shares 0.25 July 1, 1992
AIM Intermediate Government Fund B Shares 0.25 September 1, 1993
AIM Intermediate Government Fund C Shares 1.00** August 4, 1997
AIM International Equity Fund A Shares 0.25 May 21, 1992
AIM International Equity Fund B Shares 0.25 September 15, 1994
AIM International Equity Fund C Shares 1.00** August 4, 1997
AIM Large Cap Growth Fund A Shares 0.25 March 1, 1999
AIM Large Cap Growth Fund B Shares 0.25 March 1, 1999
AIM Large Cap Growth Fund C Shares 1.00** March 1, 1999
AIM Limited Maturity Treasury Fund 0.15 December 2, 1987
AIM Money Market Fund B Shares 0.25 October 18, 1993
AIM Money Market Fund C Shares 1.00** August 4, 1997
AIM Money Market Fund Cash Reserve Shares 0.25 October 18, 1993
AIM Municipal Bond Fund A Shares 0.25 July 1, 1992
AIM Municipal Bond Fund B Shares 0.25 September 1, 1993
AIM Municipal Bond Fund C Shares 1.00** August 4, 1997
AIM Select Growth Fund A Shares 0.25 July 1, 1992
AIM Select Growth Fund B Shares 0.25 September 1,1993
AIM Select Growth Fund C Shares 1.00** August 4, 1997
AIM Small Cap Opportunities Fund A Shares 0.25 June 29, 1998
AIM Small Cap Opportunities Fund B Shares 0.25 July 13, 1998
AIM Small Cap Opportunities Fund C Shares 1.00** December 30, 1998
AIM Tax-Exempt Bond Fund of Connecticut A Shares 0.25 July 1, 1992
AIM Tax-Exempt Cash Fund A Shares 0.10 July 1, 1992
AIM Value Fund A Shares 0.25 July 1, 1992
AIM Value Fund B Shares 0.25 October 18, 1993
AIM Value Fund C Shares 1.00** August 4, 1997
AIM Weingarten Fund A Shares 0.25 September 9, 1986
AIM Weingarten Fund B Shares 0.25 June 15, 1995
AIM Weingarten Fund C Shares 1.00** August 4, 1997
</TABLE>
1/99
<PAGE> 6
*Frequency of Payments: Quarterly, B and C share payments begin after an initial
12 month holding period. Where the broker dealer or financial institution waives
the 1% up-front commission on Class C shares, payments commence immediately.
**Of this amount, 0.25% is paid as a shareholder servicing fee and the remainder
is paid as an asset-based sales charge, as those terms are defined under the
rules of the National Association of Securities Dealers, Inc.
Minimum Payments: $50 (with respect to all funds in the aggregate.)
No payment pursuant to this Schedule is payable to a dealer, bank or other
service provider for the first year with respect to sales of $1 million or more,
at no load, in cases where A I M Distributors, Inc. has advanced the service fee
to the dealer, bank or other service provider.
THE FOLLOWING FUNDS ARE ADDED AS OF THE CLOSE OF BUSINESS MAY 29, 1998:
<TABLE>
<CAPTION>
Fund Fee Rate* Plan Calculation Date
---- -------- ---------------------
<S> <C> <C>
AIM Basic Value Fund A Shares 0.25 May 29, 1998
AIM Basic Value Fund B Shares 0.25 May 29, 1998
AIM Basic Value Fund C Shares 1.00** May 3, 1999
AIM Developing Markets Fund A Shares 0.25 May 29, 1998
AIM Developing Markets Fund B Shares 0.25 May 29, 1998
AIM Developing Markets Fund C Shares 1.00** March 1, 1999
AIM Europe Growth Fund A Shares 0.25 May 29, 1998
AIM Europe Growth Fund B Shares 0.25 May 29, 1998
AIM Europe Growth Fund C Shares 1.00** May 3, 1999
AIM Global Consumer Products and
Services Fund A Shares 0.40** May 29, 1998
AIM Global Consumer Products and
Services Fund B Shares 0.25 May 29, 1998
AIM Global Consumer Products and
Services Fund C Shares 1.00** March 1, 1999
AIM Global Financial Services Fund A Shares 0.40** May 29, 1998
AIM Global Financial Services Fund B Shares 0.25 May 29, 1998
AIM Global Financial Services Fund C Shares 1.00** March 1, 1999
AIM Global Government Income Fund A Shares 0.25 May 29, 1998
AIM Global Government Income Fund B Shares 0.25 May 29, 1998
AIM Global Government Income Fund C Shares 1.00** March 1, 1999
AIM Global Growth & Income Fund A Shares 0.25 May 29, 1998
AIM Global Growth & Income Fund B Shares 0.25 May 29, 1998
AIM Global Growth & Income Fund C Shares 1.00** March 1, 1999
AIM Global Health Care Fund A Shares 0.40** May 29, 1998
AIM Global Health Care Fund B Shares 0.25 May 29, 1998
AIM Global Health Care Fund C Shares 1.00** March 1, 1999
AIM Emerging Markets Debt Fund A Shares 0.25 May 29, 1998
AIM Emerging Markets Debt Fund B Shares 0.25 May 29, 1998
AIM Emerging Markets Debt Fund C Shares 1.00** March 1, 1999
AIM Global Infrastructure Fund A Shares 0.40** May 29, 1998
AIM Global Infrastructure Fund B Shares 0.25 May 29, 1998
AIM Global Infrastructure Fund C Shares 1.00** March 1, 1999
AIM Global Resources Fund A Shares O.40** May 29, 1998
AIM Global Resources Fund B Shares O.25 May 29, 1998
AIM Global Resources Fund C Shares 1.00** March 1, 1999
AIM Global Telecommunications Fund A Shares 0.40** May 29, 1998
AIM Global Telecommunications Fund B Shares 0.25 May 29, 1998
AIM Global Telecommunications Fund C Shares 1.00** March 1, 1999
</TABLE>
1/99
<PAGE> 7
<TABLE>
<CAPTION>
Fund Fee Rate* Plan Calculation Date
---- -------- ---------------------
<S> <C> <C>
AIM Japan Growth Fund A Shares 0.25 May 29, 1998
AIM Japan Growth Fund B Shares 0.25 May 29, 1998
AIM Japan Growth Fund C Shares 1.00** March 1, 1999
AIM Latin American Growth Fund A Shares 0.40** May 29, 1998
AIM Latin American Growth Fund B Shares 0.25 May 29, 1998
AIM Latin American Growth Fund C Shares 1.00** May 3, 1999
AIM Mid Cap Equity Fund A Shares 0.25 May 29, 1998
AIM Mid Cap Equity Fund B Shares 0.25 May 29, 1998
AIM Mid Cap Equity Fund C Shares 1.00** May 3, 1999
AIM Global Trends Fund A Shares 0.40** May 29, 1998
AIM Global Trends Fund B Shares 0.25 May 29, 1998
AIM Global Trends Fund C Shares 1.00** May 29, 1998
AIM New Pacific Growth Fund A Shares 0.25 May 29, 1998
AIM New Pacific Growth Fund B Shares 0.25 May 29, 1998
AIM New Pacific Growth Fund C Shares 1.00** May 3, 1999
AIM Small Cap Growth Fund A Shares 0.25 May 29, 1998
AIM Small Cap Growth Fund B Shares 0.25 May 29, 1998
AIM Small Cap Growth Fund C Shares 1.00** May 3, 1999
AIM Strategic Income Fund A Shares 0.25 May 29, 1998
AIM Strategic Income Fund B Shares 0.25 May 29, 1998
AIM Strategic Income Fund C Shares 1.00** March 1, 1999
</TABLE>
*Frequency of Payments:
EFFECTIVE UNTIL JUNE 30, 1998: Class A and B share payments commence immediately
and are paid quarterly. Class C share payments commence after an initial twelve
month holding period and are paid quarterly.
**Of this amount, 0.25% is paid as a shareholder servicing fee and the remainder
is paid as an asset-based sales charge, as those terms are defined under the
rules of the National Association of Securities Dealers, Inc.
EFFECTIVE JULY 1, 1998: B share payments, like C share payments, will begin
after an initial 12 month holding period and are paid quarterly. Where the
broker dealer or financial institution waives the 1% up-front commission on
Class C shares, payments commence immediately.
**Of this amount, 0.25% is paid as a shareholder servicing fee and the remainder
is paid as an asset-based sales charge, as those terms are defined under the
rules of the National Association of Securities Dealers, Inc.
Minimum Payments: $50 (with respect to all funds in the aggregate.)
No payment pursuant to this Schedule is payable to a dealer, bank or other
service provider for the first year with respect to sales of $1 million or more,
at no load, in cases where A I M Distributors, Inc. has advanced the service fee
to the dealer, bank or other service provider.
1/99
<PAGE> 1
EXHIBIT m(5)
[LOGO ONLY]
A I M DISTRIBUTORS, INC.
BANK SHAREHOLDER
SERVICE AGREEMENT
We desire to enter into an Agreement with A I M Distributors, Inc. (the
"Company") acting as agent for the "AIM Funds", for servicing of our agency
clients who are shareholders of, and the administration of such shareholder
accounts in the shares of the AIM Funds (hereinafter referred to as the
"Shares"). Subject to the Company's acceptance of this Agreement, the terms and
conditions of this Agreement shall be as follows:
1. We shall provide continuing personal shareholder and administration
services for holders of the Shares who are also our clients. Such
services to our clients may include, without limitation, some or all of
the following: answering shareholder inquires regarding the Shares and
the AIM Funds; performing subaccounting; establishing and maintaining
shareholder accounts and records; processing and bunching 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 us; forwarding applicable AIM
Funds prospectuses, proxy statements, reports and notices to our
clients who are holders of Shares; and such other administrative
services as you reasonably may request, to the extent we are permitted
by applicable statute, rule or regulations to provide such services. We
represent that we shall accept fees hereunder only so long as we
continue to provide personal shareholder services to our clients.
2. Shares purchased by us as agents for our clients will be registered
(choose one) (in our name or in the name of our nominee) (in the names
of our clients). The client will be the beneficial owner of the Shares
purchased and held by us in accordance with the client's instructions
and the client may exercise all applicable rights of a holder of such
Shares. We agree to transmit to the AIM Funds' transfer agent in a
timely manner, all purchase orders and redemption requests of our
clients and to forward to each client any proxy statements, periodic
shareholder reports and other communications received from the Company
by us on behalf of our clients. The Company agrees to pay all
out-of-pocket expenses actually incurred by us in connection with the
transfer by us of such proxy statements and reports to our clients as
required by applicable law or regulation. We agree to transfer record
ownership of a client's Shares to the client promptly upon the request
of a client. In addition, record ownership will be promptly transferred
to the client in the event that the person or entity ceases to be our
client.
3. Within three (3) business days of placing a purchase order we agree to
send (i) a cashiers check to the Company, or (ii) a wire transfer to
the AIM Funds' transfer agent, in an amount equal to the amount of all
purchase orders placed by us on behalf of our clients and accepted by
the Company.
4. We agree to make available to the Company, upon the Company's request,
such information relating to our clients who are beneficial owners of
Shares and their transactions in such Shares as may be required by
applicable laws and regulations or as may be reasonably requested by
the
1/99
<PAGE> 2
Bank Shareholder Service Agreement Page 2
Company. The names of our customers shall remain our sole property and
shall not be used by the Company for any other purpose except as needed
for servicing and information mailings in the normal course of business
to holders of the Shares.
5. We shall provide such facilities and personnel (which may be all or any
part of the facilities currently used in our business, or all or any
personnel employed by us) as may be necessary or beneficial in carrying
out the purposes of this Agreement.
6. Except as may be provided in a separate written agreement between the
Company and us, neither we nor any of our employees or agents are
authorized to assist in distribution of any of the AIM Funds' shares
except those contained in the then current Prospectus applicable to the
Shares; and we shall have no authority to act as agent for the Company
or the AIM Funds. Neither the AIM Funds, A I M Advisors, Inc. nor A I M
Distributors, Inc. will be a party, nor will they be represented as a
party, to any agreement that we may enter into with our clients.
7. In consideration of the services and facilities described herein, we
shall receive from the Company on behalf of the AIM Funds an annual
service fee, payable at such intervals as may be set forth in Schedule
A hereto, of a percentage of the aggregate average net asset value of
the Shares owned beneficially by our clients during each payment
period, as set forth in Schedule A hereto, which may be amended from
time to time by the Company. We understand that this Agreement and the
payment of such service fees has been authorized and approved by the
Boards of Directors/Trustees of the AIM Funds, and is subject to
limitations imposed by the National Association of Securities Dealers,
Inc. In cases where the Company has advanced payments to us of the
first year's fee for shares sold with a contingent deferred sales
charge, no payments will be made to us during the first year the
subject Shares are held.
8. The AIM Funds reserve the right, at their discretion and without
notice, to suspend the sale of any Shares or withdraw the sale of
Shares.
9. We understand that the Company reserves the right to amend this
Agreement or Schedule A hereto at any time without our consent by
mailing a copy of an amendment to us at the address set forth below.
Such amendment shall become effective on the date specified in such
amendment unless we elect to terminate this Agreement within thirty
(30) days of our receipt of such amendment.
10. This Agreement may be terminated at any time by the Company on not less
than 15 days' written notice to us at our principal place of business.
We, on 15 days' written notice addressed to the Company at its
principal place of business, may terminate this Agreement, said
termination to become effective on the date of mailing notice to
Company of such termination. The Company's failure to terminate for any
cause shall not constitute a waiver of the Company's right to terminate
at a later date for any such cause. This Agreement shall terminate
automatically in the event of its assignment, the term "assignment" for
this purpose having the meaning defined in Section 2(a)(4) of the
Investment Company Act of 1940, as amended.
1/99
<PAGE> 3
Bank Shareholder Service Agreement Page 3
11. All communications to the Company shall be sent to it at Eleven
Greenway Plaza, Suite 100, Houston, Texas, 77046-1173. Any notice to us
shall be duly given if mailed or telegraphed to us at this address
shown on this Agreement.
12. This Agreement shall become effective as of the date when it is
executed and dated below by the Company. This Agreement and all rights
and obligations of the parties hereunder shall be governed by and
construed under the laws of the State of Texas.
A I M DISTRIBUTORS, INC.
Date: By: X
-------------------- ----------------------------------------------
The undersigned agrees to abide by the foregoing terms and conditions.
Date: By: X
-------------------- ----------------------------------------------
Signature
----------------------------------------------
Print Name Title
----------------------------------------------
Dealer's Name
----------------------------------------------
Address
----------------------------------------------
City State Zip
Please sign both copies and return one copy of each to:
A I M Distributors, Inc.
11 Greenway Plaza, Suite 100
Houston, Texas 77046-1173
1/99
<PAGE> 4
Bank Shareholder Service Agreement Page 4
SCHEDULE "A" TO
SHAREHOLDER SERVICE AGREEMENT
<TABLE>
<CAPTION>
Fund Fee Rate* Plan Calculation Date
---- -------- ---------------------
<S> <C> <C>
AIM Advisor Flex Fund A Shares 0.25 August 4, 1997
AIM Advisor Flex Fund B Shares 0.25 March 3, 1998
AIM Advisor Flex Fund C Shares 1.00** August 4, 1997
AIM Advisor International Value Fund A Shares 0.25 August 4, 1997
AIM Advisor International Value Fund B Shares 0.25 March 3, 1998
AIM Advisor International Value Fund C Shares 1.00** August 4, 1997
AIM Advisor Large Cap Value Fund A Shares 0.25 August 4, 1997
AIM Advisor Large Cap Value Fund B Shares 0.25 March 3, 1998
AIM Advisor Large Cap Value Fund C Shares 1.00** August 4, 1997
AIM Advisor MultiFlex Fund A Shares 0.25 August 4, 1997
AIM Advisor MultiFlex Fund B Shares 0.25 March 3, 1998
AIM Advisor MultiFlex Fund C Shares 1.00** August 4, 1997
AIM Advisor Real Estate Fund A Shares 0.25 August 4, 1997
AIM Advisor Real Estate Fund B Shares 0.25 March 3, 1998
AIM Advisor Real Estate Fund C Shares 1.00** August 4, 1997
AIM Aggressive Growth Fund A Shares 0.25 July 1, 1992
AIM Aggressive Growth Fund B Shares 0.25 March 1, 1999
AIM Aggressive Growth Fund C Shares 1.00** March 1, 1999
AIM Asian Growth Fund A Shares 0.25 November 1, 1997
AIM Asian Growth Fund B Shares 0.25 November 1, 1997
AIM Asian Growth Fund C Shares 1.00** November 1, 1997
AIM Balanced Fund A Shares 0.25 October 18, 1993
AIM Balanced Fund B Shares 0.25 October 18, 1993
AIM Balanced Fund C Shares 1.00** August 4, 1997
AIM Blue Chip Fund A Shares 0.25 June 3, 1996
AIM Blue Chip Fund B Shares 0.25 October 1, 1996
AIM Blue Chip Fund C Shares 1.00** August 4, 1997
AIM Capital Development Fund A Shares 0.25 June 17, 1996
AIM Capital Development Fund B Shares 0.25 October 1, 1996
AIM Capital Development Fund C Shares 1.00** August 4, 1997
AIM Charter Fund A Shares 0.25 November 18, 1986
AIM Charter Fund B Shares 0.25 June 15, 1995
AIM Charter Fund C Shares 1.00** August 4, 1997
AIM Constellation Fund A Shares 0.25 September 9, 1986
AIM Constellation Fund B Shares 0.25 November 3, 1997
AIM Constellation Fund C Shares 1.00** August 4, 1997
AIM European Development Fund A Shares 0.25 November 1, 1997
AIM European Development Fund B Shares 0.25 November 1, 1997
AIM European Development Fund C Shares 1.00** November 1, 1997
AIM Global Aggressive Growth Fund A Shares 0.50** September 15, 1994
AIM Global Aggressive Growth Fund B Shares 0.25 September 15, 1994
</TABLE>
1/99
<PAGE> 5
Bank Shareholder Service Agreement Page 5
<TABLE>
<CAPTION>
Fund Fee Rate* Plan Calculation Date
---- -------- ---------------------
<S> <C> <C>
AIM Global Aggressive Growth Fund C Shares 1.00** August 4, 1997
AIM Global Growth Fund A Shares 0.50 September 15, 1994
AIM Global Growth Fund B Shares 0.25 September 15, 1994
AIM Global Growth Fund C Shares 1.00** August 4, 1997
AIM Global Income Fund A Shares 0.50 September 15, 1994
AIM Global Income Fund B Shares 0.25 September 15, 1994
AIM Global Income Fund C Shares 1.00** August 4, 1997
AIM Global Utilities Fund A Shares 0.25 July 1, 1992
AIM Global Utilities Fund B Shares 0.25 September 1, 1993
AIM Global Utilities Fund C Shares 1.00** August 4, 1997
AIM High Income Municipal Fund A Shares 0.25 December 22, 1997
AIM High Income Municipal Fund B Shares 0.25 December 22, 1997
AIM High Income Municipal Fund C Shares 1.00** December 22, 1997
AIM High Yield Fund A Shares 0.25 July 1, 1992
AIM High Yield Fund B Shares 0.25 September 1, 1993
AIM High Yield Fund C Shares 1.00** August 4, 1997
AIM High Yield Fund II A Shares 0.25 October 1, 1998
AIM High Yield Fund II B Shares 0.25 November 20, 1998
AIM High Yield Fund II C Shares 1.00** November 20, 1998
AIM Income Fund A Shares 0.25 July 1, 1992
AIM Income Fund B Shares 0.25 September 1, 1993
AIM Income Fund C Shares 1.00** August 4, 1997
AIM Intermediate Government Fund A Shares 0.25 July 1, 1992
AIM Intermediate Government Fund B Shares 0.25 September 1, 1993
AIM Intermediate Government Fund C Shares 1.00** August 4, 1997
AIM International Equity Fund A Shares 0.25 May 21, 1992
AIM International Equity Fund B Shares 0.25 September 15, 1994
AIM International Equity Fund C Shares 1.00** August 4, 1997
AIM Large Cap Growth Fund A Shares 0.25 March 1, 1999
AIM Large Cap Growth Fund B Shares 0.25 March 1, 1999
AIM Large Cap Growth Fund C Shares 1.00** March 1, 1999
AIM Limited Maturity Treasury Fund 0.15 December 2, 1987
AIM Money Market Fund B Shares 0.25 October 18, 1993
AIM Money Market Fund C Shares 1.00** August 4, 1997
AIM Money Market Fund Cash Reserve Shares 0.25 October 18, 1993
AIM Municipal Bond Fund A Shares 0.25 July 1, 1992
AIM Municipal Bond Fund B Shares 0.25 September 1, 1993
AIM Municipal Bond Fund C Shares 1.00** August 4, 1997
AIM Select Growth Fund A Shares 0.25 July 1, 1992
AIM Select Growth Fund B Shares 0.25 September 1,1993
AIM Select Growth Fund C Shares 1.00** August 4, 1997
AIM Small Cap Opportunities Fund A Shares 0.25 June 29, 1998
AIM Small Cap Opportunities Fund B Shares 0.25 July 13, 1998
AIM Small Cap Opportunities Fund C Shares 1.00** December 30, 1998
</TABLE>
1/99
<PAGE> 6
Bank Shareholder Service Agreement Page 6
<TABLE>
<CAPTION>
Fund Fee Rate* Plan Calculation Date
---- -------- ---------------------
<S> <C> <C>
AIM Tax-Exempt Bond Fund of Connecticut A Shares 0.25 July 1, 1992
AIM Tax-Exempt Cash Fund A Shares 0.10 July 1, 1992
AIM Value Fund A Shares 0.25 July 1, 1992
AIM Value Fund B Shares 0.25 October 18, 1993
AIM Value Fund C Shares 1.00** August 4, 1997
AIM Weingarten Fund A Shares 0.25 September 9, 1986
AIM Weingarten Fund B Shares 0.25 June 15, 1995
AIM Weingarten Fund C Shares 1.00** August 4, 1997
</TABLE>
*Frequency of Payments: Quarterly, B and C share payments begin after an initial
12 month holding period. Where the broker dealer or financial institution waives
the 1% up-front commission on Class C shares, payments commence immediately.
**Of this amount, 0.25% is paid as a shareholder servicing fee and the remainder
is paid as an asset-based sales charge, as those terms are defined under the
rules of the National Association of Securities Dealers, Inc.
Minimum Payments: $50 (with respect to all funds in the aggregate.)
No payment pursuant to this Schedule is payable to a dealer, bank or other
service provider for the first year with respect to sales of $1 million or more,
at no load, in cases where A I M Distributors, Inc. has advanced the service fee
to the dealer, bank or other service provider.
THE FOLLOWING FUNDS ARE ADDED AS OF THE CLOSE OF BUSINESS MAY 29, 1998:
<TABLE>
<CAPTION>
Fund Fee Rate* Plan Calculation Date
---- -------- ---------------------
<S> <C> <C>
AIM Basic Value Fund A Shares 0.25 May 29, 1998
AIM Basic Value Fund B Shares 0.25 May 29, 1998
AIM Basic Value Fund C Shares 1.00** May 3, 1999
AIM Developing Markets Fund A Shares 0.25 May 29, 1998
AIM Developing Markets Fund B Shares 0.25 May 29, 1998
AIM Developing Markets Fund C Shares 1.00** March 3, 1999
AIM Europe Growth Fund A Shares 0.25 May 29, 1998
AIM Europe Growth Fund B Shares 0.25 May 29, 1998
AIM Europe Growth Fund C Shares 1.00** May 3, 1999
AIM Global Consumer Products and
Services Fund A Shares 0.40** May 29, 1998
AIM Global Consumer Products and
Services Fund B Shares 0.25 May 29, 1998
AIM Global Consumer Products and
Services Fund C Shares 1.00** March 1, 1999
</TABLE>
1/99
<PAGE> 7
Bank Shareholder Service Agreement Page 7
<TABLE>
<CAPTION>
Fund Fee Rate* Plan Calculation Date
---- -------- ---------------------
<S> <C> <C>
AIM Global Financial Services Fund A Shares 0.40** May 29, 1998
AIM Global Financial Services Fund B Shares 0.25 May 29, 1998
AIM Global Financial Services Fund C Shares 1.00** March 1, 1999
AIM Global Government Income Fund A Shares 0.25 May 29, 1998
AIM Global Government Income Fund B Shares 0.25 May 29, 1998
AIM Global Government Income Fund C Shares 1.00** March 1, 1999
AIM Global Growth & Income Fund A Shares 0.25 May 29, 1998
AIM Global Growth & Income Fund B Shares 0.25 May 29, 1998
AIM Global Growth & Income Fund C Shares 1.00** March 1, 1999
AIM Global Health Care Fund A Shares 0.40** May 29, 1998
AIM Global Health Care Fund B Shares 0.25 May 29, 1998
AIM Global Health Care Fund C Shares 1.00** March 1, 1999
AIM Emerging Markets Debt Fund A Shares 0.25 May 29, 1998
AIM Emerging Markets Debt Fund B Shares 0.25 May 29, 1998
AIM Emerging Markets Debt Fund C Shares 1.00** March 1, 1999
AIM Global Infrastructure Fund A Shares 0.40** May 29, 1998
AIM Global Infrastructure Fund B Shares 0.25 May 29, 1998
AIM Global Infrastructure Fund C Shares 1.00** March 1, 1999
AIM Global Resources Fund A Shares 0.40** May 29, 1998
AIM Global Resources Fund B Shares 0.25 May 29, 1998
AIM Global Resources Fund C Shares 1.00** March 1, 1999
AIM Global Telecommunications Fund A Shares 0.40** May 29, 1998
AIM Global Telecommunications Fund B Shares 0.25 May 29, 1998
AIM Global Telecommunications Fund C Shares 1.00** March 1, 1999
AIM Japan Growth Fund A Shares 0.25 May 29, 1998
AIM Japan Growth Fund B Shares 0.25 May 29, 1998
AIM Japan Growth Fund C Shares 1.00** May 3, 1999
AIM Latin American Growth Fund A Shares 0.40** May 29, 1998
AIM Latin American Growth Fund B Shares 0.25 May 29, 1998
AIM Latin American Growth Fund C Shares 1.00** March 1, 1999
AIM Mid Cap Equity Fund A Shares 0.25 May 29, 1998
AIM Mid Cap Equity Fund B Shares 0.25 May 29, 1998
AIM Mid Cap Equity Fund C Shares 1.00** May 3, 1999
AIM Global Trends Fund A Shares 0.40** May 29, 1998
AIM Global Trends Fund B Shares 0.25 May 29, 1998
AIM Global Trends Fund C Shares 1.00** May 29, 1998
AIM New Pacific Growth Fund A Shares 0.25 May 29, 1998
AIM New Pacific Growth Fund B Shares 0.25 May 29, 1998
AIM New Pacific Growth Fund C Shares 1.00** May 3, 1999
AIM Small Cap Growth Fund A Shares 0.25 May 29, 1998
AIM Small Cap Growth Fund B Shares 0.25 May 29, 1998
AIM Small Cap Growth Fund C Shares 1.00** May 3, 1999
AIM Strategic Income Fund A Shares 0.25 May 29, 1998
AIM Strategic Income Fund B Shares 0.25 May 29, 1998
AIM Strategic Income Fund C Shares 1.00** March 1, 1999
</TABLE>
*Frequency of Payments:
1/99
<PAGE> 8
Bank Shareholder Service Agreement Page 8
EFFECTIVE UNTIL JUNE 30, 1998: Class A and B share payments commence immediately
and are paid quarterly. Class C share payments commence after an initial twelve
month holding period and are paid quarterly.
**Of this amount, 0.25% is paid as a shareholder servicing fee and the remainder
is paid as an asset-based sales charge, as those terms are defined under the
rules of the National Association of Securities Dealers, Inc.
EFFECTIVE JULY 1, 1998: B share payments, like C share payments, will begin
after an initial 12 month holding period and are paid quarterly. Where the
broker dealer or financial institution waives the 1% up-front commission on
Class C shares, payments commence immediately.
Minimum Payments: $50 (with respect to all funds in the aggregate.)
No payment pursuant to this Schedule is payable to a dealer, bank or other
service provider for the first year with respect to sales of $1 million or more,
at no load, in cases where A I M Distributors, Inc. has advanced the service fee
to the dealer, bank or other service provider.
1/99
<PAGE> 1
EXHIBIT m(6)
AGENCY PRICING AGREEMENT
(THE AIM FAMILY OF FUNDS--Registered Trademark--)
This Agreement is entered into as of the ___ of _________, 19__,
between______________(the "Plan Provider") and A I M Distributors, Inc. (the
"Distributor").
RECITAL
Plan Provider acts as a trustee and/or servicing agent for defined
contribution plans and/or deferred compensation plans (the "Plans") and invests
and reinvests such Plans' assets as specified by an investment advisor, sponsor
or administrative committee of the Plan (a "Plan Representative") generally upon
the direction of Plan beneficiaries (the "Participants").
Plan Provider and Distributor desire to facilitate the purchase and
redemption of shares (the "Shares") of the funds listed on Exhibit A hereto
which may be amended from time to time by Distributor (the "Fund" or "Funds"),
registered investment companies distributed by Distributor, on behalf of the
Plans, through one or more accounts (not to exceed one per Plan) in each Fund
(individually an "Account" and collectively the "Accounts"), subject to the
terms and conditions of this Agreement. Distributor shall, on behalf of the
Funds, pay to Plan Provider a fee in accordance with Exhibit A hereto.
AGREEMENT
1. SERVICES
Plan Provider shall provide shareholder and administration services for
the Plans and/or their Participants, including, without limitation:
answering questions about the Funds; assisting in changing dividend
options, account designations and addresses; establishing and
maintaining shareholder accounts and records; and assisting in
processing purchase and redemption transactions (the "Services"). Plan
Provider shall comply with all applicable laws, rules and regulations,
including requirements regarding prospectus delivery and maintenance
and preservation of records. To the extent allowed by law, Plan
Provider shall provide Distributor with copies of all records that
Distributor may reasonably request. Distributor or its affiliate will
recognize each Plan as an unallocated account in each Fund, and will
not maintain separate accounts in each Fund for each Participant.
Except to the extent provided in Section 3, all Services performed by
Plan Provider shall be as an independent contractor and not as an
employee or agent of Distributor or any of the Funds. Plan Provider and
Plan Representatives, and not Distributor, shall take all necessary
action so that the transactions contemplated by this Agreement shall
not be "Prohibited Transactions" under section 406 of the Employee
Retirement Income Security Act of 1974, or section 4975 of the Internal
Revenue Code.
2. PRICING INFORMATION
Each Fund or its designee will furnish Plan Provider on each business
day that the New York Stock Exchange is open for business ("Business
Day"), with (i) net asset value information as of the close of trading
(currently 4:00 p.m. Eastern Time) on the New York
<PAGE> 2
Stock Exchange or as at such later times at which a Fund's net asset
value is calculated as specified in such Fund's prospectus ("Close of
Trading"), (ii) dividend and capital gains information as it becomes
available, and (iii) in the case of income Funds, the daily accrual or
interest rate factor (mil rate). The Funds shall use their best efforts
to provide such information to Plan Provider by 6:00 p.m. Central Time
on the same Business Day.
Distributor or its affiliate will provide Plan Provider (a) daily
confirmations of Account activity within five Business Days after each
day on which a purchase or redemption of Shares is effected for the
particular Account, (b) if requested by Plan Provider, quarterly
statements detailing activity in each Account within fifteen Business
Days after the end of each quarter, and (c) such other reports as may
be reasonably requested by Plan Provider.
3. ORDERS AND SETTLEMENT
If Plan Provider receives instructions in proper form from Participants
or Plan Representatives before the Close of Trading on a Business Day,
Plan Provider will process such instructions that same evening. On the
next Business Day, Plan Provider will transmit orders for net purchases
or redemptions of Shares to Distributor or its designee by 9:00 a.m.
Central Time and wire payment for net purchases by 2:00 p.m. Central
Time. Distributor or its affiliate will wire payment for net
redemptions on the Business Day following the day the order is executed
for the Accounts. In doing so, Plan Provider will be considered the
Funds' agent, and Shares will be purchased and redeemed as of the
Business Day on which Plan Provider receives the instructions. Plan
Provider will record time and date of receipt of instructions and will,
upon request, provide such instructions and other records relating to
the Services to Distributor's auditors. If Plan Provider receives
instructions in proper form after the Close of Trading on a Business
Day, Plan Provider will treat the instructions as if received on the
next Business Day.
4. REPRESENTATIONS WITH RESPECT TO THE DISTRIBUTOR AND THE FUNDS
Plan Provider and its agents shall limit representations concerning a
Fund or Shares to those contained in the then current prospectus of
such Fund, in current sales literature furnished by Distributor to Plan
Provider, in publicly available databases, such as those databases
created by Standard & Poor's and Morningstar, and in current sales
literature created by Plan Provider and submitted to and approved in
writing by Distributor prior to its use.
5. USE OF NAMES
Plan Provider and its affiliates will not, without the prior written
approval of Distributor, make public references to A I M Management
Group Inc. or any of its subsidiaries, or to the Funds. For purposes of
this provision, the public does not include Plan Providers'
representatives who are actively engaged in promoting the Funds. Any
brochure or other communication to the public that mentions the Funds
shall be submitted to Distributor for written approval prior to use.
Plan Provider shall provide copies of its regulatory filings that
include any reference to A I M Management Group Inc. or its
subsidiaries or the Funds to Distributor. If Plan Provider or its
affiliates should make unauthorized references or representations, Plan
Provider agrees to indemnify and hold harmless the Funds, A I M
Management Group
-2-
<PAGE> 3
Inc. and its subsidiaries from any claims, losses, expenses or
liability arising in any way out of or connected in any way with such
references or representations.
6. TERMINATION
(a) This Agreement may be terminated with respect to any Fund at
any time without any penalty by the vote of a majority of the
directors of such Fund who are "disinterested directors", as
that term is defined in the Investment Company Act of 1940, as
amended (the "1940 Act"), or by a vote of a majority of the
Fund's outstanding shares, on sixty (60) days' written notice.
It will be terminated by any act which terminates either the
Fund's Distribution Plan, or any related agreement thereunder,
and in any event, it shall terminate automatically in the
event of its assignment as that term is defined in the 1940
Act.
(b) Either party may terminate this Agreement upon ninety (90)
days' prior written notice to the other party at the address
specified below.
7. INDEMNIFICATION
(a) Plan Provider agrees to indemnify and hold harmless the
Distributor, its affiliates, the Funds, the Funds' investment
advisors, and each of their directors, officers, employees,
agents and each person, if any, who controls them within the
meaning of the Securities Act of 1933, as amended (the
"Securities Act"), (the "Distributor Indemnitees") against any
losses, claims, damages, liabilities or expenses to which a
Distributor Indemnitee may become subject insofar as those
losses, claims, damages, liabilities or expenses or actions in
respect thereof, arise out of or are based upon (i) Plan
Provider's negligence or willful misconduct in performing the
Services, (ii) any breach by Plan Provider of any material
provision of this Agreement, or (iii) any breach by Plan
Provider of a representation, warranty or covenant made in
this Agreement; and Plan Provider will reimburse the
Distributor Indemnitee for any legal or other expenses
reasonably incurred, as incurred, by them in connection with
investigating or defending such loss, claim or action. This
indemnity agreement will be in addition to any liability which
Plan Provider may otherwise have.
(b) Distributor agrees to indemnify and hold harmless Plan
Provider and its affiliates, and each of its directors,
officers, employees, agents and each person, if any, who
controls Plan Provider within the meaning of the Securities
Act (the "Plan Provider Indemnitees") against any losses,
claims, damages, liabilities or expenses to which a Plan
Provider Indemnitee may become subject insofar as such losses,
claims, damages, liabilities or expenses (or actions in
respect thereof) arise out of or are based upon (i) any untrue
statement or alleged untrue statement of any material fact
contained in the Registration Statement or Prospectus of a
Fund, or the omission or the alleged omission to state therein
a material fact required to be stated therein or necessary to
make statements therein not misleading, (ii) any breach by
Distributor of any material provision of this Agreement, (iii)
Distributor's negligence or willful misconduct in carrying out
its duties and responsibilities under this Agreement, or (iv)
any breach by Distributor of a representation, warranty or
covenant made in this Agreement; and Distributor will
reimburse the Plan Provider Indemnitees for any
-3-
<PAGE> 4
legal or other expenses reasonably incurred, as incurred, by
them, in connection with investigating or defending any such
loss, claim or action. This indemnity agreement will be in
addition to any liability which Distributor may otherwise
have.
(c) If any third party threatens to commence or commences any
action for which one party (the "Indemnifying Party") may be
required to indemnify another person hereunder (the
"Indemnified Party"), the Indemnified Party shall promptly
give notice thereof to the Indemnifying Party. The
Indemnifying Party shall be entitled, at its own expense and
without limiting its obligations to indemnify the Indemnified
Party, to assume control of the defense of such action with
counsel selected by the Indemnifying Party which counsel shall
be reasonably satisfactory to the Indemnified Party. If the
Indemnifying Party assumes the control of the defense, the
Indemnified Party may participate in the defense of such claim
at its own expense. Without the prior written consent of the
Indemnified Party, which consent shall not be withheld
unreasonably, the Indemnifying Party may not settle or
compromise the liability of the Indemnified Party in such
action or consent to or permit the entry of any judgment in
respect thereof unless in connection with such settlement,
compromise or consent each Indemnified Party receives from
such claimant an unconditional release from all liability in
respect of such claim.
8. GOVERNING LAW
This Agreement shall be governed by and construed in accordance with
the internal laws of the State of Texas applicable to agreements fully
executed and to be performed therein.
9. ADDITIONAL REPRESENTATIONS, WARRANTIES AND COVENANTS
Each party represents that it is free to enter into this Agreement and
that by doing so it will not breach or otherwise impair any other
agreement or understanding with any other person, corporation or other
entity. Each party represents that it has full power and authority
under applicable law, and has taken all action necessary to enter into
and perform this Agreement and the person executing this Agreement on
its behalf is duly authorized and empowered to execute and deliver this
Agreement. Additionally, each party represents that this Agreement,
when executed and delivered, shall constitute its valid, legal and
binding obligation, enforceable in accordance with its terms.
Plan Provider further represents, warrants, and covenants that:
(a) it is registered as a transfer agent pursuant to Section 17A
of the Securities Exchange Act of 1934, as amended (the "1934
Act"), or is not required to be registered as such;
(b) the arrangements provided for in this Agreement will be
disclosed to the Plan Representatives; and
(c) it is registered as a broker-dealer under the 1934 Act or any
applicable state securities laws, or, including as a result of
entering into and performing the services set forth in this
Agreement, is not required to be registered as such.
-4-
<PAGE> 5
Distributor further represents, warrants and covenants, that:
(a) it is registered as a broker-dealer under the 1934 Act and any
applicable state securities laws; and
(b) the Funds' advisors are registered as investment advisors
under the Investment Advisers Act of 1940, the Funds are
registered as investment companies under the 1940 Act and Fund
Shares are registered under the Securities Act.
10. MODIFICATION
This Agreement and Exhibit A may be amended at any time by Distributor
without Plan Provider's consent by Distributor mailing a copy of an
amendment to Plan Provider at the address set forth below. Such
amendment shall become effective thirty (30) days from the date of
mailing unless this Agreement is terminated by the Plan Provider within
such thirty (30) days.
11. ASSIGNMENT
This Agreement shall not be assigned by a party hereto, without the
prior written consent of the other parties hereto, except that a party
may assign this Agreement to an affiliate having the same ultimate
ownership as the assigning party without such consent.
12. SURVIVAL
The provisions of Sections 1, 5 and 7 shall survive termination of this
Agreement.
-5-
<PAGE> 6
IN WITNESS WHEREOF, the undersigned have executed this Agreement by their duly
authorized officers as of the date first above written.
-------------------------------------
(PLAN PROVIDER)
By:
----------------------------------
Print Name:
--------------------------
Title:
-------------------------------
Address:
-----------------------------
A I M DISTRIBUTORS, INC.
(DISTRIBUTOR)
By:
----------------------------------
Print Name:
--------------------------
Title:
-------------------------------
11 Greenway Plaza
Suite 100
Houston, Texas 77210
-6-
<PAGE> 7
EXHIBIT A
For the term of this Agreement, Distributor, or its affiliates, shall
pay Plan Provider the following amounts for each of the following Funds with
respect to the average daily net asset value of the Class A Shares of the Plans'
balances for the prior quarter:
<TABLE>
<CAPTION>
FUND ANNUAL FEE
- ---- ----------
<S> <C>
AIM Advisor Funds, Inc. (Class A Shares Only)
AIM Advisor Flex Fund .25%
AIM Advisor International Value Fund .25%
AIM Advisor Large Cap Value Fund .25%
AIM Advisor MultiFlex Fund .25%
AIM Advisor Real Estate Fund .25%
AIM Equity Funds, Inc. (Class A Shares Only)
AIM Aggressive Growth Fund .25%
AIM Blue Chip Fund .25%
AIM Capital Development Fund .25%
AIM Charter Fund .25%
AIM Constellation Fund .25%
AIM Large Cap Growth Fund .25%
AIM Weingarten Fund .25%
AIM Funds Group (Class A Shares Only)
AIM Balanced Fund .25%
AIM Global Utilities Fund .25%
AIM High Yield Fund .25%
AIM Income Fund .25%
AIM Intermediate Government Fund .25%
AIM Municipal Bond Fund .25%
AIM Select Growth Fund .25%
AIM Value Fund .25%
AIM Growth Series (Class A Shares Only)
AIM Basic Value Fund .25%
AIM Europe Growth Fund .25%
AIM Japan Growth Fund .25%
AIM Mid Cap Equity Fund .25%
AIM New Pacific Growth Fund .25%
AIM Small Cap Growth Fund .25%
</TABLE>
<PAGE> 8
<TABLE>
<S> <C>
AIM International Funds, Inc. (Class A Shares Only)
AIM Asian Growth Fund .25%
AIM European Development Fund .25%
AIM Global Aggressive Growth Fund .25%
AIM Global Growth Fund .25%
AIM Global Income Fund .25%
AIM International Equity Fund .25%
AIM Investment Funds (Class A Shares Only)
AIM Emerging Markets Fund .25%
AIM Emerging Markets Debt Fund .25%
AIM Global Consumer Products and Services Fund .25%
AIM Global Financial Services Fund .25%
AIM Global Government Income Fund .25%
AIM Global Growth & Income Fund .25%
AIM Global Health Care Fund .25%
AIM Global Infrastructure Fund .25%
AIM Global Resources Fund .25%
AIM Global Telecommunications Fund .25%
AIM Latin American Growth Fund .25%
AIM Strategic Income Fund .25%
AIM Investment Securities Funds (Class A Shares Only)
AIM High Yield Fund II .25%
AIM Limited Maturity Treasury Fund .15%
AIM Series Trust (Class A Shares Only)
AIM Global Trends Fund .25%
AIM Special Opportunities Funds (Class A Shares Only)
AIM Small Cap Opportunities Fund .25%
</TABLE>
Distributor or its affiliates shall calculate the amount of quarterly
payment and shall deliver to Plan Provider a quarterly statement showing the
calculation of the quarterly amounts payable to Plan Provider. Distributor
reserves the right at any time to impose minimum fee payment requirements before
any quarterly payments will be made to Plan Provider. Payment to Plan Provider
shall occur within 30 days following the end of each quarter. All parties agree
that the payments referred to herein are for record keeping and administrative
services only and are not for legal, investment advisory or distribution
services.
Minimum Payments: $50 (with respect to all Funds in the aggregate.)
<PAGE> 1
EXHIBIT m(7)
[LOGO ONLY]
A I M DISTRIBUTORS, INC.
A I M DISTRIBUTORS, INC.
SHAREHOLDER SERVICE AGREEMENT
(BANK TRUST DEPARTMENTS)
____________, 19__
A I M Distributors, Inc.
11 Greenway Plaza, Suite 100
Houston, Texas 77046-1173
Gentlemen:
We desire to enter into an Agreement with A I M Distributors, Inc. ("AIM
Distributors") as agent on behalf of the funds listed on Schedule A hereto (the
"Funds"), for the servicing of our clients who are shareholders of, and the
administration of accounts in, the Funds. We understand that this Shareholder
Service Agreement (the "Agreement") has been adopted pursuant to Rule 12b-1
under the Investment Company Act of 1940 (the "1940 Act") by each of the Funds,
under a Distribution Plan (the "Plan") adopted pursuant to said Rule, and is
subject to applicable rules of the National Association of Securities Dealers,
Inc. ("NASD"). This Agreement defines the services to be provided by us for
which we are to receive payments pursuant to the Plan. The Plan and the
Agreement have been approved by a majority of the directors or trustees of the
applicable Fund, including a majority of directors or trustees who are not
interested persons of the applicable Fund, and who have no direct or indirect
financial interest in the operation of the Plan or related agreements, by votes
cast in person at a meeting called for the purpose of voting on the Plan. Such
approval included a determination by the directors or trustees of the applicable
Fund, in the exercise of their reasonable business judgement and in light of
their fiduciary duties, that there is a reasonable likelihood that the Plan will
benefit the Fund and the holders of its Shares. The terms and conditions of this
Agreement shall be as follows:
1. To the extent that we provide continuing personal shareholder services
and administrative support services to our customers who may from time
to time own shares of the Funds of record or beneficially, including
but not limited to, forwarding sales literature, answering routine
customer inquiries regarding the Funds, assisting customers in changing
dividend options, account designations and addresses, and in enrolling
into 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 capital
gains distributions automatically in shares of the Funds and providing
such other services as AIM Distributors or the customer may reasonably
request, you shall pay us a fee periodically. We represent that we
shall accept fees hereunder only so long as we continue to provide such
personal shareholder services.
2. We agree to transmit to AIM Distributors in a timely manner, all
purchase orders and redemption requests of our clients and to forward
to each client all proxy statements, periodic shareholder reports and
other communications received from AIM Distributors by us relating
<PAGE> 2
Shareholder Service Agreement Page 2
(Bank Trust Departments)
to shares of the Funds owned by our clients. AIM Distributors, on behalf
of the Funds, agrees to pay all out-of-pocket expenses actually incurred
by us in connection with the transfer by us of such proxy statements and
reports to our clients as required under applicable laws or regulations.
3. We agree to make available upon AIM Distributors's request, such
information relating to our clients who are beneficial owners of Fund
shares and their transactions in such shares as may be required by
applicable laws and regulations or as may be reasonably requested by AIM
Distributors.
4. We agree to transfer record ownership of a client's Fund shares to the
client promptly upon the request of a client. In addition, record
ownership will be promptly transferred to the client in the event that
the person or entity ceases to be our client.
5. Neither we nor any of our employees or agents are authorized to make
any representation to our clients concerning the Funds except those
contained in the then current prospectuses applicable to the Funds,
copies of which will be supplied to us by AIM Distributors; and we
shall have no authority to act as agent for any Fund or AIM
Distributors. Neither a Fund, nor A I M Advisors, Inc. ("AIM") will be
a party, nor will they be represented as a party, to any agreement that
we may enter into with our clients and neither a Fund nor AIM shall
participate, directly or indirectly, in any compensation that we may
receive from our clients in connection with our acting on their behalf
with respect to this Agreement.
6. In consideration of the services and facilities described herein, we
shall receive a maximum annual service fee and asset-based sales charge,
payable monthly, as set forth on Schedule A hereto. We understand that
this Agreement and the payment of such service fees and asset-based
sales charge has been authorized and approved by the Board of Directors
or Trustees of the applicable Fund, and that the payment of fees
thereunder is subject to limitations imposed by the rules of the NASD.
7. AIM Distributors reserves the right, in its discretion and without
notice, to suspend the sale of any Fund or withdraw the sale of shares
of a Fund, or upon notice to us, to amend this Agreement. We agree that
any order to purchase shares of the Funds placed by us after notice of
any amendment to this Agreement has been sent to us shall constitute our
agreement to any such amendment.
8. All communications to AIM Distributors shall be duly given if mailed to
A I M Distributors, Inc., 11 Greenway Plaza, Suite 100, Houston, Texas
77046-1173. Any notice to us shall be duly given if mailed to us at the
address specified by us in this Agreement or to such other address as we
shall have designated in writing to AIM Distributors.
9. This Agreement may be terminated at any time by AIM Distributors on not
less than 60 days' written notice to us at our principal place of
business. We, on 60 days' written notice addressed to AIM Distributors
at its principal place of business, may terminate this Agreement. AIM
Distributors may also terminate this Agreement for cause on violation by
us of any of the provisions of this Agreement, said termination to
become effective on the date of mailing notice to us of such
termination. AIM Distributors's failure to terminate for any cause shall
not constitute a waiver of AIM Distributors's right to terminate at a
later date for
<PAGE> 3
Shareholder Service Agreement Page 3
(Bank Trust Departments)
any such cause. This Agreement may be terminated with respect to any
Fund at any time by the vote of a majority of the directors or trustees
of such Fund who are disinterested directors or by a vote of a majority
of the Fund's outstanding shares, on not less than 60 days' written
notice to us at our principal place of business. This Agreement will be
terminated by any act which terminates the Agreement for Purchase of
Shares of The AIM Family of Funds--Registered Trademark-- between us and
AIM Distributors or a Fund's Distribution Plan, and in any event, it
shall terminate automatically in the event of its assignment by us, the
term "assignment" for this purpose having the meaning defined in Section
2(a)(4) of the 1940 Act.
10. We represent that our activities on behalf of our clients and pursuant
to this Agreement either (i) are not such as to require our registration
as a broker-dealer in the state(s) in which we engage in such
activities, or (ii) we are registered as a broker-dealer in the state(s)
in which we engage in such activities. We represent that we are
registered as a broker-dealer with the NASD if required under applicable
law.
11. This Agreement and the Agreement for Purchase of Shares of The AIM
Family of Funds--Registered Trademark-- through Bank Trust Departments
constitute the entire agreement between us and AIM Distributors and
supersede all prior oral or written agreements between the parties
hereto. This Agreement may be executed in counterparts, each of which
shall be deemed an original but all of which shall constitute the same
instrument.
12. This Agreement and all rights and obligations of the parties hereunder
shall be governed by and construed under the laws of the State of Texas.
13. This Agreement shall become effective as of the date when it is executed
and dated by AIM Distributors.
<PAGE> 4
Shareholder Service Agreement Page 4
(Bank Trust Departments)
The undersigned agrees to abide by the foregoing terms and conditions.
-----------------------------------
(Firm Name)
-----------------------------------
(Address)
-----------------------------------
City/State/Zip/County
By:
--------------------------------
Name:
------------------------------
Title:
-----------------------------
Dated:
-----------------------------
ACCEPTED:
A I M DISTRIBUTORS, INC.
By:
--------------------------------
Name:
------------------------------
Title:
-----------------------------
Dated:
-----------------------------
Please sign both copies and return to:
A I M Distributors, Inc.
11 Greenway Plaza, Suite 100
Houston, Texas 77046-1173
<PAGE> 5
Shareholder Service Agreement Page 5
(Bank Trust Departments)
SCHEDULE A
<TABLE>
<CAPTION>
Funds Fees
----- ----
<S> <C> <C>
AIM Advisor Funds, Inc.
AIM Advisor Flex Fund
AIM Advisor International Value Fund
AIM Advisor Large Cap Value Fund
AIM Advisor MultiFlex Fund
AIM Advisor Real Estate Fund
AIM Equity Funds, Inc.
AIM Aggressive Growth Fund
AIM Blue Chip Fund
AIM Capital Development Fund
AIM Charter Fund (Retail Class)
AIM Constellation Fund (Retail Class)
AIM Large Cap Growth Fund
AIM Weingarten Fund (Retail Class)
AIM Funds Group
AIM Balanced Fund
AIM Global Utilities Fund
AIM High Yield Fund
AIM Income Fund
AIM Intermediate Government Fund
AIM Money Market Fund
AIM Municipal Bond Fund
AIM Select Growth Fund
AIM Value Fund
AIM Growth Series
AIM Basic Value Fund
AIM Europe Growth Fund
AIM Japan Growth Fund
AIM Mid Cap Equity Fund
AIM New Pacific Growth Fund
AIM Small Cap Growth Fund
AIM International Funds, Inc.
AIM Asian Growth Fund
AIM European Development Fund
AIM Global Aggressive Growth Fund
AIM Global Growth Fund
AIM Global Income Fund
AIM International Equity Fund
</TABLE>
<PAGE> 6
Shareholder Service Agreement Page 6
(Bank Trust Departments)
<TABLE>
<S> <C>
AIM Investment Funds
AIM Developing Markets Fund
AIM Emerging Markets Debt Fund
AIM Global Consumer Products and Services Fund
AIM Global Financial Services Fund
AIM Global Government Income Fund
AIM Global Growth & Income Fund
AIM Global Health Care Fund
AIM Global Infrastructure Fund
AIM Global Resources Fund
AIM Global Telecommunications Fund
AIM Latin American Growth Fund
AIM Strategic Income Fund
AIM Investment Securities Funds
AIM Limited Maturity Treasury Fund
AIM High Yield Fund II
AIM Series Trust
AIM Global Trends Fund
AIM Special Opportunities Funds
AIM Small Cap Opportunities Fund
AIM Tax-Exempt Funds, Inc.
AIM High Income Municipal Fund
AIM Tax-Exempt Cash Fund
AIM Tax-Exempt Bond Fund of Connecticut
</TABLE>
<PAGE> 7
[LOGO ONLY]
A I M Distributors, Inc.
A I M DISTRIBUTORS, INC.
SHAREHOLDER SERVICE AGREEMENT
(BROKERS FOR BANK TRUST DEPARTMENTS)
__________________ , 19__
A I M Distributors, Inc.
11 Greenway Plaza, Suite 1919
Houston, Texas 77046-1173
Gentlemen:
We desire to enter into an Agreement with A I M Distributors, Inc.
("AIM Distributors") as agent on behalf of the funds listed on Schedule A
hereto, which may be amended from time to time by AIM Distributors (the
"Funds"), for the servicing of our clients who are shareholders of, and the
administration of accounts in, the Funds. We understand that this Shareholder
Service Agreement (the "Agreement") has been adopted pursuant to Rule 12b-1
under the Investment Company Act of 1940 (the "1940 Act") by each of the Funds,
under a Distribution Plan (the "Plan") adopted pursuant to said Rule, and is
subject to applicable rules of the National Association of Securities Dealers,
Inc. ("NASD"). This Agreement defines the services to be provided by us for
which we are to receive payments pursuant to the Plan. The Plan and the
Agreement have been approved by a majority of the directors or trustees of the
applicable Fund, including a majority of directors or trustees who are not
interested persons of the applicable Fund, and who have no direct or indirect
financial interest in the operation of the Plan or related agreements, by votes
cast in person at a meeting called for the purpose of voting on the Plan. Such
approval included a determination by the directors or trustees of the
applicable Fund, in the exercise of their reasonable business judgement and in
light of their fiduciary duties, that there is a reasonable likelihood that the
Plan will benefit the Fund and the holders of its Shares. The terms and
conditions of this Agreement shall be as follows:
1. To the extent that we provide continuing personal shareholder services
and administrative support services to our customers who may from
time to time own shares of the Funds of record or beneficially,
including but not limited to, forwarding sales literature, answering
routine customer inquiries regarding the Funds, assisting customers
in changing dividend options, account designations and addresses, and
in enrolling into 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 capital gains distributions automatically in shares of
the Funds and providing such other services as AIM Distributors or
the customer may reasonably request, you shall pay us a fee
periodically. We represent that we shall accept fees hereunder only
so long as we continue to provide such personal shareholder services.
2. We agree to transmit to AIM Distributors in a timely manner, all
purchase orders and redemption requests of our clients and to forward
to each client all proxy statements, periodic
<PAGE> 8
Shareholder Service Agreement Page 2
(Brokers for Bank Trust Departments)
shareholder reports and other communications received from AIM
Distributors by us relating to shares of the Funds owned by our
clients. AIM Distributors, on behalf of the Funds, agrees to pay all
out-of-pocket expenses actually incurred by us in connection with the
transfer by us of such proxy statements and reports to our clients as
required under applicable laws or regulations.
3. We agree to transfer to AIM Distributors in a timely manner as set
forth in the applicable prospectus, federal funds in an amount equal
to the amount of all purchase orders placed by us and accepted by AIM
Distributors. In the event that AIM Distributors fails to receive such
federal funds on such date (other than through the fault of AIM
Distributors), we shall indemnify the applicable Fund and AIM
Distributors against any expense (including overdraft charges)
incurred by the applicable Fund and/or AIM Distributors as a result of
the failure to receive such federal funds.
4. We agree to make available upon AIM Distributors's request, such
information relating to our clients who are beneficial owners of Fund
shares and their transactions in such shares as may be required by
applicable laws and regulations or as may be reasonably requested by
AIM Distributors.
5. We agree to transfer record ownership of a client's Fund shares to the
client promptly upon the request of a client. In addition, record
ownership will be promptly transferred to the client in the event that
the person or entity ceases to be our client.
6. Neither we nor any of our employees or agents are authorized to make
any representation to our clients concerning the Funds except those
contained in the then current prospectuses applicable to the Funds,
copies of which will be supplied to us by AIM Distributors; and we
shall have no authority to act as agent for any Fund or AIM
Distributors. Neither a Fund, nor A I M Advisors, Inc. ("AIM") will
be a party, nor will they be represented as a party, to any agreement
that we may enter into with our clients and neither a Fund nor AIM
shall participate, directly or indirectly, in any compensation that
we may receive from our clients in connection with our acting on
their behalf with respect to this Agreement.
7. In consideration of the services and facilities described herein, we
shall receive a maximum annual service fee and asset-based sales
charge, payable monthly, as set forth on Schedule A hereto. We
understand that this Agreement and the payment of such service fees
and asset-based sales charge has been authorized and approved by the
Board of Directors or Trustees of the applicable Fund, and that the
payment of fees thereunder is subject to limitations imposed by the
rules of the NASD.
8. AIM Distributors reserves the right, in its discretion and without
notice, to suspend the sale of any Fund or withdraw the sale of shares
of a Fund, or upon notice to us, to amend this Agreement. We agree
that any order to purchase shares of the Funds placed by us after
notice of any amendment to this Agreement has been sent to us shall
constitute our agreement to any such amendment.
9. All communications to AIM Distributors shall be duly given if mailed
to
<PAGE> 9
Shareholder Service Agreement Page 3
(Brokers for Bank Trust Departments)
A I M Distributors, Inc., 11 Greenway Plaza, Suite 1919, Houston,
Texas 77046-1173. Any notice to us shall be duly given if mailed to us
at the address specified by us in this Agreement or to such other
address as we shall have designated in writing to AIM Distributors.
10. This Agreement may be terminated at any time by AIM Distributors on
not less than 60 days' written notice to us at our principal place of
business. We, on 60 days' written notice addressed to AIM
Distributors at its principal place of business, may terminate this
Agreement. AIM Distributors may also terminate this Agreement for
cause on violation by us of any of the provisions of this Agreement,
said termination to become effective on the date of mailing notice to
us of such termination. AIM Distributors's failure to terminate for
any cause shall not constitute a waiver of AIM Distributors's right
to terminate at a later date for any such cause. This Agreement may
be terminated with respect to any Fund at any time by the vote of a
majority of the directors or trustees of such Fund who are
disinterested directors or by a vote of a majority of the Fund's
outstanding shares, on not less than 60 days' written notice to us at
our principal place of business. This Agreement will be terminated by
any act which terminates the Selected Dealer Agreement between us and
AIM Distributors or a Fund's Distribution Plan, and in any event,
shall terminate automatically in the event of its assignment by us,
the term "assignment" for this purpose having the meaning defined in
Section 2(a)(4) of the 1940 Act.
11. We represent that our activities on behalf of our clients and pursuant
to this Agreement either (I) are not such as to require our
registration as a broker-dealer in the state(s) in which we engage in
such activities, or (ii) we are registered as a broker-dealer in the
state(s) in which we engage in such activities. We represent that we
are registered as a broker-dealer with the NASD if required under
applicable law.
12. This Agreement and all rights and obligations of the parties hereunder
shall be governed by and construed under the laws of the State of
Texas. This Agreement may be executed in counterparts, each of which
shall be deemed an original but all of which shall constitute the same
instrument. This Agreement shall not relieve us or AIM Distributors
from any obligations either may have under any other agreements
between us.
13. This Agreement shall become effective as of the date when it is
executed and dated by AIM Distributors.
<PAGE> 10
Shareholder Service Agreement Page 4
(Brokers for Bank Trust Departments)
The undersigned agrees to abide by the foregoing terms and conditions.
_____________________________________________
(Firm Name)
_____________________________________________
(Address)
_____________________________________________
City/State/Zip/County
By: ________________________________________
Name:________________________________________
Title:_______________________________________
Dated:_______________________________________
ACCEPTED:
A I M DISTRIBUTORS, INC.
By: ______________________________
Name: ______________________________
Title:______________________________
Dated:______________________________
Please sign both copies and return to:
A I M Distributors, Inc.
11 Greenway Plaza, Suite 1919
Houston, Texas 77046-1173
<PAGE> 11
Shareholder Service Agreement Page 5
(Brokers for Bank Trust Departments)
SCHEDULE A
Funds Fees
----- ----
AIM Advisor Funds, Inc.
AIM Advisor Flex Fund
AIM Advisor International Value Fund
AIM Advisor Large Cap Value Fund
AIM Advisor MultiFlex Fund
AIM Advisor Real Estate Fund
AIM Equity Funds, Inc.
AIM Blue Chip Fund
AIM Capital Development Fund
AIM Charter Fund (Retail Class)
AIM Constellation Fund (Retail Class)
AIM Weingarten Fund (Retail Class)
AIM Aggressive Growth Fund
AIM Funds Group
AIM Balanced Fund
AIM Global Utilities Fund
AIM High Yield Fund
AIM Income Fund
AIM Intermediate Government Fund
AIM Money Market Fund
AIM Municipal Bond Fund
AIM Select Growth Fund
AIM Value Fund
AIM Growth Series
AIM Basic Value Fund
AIM Europe Growth Fund
AIM International Growth Fund
AIM Japan Growth Fund
AIM Mid Cap Equity Fund
AIM New Pacific Growth Fund
AIM Small Cap Growth Fund
AIM Worldwide Growth Fund
AIM International Funds, Inc.
AIM Asian Growth Fund
AIM European Development Fund
AIM Global Aggressive Growth Fund
AIM Global Growth Fund
AIM Global Income Fund
AIM International Equity Fund
<PAGE> 12
Shareholder Service Agreement Page 6
(Brokers for Bank Trust Departments)
AIM Investment Funds
AIM Developing Markets Fund
AIM Emerging Markets Fund
AIM Emerging Markets Debt Fund
AIM Global Consumer Products and Services Fund
AIM Global Financial Services Fund
AIM Global Government Income Fund
AIM Global Growth & Income Fund
AIM Global Health Care Fund
AIM Global Infrastructure Fund
AIM Global Resources Fund
AIM Global Telecommunications Fund
AIM Latin American Growth Fund
AIM Strategic Income Fund
AIM Investment Securities Funds
AIM Limited Maturity Treasury Fund
AIM High Yield Fund II
AIM Series Trust
AIM Global Trends Fund
AIM Special Opportunities Funds
AIM Small Cap Opportunities Fund
AIM Tax-Exempt Funds, Inc.
AIM High Income Municipal Fund
AIM Tax-Exempt Cash Fund
AIM Tax-Exempt Bond Fund of Connecticut
