<PAGE> 1
As filed with the Securities and Exchange Commission on April 14, 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. 47 X
---
and/or
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 X
---
Amendment No. 43 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)
---
X on May 3, 1999 pursuant to paragraph (b)
---
60 days after filing pursuant to paragraph (a)(1)
---
on (date) pursuant to paragraph (a)(1)
---
75 days after filing pursuant to paragraph (a)(2)
---
on (date) pursuant to paragraph (a)(2)
---
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. 47
includes a manually executed signature page for one master trust, Growth
Portfolio.
<PAGE> 2
AIM BASIC VALUE FUND
- -------------------------------------------------------------------------------
AIM Basic Value Fund seeks to provide long-term growth of capital.
PROSPECTUS
MAY 3, 1999
This prospectus contains important
information about the Class A, B and
C shares of the fund. Please read it
before investing and keep it for
future reference.
As with all other mutual fund
securities, the Securities and
Exchange Commission has not approved
or disapproved these securities or
determined whether the information
in this prospectus is adequate or
accurate. Anyone who tells you
otherwise is committing a crime.
[AIM LOGO APPEARS HERE] INVEST WITH DISCIPLINE
--Registered Trademark--
<PAGE> 3
--------------------
AIM BASIC VALUE FUND
--------------------
TABLE OF CONTENTS
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
INVESTMENT OBJECTIVE AND STRATEGIES 1
- - - - - - - - - - - - - - - - - - - - - - - - -
PRINCIPAL RISKS OF INVESTING IN THE FUND 1
- - - - - - - - - - - - - - - - - - - - - - - - -
PERFORMANCE INFORMATION 2
- - - - - - - - - - - - - - - - - - - - - - - - -
Annual Total Returns 2
Performance Table 2
FEE TABLE AND EXPENSE EXAMPLE 3
- - - - - - - - - - - - - - - - - - - - - - - - -
Fee Table 3
Expense Example 3
FUND MANAGEMENT 4
- - - - - - - - - - - - - - - - - - - - - - - - -
The Advisor 4
Advisor Compensation 4
Portfolio Managers 4
OTHER INFORMATION 4
- - - - - - - - - - - - - - - - - - - - - - - - -
Sales Charges 4
Dividends and Distributions 4
FINANCIAL HIGHLIGHTS 5
- - - - - - - - - - - - - - - - - - - - - - - - -
SHAREHOLDER INFORMATION A-1
- - - - - - - - - - - - - - - - - - - - - - - - -
Choosing a Share Class A-1
Purchasing Shares A-4
Redeeming Shares A-5
Exchanging Shares A-7
Pricing of Shares A-8
Taxes A-8
OBTAINING ADDITIONAL INFORMATION Back Cover
- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -
</TABLE>
The AIM Family of Funds, The AIM Family of Funds and Design (i.e., the AIM
logo), AIM and Design, AIM, AIM LINK, AIM Institutional Funds, aimfunds.com, La
Familia AIM de Fondos, La Familia AIM de Fondos and Design and Invest with
Discipline are registered service marks and AIM Bank Connection is a service
mark of A I M Management Group Inc.
No dealer, salesperson or any other person has been authorized to give any
information or to make any representations other than those contained in this
prospectus, and you should not rely on such other information or
representations.
<PAGE> 4
--------------------
AIM BASIC VALUE FUND
--------------------
INVESTMENT OBJECTIVE AND STRATEGIES
- --------------------------------------------------------------------------------
The fund's investment objective is long-term growth of capital.
The fund seeks to meet this 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, all of which are issued by
U.S. issuers. The portfolio may also invest up to 25% of its total assets in
foreign 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 available in the marketplace. The portfolio managers
consider whether to 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, money market instruments, or high-quality 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 prices of equity
securities change in response to many factors, including the historical and
prospective earnings of the issuer, the value of its assets, general economic
conditions, interest rates, investor perceptions, and market liquidity.
Foreign securities have additional risks, including exchange rate changes,
political and economic upheaval, the relative lack of information about these
companies, relatively low market liquidity and the potential lack of strict
financial and accounting controls and standards.
The value of your shares could be adversely affected if the computer systems
used by the portfolio's investment advisor and other service providers are
unable to distinguish the year 2000 from the year 1900.
The portfolio's investment advisor and independent technology consultants are
working to avoid year 2000-related problems in its systems and to obtain
assurances that other service providers are taking similar steps. Year 2000
problems may also affect issuers in whose securities the portfolio invests.
An investment in the fund is not a deposit of a bank and is not insured or
guaranteed by the Federal Deposit Insurance Corporation or any other government
agency.
1
<PAGE> 5
--------------------
AIM BASIC VALUE FUND
--------------------
PERFORMANCE INFORMATION
- --------------------------------------------------------------------------------
The bar chart and table shown below provide an indication of the risks of
investing in the fund. The fund's past performance is not necessarily an
indication of its future performance.
ANNUAL TOTAL 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]
<TABLE>
<CAPTION>
Annual
Year Ended Total
December 31 Return
- ----------- ------
<S> <C>
1996 ....................................... 15.12%
1997 ....................................... 27.23%
1998 ....................................... 7.02%
</TABLE>
During the periods shown in the bar chart, the highest quarterly return was
15.01% (quarter ended September 30, 1997) and the lowest quarterly return was
- -12.63% (quarter ended September 30, 1998).
PERFORMANCE TABLE
The following performance table compares the fund's performance to that of a
broad-based securities market index. The fund's performance reflects payment of
sales loads.
<TABLE>
<CAPTION>
AVERAGE ANNUAL TOTAL RETURNS
- -------------------------------------------------------------------------------------------------
(for the periods ended SINCE INCEPTION
December 31, 1998) 1 YEAR INCEPTION DATE
- -------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Class A 1.15% 16.99% 10/18/95
Class B 1.34 17.69 10/18/95
Class C -- -- 5/3/99
Russell 1000(R) Index(1) 27.02 28.08(2) 10/31/95(2)
- -------------------------------------------------------------------------------------------------
</TABLE>
(1) The Russell 1000(R) Index is a widely recognized, unmanaged index of common
stocks that measures the performance of the 1,000 largest companies in the
Russell 3000(R) 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 classes with the longest performance history.
2
<PAGE> 6
--------------------
AIM BASIC VALUE FUND
--------------------
FEE TABLE AND EXPENSE EXAMPLE
- --------------------------------------------------------------------------------
FEE TABLE
This table describes the fees and expenses that you may pay if you buy and hold
shares of the fund:
<TABLE>
<CAPTION>
SHAREHOLDER FEES
- - - - - - - - - - - - - - - - - - - - - - - - - - - - -
(fees paid directly from
your investment) CLASS A CLASS B CLASS C
- -------------------------------------------------------
<S> <C> <C> <C>
Maximum Sales Charge
(Load)
Imposed on Purchases
(as a percentage of
offering price) 5.50% None None
Maximum Deferred
Sales Charge (Load)
(as a percentage of
original purchase
price or redemption
proceeds, whichever
is less) None(1) 5.00% 1.00%
- -------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
ANNUAL FUND OPERATING EXPENSES
- - - - - - - - - - - - - - - - - - - - - - - - - - - - -
(expenses that are deducted
from fund assets)(2) CLASS A CLASS B CLASS C
- -------------------------------------------------------
<S> <C> <C> <C>
Management Fees 0.73% 0.73% 0.73%
Distribution and/or
Service (12b-1) Fees 0.35 1.00 1.00
Other Expenses 1.03 1.03 1.03
Total Annual Fund
Operating Expenses 2.11 2.76 2.76
Expense Reimbursement(3) 0.36 0.36 0.36
Net Expenses 1.75 2.40 2.40
- -------------------------------------------------------
</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 contractually agreed to limit net expenses.
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 gross operating expenses remain the same. To the extent fees are waived
or expenses are reimbursed, the expenses will be lower. Although your actual
returns and costs may be higher or lower, based on these assumptions your costs
would be:
<TABLE>
<CAPTION>
1 YEAR 3 YEARS 5 YEARS 10 YEARS
- ----------------------------------------------
<S> <C> <C> <C> <C>
Class A $752 $1,175 $1,622 $2,857
Class B 779 1,156 1,659 2,934
Class C 379 856 1,459 3,090
- ----------------------------------------------
</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 $752 $1,175 $1,622 $2,857
Class B 279 856 1,459 2,934
Class C 279 856 1,459 3,090
- ----------------------------------------------
</TABLE>
3
<PAGE> 7
--------------------
AIM BASIC VALUE FUND
--------------------
FUND MANAGEMENT
- --------------------------------------------------------------------------------
THE ADVISOR
A I M Advisors, Inc. (the advisor) serves as the investment advisor for the
Value Portfolio (the portfolio), 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 portfolio'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 portfolio, encompassing a broad range of
investment objectives.
ADVISOR COMPENSATION
During the fiscal year ended December 31, 1998, the advisor and Chancellor LGT
Asset Management, Inc. (the advisor for the period January 1, 1998 through May
28, 1998) together received compensation of 0.75% of average daily net assets
consisting of a management and administrative fee of 0.73% and an accounting fee
of 0.02%.
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 are
- - 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.
- - 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.
OTHER INFORMATION
- --------------------------------------------------------------------------------
SALES CHARGES
Purchases of Class A shares of AIM Basic Value 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. Purchases of Class B and Class C shares are subject to the
contingent deferred sales charges listed in that section.
DIVIDENDS AND DISTRIBUTIONS
DIVIDENDS
The fund generally declares and pays dividends, if any, annually.
CAPITAL GAINS DISTRIBUTIONS
The fund generally distributes long-term and short-term capital gains (including
any net gains from foreign currency transactions), if any, annually.
4
<PAGE> 8
--------------------
AIM BASIC VALUE FUND
--------------------
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
The financial highlights table is intended to help you understand the fund's
financial performance. Certain information reflects financial results for a
single fund share.
The total returns in the table represent the rate that an investor would have
earned (or lost) on an investment in the fund (assuming reinvestment of all
dividends and distributions).
This information has been audited by 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
-------------------------------------------
OCTOBER 18,
YEAR ENDED DECEMBER 31, TO
------------------------- DECEMBER 31,
1998(a) 1997 1996 1995
- ---------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Net asset value, beginning of period $17.25 $14.65 $12.76 $11.43
Income from investment operations:
Net investment income (loss)(b) 0.04 0.09(c) (0.01)(c) 0.03(c)
Net gains on securities (both realized and
unrealized) 1.16 3.87 1.94 1.30
Total from investment operations 1.20 3.96 1.93 1.33
Less distributions:
Dividends from net investment income -- (0.03) -- --
Distributions from net realized gains (0.32) (1.33) (0.04) --
Total distributions (0.32) (1.36) (0.04) --
Net asset value, end of period $18.13 $17.25 $14.65 $12.76
Total return(d) 7.02% 27.23% 15.12% 11.64%
- ---------------------------------------------------------------------------------------------
Ratios/supplemental data:
Net assets, end of period (000s omitted) $9,074 $7,688 $2,529 $ 870
Ratio of expenses to average net assets(c):
With expense reductions and/or reimbursement 1.74%(e) 1.99% 2.00% 2.00%(f)
Without expense reductions and/or
reimbursement 2.11%(e) 2.97% 5.51% 50.54%(f)
Ratio of net investment income (loss) to average
net assets(c):
With expense reductions and/or reimbursement 0.25%(e) 0.56% (0.10)% 1.10%(f)
Without expense reductions and/or
reimbursement (0.08)%(e) (0.42)% (3.61)% (47.44)%(f)
Ratio of interest expense to average net
assets(g) -- 0.03% -- --
Portfolio turnover rate(g) 148% 93% 256% --
- ---------------------------------------------------------------------------------------------
</TABLE>
(a) The Portfolio changed investment advisors on May 29, 1998.
(b) Before reimbursement and net investment loss per share would have been
$(0.02), $(0.07), $(0.50), and $(1.11) for 1998-1995, respectively.
(c) Calculated using average shares outstanding.
(d) Does not deduct sales charges and is not annualized for periods less than
one year.
(e) Ratios are based on average net assets of $8,458,715.
(f) Annualized.
(g) Portfolio turnover rates and ratio of interest expense to average net assets
are calculated on the basis of the Portfolio as a whole without
distinguishing between the classes of shares issued.
5
<PAGE> 9
--------------------
AIM BASIC VALUE FUND
--------------------
FINANCIAL HIGHLIGHTS (continued)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
CLASS B
- -------------------------------------------------------------------------------------------
OCTOBER 18,
YEAR ENDED DECEMBER 31, TO
-------------------------- DECEMBER 31,
1998(a) 1997 1996 1995
- -------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Net asset value, beginning of period $ 17.04 $ 14.54 $12.75 $ 11.43
Income from investment operations:
Net investment income(b) (0.08) (0.01)(c) (0.10)(c) 0.01(c)
Net gains on securities (both realized and
unrealized) 1.15 3.83 1.93 1.31
Total from investment operations 1.07 3.82 1.83 1.32
Less distributions:
Dividends from net investment income -- -- -- --
Distributions from net realized gains (0.32) (1.32) (0.04) --
Total distributions (0.32) (1.32) (0.04) --
Net asset value, end of period $ 17.79 $ 17.04 $14.54 $ 12.75
Total return(d) 6.34% 26.44% 14.35% 11.55%
- -------------------------------------------------------------------------------------------
Ratios/supplemental data:
Net assets, end of period (000s omitted) $17,406 $16,717 $5,503 $ 1,254
Ratio of expenses to average net assets:
With expense reductions and/or reimbursement 2.39%(e) 2.64% 2.65% 2.65%(f)
Without expense reductions and/or
reimbursement 2.76%(e) 3.62% 6.16% 51.19%(f)
Ratio of net investment income to average net
assets:
With expense reductions and/or reimbursement (0.40)%(e) (0.09)% (0.75)% 0.45%(f)
Without expense reductions and/or
reimbursement (0.72)%(e) (1.07)% (4.26)% (48.09)%(f)
Ratio of interest expense to average net
assets(g) -- 0.03% -- --
Portfolio turnover rate(g) 148% 93% 256% --
- -------------------------------------------------------------------------------------------
</TABLE>
(a) The Portfolio changed investment advisors on May 29, 1998.
(b) Before reimbursement the net investment loss per share would have been
$(0.15), $(0.17), $(0.59), and $(1.13) for 1998-1995, respectively.
(c) Calculated based upon average shares outstanding during the period.
(d) Does not deduct contingent deferred sales charges and is not annualized for
periods less than one year.
(e) Ratios are based on average net assets of $18,806,810.
(f) Annualized.
(g) Portfolio turnover rates and ratio of interest expense to average net assets
are calculated on the basis of the Portfolio as a whole without
distinguishing between the classes of shares issued.
6
<PAGE> 10
-------------------
THE AIM FUNDS
-------------------
Shareholder Information
- --------------------------------------------------------------------------------
In addition to the fund, A I M Advisors, Inc. serves as investment advisor to
many other mutual funds (the AIM Funds). The following information is about all
the AIM Funds.
CHOOSING A SHARE CLASS
Many of 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 charge on redemptions within
six 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(1)
- - Generally more appropriate for - Purchase orders limited to - Generally more appropriate
long-term investors amounts less than $250,000 for short-term investors
</TABLE>
(1) AIM 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.
A- 1 MCF--05/99
<PAGE> 11
-------------------
THE AIM FUNDS
-------------------
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>
COMPUTING A CDSC
The CDSC on redemptions of shares is computed based on the lower of their
original purchase price or current market value, net of reinvested dividends and
capital gains distributions. In determining whether to charge a CDSC, we will
assume that you have redeemed shares on which there is no CDSC first and, then,
shares in the order of purchase.
REDUCED SALES CHARGES AND SALES CHARGE EXCEPTIONS
You may qualify for reduced sales charges or sales charge exceptions. To qualify
for these reductions or exceptions, you or your financial consultant must
provide sufficient information at the time of purchase to verify that your
purchase qualifies for such treatment.
REDUCED SALES CHARGES
You may be eligible to buy Class A shares at reduced initial sales charge rates
under Rights of Accumulation or Letters of Intent under certain circumstances.
Rights of Accumulation
You may combine your new purchases of Class A shares with Class A shares
currently owned for the purpose of qualifying for the lower initial sales charge
rates that apply to larger purchases. The applicable initial sales charge for
the new purchase is based on the total of your current purchase and the current
value of all Class A shares you own.
Letters of Intent
Under a Letter of Intent (LOI), you commit to purchase a specified dollar amount
of Class A shares of AIM Funds during a
MCF--05/99 A- 2
<PAGE> 12
-------------------
THE AIM FUNDS
-------------------
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.
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 $ ($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 25 50
All other accounts 50 50
- ----------------------------------------------------------------------------------------------------------------
</TABLE>
HOW TO PURCHASE SHARES
You may purchase shares using one of the options below.
PURCHASE OPTIONS
- -
<TABLE>
<CAPTION>
OPENING AN ACCOUNT ADDING TO AN ACCOUNT
- ----------------------------------------------------------------------------------------------------------
<S> <C> <C>
Through a Financial Consultant Contact your financial consultant. Same
By Mail Mail completed Account Application Mail your check and the remittance
and purchase payment to the 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- 3 MCF--05/99
<PAGE> 13
-------------------
THE AIM FUNDS
-------------------
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).
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 18 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.
MCF--05/99 A- 4
<PAGE> 14
-------------------
THE AIM FUNDS
-------------------
HOW TO REDEEM SHARES
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
Through a Financial Contact your financial consultant.
Consultant
By Mail Send a written request to the transfer agent. Requests must
include (1) original signatures of all registered owners;
(2) the name of the AIM Fund and your account number; (3) if
the transfer agent does not hold your shares, endorsed share
certificates or share certificates accompanied by an
executed stock power; and (4) signature guarantees, if
necessary (see below). The transfer agent may require that
you provide additional information, such as corporate
resolutions or powers of attorney, if applicable. If you are
redeeming from an IRA account, you must include a statement
of whether or not you are at least 59 1/2 years old and
whether you wish to have federal income tax withheld from
your proceeds. The transfer agent may require certain other
information before you can redeem from an employer-sponsored
retirement plan. Contact your employer for details.
By Telephone Call the transfer agent. You will be allowed to redeem by
telephone if (1) the proceeds are to be mailed to the
address on record 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.
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- 5 MCF--05/99
<PAGE> 15
-------------------
THE AIM FUNDS
-------------------
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, at its discretion, redeem the account and distribute the proceeds
to you.
EXCHANGING SHARES
You may, under certain circumstances, exchange shares in one AIM Fund for those
of another AIM Fund. Before requesting an exchange, review the prospectus of the
AIM Fund you wish to acquire. Exchange privileges also apply to holders of the
Connecticut General Guaranteed Account, established for tax-qualified group
annuities, for contracts purchased on or before June 30, 1992.
PERMITTED EXCHANGES
Except as otherwise stated below, you may exchange your shares for shares of the
same class of another AIM Fund. You 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 also may exchange AIM Cash Reserve Shares of AIM Money Market Fund for
Advisor Class shares, but only if you acquired the AIM Cash Reserve Shares
through an exchange from Advisor Class shares.
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;
MCF--05/99 A- 6
<PAGE> 16
-------------------
THE AIM FUNDS
-------------------
- - Exchanges must be made between accounts with identical registration
information;
- - The account you wish to exchange from must have a certified tax identification
number (or the Fund has received an appropriate Form W-8 or W-9);
- - Shares must have been held for at least one day prior to the exchange; 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 purchase of shares
being acquired in an exchange for up to five business days if it determines that
it would be materially disadvantaged by the immediate transfer of exchange
proceeds. There is no fee for exchanges. The exchange privilege is not an option
or right to purchase shares. Any of the participating AIM Funds or the
distributor may modify or discontinue this privilege at any time.
BY MAIL
If you wish to make an exchange by mail, you must include original signatures of
each registered owner exactly as the shares are registered, the account
registration and account number, the dollar amount or number of shares to be
exchanged and the names of the AIM Funds from which and into which the exchange
is to be made.
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. TO PROTECT THE INTERESTS OF
INVESTORS, EACH AIM FUND AND THE DISTRIBUTOR MAY REJECT ANY ORDER CONSIDERED
MARKET-TIMING ACTIVITY.
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 of 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, as allowed by the Securities and Exchange Commission, such as
when the NYSE restricts or suspends trading.
A- 7 MCF--05/99
<PAGE> 17
-------------------
THE AIM FUNDS
-------------------
TAXES
In general, dividends and distributions you receive are taxable as ordinary
income or long-term capital gains for federal income tax purposes, whether you
reinvest them in additional shares or take them in cash. Distributions are
taxable to you at different rates depending on the length of time the fund holds
its assets. Different tax rates apply to ordinary income and long-term capital
gain distributions, regardless of how long you have held your shares. Every
year, you will be sent information showing the amount of dividends and
distributions you received from each AIM Fund during the prior year.
Any long-term or short-term capital gains realized from redemptions of AIM
Fund shares will be subject to federal income tax. Exchanges of shares for
shares of another AIM Fund are treated as a sale, and any gain realized on the
transaction will generally be subject to federal income tax.
The foreign, state and local tax consequences of investing in AIM Fund shares
may differ materially from the federal income tax consequences described above.
You should consult your tax advisor before investing.
MCF--05/99 A- 8
<PAGE> 18
--------------------
AIM BASIC VALUE FUND
--------------------
OBTAINING ADDITIONAL INFORMATION
- --------------------------------------------------------------------------------
More information may be obtained free of charge upon request. The Statement of
Additional Information (SAI), a current version of which is on file with the
Securities and Exchange Commission (SEC), contains more details about the fund
and is incorporated by reference into the prospectus (is legally a part of this
prospectus). Annual and semiannual reports to shareholders contain additional
information about the fund's investments. The fund's annual report also
discusses the market conditions and investment strategies that significantly
affected the fund's performance during its last fiscal year.
If you have questions about this fund, another fund in The AIM Family of
Funds--Registered Trademark-- or your account, or wish to obtain free copies of
the fund's current SAI or annual or semiannual reports, please contact us
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
BY MAIL: A I M 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)
</TABLE>
- --------------------------------------------------------------------------------
You also can obtain copies of the fund's SAI and other information at the SEC's
Public Reference Room in Washington, DC, 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, DC 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
[AIM LOGO APPEARS HERE] www.aimfunds.com BVA-PRO-2 INVEST WITH DISCIPLINE
--Registered Trademark--
<PAGE> 19
AIM EUROPE GROWTH FUND
------------------------------------------------------------------------
AIM Europe Growth Fund seeks to provide long-term growth of capital.
PROSPECTUS
MAY 3, 1999
This prospectus contains important
information about the Class A, B and
C shares of the fund. Please read it
before investing and keep it for
future reference.
As with all other mutual fund
securities, the Securities and
Exchange Commission has not approved
or disapproved these securities or
determined whether the information
in this prospectus is adequate or
accurate. Anyone who tells you
otherwise is committing a crime.
[AIM LOGO APPEARS HERE] INVEST WITH DISCIPLINE
-- Registered Trademark --
<PAGE> 20
----------------------
AIM EUROPE GROWTH FUND
----------------------
TABLE OF CONTENTS
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
INVESTMENT OBJECTIVE AND STRATEGIES 1
- - - - - - - - - - - - - - - - - - - - - - - - -
PRINCIPAL RISKS OF INVESTING IN THE FUND 1
- - - - - - - - - - - - - - - - - - - - - - - - -
PERFORMANCE INFORMATION 2
- - - - - - - - - - - - - - - - - - - - - - - - -
Annual Total Returns 2
Performance Table 2
FEE TABLE AND EXPENSE EXAMPLE 3
- - - - - - - - - - - - - - - - - - - - - - - - -
Fee Table 3
Expense Example 3
FUND MANAGEMENT 4
- - - - - - - - - - - - - - - - - - - - - - - - -
The Advisors 4
Advisor Compensation 4
Portfolio Manager 4
OTHER INFORMATION 4
- - - - - - - - - - - - - - - - - - - - - - - - -
Sales Charges 4
Dividends and Distributions 4
FINANCIAL HIGHLIGHTS 5
- - - - - - - - - - - - - - - - - - - - - - - - -
SHAREHOLDER INFORMATION A-1
- - - - - - - - - - - - - - - - - - - - - - - - -
Choosing a Share Class A-1
Purchasing Shares A-4
Redeeming Shares A-5
Exchanging Shares A-7
Pricing of Shares A-8
Taxes A-8
OBTAINING ADDITIONAL INFORMATION Back Cover
- - - - - - - - - - - - - - - - - - - - - - - - -
</TABLE>
The AIM Family of Funds, The AIM Family of Funds and Design (i.e., the AIM
logo), AIM and Design, AIM, AIM LINK, AIM Institutional Funds, aimfunds.com, La
Familia AIM de Fondos, La Familia AIM de Fondos and Design and Invest with
Discipline are registered service marks and AIM Bank Connection is a service
mark of A I M Management Group Inc.
No dealer, salesperson or any other person has been authorized to give any
information or to make any representations other than those contained in this
prospectus, and you should not rely on such other information or
representations.
<PAGE> 21
----------------------
AIM EUROPE GROWTH FUND
----------------------
INVESTMENT OBJECTIVE AND STRATEGIES
- --------------------------------------------------------------------------------
The fund's investment objective is long-term growth of capital.
The fund seeks to meet this 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 normally considers a company to be
domiciled in a particular country if it (1) is organized under the laws of a
particular country or has its principal office in a particular country; or (2)
derives 50% or more of its total revenues from business in that country,
provided that, in the view of the portfolio manager, the value of the issuer's
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 or in U.S. and foreign
investment-grade debt securities, or securities deemed by the portfolio manager
to be of comparable quality. The fund may also invest in securities of issuers
located in developing countries, i.e., those that are in the initial stages of
their industrial cycles.
In selecting investments, the portfolio manager seeks to identify those
countries and industries where political and economic factors, including
currency movements, are likely to produce above-average growth rates. The
portfolio manager then balances the potential benefits with the risks of
investing in those countries and industries. The portfolio manager allocates
investments among fixed-income securities based on his views as to the best
values then available in the marketplace. The portfolio manager considers
whether to 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 currency or multinational currency units), money market
instruments, or high-quality debt securities. In anticipation of or in response
to adverse market conditions, the fund may also invest up to 100% of its total
assets in the securities of U.S. issuers and denominated in U.S. dollars. 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 prices of equity
securities change in response to many factors, including the historical and
prospective earnings of the issuer, the value of its assets, general economic
conditions, interest rates, investor perceptions, and market liquidity.
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:
- - 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.
- - Political and economic conditions--The value of the fund's 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.
- - Regulations--Foreign companies generally are subject to less stringent
regulations, including financial and accounting controls, than are U.S.
companies. As a result, there generally is less publicly available information
about foreign companies than about U.S. companies.
- - 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.
These factors may affect the prices of securities issued by foreign companies
located in developing countries more than those in countries with mature
economies. 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.
The value of your shares could be adversely affected if the computer systems
used by the fund's investment advisor and other service providers are unable to
distinguish the year 2000 from the year 1900.
The fund's investment advisor and independent technology consultants are
working to avoid year 2000-related problems in its systems and to obtain
assurances that other service providers are taking similar steps. Year 2000
problems may also affect issuers in whose securities the fund invests.
An investment in the fund is not a deposit of a bank and is not insured or
guaranteed by the Federal Deposit Insurance Corporation or any other government
agency.
1
<PAGE> 22
----------------------
AIM EUROPE GROWTH FUND
----------------------
PERFORMANCE INFORMATION
- --------------------------------------------------------------------------------
The bar chart and table shown below provide an indication of the risks of
investing in the fund. The fund's past performance is not necessarily an
indication of its future performance.
ANNUAL TOTAL 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]
<TABLE>
<CAPTION>
Annual
Year Ended Total
December 31 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 periods shown in the bar chart, the highest quarterly return was
23.25% (quarter ended March 31, 1998) and the lowest quarterly return was
- -21.04% (quarter ended September 30, 1998).
PERFORMANCE TABLE
The following performance table compares the fund's performance to that of a
broad-based securities market index. The fund's performance reflects payment of
sales loads.
<TABLE>
<CAPTION>
AVERAGE ANNUAL TOTAL RETURNS
- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -
(for the periods ended SINCE INCEPTION
December 31, 1998) 1 YEAR 5 YEARS 10 YEARS INCEPTION DATE
- -----------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Class A 10.24% 8.69% 8.01% 12.58% 7/19/85
Class B 10.80 8.94 -- 11.43 4/1/93
Class C -- -- -- -- 5/3/99
MSCI AC Europe Index(1) 27.18 19.27 15.56 15.63(2) 12/31/87(2)
- -----------------------------------------------------------------------------
</TABLE>
(1) The Morgan Stanley Capital International All Country Europe Index is an
unmanaged index that is designed to represent the performance of stock
markets in Europe, including both developed and emerging markets.
(2) The average annual total return given is since the date closest to the
inception date of the class with the longest performance history.
2
<PAGE> 23
----------------------
AIM EUROPE GROWTH FUND
----------------------
FEE TABLE AND EXPENSE EXAMPLE
- --------------------------------------------------------------------------------
FEE TABLE
This table describes the fees and expenses that you may pay if you buy and hold
shares of the fund:
<TABLE>
<CAPTION>
SHAREHOLDER FEES
- - - - - - - - - - - - - - - - - - - - - - - - - - -
(fees paid directly from
your investment) CLASS A CLASS B CLASS C
- ---------------------------------------------------
<S> <C> <C> <C>
Maximum Sales Charge (Load)
Imposed on Purchases
(as a percentage of
offering price) 5.50% None None
Maximum Deferred
Sales Charge (Load)
(as a percentage of
original purchase
price or redemption
proceeds, whichever
is less) None(1) 5.00% 1.00%
- ---------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
ANNUAL FUND OPERATING EXPENSES
- - - - - - - - - - - - - - - - - - - - - - - - - - -
(expenses that are deducted
from fund assets) CLASS A CLASS B CLASS C
- ---------------------------------------------------
<S> <C> <C> <C>
Management Fees 0.98% 0.98% 0.98%
Distribution and/or
Service (12b-1) Fees 0.35 1.00 1.00
Other Expenses:
Other 0.42 0.42 0.42
Interest 0.27 0.27 0.27
Total Other Expenses 0.69 0.69 0.69
Total Annual Fund
Operating Expenses 2.02 2.67 2.67
- ---------------------------------------------------
</TABLE>
(1) If you buy $1,000,000 or more of Class A shares and redeem these shares
within 18 months from the date of purchase, you may pay a 1% contingent
deferred sales charge (CDSC) at the time of redemption.
As a result of 12b-1 fees, long-term shareholders in the fund may pay more than
the maximum permitted initial sales charge.
EXPENSE EXAMPLE
This example is intended to help you compare the costs of investing in different
classes of the fund with the cost of investing in other mutual funds.
The example assumes that you invest $10,000 in the fund for the time periods
indicated and then redeem all of your shares at the end of those periods. The
example also assumes that your investment has a 5% return each year and that the
fund's operating expenses remain the same. Although your actual returns and
costs may be higher or lower, based on these assumptions your costs would be:
<TABLE>
<CAPTION>
1 YEAR 3 YEARS 5 YEARS 10 YEARS
- ----------------------------------------------
<S> <C> <C> <C> <C>
Class A $744 $1,149 $1,578 $2,769
Class B 770 1,129 1,615 2,846
Class C 370 829 1,415 3,003
- ----------------------------------------------
</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 $744 $1,149 $1,578 $2,769
Class B 270 829 1,415 2,846
Class C 270 829 1,415 3,003
- ----------------------------------------------
</TABLE>
3
<PAGE> 24
----------------------
AIM EUROPE GROWTH FUND
----------------------
FUND MANAGEMENT
- --------------------------------------------------------------------------------
THE ADVISORS
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
1967. 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 and Chancellor LGT
Asset Management, Inc. (the advisor for the period January 1, 1998 through May
28, 1998) together received compensation of 1.01% of average daily net assets
consisting of a management and administrative fee of 0.98% and an accounting fee
of 0.03%.
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 is
- - 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.
OTHER INFORMATION
- --------------------------------------------------------------------------------
SALES CHARGES
Purchases of Class A shares of AIM Europe Growth 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. Purchasing of Class B and Class C shares are subject to the
contingent deferred sales charge listed in that section.
DIVIDENDS AND DISTRIBUTIONS
DIVIDENDS
The fund generally declares and pays dividends, if any, annually.
CAPITAL GAINS DISTRIBUTIONS
The fund generally distributes long-term and short-term capital gains (including
any net gains from foreign currency transactions), if any, annually.
4
<PAGE> 25
----------------------
AIM EUROPE GROWTH FUND
----------------------
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
The financial highlights table is intended to help you understand the fund's
financial performance. Certain information reflects financial results for a
single fund share.
The total returns in the table represent the rate that an investor would have
earned (or lost) on an investment in the fund (assuming reinvestment of all
dividends and distributions).
This information has been audited by 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(a) 1997(a) 1996(a) 1995(a) 1994(a)
- ------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Per Share Operating Performance:
Net asset value, beginning of period $ 14.32 $ 12.89 $ 10.88 $ 10.03 $ 10.84
Income from investment operations:
Net investment income (loss) (0.03) (0.04) (0.03) 0.04 0.06
Net realized and unrealized gain (loss) on
investments 2.35 1.48 2.16 0.95 (0.69)
Net increase (decrease) from investment
operations 2.32 1.44 2.13 0.99 (0.63)
Distributions to shareholders:
From net investment income -- -- -- (0.10) (0.05)
From net realized gain on investments (0.97) (0.01) (0.12) (0.04) --
In excess of net realized gain on investments -- -- -- -- (0.13)
Total distributions (0.97) (0.01) (0.12) (0.14) (0.18)
Net asset value, end of period $ 15.67 $ 14.32 $ 12.89 $ 10.88 $ 10.03
Total investment return(b) 16.63% 11.20% 19.61% 9.86% (5.8)%
- ------------------------------------------------------------------------------------------------------
Ratios/supplemental data:
Net assets, end of period (in 000s) $415,066 $407,004 $453,792 $483,375 $646,313
Ratio of net investment income (loss) to average
net assets (0.20)% (0.29)% (0.26)% 0.38% 0.61%
Ratio of expenses to average net assets
excluding interest expense:
With expense reductions 1.75% 1.75% 1.82% 1.83% 1.73%
Without expense reductions 1.75% 1.89% 1.88% 1.89% 1.81%
Ratio of interest expense to average net
assets(c) 0.27% N/A N/A N/A N/A
Portfolio turnover rate(c) 97% 107% 123% 108% 91%
- ------------------------------------------------------------------------------------------------------
</TABLE>
(a) These selected per share data were calculated based upon average shares
outstanding during the period.
(b) Does not include sales charges.
(c) Portfolio turnover rates and ratio of interest expense to average net assets
are calculated on the basis of the Fund as a whole without distinguishing
between the classes of shares issued.
N/A Not Applicable.
<TABLE>
<CAPTION>
CLASS B
-----------------------------------------------
YEAR ENDED DECEMBER 31,
1998(a) 1997(a) 1996(a) 1995(a) 1994(a)
- -------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Per Share Operating Performance:
Net asset value, beginning of period $ 14.06 $ 12.73 $ 10.81 $ 9.97 $ 10.79
Income from investment operations:
Net investment income (loss) (0.14) (0.13) (0.11) (0.03) --
Net realized and unrealized gain (loss) on
investments 2.31 1.47 2.15 0.94 (0.69)
Net increase (decrease) from investment
operations 2.17 1.34 2.04 0.91 (0.69)
Distributions to shareholders:
From net investment income -- -- -- (0.03) --
From net realized gain on investments (0.97) (0.01) (0.12) (0.04) --
In excess of net realized gain on investments -- -- -- -- (0.13)
Total distributions (0.97) (0.01) (0.12) (0.07) (0.13)
Net asset value, end of period $ 15.26 $ 14.06 $ 12.73 $ 10.81 $ 9.97
Total investment return(b) 15.80% 10.55% 18.79% 9.20% (6.38)%
- -------------------------------------------------------------------------------------------------
Ratios/supplemental data:
Net assets, end of period (in 000s) $99,943 $81,011 $87,092 $73,025 $81,602
Ratio of net investment income (loss) to average
net assets (0.85)% (0.94)% (0.91)% (0.27)% (0.04)%
Ratio of expenses to average net assets
excluding interest expense:
With expense reductions 2.40% 2.40% 2.47% 2.48% 2.38%
Without expense reductions 2.40% 2.54% 2.53% 2.54% 2.46%
Ratio of interest expense to average net
assets(c) 0.27% N/A N/A N/A N/A
Portfolio turnover rate(c) 97% 107% 123% 108% 91%
- -------------------------------------------------------------------------------------------------
</TABLE>
(a) These selected per share data were calculated based upon average shares
outstanding during the period.
(b) Does not include contingent deferred sales charges.
(c) Portfolio turnover rates and ratio of interest expense to average net assets
are calculated on the basis of the Fund as a whole without distinguishing
between the classes of shares issued.
N/A Not Applicable.
5
<PAGE> 26
-------------------
THE AIM FUNDS
-------------------
Shareholder Information
- --------------------------------------------------------------------------------
In addition to the fund, A I M Advisors, Inc. serves as investment advisor to
many other mutual funds (the AIM Funds). The following information is about all
the AIM Funds.
CHOOSING A SHARE CLASS
Many of 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 charge on redemptions within
six 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(1)
- - Generally more appropriate for - Purchase orders limited to - Generally more appropriate
long-term investors amounts less than $250,000 for short-term investors
</TABLE>
(1) AIM 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.
A- 1 MCF--05/99
<PAGE> 27
-------------------
THE AIM FUNDS
-------------------
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>
COMPUTING A CDSC
The CDSC on redemptions of shares is computed based on the lower of their
original purchase price or current market value, net of reinvested dividends and
capital gains distributions. In determining whether to charge a CDSC, we will
assume that you have redeemed shares on which there is no CDSC first and, then,
shares in the order of purchase.
REDUCED SALES CHARGES AND SALES CHARGE EXCEPTIONS
You may qualify for reduced sales charges or sales charge exceptions. To qualify
for these reductions or exceptions, you or your financial consultant must
provide sufficient information at the time of purchase to verify that your
purchase qualifies for such treatment.
REDUCED SALES CHARGES
You may be eligible to buy Class A shares at reduced initial sales charge rates
under Rights of Accumulation or Letters of Intent under certain circumstances.
Rights of Accumulation
You may combine your new purchases of Class A shares with Class A shares
currently owned for the purpose of qualifying for the lower initial sales charge
rates that apply to larger purchases. The applicable initial sales charge for
the new purchase is based on the total of your current purchase and the current
value of all Class A shares you own.
Letters of Intent
Under a Letter of Intent (LOI), you commit to purchase a specified dollar amount
of Class A shares of AIM Funds during a
MCF--05/99 A- 2
<PAGE> 28
-------------------
THE AIM FUNDS
-------------------
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.
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 $ ($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 25 50
All other accounts 50 50
- ----------------------------------------------------------------------------------------------------------------
</TABLE>
HOW TO PURCHASE SHARES
You may purchase shares using one of the options below.
PURCHASE OPTIONS
- -
<TABLE>
<CAPTION>
OPENING AN ACCOUNT ADDING TO AN ACCOUNT
- ----------------------------------------------------------------------------------------------------------
<S> <C> <C>
Through a Financial Consultant Contact your financial consultant. Same
By Mail Mail completed Account Application Mail your check and the remittance
and purchase payment to the 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- 3 MCF--05/99
<PAGE> 29
-------------------
THE AIM FUNDS
-------------------
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).
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 18 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.
MCF--05/99 A- 4
<PAGE> 30
-------------------
THE AIM FUNDS
-------------------
HOW TO REDEEM SHARES
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
Through a Financial Contact your financial consultant.
Consultant
By Mail Send a written request to the transfer agent. Requests must
include (1) original signatures of all registered owners;
(2) the name of the AIM Fund and your account number; (3) if
the transfer agent does not hold your shares, endorsed share
certificates or share certificates accompanied by an
executed stock power; and (4) signature guarantees, if
necessary (see below). The transfer agent may require that
you provide additional information, such as corporate
resolutions or powers of attorney, if applicable. If you are
redeeming from an IRA account, you must include a statement
of whether or not you are at least 59 1/2 years old and
whether you wish to have federal income tax withheld from
your proceeds. The transfer agent may require certain other
information before you can redeem from an employer-sponsored
retirement plan. Contact your employer for details.
By Telephone Call the transfer agent. You will be allowed to redeem by
telephone if (1) the proceeds are to be mailed to the
address on record 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.
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- 5 MCF--05/99
<PAGE> 31
-------------------
THE AIM FUNDS
-------------------
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, at its discretion, redeem the account and distribute the proceeds
to you.
EXCHANGING SHARES
You may, under certain circumstances, exchange shares in one AIM Fund for those
of another AIM Fund. Before requesting an exchange, review the prospectus of the
AIM Fund you wish to acquire. Exchange privileges also apply to holders of the
Connecticut General Guaranteed Account, established for tax-qualified group
annuities, for contracts purchased on or before June 30, 1992.
PERMITTED EXCHANGES
Except as otherwise stated below, you may exchange your shares for shares of the
same class of another AIM Fund. You 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 also may exchange AIM Cash Reserve Shares of AIM Money Market Fund for
Advisor Class shares, but only if you acquired the AIM Cash Reserve Shares
through an exchange from Advisor Class shares.
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;
MCF--05/99 A- 6
<PAGE> 32
-------------------
THE AIM FUNDS
-------------------
- - Exchanges must be made between accounts with identical registration
information;
- - The account you wish to exchange from must have a certified tax identification
number (or the Fund has received an appropriate Form W-8 or W-9);
- - Shares must have been held for at least one day prior to the exchange; 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 purchase of shares
being acquired in an exchange for up to five business days if it determines that
it would be materially disadvantaged by the immediate transfer of exchange
proceeds. There is no fee for exchanges. The exchange privilege is not an option
or right to purchase shares. Any of the participating AIM Funds or the
distributor may modify or discontinue this privilege at any time.
BY MAIL
If you wish to make an exchange by mail, you must include original signatures of
each registered owner exactly as the shares are registered, the account
registration and account number, the dollar amount or number of shares to be
exchanged and the names of the AIM Funds from which and into which the exchange
is to be made.
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. TO PROTECT THE INTERESTS OF
INVESTORS, EACH AIM FUND AND THE DISTRIBUTOR MAY REJECT ANY ORDER CONSIDERED
MARKET-TIMING ACTIVITY.
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 of 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, as allowed by the Securities and Exchange Commission, such as
when the NYSE restricts or suspends trading.
A- 7 MCF--05/99
<PAGE> 33
-------------------
THE AIM FUNDS
-------------------
TAXES
In general, dividends and distributions you receive are taxable as ordinary
income or long-term capital gains for federal income tax purposes, whether you
reinvest them in additional shares or take them in cash. Distributions are
taxable to you at different rates depending on the length of time the fund holds
its assets. Different tax rates apply to ordinary income and long-term capital
gain distributions, regardless of how long you have held your shares. Every
year, you will be sent information showing the amount of dividends and
distributions you received from each AIM Fund during the prior year.
Any long-term or short-term capital gains realized from redemptions of AIM
Fund shares will be subject to federal income tax. Exchanges of shares for
shares of another AIM Fund are treated as a sale, and any gain realized on the
transaction will generally be subject to federal income tax.
The foreign, state and local tax consequences of investing in AIM Fund shares
may differ materially from the federal income tax consequences described above.
You should consult your tax advisor before investing.
MCF--05/99 A- 8
<PAGE> 34
----------------------
AIM EUROPE GROWTH FUND
----------------------
OBTAINING ADDITIONAL INFORMATION
- --------------------------------------------------------------------------------
More information may be obtained free of charge upon request. The Statement of
Additional Information (SAI), a current version of which is on file with the
Securities and Exchange Commission (SEC), contains more details about the fund
and is incorporated by reference into the prospectus (is legally a part of this
prospectus). Annual and semiannual reports to shareholders contain additional
information about the fund's investments. The fund's annual report also
discusses the market conditions and investment strategies that significantly
affected the fund's performance during its last fiscal year.
If you have questions about this fund, another fund in The AIM Family of
Funds--Registered Trademark-- or your account, or wish to obtain free copies of
the fund's current SAI or annual or semiannual reports, please contact us:
- ---------------------------------------------------------
<TABLE>
<S> <C>
BY MAIL: A I M 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)
</TABLE>
- ---------------------------------------------------------
You also can obtain copies of the fund's SAI and other information at the SEC's
Public Reference Room in Washington, DC, 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, DC 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
- ------------------------------------
[AIM LOGO APPEARS HERE] www.aimfunds.com ERG-PRO-1 INVEST WITH DISCIPLINE
-- Registered Trademark --
<PAGE> 35
AIM JAPAN GROWTH FUND
-----------------------------------------------------------------------
AIM Japan Growth Fund seeks to provide long-term growth of capital.
PROSPECTUS
MAY 3, 1999
This prospectus contains important
information about the Class A, B and
C shares of the fund. Please read it
before investing and keep it for
future reference.
As with all other mutual fund
securities, the Securities and
Exchange Commission has not approved
or disapproved these securities or
determined whether the information
in this prospectus is adequate or
accurate. Anyone who tells you
otherwise is committing a crime.
[AIM LOGO APPEARS HERE] INVEST WITH DISCIPLINE
--Registered Trademark--
<PAGE> 36
---------------------
AIM JAPAN GROWTH FUND
---------------------
Table of Contents
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
INVESTMENT OBJECTIVE AND STRATEGIES 1
- - - - - - - - - - - - - - - - - - - - - - - - - -
PRINCIPAL RISKS OF INVESTING IN THE
FUND 1
- - - - - - - - - - - - - - - - - - - - - - - - - -
PERFORMANCE INFORMATION 2
- - - - - - - - - - - - - - - - - - - - - - - - - -
Annual Total Returns 2
Performance Table 2
FEE TABLE AND EXPENSE EXAMPLE 3
- - - - - - - - - - - - - - - - - - - - - - - - - -
Fee Table 3
Expense Example 3
FUND MANAGEMENT 4
- - - - - - - - - - - - - - - - - - - - - - - - - -
The Advisors 4
Advisor Compensation 4
Portfolio Manager 4
OTHER INFORMATION 4
- - - - - - - - - - - - - - - - - - - - - - - - - -
Sales Charges 4
Dividends and Distributions 4
FINANCIAL HIGHLIGHTS 5
- - - - - - - - - - - - - - - - - - - - - - - - - -
SHAREHOLDER INFORMATION A-1
- - - - - - - - - - - - - - - - - - - - - - - - - -
Choosing a Share Class A-1
Purchasing Shares A-4
Redeeming Shares A-5
Exchanging Shares A-7
Pricing of Shares A-8
Taxes A-8
OBTAINING ADDITIONAL INFORMATION Back Cover
- - - - - - - - - - - - - - - - - - - - - - - - - -
</TABLE>
The AIM Family of Funds, The AIM Family of Funds and Design (i.e., the AIM
logo), AIM and Design, AIM, AIM LINK, AIM Institutional Funds, aimfunds.com, La
Familia AIM de Fondos, La Familia AIM de Fondos and Design and Invest with
Discipline are registered service marks and AIM Bank Connection is a service
mark of A I M Management Group Inc.
No dealer, salesperson or any other person has been authorized to give any
information or to make any representations other than those contained in this
prospectus, and you should not rely on such other information or
representations.
<PAGE> 37
---------------------
AIM JAPAN GROWTH FUND
---------------------
INVESTMENT OBJECTIVE AND STRATEGIES
- --------------------------------------------------------------------------------
The fund's investment objective is long-term growth of capital.
The fund seeks to meet this 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 (1) 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 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 of 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 portfolio manager to be of comparable quality.
The fund may also invest in securities of issuers located in developing
countries, i.e., those that are in the initial stages of their industrial
cycles.
In selecting investments, the portfolio manager seeks to identify industries
that, in view of political and economic considerations, including currency
movements, are likely to produce above-average growth rates. The portfolio
manager then balances the potential benefits with the risks of investing in
those industries. The portfolio manager further allocates investments among
fixed-income securities of particular issuers on the basis of their views as to
the best values then available in the marketplace. The portfolio manager
considers whether to 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
instruments, or high-quality debt securities. 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 prices of equity
securities change in response to many factors, including the historical and
prospective earnings of the issuer, the value of its assets, general economic
conditions, interest rates, investor perceptions, and market liquidity.
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 market prices of Japanese
securities may be distorted to serve political or other purposes, and
shareholders' rights are not always equally enforced.
The prices of foreign securities may be further affected by other factors,
including:
- - 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.
- - 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.
- - Regulations--Foreign companies generally are subject to less stringent
regulations, including financial and accounting controls, than are U.S.
companies. As a result, there generally is less publicly available information
about foreign companies than about U.S. companies.
- - 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.
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 value of your shares could be adversely affected if the computer systems
used by the fund's investment advisor and other service providers are unable to
distinguish the year 2000 from the year 1900.
The fund's investment advisor and independent technology consultants are
working to avoid year 2000-related problems in its systems and to obtain
assurances that other service providers are taking similar steps. Year 2000
problems may also affect issuers in whose securities the fund invests.
An investment in the fund is not a deposit of a bank and is not insured or
guaranteed by the Federal Deposit Insurance Corporation or any other government
agency.
1
<PAGE> 38
---------------------
AIM JAPAN GROWTH FUND
---------------------
PERFORMANCE INFORMATION
- --------------------------------------------------------------------------------
The bar chart and table shown below provide an indication of the risks of
investing in the fund. The fund's past performance is not necessarily an
indication of its future performance.
ANNUAL TOTAL 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]
<TABLE>
<CAPTION>
Annual
Year Ended Total
December 31 Return
- ----------- ------
<S> <C>
1989 ....................................... 60.73%
1990 ....................................... -28.73%
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 periods shown in the bar chart, the highest quarterly return was
25.16% (quarter ended September 30, 1989) and the lowest quarterly return was
- -28.63% (quarter ended September 30, 1990).
PERFORMANCE TABLE
The following performance table compares the fund's performance to that of a
broad-based securities market index. The fund's performance reflects payment of
sales loads.
<TABLE>
<CAPTION>
AVERAGE ANNUAL TOTAL RETURNS
- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -
(for the periods ended SINCE INCEPTION
December 31, 1998) 1 YEAR 5 YEARS 10 YEARS INCEPTION DATE
- ---------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Class A (5.99)% (2.76)% 0.14% 10.35% 7/19/85
Class B (6.18) (2.62) -- 0.64 4/1/93
Class C -- -- -- -- 5/3/99
MSCI Japan Index(1) 5.05 (3.69) (5.33) 7.98(2) 7/31/85(2)
- ---------------------------------------------------------------------------------
</TABLE>
(1) The Morgan Stanley Capital International Japan Index measures 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.
2
<PAGE> 39
---------------------
AIM JAPAN GROWTH FUND
---------------------
FEE TABLE AND EXPENSE EXAMPLE
- --------------------------------------------------------------------------------
FEE TABLE
This table describes the fees and expenses that you may pay if you buy and hold
shares of the fund:
<TABLE>
<CAPTION>
SHAREHOLDER FEES
- - - - - - - - - - - - - - - - - - - - - - - - - - - - -
(fees paid directly from
your investment) CLASS A CLASS B CLASS C
- -------------------------------------------------------
<S> <C> <C> <C>
Maximum Sales Charge (Load)
Imposed on Purchases
(as a percentage of
offering price) 5.50% None None
Maximum Deferred
Sales Charge (Load)
(as a percentage of
original purchase
price or redemption
proceeds, whichever
is less) None(1) 5.00% 1.00%
- -------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
ANNUAL FUND OPERATING EXPENSES
- - - - - - - - - - - - - - - - - - - - - - - - - - - - -
(expenses that are deducted
from fund assets) CLASS A CLASS B CLASS C
- -------------------------------------------------------
<S> <C> <C> <C>
Management Fees 0.98% 0.98% 0.98%
Distribution and/or
Service (12b-1) Fees 0.35 1.00 1.00
Other Expenses 1.00 1.00 1.00
Total Annual Fund
Operating Expenses 2.33 2.98 2.98
Expense
Reimbursement(2) 0.33 0.33 0.33
Net Expenses 2.00 2.65 2.65
- -------------------------------------------------------
</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 contractually agreed to limit net expenses.
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 gross operating expenses remain the same. To the extent fees are waived
or expenses are reimbursed, the expenses will be lower. Although your actual
returns and costs may be higher or lower, based on these assumptions your costs
would be:
<TABLE>
<CAPTION>
1 YEAR 3 YEARS 5 YEARS 10 YEARS
- ----------------------------------------------
<S> <C> <C> <C> <C>
Class A $773 $1,237 $1,727 $3,069
Class B 801 1,221 1,767 3,147
Class C 401 921 1,567 3,299
- ----------------------------------------------
</TABLE>
You would pay the following expenses if you did not redeem your shares:
<TABLE>
<CAPTION>
1 YEAR 3 YEARS 5 YEARS 10 YEARS
- ----------------------------------------------
<S> <C> <C> <C> <C>
Class A $773 $1,237 $1,727 $3,069
Class B 301 921 1,567 3,147
Class C 301 921 1,567 3,299
- ----------------------------------------------
</TABLE>
3
<PAGE> 40
---------------------
AIM JAPAN GROWTH FUND
---------------------
FUND MANAGEMENT
- --------------------------------------------------------------------------------
THE ADVISORS
A I M Advisors, Inc. (the advisor) serves as the fund's investment advisor.
INVESCO Asset Management (Japan) Limited (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 Imperial Tower, 1-1-1
Uchisaiwai-cho, Chiyoda-Ku, Tokyo, 100-0011. 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
1990. 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 and Chancellor LGT
Asset Management Inc. (the advisor for the period of January 1, 1998 through May
28, 1998) together received compensation of 1.01% of average daily net assets,
consisting of a management and administrative fee of 0.98% and an accounting fee
of 0.03%.
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 is
- - 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.
OTHER INFORMATION
- --------------------------------------------------------------------------------
SALE CHARGES
Purchases of Class A shares of AIM Japan Growth 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. Purchases of Class B and Class C shares are subject to the
contingent deferred sales charges listed in that section.
DIVIDENDS AND DISTRIBUTIONS
DIVIDENDS
The fund generally declares and pays dividends, if any, annually.
CAPITAL GAINS DISTRIBUTIONS
The fund generally distributes long-term and short-term capital gains (including
any net gains from foreign currency transactions), if any, annually.
4
<PAGE> 41
---------------------
AIM JAPAN GROWTH FUND
---------------------
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
The financial highlights table is intended to help you understand the fund's
financial performance. Certain information reflects financial results for a
single fund share.
The total returns in the table represent the rate that an investor would have
earned (or lost) on an investment in the fund (assuming reinvestment of all
dividends and distributions).
This information has been audited by 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(a) 1997(a) 1996(a) 1995(a) 1994
- --------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Per Share Operating Performance:
Net asset value, beginning of period $ 8.96 $ 9.76 $ 11.00 $ 12.15 $ 11.61
Income from investment operations:
Net investment income (loss) (0.02)(b) (0.08) (0.04) (0.04) (0.04)
Net realized and unrealized gain (loss) on
investments (0.03) (0.70) (0.77) 0.26 0.79
Net increase (decrease) from investment
operations (0.05) (0.78) (0.81) 0.22 0.75
Distributions to shareholders:
From net realized gain on investments (0.01) (0.02) (0.43) (1.37) (0.21)
In excess of net realized gain on investments -- -- -- -- --
Total distributions (0.01) (0.02) (0.43) (1.37) (0.21)
Net asset value, end of period $ 8.90 $ 8.96 $ 9.76 $ 11.00 $ 12.15
Total investment return(c) (0.54)% (7.99)% (7.43)% 1.94% 6.56%
- --------------------------------------------------------------------------------------------------
Ratios/supplemental data:
Net assets, end of period (in 000s) $37,608 $44,583 $63,585 $111,105 $98,066
Ratio of net investment income (loss) to average
net assets (0.19)% (0.61)% (0.40)% (0.40)% (0.32)%
Ratio of operating expenses to average net
assets:
With expense reductions and/or reimbursement 1.96% 1.99% 1.84% 1.99% 1.91%
Without expense reductions and/or
reimbursement 2.33% 2.06% 1.94% 2.14% 2.03%
Portfolio turnover rate(d) 67% 58% 31% 67% 49%
- --------------------------------------------------------------------------------------------------
</TABLE>
(a) These selected per share data were calculated based upon average shares
outstanding during the period.
(b) Includes reimbursement of Fund operating expenses per share of $0.03.
(c) Total investment return does not include sales charge.
(d) Portfolio turnover rates are calculated on the basis of the Fund as a whole
without distinguishing between the classes of shares issued.
<TABLE>
<CAPTION>
CLASS B
-----------------------------------------------
YEAR ENDED DECEMBER 31,
1998(a) 1997(a) 1996(a) 1995(a) 1994
- -------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Per Share Operating Performance:
Net asset value, beginning of period $ 8.67 $ 9.49 $ 10.78 $ 12.02 $ 11.57
Income from investment operations:
Net investment income (loss) (0.07)(b) (0.14) (0.11) (0.12) (0.13)
Net realized and unrealized gain (loss) on
investments (0.04) (0.66) (0.75) 0.25 0.79
Net increase (decrease) from investment
operations (0.11) (0.80) (0.86) 0.13 0.66
Distributions to shareholders:
From net realized gain on investments (0.01) (0.02) (0.43) (1.37) (0.21)
In excess of net realized gain on investments -- -- -- -- --
Total distributions (0.01) (0.02) (0.43) (1.37) (0.21)
Net asset value, end of period $ 8.55 $ 8.67 $ 9.49 $ 10.78 $ 12.02
Total investment return(c) (1.25)% (8.42)% (8.05)% 1.20% 5.81%
- -------------------------------------------------------------------------------------------------
Ratios/supplemental data:
Net assets, end of period (in 000s) $22,815 $24,250 $32,116 $41,274 $27,355
Ratio of net investment income (loss) to average
net assets (0.84)% (1.26)% (1.05)% (1.05)% (0.97)%
Ratio of operating expenses to average net
assets:
With expense reductions and/or reimbursement 2.61% 2.64% 2.49% 2.64% 2.56%
Without expense reductions and/or
reimbursement 2.98% 2.71% 2.59% 2.79% 2.68%
Portfolio turnover rate(d) 67% 58% 31% 67% 49%
- -------------------------------------------------------------------------------------------------
</TABLE>
(a) These selected per share data were calculated based upon average shares
outstanding during the period.
(b) Includes reimbursement of Fund operating expenses per share of $0.03.
(c) Total investment return does not include contingent deferred sales charge.
(d) Portfolio turnover rates are calculated on the basis of the Fund as a whole
without distinguishing between the classes of shares issued.
5
<PAGE> 42
-------------------
THE AIM FUNDS
-------------------
Shareholder Information
- --------------------------------------------------------------------------------
In addition to the fund, A I M Advisors, Inc. serves as investment advisor to
many other mutual funds (the AIM Funds). The following information is about all
the AIM Funds.
CHOOSING A SHARE CLASS
Many of 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 charge on redemptions within
six 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(1)
- - Generally more appropriate for - Purchase orders limited to - Generally more appropriate
long-term investors amounts less than $250,000 for short-term investors
</TABLE>
(1) AIM 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.
A- 1 MCF--05/99
<PAGE> 43
-------------------
THE AIM FUNDS
-------------------
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>
COMPUTING A CDSC
The CDSC on redemptions of shares is computed based on the lower of their
original purchase price or current market value, net of reinvested dividends and
capital gains distributions. In determining whether to charge a CDSC, we will
assume that you have redeemed shares on which there is no CDSC first and, then,
shares in the order of purchase.
REDUCED SALES CHARGES AND SALES CHARGE EXCEPTIONS
You may qualify for reduced sales charges or sales charge exceptions. To qualify
for these reductions or exceptions, you or your financial consultant must
provide sufficient information at the time of purchase to verify that your
purchase qualifies for such treatment.
REDUCED SALES CHARGES
You may be eligible to buy Class A shares at reduced initial sales charge rates
under Rights of Accumulation or Letters of Intent under certain circumstances.
Rights of Accumulation
You may combine your new purchases of Class A shares with Class A shares
currently owned for the purpose of qualifying for the lower initial sales charge
rates that apply to larger purchases. The applicable initial sales charge for
the new purchase is based on the total of your current purchase and the current
value of all Class A shares you own.
Letters of Intent
Under a Letter of Intent (LOI), you commit to purchase a specified dollar amount
of Class A shares of AIM Funds during a
MCF--05/99 A- 2
<PAGE> 44
-------------------
THE AIM FUNDS
-------------------
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.
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 $ ($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 25 50
All other accounts 50 50
- ----------------------------------------------------------------------------------------------------------------
</TABLE>
HOW TO PURCHASE SHARES
You may purchase shares using one of the options below.
PURCHASE OPTIONS
- -
<TABLE>
<CAPTION>
OPENING AN ACCOUNT ADDING TO AN ACCOUNT
- ----------------------------------------------------------------------------------------------------------
<S> <C> <C>
Through a Financial Consultant Contact your financial consultant. Same
By Mail Mail completed Account Application Mail your check and the remittance
and purchase payment to the 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- 3 MCF--05/99
<PAGE> 45
-------------------
THE AIM FUNDS
-------------------
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).
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 18 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.
MCF--05/99 A- 4
<PAGE> 46
-------------------
THE AIM FUNDS
-------------------
HOW TO REDEEM SHARES
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
Through a Financial Contact your financial consultant.
Consultant
By Mail Send a written request to the transfer agent. Requests must
include (1) original signatures of all registered owners;
(2) the name of the AIM Fund and your account number; (3) if
the transfer agent does not hold your shares, endorsed share
certificates or share certificates accompanied by an
executed stock power; and (4) signature guarantees, if
necessary (see below). The transfer agent may require that
you provide additional information, such as corporate
resolutions or powers of attorney, if applicable. If you are
redeeming from an IRA account, you must include a statement
of whether or not you are at least 59 1/2 years old and
whether you wish to have federal income tax withheld from
your proceeds. The transfer agent may require certain other
information before you can redeem from an employer-sponsored
retirement plan. Contact your employer for details.
By Telephone Call the transfer agent. You will be allowed to redeem by
telephone if (1) the proceeds are to be mailed to the
address on record 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.
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- 5 MCF--05/99
<PAGE> 47
-------------------
THE AIM FUNDS
-------------------
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, at its discretion, redeem the account and distribute the proceeds
to you.
EXCHANGING SHARES
You may, under certain circumstances, exchange shares in one AIM Fund for those
of another AIM Fund. Before requesting an exchange, review the prospectus of the
AIM Fund you wish to acquire. Exchange privileges also apply to holders of the
Connecticut General Guaranteed Account, established for tax-qualified group
annuities, for contracts purchased on or before June 30, 1992.
PERMITTED EXCHANGES
Except as otherwise stated below, you may exchange your shares for shares of the
same class of another AIM Fund. You 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 also may exchange AIM Cash Reserve Shares of AIM Money Market Fund for
Advisor Class shares, but only if you acquired the AIM Cash Reserve Shares
through an exchange from Advisor Class shares.
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;
MCF--05/99 A- 6
<PAGE> 48
-------------------
THE AIM FUNDS
-------------------
- - Exchanges must be made between accounts with identical registration
information;
- - The account you wish to exchange from must have a certified tax identification
number (or the Fund has received an appropriate Form W-8 or W-9);
- - Shares must have been held for at least one day prior to the exchange; 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 purchase of shares
being acquired in an exchange for up to five business days if it determines that
it would be materially disadvantaged by the immediate transfer of exchange
proceeds. There is no fee for exchanges. The exchange privilege is not an option
or right to purchase shares. Any of the participating AIM Funds or the
distributor may modify or discontinue this privilege at any time.
BY MAIL
If you wish to make an exchange by mail, you must include original signatures of
each registered owner exactly as the shares are registered, the account
registration and account number, the dollar amount or number of shares to be
exchanged and the names of the AIM Funds from which and into which the exchange
is to be made.
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. TO PROTECT THE INTERESTS OF
INVESTORS, EACH AIM FUND AND THE DISTRIBUTOR MAY REJECT ANY ORDER CONSIDERED
MARKET-TIMING ACTIVITY.
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 of 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, as allowed by the Securities and Exchange Commission, such as
when the NYSE restricts or suspends trading.
A- 7 MCF--05/99
<PAGE> 49
-------------------
THE AIM FUNDS
-------------------
TAXES
In general, dividends and distributions you receive are taxable as ordinary
income or long-term capital gains for federal income tax purposes, whether you
reinvest them in additional shares or take them in cash. Distributions are
taxable to you at different rates depending on the length of time the fund holds
its assets. Different tax rates apply to ordinary income and long-term capital
gain distributions, regardless of how long you have held your shares. Every
year, you will be sent information showing the amount of dividends and
distributions you received from each AIM Fund during the prior year.
Any long-term or short-term capital gains realized from redemptions of AIM
Fund shares will be subject to federal income tax. Exchanges of shares for
shares of another AIM Fund are treated as a sale, and any gain realized on the
transaction will generally be subject to federal income tax.
The foreign, state and local tax consequences of investing in AIM Fund shares
may differ materially from the federal income tax consequences described above.
You should consult your tax advisor before investing.
MCF--05/99 A- 8
<PAGE> 50
AIM JAPAN GROWTH FUND
Obtaining Additional Information
- --------------------------------------------------------------------------------
More information may be obtained free of charge upon request. The Statement of
Additional Information (SAI), a current version of which is on file with the
Securities and Exchange Commission (SEC), contains more details about the fund
and is incorporated by reference into the prospectus (is legally a part of this
prospectus). Annual and semiannual reports to shareholders contain additional
information about the fund's investments. The fund's annual report also
discusses the market conditions and investment strategies that significantly
affected the fund's performance during its last fiscal year.
If you have questions about this fund, another fund in The AIM Family of
Funds(R) or your account, or wish to obtain free copies of the fund's current
SAI or annual or semiannual reports, please contact us
- ---------------------------------------------------------
<TABLE>
<S> <C>
BY MAIL: A I M 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)
</TABLE>
- ---------------------------------------------------------
You also can obtain copies of the fund's SAI and other information at the SEC's
Public Reference Room in Washington, DC, 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, DC 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
[AIM LOGO APPEARS HERE] www.aimfunds.com JPG-PRO-1 INVEST WITH DISCIPLINE
--Registration Mark--
<PAGE> 51
AIM MID CAP EQUITY FUND
------------------------------------------------------------------------
AIM Mid Cap Equity Fund seeks to provide long-term growth of capital.
PROSPECTUS
MAY 3, 1999
This prospectus contains important
information about the Class A, B and
C shares of the fund. Please read it
before investing and keep it for
future reference.
As with all other mutual fund
securities, the Securities and
Exchange Commission has not approved
or disapproved these securities or
determined whether the information
in this prospectus is adequate or
accurate. Anyone who tells you
otherwise is committing a crime.
[AIM LOGO APPEARS HERE] INVEST WITH DISCIPLINE
--Registered Trademark--
<PAGE> 52
-----------------------
AIM MID CAP EQUITY FUND
-----------------------
TABLE OF CONTENTS
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
INVESTMENT OBJECTIVE AND STRATEGIES 1
- - - - - - - - - - - - - - - - - - - - - - - - -
PRINCIPAL RISKS OF INVESTING IN THE
FUND 1
- - - - - - - - - - - - - - - - - - - - - - - - -
PERFORMANCE INFORMATION 2
- - - - - - - - - - - - - - - - - - - - - - - - -
Annual Total Returns 2
Performance Table 2
FEE TABLE AND EXPENSE EXAMPLE 3
- - - - - - - - - - - - - - - - - - - - - - - - -
Fee Table 3
Expense Example 3
FUND MANAGEMENT 4
- - - - - - - - - - - - - - - - - - - - - - - - -
The Advisor 4
Advisor Compensation 4
Portfolio Managers 4
OTHER INFORMATION 4
- - - - - - - - - - - - - - - - - - - - - - - - -
Sales Charges 4
Dividends and Distributions 4
FINANCIAL HIGHLIGHTS 5
- - - - - - - - - - - - - - - - - - - - - - - - -
SHAREHOLDER INFORMATION A-1
- - - - - - - - - - - - - - - - - - - - - - - - -
Choosing a Share Class A-1
Purchasing Shares A-4
Redeeming Shares A-5
Exchanging Shares A-7
Pricing of Shares A-8
Taxes A-8
OBTAINING ADDITIONAL INFORMATION Back Cover
- - - - - - - - - - - - - - - - - - - - - - - - -
</TABLE>
The AIM Family of Funds, The AIM Family of Funds and Design (i.e., the AIM
logo), AIM and Design, AIM, AIM LINK, AIM Institutional Funds, aimfunds.com, La
Familia AIM de Fondos, La Familia AIM de Fondos and Design and Invest with
Discipline are registered service marks and AIM Bank Connection is a service
mark of A I M Management Group Inc.
No dealer, salesperson or any other person has been authorized to give any
information or to make any representations other than those contained in this
prospectus, and you should not rely on such other information or
representations.
<PAGE> 53
-----------------------
AIM MID CAP EQUITY FUND
-----------------------
INVESTMENT OBJECTIVE AND STRATEGIES
- --------------------------------------------------------------------------------
The fund's investment objective is long-term growth of capital.
The fund seeks to meet this objective by investing, normally, at least 65% of
its total assets in equity securities of U.S. issuers that have market
capitalizations within the range of market capitalizations of companies included
in the Russell Midcap(TM) Index.
The fund may invest up to 35% of its total assets in equity securities of
other U.S. issuers or in investment-grade debt securities of U.S. issuers. The
Fund may also invest up to 25% of its total assets in foreign securities.
In selecting investments, the portfolio managers seek to identify those
companies that are, in the portfolio managers' view, undervalued relative to
current or projected earnings, or the current market value of assets owned by
the company. The primary emphasis of the portfolio managers' 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. The portfolio managers consider whether to sell a
particular security when any of these factors materially change.
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 instruments, or high-quality debt securities. 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 prices of equity
securities change in response to many factors, including the historical and
prospective earnings of the issuer, the value of its assets, general economic
conditions, interest rates, investor perceptions, and market liquidity.
Foreign securities have additional risks, including exchange rate changes,
political and economic upheaval, the relative lack of information about these
companies, relatively low market liquidity, and the potential lack of strict
financial and accounting controls and standards.
The value of your shares could be adversely affected if the computer systems
used by the fund's investment advisor and other service providers are unable to
distinguish the year 2000 from the year 1900.
The fund's investment advisor and independent technology consultants are
working to avoid year 2000-related problems in its systems and to obtain
assurances that other service providers are taking similar steps. Year 2000
problems may also affect issuers in whose securities the fund invests.
An investment in the fund is not a deposit of a bank and is not insured or
guaranteed by the Federal Deposit Insurance Corporation or any other government
agency.
1
<PAGE> 54
-----------------------
AIM MID CAP EQUITY FUND
-----------------------
PERFORMANCE INFORMATION
- --------------------------------------------------------------------------------
The bar chart and table shown below provide an indication of the risks of
investing in the fund. The fund's past performance is not necessarily an
indication of its future performance.
ANNUAL TOTAL 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]
<TABLE>
<CAPTION>
Annual
Year Ended Total
December 31 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 periods shown in the bar chart, the highest quarterly return was
25.61% (quarter ended December 31, 1992) and the lowest quarterly return was
- -25.00% (quarter ended September 30, 1998).
PERFORMANCE TABLE
The following performance table compares the fund's performance to that of a
broad-based securities market index. The fund's performance reflects payment of
sales loads.
<TABLE>
<CAPTION>
AVERAGE ANNUAL TOTAL RETURNS
- ------------------------------------------------------------------------------
(for the periods ended SINCE INCEPTION
December 31, 1998) 1 YEAR 5 YEARS 10 YEARS INCEPTION DATE
- ------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Class A (9.94)% 11.11% 15.24% 12.57% 6/9/87
Class B (9.88) 11.38 -- 12.84 4/1/93
Class C -- -- -- -- 5/3/99
Russell Midcap(TM)
Index(1) 10.09 17.35 16.69 14.46(2) 5/31/87(2)
- ------------------------------------------------------------------------------
</TABLE>
(1) The Russell Midcap(TM) Index measures the performance of the smallest 800
companies in the Russell 1000--Registered Trademark-- Index. These companies
are considered representative of medium-sized companies.
(2) The average annual total return given is since the date closest to the
inception date of the class with the longest performance history.
2
<PAGE> 55
-----------------------
AIM MID CAP EQUITY FUND
-----------------------
FEE TABLE AND EXPENSE EXAMPLE
- --------------------------------------------------------------------------------
FEE TABLE
This table describes the fees and expenses that you may pay if you buy and hold
shares of the fund:
<TABLE>
<CAPTION>
SHAREHOLDER FEES
- ------------------------------------------------------------
(fees paid directly from
your investment) CLASS A CLASS B CLASS C
- ------------------------------------------------------------
<S> <C> <C> <C>
Maximum Sales Charge (Load)
Imposed on Purchases
(as a percentage of
offering price) 5.50% None None
Maximum Deferred
Sales Charge (Load)
(as a percentage of
original purchase
price or redemption
proceeds, whichever is less) None(1) 5.00% 1.00%
- ------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
ANNUAL FUND OPERATING EXPENSES
- ------------------------------------------------------------
(expenses that are deducted
from fund assets) CLASS A CLASS B CLASS C
- ------------------------------------------------------------
<S> <C> <C> <C>
Management Fees 0.73% 0.73% 0.73%
Distribution and/or
Service (12b-1) Fees 0.35 1.00 1.00
Other Expenses 0.49 0.49 0.49
Total Annual Fund
Operating Expenses 1.57 2.22 2.22
- ------------------------------------------------------------
</TABLE>
(1) If you buy $1,000,000 or more of Class A shares and redeem these shares
within 18 months from the date of purchase, you may pay a 1% contingent
deferred sales charge (CDSC) at the time of redemption.
As a result of 12b-1 fees, long-term shareholders in the fund may pay more than
the maximum permitted initial sales charge.
EXPENSE EXAMPLE
This example is intended to help you compare the costs of investing in different
classes of the fund with the cost of investing in other mutual funds.
The example assumes that you invest $10,000 in the fund for the time periods
indicated and then redeem all of your shares at the end of those periods. The
example also assumes that your investment has a 5% return each year and that the
fund's operating expenses remain the same. Although your actual returns and
costs may be higher or lower, based on these assumptions your costs would be:
<TABLE>
<CAPTION>
1 YEAR 3 YEARS 5 YEARS 10 YEARS
- ----------------------------------------------
<S> <C> <C> <C> <C>
Class A $701 $1,018 $1,358 $2,315
Class B 725 994 1,390 2,391
Class C 325 694 1,190 2,554
- ----------------------------------------------
</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 $701 $1,018 $1,358 $2,315
Class B 225 694 1,190 2,391
Class C 225 694 1,190 2,554
- ----------------------------------------------
</TABLE>
3
<PAGE> 56
-----------------------
AIM MID CAP EQUITY FUND
-----------------------
FUND MANAGEMENT
- --------------------------------------------------------------------------------
THE ADVISOR
A I M Advisors, Inc. (the advisor) serves as the fund's investment advisor and
is responsible for its day-to-day management. The advisor is located at 11
Greenway Plaza, Suite 100, Houston, Texas 77046-1173. The advisor supervises all
aspects of the fund's operations and provides investment advisory services to
the fund, including obtaining and evaluating economic, statistical and financial
information to formulate and implement investment programs for the fund.
The advisor has acted as an investment advisor since its organization in 1976.
Today, the advisor, together with its subsidiaries, advises or manages over 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 and Chancellor LGT
Asset Management, Inc. (the advisor for the period January 1, 1998 through May
28, 1998) together received compensation of 0.76% of average daily net assets,
consisting of a management and administrative fee of 0.73% and an accounting fee
of 0.03%.
PORTFOLIO MANAGERS
The advisor uses a team approach to investment management. The individual
members of the team who are primarily responsible for the day-to-day management
of the fund's portfolio are
- - 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.
- - 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.
- - 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.
OTHER INFORMATION
- --------------------------------------------------------------------------------
SALES CHARGES
Purchases of Class A shares of AIM Mid Cap Equity 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. Purchases of Class B and Class C shares are subject
to the contingent deferred sales charges listed in that section.
DIVIDENDS AND DISTRIBUTIONS
DIVIDENDS
The fund generally declares and pays dividends, if any, annually.
CAPITAL GAINS DISTRIBUTIONS
The fund generally distributes long-term and short-term capital gains (including
any net gains from foreign currency transactions), if any, annually.
4
<PAGE> 57
-----------------------
AIM MID CAP EQUITY FUND
-----------------------
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
The financial highlights table is intended to help you understand the fund's
financial performance. Certain information reflects financial results for a
single fund share.
The total returns in the table represent the rate that an investor would have
earned (or lost) on an investment in the fund (assuming reinvestment of all
dividends and distributions).
This information has been audited by 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(a) 1997 1996 1995 1994
- ------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of period $ 21.01 $ 20.77 $ 19.07 $ 17.69 $ 17.17
Income from investment operations:
Net investment income (loss) (0.24)(b) (0.20) 0.03 0.24 0.04(b)
Net gains (losses) on securities (both
realized and unrealized) (0.81) 3.00 2.96 3.93 2.55
Total from investment operations (1.05) 2.80 2.99 4.17 2.59
Less distributions:
Dividends from net investment income -- -- -- (0.21) (0.02)
Distributions from net realized gains (0.99) (2.56) (1.29) (2.58) (2.05)
Total distributions (0.99) (2.56) (1.29) (2.79) (2.07)
Net asset value, end of period $ 18.97 $ 21.01 $ 20.77 $ 19.07 $ 17.69
Total return(c) (4.71)% 14.05% 15.65% 23.23% 15.69%
- ------------------------------------------------------------------------------------------------------
Ratios/supplemental data:
Net assets, end of period (000s omitted) $180,258 $255,674 $343,427 $396,291 $196,937
Ratio of expenses to average net assets:
With expense reductions and/or reimbursement 1.56%(d) 1.37% 1.36% 1.46% 1.58%
Without expense reductions and/or
reimbursement 1.57%(d) 1.48% 1.41% -- --
Ratio of net investment income (loss) to average
net assets:
With expense reductions and/or reimbursement (1.09)%(d) (0.90)% 0.12% 1.24% 0.17%
Without expense reductions and/or
reimbursement (1.10)%(d) (1.01)% 0.07% -- --
Portfolio turnover rate(e) 168% 190% 253% 71% 102%
- ------------------------------------------------------------------------------------------------------
</TABLE>
(a) The Fund changed investment advisors on May 29, 1998.
(b) Calculated using average shares outstanding.
(c) Does not deduct sales charges.
(d) Ratios are based on average net assets of $216,642,403.
(e) Portfolio turnover rates are calculated on the basis of the Fund as a whole
without distinguishing between the classes of shares issued.
<TABLE>
<CAPTION>
CLASS B
---------------------------------------------------
YEAR ENDED DECEMBER 31,
1998(a) 1997 1996 1995 1994
- -----------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of period $ 20.31 $ 20.28 $ 18.77 $ 17.50 $ 17.09
Income from investment operations:
Net investment income (0.38)(b) (0.34) (0.11) 0.10 (0.09)
Net gains (losses) on securities (both
realized and unrealized) (0.78) 2.93 2.91 3.87 2.55
Total from investment operations (1.16) 2.59 2.80 3.97 2.46
Less distributions:
Dividends for net investment income -- -- -- (0.12) --
Distributions from net realized gains (0.99) (2.56) (1.29) (2.58) (2.05)
Total distributions (0.99) (2.56) (1.29) (2.70) (2.05)
Net asset value, end of period $ 18.16 $ 20.31 $ 20.28 $ 18.77 $ 17.50
Total return(c) (5.41)% 13.35% 14.82% 22.42% 15.06%
- -----------------------------------------------------------------------------------------------------
Ratios/supplemental data:
Net assets, end of period (000s omitted) $165,447 $255,468 $334,590 $348,435 $80,060
Ratio of expenses to average net assets:
With expense reductions and/or reimbursement 2.21%(d) 2.02% 2.01% 2.11% 2.23%
Without expense reductions and/or
reimbursement 2.22%(d) 2.13% 2.06% -- --
Ratio of net investment income to average net
assets:
With expense reductions and/or reimbursement (1.74)%(d) (1.55)% (0.53)% 0.59% (0.48)%
Without expense reductions and/or
reimbursement (1.75)%(d) (1.66)% (0.58)% -- --
Portfolio turnover rate(e) 168% 190% 253% 71% 102%
- -----------------------------------------------------------------------------------------------------
</TABLE>
(a) The Fund changed investment advisors on May 29, 1998.
(b) Calculated using average shares outstanding.
(c) Does not deduct contingent deferred sales charges.
(d) Ratios are based on average net assets of $214,825,194.
(e) Portfolio turnover rates are calculated on the basis of the Fund as a whole
without distinguishing between the classes of shares issued.
5
<PAGE> 58
-------------------
THE AIM FUNDS
-------------------
Shareholder Information
- --------------------------------------------------------------------------------
In addition to the fund, A I M Advisors, Inc. serves as investment advisor to
many other mutual funds (the AIM Funds). The following information is about all
the AIM Funds.
CHOOSING A SHARE CLASS
Many of 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 charge on redemptions within
six 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(1)
- - Generally more appropriate for - Purchase orders limited to - Generally more appropriate
long-term investors amounts less than $250,000 for short-term investors
</TABLE>
(1) AIM 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.
A- 1 MCF--05/99
<PAGE> 59
-------------------
THE AIM FUNDS
-------------------
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>
COMPUTING A CDSC
The CDSC on redemptions of shares is computed based on the lower of their
original purchase price or current market value, net of reinvested dividends and
capital gains distributions. In determining whether to charge a CDSC, we will
assume that you have redeemed shares on which there is no CDSC first and, then,
shares in the order of purchase.
REDUCED SALES CHARGES AND SALES CHARGE EXCEPTIONS
You may qualify for reduced sales charges or sales charge exceptions. To qualify
for these reductions or exceptions, you or your financial consultant must
provide sufficient information at the time of purchase to verify that your
purchase qualifies for such treatment.
REDUCED SALES CHARGES
You may be eligible to buy Class A shares at reduced initial sales charge rates
under Rights of Accumulation or Letters of Intent under certain circumstances.
Rights of Accumulation
You may combine your new purchases of Class A shares with Class A shares
currently owned for the purpose of qualifying for the lower initial sales charge
rates that apply to larger purchases. The applicable initial sales charge for
the new purchase is based on the total of your current purchase and the current
value of all Class A shares you own.
Letters of Intent
Under a Letter of Intent (LOI), you commit to purchase a specified dollar amount
of Class A shares of AIM Funds during a
MCF--05/99 A- 2
<PAGE> 60
-------------------
THE AIM FUNDS
-------------------
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.
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 $ ($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 25 50
All other accounts 50 50
- ----------------------------------------------------------------------------------------------------------------
</TABLE>
HOW TO PURCHASE SHARES
You may purchase shares using one of the options below.
PURCHASE OPTIONS
- -
<TABLE>
<CAPTION>
OPENING AN ACCOUNT ADDING TO AN ACCOUNT
- ----------------------------------------------------------------------------------------------------------
<S> <C> <C>
Through a Financial Consultant Contact your financial consultant. Same
By Mail Mail completed Account Application Mail your check and the remittance
and purchase payment to the 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- 3 MCF--05/99
<PAGE> 61
-------------------
THE AIM FUNDS
-------------------
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).
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 18 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.
MCF--05/99 A- 4
<PAGE> 62
-------------------
THE AIM FUNDS
-------------------
HOW TO REDEEM SHARES
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
Through a Financial Contact your financial consultant.
Consultant
By Mail Send a written request to the transfer agent. Requests must
include (1) original signatures of all registered owners;
(2) the name of the AIM Fund and your account number; (3) if
the transfer agent does not hold your shares, endorsed share
certificates or share certificates accompanied by an
executed stock power; and (4) signature guarantees, if
necessary (see below). The transfer agent may require that
you provide additional information, such as corporate
resolutions or powers of attorney, if applicable. If you are
redeeming from an IRA account, you must include a statement
of whether or not you are at least 59 1/2 years old and
whether you wish to have federal income tax withheld from
your proceeds. The transfer agent may require certain other
information before you can redeem from an employer-sponsored
retirement plan. Contact your employer for details.
By Telephone Call the transfer agent. You will be allowed to redeem by
telephone if (1) the proceeds are to be mailed to the
address on record 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.
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- 5 MCF--05/99
<PAGE> 63
-------------------
THE AIM FUNDS
-------------------
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, at its discretion, redeem the account and distribute the proceeds
to you.
EXCHANGING SHARES
You may, under certain circumstances, exchange shares in one AIM Fund for those
of another AIM Fund. Before requesting an exchange, review the prospectus of the
AIM Fund you wish to acquire. Exchange privileges also apply to holders of the
Connecticut General Guaranteed Account, established for tax-qualified group
annuities, for contracts purchased on or before June 30, 1992.
PERMITTED EXCHANGES
Except as otherwise stated below, you may exchange your shares for shares of the
same class of another AIM Fund. You 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 also may exchange AIM Cash Reserve Shares of AIM Money Market Fund for
Advisor Class shares, but only if you acquired the AIM Cash Reserve Shares
through an exchange from Advisor Class shares.
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;
MCF--05/99 A- 6
<PAGE> 64
-------------------
THE AIM FUNDS
-------------------
- - Exchanges must be made between accounts with identical registration
information;
- - The account you wish to exchange from must have a certified tax identification
number (or the Fund has received an appropriate Form W-8 or W-9);
- - Shares must have been held for at least one day prior to the exchange; 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 purchase of shares
being acquired in an exchange for up to five business days if it determines that
it would be materially disadvantaged by the immediate transfer of exchange
proceeds. There is no fee for exchanges. The exchange privilege is not an option
or right to purchase shares. Any of the participating AIM Funds or the
distributor may modify or discontinue this privilege at any time.
BY MAIL
If you wish to make an exchange by mail, you must include original signatures of
each registered owner exactly as the shares are registered, the account
registration and account number, the dollar amount or number of shares to be
exchanged and the names of the AIM Funds from which and into which the exchange
is to be made.
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. TO PROTECT THE INTERESTS OF
INVESTORS, EACH AIM FUND AND THE DISTRIBUTOR MAY REJECT ANY ORDER CONSIDERED
MARKET-TIMING ACTIVITY.
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 of 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, as allowed by the Securities and Exchange Commission, such as
when the NYSE restricts or suspends trading.
A- 7 MCF--05/99
<PAGE> 65
-------------------
THE AIM FUNDS
-------------------
TAXES
In general, dividends and distributions you receive are taxable as ordinary
income or long-term capital gains for federal income tax purposes, whether you
reinvest them in additional shares or take them in cash. Distributions are
taxable to you at different rates depending on the length of time the fund holds
its assets. Different tax rates apply to ordinary income and long-term capital
gain distributions, regardless of how long you have held your shares. Every
year, you will be sent information showing the amount of dividends and
distributions you received from each AIM Fund during the prior year.
Any long-term or short-term capital gains realized from redemptions of AIM
Fund shares will be subject to federal income tax. Exchanges of shares for
shares of another AIM Fund are treated as a sale, and any gain realized on the
transaction will generally be subject to federal income tax.
The foreign, state and local tax consequences of investing in AIM Fund shares
may differ materially from the federal income tax consequences described above.
You should consult your tax advisor before investing.
MCF--05/99 A- 8
<PAGE> 66
-----------------------
AIM MID CAP EQUITY FUND
-----------------------
OBTAINING ADDITIONAL INFORMATION
- --------------------------------------------------------------------------------
More information may be obtained free of charge upon request. The Statement of
Additional Information (SAI), a current version of which is on file with the
Securities and Exchange Commission (SEC), contains more details about the fund
and is incorporated by reference into the prospectus (is legally a part of this
prospectus). Annual and semiannual reports to shareholders contain additional
information about the fund's investments. The fund's annual report also
discusses the market conditions and investment strategies that significantly
affected the fund's performance during its last fiscal year.
If you have questions about this fund, another fund in The AIM Family of
Funds--Registered Trademark-- or your account, or wish to obtain free copies of
the fund's current SAI or annual or semiannual reports, please contact us
- ---------------------------------------------------------
<TABLE>
<S> <C>
BY MAIL: A I M 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)
</TABLE>
- ---------------------------------------------------------
You also can obtain copies of the fund's SAI and other information at the SEC's
Public Reference Room in Washington, DC, 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, DC 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
- -----------------------------------
[AIM LOGO APPEARS HERE] www.aimfunds.com MCE-PRO-1 INVEST WITH DISCIPLINE
--Registered Trademark--
<PAGE> 67
AIM NEW PACIFIC GROWTH FUND
- --------------------------------------------------------------------------------
AIM New Pacific Growth Fund seeks to provide long-term growth of
capital.
PROSPECTUS
MAY 3, 1999
This prospectus contains important
information about the Class A, B and
C shares of the fund. Please read it
before investing and keep it for
future reference.
As with all other mutual fund
securities, the Securities and
Exchange Commission has not approved
or disapproved these securities or
determined whether the information
in this prospectus is adequate or
accurate. Anyone who tells you
otherwise is committing a crime.
[AIM LOGO APPEARS HERE] INVEST WITH DISCIPLINE
--Registered Trademark--
<PAGE> 68
---------------------------
AIM NEW PACIFIC GROWTH FUND
----------------------------
TABLE OF CONTENTS
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
INVESTMENT OBJECTIVE AND STRATEGIES 1
- - - - - - - - - - - - - - - - - - - - - - - - -
PRINCIPAL RISKS OF INVESTING IN THE FUND 1
- - - - - - - - - - - - - - - - - - - - - - - - -
PERFORMANCE INFORMATION 2
- - - - - - - - - - - - - - - - - - - - - --- - -
Annual Total Returns 2
Performance Table 2
FEE TABLE AND EXPENSE EXAMPLE 3
- - - - - - - - - - - - - - - - - - - - - - - - -
Fee Table 3
Expense Example 3
FUND MANAGEMENT 4
- - - - - - - - - - - - - - - - - - - - - - - - -
The Advisors 4
Advisor Compensation 4
Portfolio Managers 4
OTHER INFORMATION 4
- - - - - - - - - - - - - - - - - - - - - - - - -
Sales Charges 4
Dividends and Distributions 4
FINANCIAL HIGHLIGHTS 5
- - - - - - - - - - - - - - - - - - - - - - - -
SHAREHOLDER INFORMATION A-1
- - - - - - - - - - - - - - - - - - - - - - - -
Choosing a Share Class A-1
Purchasing Shares A-4
Redeeming Shares A-5
Exchanging Shares A-7
Pricing of Shares A-8
Taxes A-8
OBTAINING ADDITIONAL INFORMATION Back Cover
- - - - - - - - - - - - - - - - - - - - - -- - - - - - - - - - - - - - - - - -
</TABLE>
The AIM Family of Funds, The AIM Family of Funds and Design (i.e., the AIM
logo), AIM and Design, AIM, AIM LINK, AIM Institutional Funds, aimfunds.com, La
Familia AIM de Fondos, La Familia AIM de Fondos and Design and Invest with
Discipline are registered service marks and AIM Bank Connection is a service
mark of A I M Management Group Inc.
No dealer, salesperson or any other person has been authorized to give any
information or to make any representations other than those contained in this
prospectus, and you should not rely on such other information or
representations.
<PAGE> 69
---------------------------
AIM NEW PACIFIC GROWTH FUND
----------------------------
INVESTMENT OBJECTIVE AND STRATEGIES
- --------------------------------------------------------------------------------
The fund's investment objective is long-term growth of capital.
The fund seeks to meet this 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, including developing countries,
i.e., those that are in the initial stages of their industrial cycles. 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 (1) is
organized under the laws of a particular country or has a principal office in a
particular country; or (2) derives 50% or more of its total revenues from
business in that country, provided that, in the view of the 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, including developing
countries. 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 portfolio
managers to be of comparable quality. The fund may invest in securities of
issuers located in developing countries, i.e., those that are in the initial
stages of their industrial cycle.
In selecting investments, the 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
portfolio managers then balance the potential benefits with the risks of
investing in those countries and industries. 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 available in the marketplace.
The portfolio managers consider whether to 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
instruments, or high-quality debt securities. 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 prices of equity
securities change in response to many factors, including the historical and
prospective earnings of the issuer, the value of its assets, general economic
conditions, interest rates, investor perceptions, and market liquidity.
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:
- - 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.
- - 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.
- - Regulations--Foreign companies generally are subject to less stringent
regulations, including financial and accounting controls, than are U.S.
companies. As a result, there generally is less publicly available information
about foreign companies than about U.S. companies.
- - 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.
These factors may affect the prices of securities issued by foreign companies
located in developing countries more than those in countries with mature
economies. 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.
The value of your shares could be adversely affected if the computer systems
used by the fund's investment advisor and other service providers are unable to
distinguish the year 2000 from the year 1900.
The fund's investment advisor and independent technology consultants are
working to avoid year 2000-related problems in its systems and to obtain
assurances that other service providers are taking similar steps. Year 2000
problems may also affect issuers in whose securities the fund invests.
An investment in the fund is not a deposit of a bank and is not insured or
guaranteed by the Federal Deposit Insurance Corporation or any other government
agency.
1
<PAGE> 70
---------------------------
AIM NEW PACIFIC GROWTH FUND
----------------------------
PERFORMANCE INFORMATION
- --------------------------------------------------------------------------------
The bar chart and table shown below provide an indication of the risks of
investing in the fund. The fund's past performance is not necessarily an
indication of its future performance.
ANNUAL TOTAL 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]
<TABLE>
<CAPTION>
Annual
Year Ended Total
December 31 Return
- ----------- ------
<S> <C>
1989 ....................................... 48.12%
1990 ....................................... -10.96%
1991 ....................................... 13.07%
1992 ....................................... -7.96%
1993 ....................................... 60.60
1994 ....................................... -19.73%
1995 ....................................... 7.45%
1996 ....................................... 20.04%
1997 ....................................... -44.25%
1998 ....................................... -19.09%
</TABLE>
During the periods shown in the bar chart, the highest quarterly return was
23.94% (quarter ended December 31, 1993) and the lowest quarterly return was
- -31.51% (quarter ended December 31, 1997).
PERFORMANCE TABLE
The following performance table compares the fund's performance to that of a
broad-based securities market index. The fund's performance reflects payment of
sales loads.
<TABLE>
<CAPTION>
AVERAGE ANNUAL TOTAL RETURNS
- --------------------------------------------------------------------------------
(for the periods ended
December 31, 1998)
SINCE INCEPTION
1 YEAR 5 YEARS 10 YEARS INCEPTION DATE
- --------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Class A (23.57)% (15.09)% 0.27% 8.15% 1/19/77
Class B (23.56) (14.97) -- (7.09) 4/1/93
Class C -- -- -- -- 5/3/99
MSCI AC
Pacific
Free
ex-Japan
Index(1) (2.07) (7.75) 6.76 8.73(2) 12/31/87(2)
- --------------------------------------------------------------------------------
</TABLE>
(1) The Morgan Stanley Capital International All Country Pacific Free ex-Japan
Index measures the performance of 11 developed and emerging markets in the
Pacific rim, excluding Japan. The index excludes shares that are not readily
purchased by non-local investors.
(2) The average annual total return given is since the date closest to the
inception date of the class with the longest history.
2
<PAGE> 71
---------------------------
AIM NEW PACIFIC GROWTH FUND
----------------------------
FEE TABLE AND EXPENSE EXAMPLE
- --------------------------------------------------------------------------------
FEE TABLE
This table describes the fees and expenses that you may pay if you buy and hold
shares of the fund:
<TABLE>
<CAPTION>
SHAREHOLDER FEES
- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -
(fees paid directly from
your investment) CLASS A CLASS B CLASS C
- --------------------------------------------------------------
<S> <C> <C> <C> <C>
Maximum Sales Charge (Load)
Imposed on Purchases
(as a percentage of
offering price) 5.50% None None
Maximum Deferred
Sales Charge (Load)
(as a percentage of
original purchase
price or redemption
proceeds, whichever is less) None(1) 5.00% 1.00%
- --------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
ANNUAL FUND OPERATING EXPENSES
- --------------------------------------------------------------
(expenses that are deducted
from fund assets) CLASS A CLASS B CLASS C
- --------------------------------------------------------------
<S> <C> <C> <C>
Management Fees 0.98% 0.98% 0.98%
Distribution and/or
Service (12b-1) Fees 0.35 1.00 1.00
Other Expenses 1.07 1.07 1.07
Total Annual Fund
Operating Expenses 2.40 3.05 3.05
Expense
Reimbursement(2) 0.40 0.40 0.40
Net Expenses 2.00 2.65 2.65
- --------------------------------------------------------------
</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 contractually agreed to limit net expenses.
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 gross operating expenses remain the same. To the extent fees are waived
or expenses are reimbursed, the expenses will be lower. Although your actual
returns and costs may be higher or lower, based on these assumptions your costs
would be:
<TABLE>
<CAPTION>
1 YEAR 3 YEARS 5 YEARS 10 YEARS
- ----------------------------------------------
<S> <C> <C> <C> <C>
Class A $780 $1,257 $1,760 $3,136
Class B 808 1,242 1,801 3,214
Class C 408 942 1,601 3,365
- ----------------------------------------------
</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 $780 $1,257 $1,760 $3,136
Class B 308 942 1,601 3,214
Class C 308 942 1,601 3,365
- ----------------------------------------------
</TABLE>
3
<PAGE> 72
---------------------------
AIM NEW PACIFIC GROWTH FUND
----------------------------
FUND MANAGEMENT
- --------------------------------------------------------------------------------
THE ADVISORS
A I M Advisors, Inc. (the advisor) serves as the fund's investment advisor.
INVESCO Asia Limited (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 12/F, Three Exchange Square, 8 Connaught Place, Hong
Kong. 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
1972. 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 and Chancellor LGT
Asset Management, Inc. (the advisor for the period January 1, 1998 through May
28, 1998) together received compensation of 1.01% of average daily net assets,
consisting of a management and administrative fee of 0.98% and an accounting fee
of 0.03%.
PORTFOLIO MANAGERS
The advisors use a team approach to investment management. The individual
members of the team who are primarily responsible for the day-to-day management
of the fund's portfolio are
- - 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.
- - 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).
OTHER INFORMATION
- --------------------------------------------------------------------------------
SALES CHARGES
Purchases of Class A shares of AIM New Pacific Growth 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. Purchases of Class B and Class C shares are subject
to the contingent deferred sales charges listed in that section.
DIVIDENDS AND DISTRIBUTIONS
DIVIDENDS
The fund generally declares and pays dividends, if any, annually.
CAPITAL GAINS DISTRIBUTIONS
The fund generally distributes long-term and short-term capital gains (including
any net gains from foreign currency transactions), if any, annually.
4
<PAGE> 73
---------------------------
AIM NEW PACIFIC GROWTH FUND
----------------------------
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
The financial highlights table is intended to help you understand the fund's
financial performance. Certain information reflects financial results for a
single fund share.
The total returns in the table represent the rate that an investor would have
earned (or lost) on an investment in the fund (assuming reinvestment of all
dividends and distributions).
This information has been audited by 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(a) 1997(a) 1996(a) 1995(a) 1994
- -----------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Per Share Operating Performance:
Net asset value, beginning of period $ 6.48 $ 13.12 $ 12.47 $ 12.10 $ 15.86
Income from investment operations:
Net investment income (loss) 0.06(b) 0.05 0.02 0.11 0.02
Net realized and unrealized gain (loss) on
investments (1.30) (5.84) 2.44 0.79 (3.15)
Net increase (decrease) from investment
operations (1.24) (5.79) 2.46 0.90 (3.13)
Distributions to shareholders:
From net investment income (0.05) (0.03) -- (0.10) (0.01)
From net realized gain on investments -- (0.82) (1.81) (0.43) (0.55)
In excess of net investment income -- -- -- -- --
In excess of net realized gain on investments -- -- -- -- (0.07)
Total distributions (0.05) (0.85) (1.81) (0.53) (0.63)
Net asset value, end of period $ 5.19 $ 6.48 $ 13.12 $ 12.47 $ 12.10
Total investment return(c) (19.09)% (44.24)% 20.04% 7.45% (19.73)%
- -----------------------------------------------------------------------------------------------------
Ratios/supplemental data:
Net assets, end of period (in 000s) $80,824 $135,807 $361,244 $383,722 $404,680
Ratio of net investment income (loss) to average
net assets 1.30% 0.41% 0.17% 0.91% 0.11%
Ratio of expenses to average net assets:
With expense reductions and/or reimbursement 2.00% 1.66% 1.86% 1.89% 1.81%
Without expense reductions and/or
reimbursement 2.40% 1.93% 1.99% 1.94% N/A
Portfolio turnover rate(d) 96% 80% 93% 63% 87%
- -----------------------------------------------------------------------------------------------------
</TABLE>
(a) These selected per share data were calculated based upon average shares
outstanding during the period.
(b) Includes reimbursement of Fund operating expenses per share of $0.02.
(c) Total investment return does not include sales charges.
(d) Portfolio turnover is calculated on the basis of the Fund as a whole without
distinguishing between the classes of shares issued.
N/A Not Applicable.
<TABLE>
<CAPTION>
CLASS B
--------------------------------------------------
YEAR ENDED DECEMBER 31,
1998(a) 1997(a) 1996(a) 1995(a) 1994
- ----------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Per Share Operating Performance:
Net asset value, beginning of period $ 6.28 $ 12.80 $ 12.29 $ 11.96 $ 15.79
Income from investment operations:
Net investment income (loss) 0.03 (0.03) (0.06) 0.03 (0.06)
Net realized and unrealized gain (loss) on
investments (1.26) (5.67) 2.38 0.75 (3.15)
Net increase (decrease) from investment
operations (1.23) (5.70) 2.32 0.78 (3.21)
Distributions to shareholders:
From net investment income (0.01) -- -- (0.02) --
From net realized gain on investments -- (0.82) (1.81) (0.43) (0.55)
In excess of net investment income -- -- -- -- --
In excess of net realized gain on investments -- -- -- -- (0.07)
Total distributions (0.01) (0.82) (1.81) (0.45) (0.62)
Net asset value, end of period $ 5.04 $ 6.28 $ 12.80 $ 12.29 $ 11.96
Total investment return(c) (19.55)% (44.65)% 19.28% 6.54% (20.30)%
- ----------------------------------------------------------------------------------------------------
Ratios/supplemental data:
Net assets, end of period (in 000s) $31,837 $55,820 $151,805 $130,887 $120,171
Ratio of net investment income (loss) to average
net assets 0.65% (0.24)% (0.48)% 0.26% (0.54)%
Ratio of expenses to average net assets:
With expense reductions and/or reimbursement 2.65% 2.31% 2.51% 2.54% 2.46%
Without expense reductions and/or
reimbursement 3.05% 2.58% 2.64% 2.59% N/A
Portfolio turnover rate(d) 96% 80% 93% 63% 87%
- ----------------------------------------------------------------------------------------------------
</TABLE>
(a) These selected per share data were calculated based upon average shares
outstanding during the period.
(b) Includes reimbursement of Fund operating expenses per share of $0.02.
(c) Total investment return does not include contingent deferred sales charges.
(d) Portfolio turnover is calculated on the basis of the Fund as a whole without
distinguishing between the classes of shares issued.
N/A Not Applicable.
5
<PAGE> 74
-------------------
THE AIM FUNDS
-------------------
Shareholder Information
- --------------------------------------------------------------------------------
In addition to the fund, A I M Advisors, Inc. serves as investment advisor to
many other mutual funds (the AIM Funds). The following information is about all
the AIM Funds.
CHOOSING A SHARE CLASS
Many of 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 charge on redemptions within
six 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(1)
- - Generally more appropriate for - Purchase orders limited to - Generally more appropriate
long-term investors amounts less than $250,000 for short-term investors
</TABLE>
(1) AIM 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.
A- 1 MCF--05/99
<PAGE> 75
-------------------
THE AIM FUNDS
-------------------
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>
COMPUTING A CDSC
The CDSC on redemptions of shares is computed based on the lower of their
original purchase price or current market value, net of reinvested dividends and
capital gains distributions. In determining whether to charge a CDSC, we will
assume that you have redeemed shares on which there is no CDSC first and, then,
shares in the order of purchase.
REDUCED SALES CHARGES AND SALES CHARGE EXCEPTIONS
You may qualify for reduced sales charges or sales charge exceptions. To qualify
for these reductions or exceptions, you or your financial consultant must
provide sufficient information at the time of purchase to verify that your
purchase qualifies for such treatment.
REDUCED SALES CHARGES
You may be eligible to buy Class A shares at reduced initial sales charge rates
under Rights of Accumulation or Letters of Intent under certain circumstances.
Rights of Accumulation
You may combine your new purchases of Class A shares with Class A shares
currently owned for the purpose of qualifying for the lower initial sales charge
rates that apply to larger purchases. The applicable initial sales charge for
the new purchase is based on the total of your current purchase and the current
value of all Class A shares you own.
Letters of Intent
Under a Letter of Intent (LOI), you commit to purchase a specified dollar amount
of Class A shares of AIM Funds during a
MCF--05/99 A- 2
<PAGE> 76
-------------------
THE AIM FUNDS
-------------------
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.
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 $ ($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 25 50
All other accounts 50 50
- ----------------------------------------------------------------------------------------------------------------
</TABLE>
HOW TO PURCHASE SHARES
You may purchase shares using one of the options below.
PURCHASE OPTIONS
- -
<TABLE>
<CAPTION>
OPENING AN ACCOUNT ADDING TO AN ACCOUNT
- ----------------------------------------------------------------------------------------------------------
<S> <C> <C>
Through a Financial Consultant Contact your financial consultant. Same
By Mail Mail completed Account Application Mail your check and the remittance
and purchase payment to the 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- 3 MCF--05/99
<PAGE> 77
-------------------
THE AIM FUNDS
-------------------
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).
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 18 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.
MCF--05/99 A- 4
<PAGE> 78
-------------------
THE AIM FUNDS
-------------------
HOW TO REDEEM SHARES
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
Through a Financial Contact your financial consultant.
Consultant
By Mail Send a written request to the transfer agent. Requests must
include (1) original signatures of all registered owners;
(2) the name of the AIM Fund and your account number; (3) if
the transfer agent does not hold your shares, endorsed share
certificates or share certificates accompanied by an
executed stock power; and (4) signature guarantees, if
necessary (see below). The transfer agent may require that
you provide additional information, such as corporate
resolutions or powers of attorney, if applicable. If you are
redeeming from an IRA account, you must include a statement
of whether or not you are at least 59 1/2 years old and
whether you wish to have federal income tax withheld from
your proceeds. The transfer agent may require certain other
information before you can redeem from an employer-sponsored
retirement plan. Contact your employer for details.
By Telephone Call the transfer agent. You will be allowed to redeem by
telephone if (1) the proceeds are to be mailed to the
address on record 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.
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- 5 MCF--05/99
<PAGE> 79
-------------------
THE AIM FUNDS
-------------------
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, at its discretion, redeem the account and distribute the proceeds
to you.
EXCHANGING SHARES
You may, under certain circumstances, exchange shares in one AIM Fund for those
of another AIM Fund. Before requesting an exchange, review the prospectus of the
AIM Fund you wish to acquire. Exchange privileges also apply to holders of the
Connecticut General Guaranteed Account, established for tax-qualified group
annuities, for contracts purchased on or before June 30, 1992.
PERMITTED EXCHANGES
Except as otherwise stated below, you may exchange your shares for shares of the
same class of another AIM Fund. You 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 also may exchange AIM Cash Reserve Shares of AIM Money Market Fund for
Advisor Class shares, but only if you acquired the AIM Cash Reserve Shares
through an exchange from Advisor Class shares.
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;
MCF--05/99 A- 6
<PAGE> 80
-------------------
THE AIM FUNDS
-------------------
- - Exchanges must be made between accounts with identical registration
information;
- - The account you wish to exchange from must have a certified tax identification
number (or the Fund has received an appropriate Form W-8 or W-9);
- - Shares must have been held for at least one day prior to the exchange; 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 purchase of shares
being acquired in an exchange for up to five business days if it determines that
it would be materially disadvantaged by the immediate transfer of exchange
proceeds. There is no fee for exchanges. The exchange privilege is not an option
or right to purchase shares. Any of the participating AIM Funds or the
distributor may modify or discontinue this privilege at any time.
BY MAIL
If you wish to make an exchange by mail, you must include original signatures of
each registered owner exactly as the shares are registered, the account
registration and account number, the dollar amount or number of shares to be
exchanged and the names of the AIM Funds from which and into which the exchange
is to be made.
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. TO PROTECT THE INTERESTS OF
INVESTORS, EACH AIM FUND AND THE DISTRIBUTOR MAY REJECT ANY ORDER CONSIDERED
MARKET-TIMING ACTIVITY.
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 of 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, as allowed by the Securities and Exchange Commission, such as
when the NYSE restricts or suspends trading.
A- 7 MCF--05/99
<PAGE> 81
-------------------
THE AIM FUNDS
-------------------
TAXES
In general, dividends and distributions you receive are taxable as ordinary
income or long-term capital gains for federal income tax purposes, whether you
reinvest them in additional shares or take them in cash. Distributions are
taxable to you at different rates depending on the length of time the fund holds
its assets. Different tax rates apply to ordinary income and long-term capital
gain distributions, regardless of how long you have held your shares. Every
year, you will be sent information showing the amount of dividends and
distributions you received from each AIM Fund during the prior year.
Any long-term or short-term capital gains realized from redemptions of AIM
Fund shares will be subject to federal income tax. Exchanges of shares for
shares of another AIM Fund are treated as a sale, and any gain realized on the
transaction will generally be subject to federal income tax.
The foreign, state and local tax consequences of investing in AIM Fund shares
may differ materially from the federal income tax consequences described above.
You should consult your tax advisor before investing.
MCF--05/99 A- 8
<PAGE> 82
---------------------------
AIM NEW PACIFIC GROWTH FUND
----------------------------
OBTAINING ADDITIONAL INFORMATION
- --------------------------------------------------------------------------------
More information may be obtained free of charge upon request. The Statement of
Additional Information (SAI), a current version of which is on file with the
Securities and Exchange Commission (SEC), contains more details about the fund
and is incorporated by reference into the prospectus (is legally a part of this
prospectus). Annual and semiannual reports to shareholders contain additional
information about the fund's investments. The fund's annual report also
discusses the market conditions and investment strategies that significantly
affected the fund's performance during its last fiscal year.
If you have questions about this fund, another fund in The AIM Family of
Funds--Registered Trademark-- or your account, or wish to obtain free copies of
the fund's current SAI or annual or semiannual reports, please contact us
- ---------------------------------------------------------
<TABLE>
<S> <C>
BY MAIL: A I M 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)
</TABLE>
- ---------------------------------------------------------
You also can obtain copies of the fund's SAI and other information at the SEC's
Public Reference Room in Washington, DC, 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, DC 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
- ----------------------------------
[AIM LOGO APPEARS HERE] www.aimfunds.com NPG-PRO-1 INVEST WITH DISCIPLINE
--Registered Trademark--
<PAGE> 83
AIM SMALL CAP GROWTH FUND
- --------------------------------------------------------------------------------
AIM Small Cap Growth Fund seeks to provide long-term growth of capital.
PROSPECTUS
MAY 3, 1999
This prospectus contains important
information about the Class A, B and
C shares of the fund. Please
read it before investing and keep it
for future reference.
As with all other mutual fund
securities, the Securities and
Exchange Commission has not approved
or disapproved these securities or
determined whether the information
in this prospectus is adequate or
accurate. Anyone who tells you
otherwise is committing a crime.
[AIM LOGO APPEARS HERE] INVEST WITH DISCIPLINE
--Registered Trademark--
<PAGE> 84
-------------------------
AIM SMALL CAP GROWTH FUND
-------------------------
TABLE OF CONTENTS
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
INVESTMENT OBJECTIVE AND STRATEGIES 1
- - - - - - - - - - - - - - - - - - - - - - - -
PRINCIPAL RISKS OF INVESTING IN THE FUND 1
- - - - - - - - - - - - - - - - - - - - - - - -
PERFORMANCE INFORMATION 2
- - - - - - - - - - - - - - - - - - - - - - - -
Annual Total Returns 2
Performance Table 2
FEE TABLE AND EXPENSE EXAMPLE 3
- - - - - - - - - - - - - - - - - - - - - - - -
Fee Table 3
Expense Example 3
FUND MANAGEMENT 4
- - - - - - - - - - - - - - - - - - - - - - - -
The Advisor 4
Advisor Compensation 4
Portfolio Managers 4
OTHER INFORMATION 4
- - - - - - - - - - - - - - - - - - - - - - - -
Sales Charges 4
Dividends and Distributions 4
FINANCIAL HIGHLIGHTS 5
- - - - - - - - - - - - - - - - - - - - - - - -
SHAREHOLDER INFORMATION A-1
- - - - - - - - - - - - - - - - - - - - - - - -
Choosing a Share Class A-1
Purchasing Shares A-4
Redeeming Shares A-5
Exchanging Shares A-7
Pricing of Shares A-8
Taxes A-8
OBTAINING ADDITIONAL INFORMATION Back Cover
- - - - - - - - - - - - - - - - - - - - - - - -
</TABLE>
The AIM Family of Funds, The AIM Family of Funds and Design (i.e., the AIM
logo), AIM and Design, AIM, AIM LINK, AIM Institutional Funds, aimfunds.com, La
Familia AIM de Fondos, La Familia AIM de Fondos and Design and Invest with
Discipline are registered service marks and AIM Bank Connection is a service
mark of A I M Management Group Inc.
No dealer, salesperson or any other person has been authorized to give any
information or to make any representations other than those contained in this
prospectus, and you should not rely on such other information or
representations.
<PAGE> 85
-------------------------
AIM SMALL CAP GROWTH FUND
-------------------------
INVESTMENT OBJECTIVE AND STRATEGIES
- --------------------------------------------------------------------------------
The fund's investment objective is long-term growth of capital.
The fund seeks to meet this 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 25% of its total assets in foreign 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 available in the marketplace. The portfolio managers
consider whether to 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, money market instruments, or high-quality 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 prices of equity
securities change in response to many factors, including the historical and
prospective earnings of the issuer, the value of its assets, general economic
conditions, interest rates, investor perceptions, and market liquidity. This is
especially true with respect to equity securities of smaller companies, whose
prices may go up and down more than equity securities of larger,
more-established companies. Also, since equity securities of smaller companies
may not be traded as often as equity securities of larger, more-established
companies, it may be difficult or impossible for the portfolio to sell
securities at a desirable price.
Foreign securities have additional risks, including exchange rate changes,
political and economic upheaval, the relative lack of information about these
companies, relatively low market liquidity and the potential lack of strict
financial and accounting controls and standards.
If the seller of a repurchase agreement in which the portfolio invests
defaults on its obligation or declares bankruptcy, the portfolio may experience
delays in selling the securities underlying the repurchase agreement. As a
result, the portfolio may incur losses arising from decline in the value of
those securities, reduced levels of income and expenses of enforcing its rights.
The value of your shares could be adversely affected if the computer systems
used by the portfolio's investment advisor and other service providers are
unable to distinguish the year 2000 from the year 1900.
The portfolio's investment advisor and independent technology consultants are
working to avoid year 2000-related problems in its systems and to obtain
assurances that other service providers are taking similar steps. Year 2000
problems may also affect issuers in whose securities the portfolio invests.
An investment in the fund is not a deposit of a bank and is not insured or
guaranteed by the Federal Deposit Insurance Corporation or any other government
agency.
1
<PAGE> 86
-------------------------
AIM SMALL CAP GROWTH FUND
-------------------------
PERFORMANCE INFORMATION
- --------------------------------------------------------------------------------
The bar chart and table shown below provide an indication of the risks of
investing in the fund. The fund's past performance is not necessarily an
indication of its future performance.
ANNUAL TOTAL 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]
<TABLE>
<CAPTION>
Annual
Year Ended Total
December 31 Return
- ----------- ------
<S> <C>
1996 ....................................... 13.81%
1997 ....................................... 16.22%
1998 ....................................... 23.15%
</TABLE>
During the periods shown in the bar chart, the highest quarterly return was
30.28% (quarter ended December 31, 1998) and the lowest quarterly return was
- -20.18% (quarter ended September 30, 1998).
PERFORMANCE TABLE
The following performance table compares the fund's performance to that of a
broad-based securities market index. The fund's performance reflects payment of
sales loads.
<TABLE>
<CAPTION>
AVERAGE ANNUAL TOTAL RETURNS
(for the periods ended SINCE INCEPTION
December 31, 1998) 1 YEAR INCEPTION DATE
- -------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Class A 16.38% 15.55% 10/18/95
Class B 17.22 16.16 10/18/95
Class C -- -- 5/3/99
Russell 2000--Registered Trademark-- Index(1) (2.55) 13.32(2) 10/31/95(2)
- -------------------------------------------------------------------------------------------------
</TABLE>
(1) The Russell 2000--Registered Trademark-- Index is a widely recognized,
unmanaged index of common stocks that measures the performance of the 2,000
smallest companies in the Russell 3000--Registered Trademark-- Index, which
measures the performance of the 3,000 largest 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.
2
<PAGE> 87
-------------------------
AIM SMALL CAP GROWTH FUND
-------------------------
FEE TABLE AND EXPENSE EXAMPLE
- --------------------------------------------------------------------------------
FEE TABLE
This table describes the fees and expenses that you may pay if you buy and hold
shares of the fund:
<TABLE>
<CAPTION>
SHAREHOLDER FEES
- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -
(fees paid directly from
your investment) CLASS A CLASS B CLASS C
- -------------------------------------------------------
<S> <C> <C> <C>
Maximum Sales Charge (Load)
Imposed on Purchases
(as a percentage of
offering price) 5.50% None None
Maximum Deferred
Sales Charge (Load)
(as a percentage of
original purchase
price or redemption
proceeds, whichever is less) None(1) 5.00% 1.00%
- -------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
ANNUAL FUND OPERATING EXPENSES
- - - - - - - - - - - - - - - - - - - - - - - - - - - - -
(expenses that are deducted
from fund assets)(2) CLASS A CLASS B CLASS C
- -------------------------------------------------------
<S> <C> <C> <C>
Management Fees 0.72% 0.72% 0.72%
Distribution and/or
Service (12b-1) Fees 0.35 1.00 1.00
Other Expenses:
Other 1.12 1.12 1.12
Interest 0.01 0.01 0.01
Total Other Expenses 1.13 1.13 1.13
Total Annual Fund
Operating Expenses 2.20 2.85 2.85
Expense
Reimbursement(3) 0.44 0.44 0.44
Net Expenses 1.76 2.41 2.41
- -------------------------------------------------------
</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 contractually agreed to limit net expenses.
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 gross operating expenses remain the same. To the extent fees are waived
or expenses are reimbursed, the expenses will be lower. Although your actual
returns and costs may be higher or lower, based on these assumptions your costs
would be:
<TABLE>
<CAPTION>
1 YEAR 3 YEARS 5 YEARS 10 YEARS
- ----------------------------------------------
<S> <C> <C> <C> <C>
Class A $761 $1,200 $1,665 $2,945
Class B 788 1,183 1,704 3,022
Class C 388 883 1,504 3,176
- ----------------------------------------------
</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 $761 $1,200 $1,665 $2,945
Class B 288 883 1,504 3,022
Class C 288 883 1,504 3,176
- ----------------------------------------------
</TABLE>
3
<PAGE> 88
-------------------------
AIM SMALL CAP GROWTH FUND
-------------------------
FUND MANAGEMENT
- --------------------------------------------------------------------------------
THE ADVISOR
A I M Advisors, Inc. (the advisor) serves as the investment advisor for the
Small Cap Portfolio (the portfolio), 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 portfolio'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 portfolio, encompassing a broad range of
investment objectives.
ADVISOR COMPENSATION
During the fiscal year ended December 31, 1998, the advisor and Chancellor LGT
Asset Management, Inc. (the advisor for the period January 1, 1998 through May
28, 1998) together received compensation of 0.74% of average daily net assets
consisting of a management and administrative fee of 0.72% and an accounting fee
of 0.02%.
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 are
- - 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.
- - 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.
- - Ryan E. Crane, Portfolio Manager, who has been responsible for the fund since
1999 and has been associated with the advisor and/or its affiliates since
1994.
OTHER INFORMATION
- --------------------------------------------------------------------------------
SALES CHARGES
Purchases of Class A shares of AIM Small Cap Growth 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. Purchases of Class B and Class C shares are subject
to the contingent deferred sales charges listed in that section.
DIVIDENDS AND DISTRIBUTIONS
DIVIDENDS
The fund generally declares and pays dividends, if any, annually.
CAPITAL GAINS DISTRIBUTIONS
The fund generally distributes long-term and short-term capital gains (including
any net gains from foreign currency transactions), if any, annually.
4
<PAGE> 89
-------------------------
AIM SMALL CAP GROWTH FUND
-------------------------
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
The financial highlights table is intended to help you understand the fund's
financial performance. Certain information reflects financial results for a
single fund share.
The total returns in the table represent the rate that an investor would have
earned (or lost) on an investment in the fund (assuming reinvestment of all
dividends and distributions).
This information has been audited by 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, OCTOBER 18, TO
-------------------------- DECEMBER 31,
1998(a) 1997 1996 1995
- ---------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Net asset value, beginning of period $14.27 $ 12.52 $11.80 $11.43
Income from investment operations:
Net investment income(b) (0.19)(c) (0.18)(c) (0.05)(c) (0.04)(c)
Net gains on securities (both realized and
unrealized) 3.45 2.20 1.69 0.33
Total from investment operations 3.26(b) 2.02 1.64 0.37
Less distributions:
Distributions from net realized gains (0.50) (0.27) (0.92) --
Total distributions (0.50) (0.27) (0.92) --
Net asset value, end of period $17.03 $ 14.27 $12.52 $11.80
Total return(d) 23.15% 16.23% 13.81% 3.24%
- ---------------------------------------------------------------------------------------------
Ratios/supplemental data:
Net assets, end of period (000s omitted) $24,737 $10,896 $8,448 $1,931
Ratio of expenses to average net assets
excluding interest expense:
With expense reductions and/or reimbursement 1.75%(e) 1.92% 2.00% 2.00%(f)
Without expense reductions and/or
reimbursement 2.19%(e) 2.52% 3.09% 24.20%(f)
Ratio of net investment income to average net
assets:
With expense reductions and/or reimbursement (1.29)%(e) (1.40)% 0.38)% 1.68%(f)
Without expense reductions and/or
reimbursement (1.73)%(e) (2.00)% (1.47)% (20.52)%(f)
Ratio of interest expense to average net
assets(g) 0.01% -- -- --
Portfolio turnover rate(g) 190% 233% 150% --
- ---------------------------------------------------------------------------------------------
</TABLE>
(a) The Portfolio changed investment advisors on May 29, 1998.
(b) Before reimbursement the net investment loss per share would have been
$(0.24), $(0.25), $(0.19), and $(0.47) for 1998-1995, respectively.
(c) Calculated using average shares outstanding.
(d) Does not deduct sales charges and is not annualized for periods less than
one year.
(e) Ratios are based on average assets of $12,647,418.
(f) Annualized.
(g) Portfolio turnover rates and ratio of interest expense to average net assets
are calculated on the basis of the Portfolio as a whole without
distinguishing between the classes of shares issued.
5
<PAGE> 90
-------------------------
AIM SMALL CAP GROWTH FUND
-------------------------
<TABLE>
<CAPTION>
CLASS B
- ----------------------------------------------------------------------------------------------
YEAR ENDED DECEMBER 31, OCTOBER 18, TO
--------------------------- DECEMBER 31,
1998(a) 1997 1996 1995
- ----------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Net asset value, beginning of period $ 14.06 $ 12.42 $ 11.78 $11.43
Income from investment operations:
Net investment income(b) (0.29)(c) (0.26)(c) (0.14)(c) (0.02)(c)
Net gains on securities (both realized and
unrealized) 3.37 2.17 1.70 0.33
Total from investment operations 3.08 1.91 1.56 0.35
Less distributions:
Distributions from net realized gains (0.50) (0.27) (0.92) --
Total distributions (0.50) (0.27) (0.92) --
Net asset value, end of period $ 16.64 $ 14.06 $ 12.42 $11.78
Total return(d) 22.22% 15.47% 13.14% 3.06%
- ----------------------------------------------------------------------------------------------
Ratios/supplemental data:
Net assets, end of period (000s omitted) $26,448 $21,222 $10,694 $2,024
Ratio of expenses to average net assets:
With expense reductions and/or reimbursement 2.40%(e) 2.57% 2.65% 2.65%(f)
Without expense reductions and/or
reimbursement 2.85%(e) 3.17% 3.74% 24.85%(f)
Ratio of net investment income to average net
assets:
With expense reductions and/or reimbursement (1.95)%(e) (2.05)% (1.03)% 1.03%(f)
Without expense reductions and/or
reimbursement (2.39)%(e) (2.65)% (2.12)% --
Ratio of interest expense to average net
assets(g) 0.01% -- -- --
Portfolio turnover rate(g) 190% 233% 150% --
- ----------------------------------------------------------------------------------------------
</TABLE>
(a) The portfolio changed investment advisors on May 29, 1998.
(b) Before reimbursement the net investment loss per share would have been
$(0.35), $(0.33), $(0.28), and $(0.49) for 1998-1995, respectively.
(c) Calculated using average shares outstanding.
(d) Does not deduct contingent deferred sales charges and is not annualized for
periods less than one year.
(e) Ratios are based on average net assets of $19,271,876.
(f) Annualized.
(g) Portfolio turnover rates and ratio of interest expense to average net assets
are calculated on the basis of the portfolio as a whole without
distinguishing between the classes of shares issued.
6
<PAGE> 91
-------------------
THE AIM FUNDS
-------------------
Shareholder Information
- --------------------------------------------------------------------------------
In addition to the fund, A I M Advisors, Inc. serves as investment advisor to
many other mutual funds (the AIM Funds). The following information is about all
the AIM Funds.
CHOOSING A SHARE CLASS
Many of 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 charge on redemptions within
six 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(1)
- - Generally more appropriate for - Purchase orders limited to - Generally more appropriate
long-term investors amounts less than $250,000 for short-term investors
</TABLE>
(1) AIM 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.
A- 1 MCF--05/99
<PAGE> 92
-------------------
THE AIM FUNDS
-------------------
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>
COMPUTING A CDSC
The CDSC on redemptions of shares is computed based on the lower of their
original purchase price or current market value, net of reinvested dividends and
capital gains distributions. In determining whether to charge a CDSC, we will
assume that you have redeemed shares on which there is no CDSC first and, then,
shares in the order of purchase.
REDUCED SALES CHARGES AND SALES CHARGE EXCEPTIONS
You may qualify for reduced sales charges or sales charge exceptions. To qualify
for these reductions or exceptions, you or your financial consultant must
provide sufficient information at the time of purchase to verify that your
purchase qualifies for such treatment.
REDUCED SALES CHARGES
You may be eligible to buy Class A shares at reduced initial sales charge rates
under Rights of Accumulation or Letters of Intent under certain circumstances.
Rights of Accumulation
You may combine your new purchases of Class A shares with Class A shares
currently owned for the purpose of qualifying for the lower initial sales charge
rates that apply to larger purchases. The applicable initial sales charge for
the new purchase is based on the total of your current purchase and the current
value of all Class A shares you own.
Letters of Intent
Under a Letter of Intent (LOI), you commit to purchase a specified dollar amount
of Class A shares of AIM Funds during a
MCF--05/99 A- 2
<PAGE> 93
-------------------
THE AIM FUNDS
-------------------
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.
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 $ ($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 25 50
All other accounts 50 50
- ----------------------------------------------------------------------------------------------------------------
</TABLE>
HOW TO PURCHASE SHARES
You may purchase shares using one of the options below.
PURCHASE OPTIONS
- -
<TABLE>
<CAPTION>
OPENING AN ACCOUNT ADDING TO AN ACCOUNT
- ----------------------------------------------------------------------------------------------------------
<S> <C> <C>
Through a Financial Consultant Contact your financial consultant. Same
By Mail Mail completed Account Application Mail your check and the remittance
and purchase payment to the 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- 3 MCF--05/99
<PAGE> 94
-------------------
THE AIM FUNDS
-------------------
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).
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 18 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.
MCF--05/99 A- 4
<PAGE> 95
-------------------
THE AIM FUNDS
-------------------
HOW TO REDEEM SHARES
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
Through a Financial Contact your financial consultant.
Consultant
By Mail Send a written request to the transfer agent. Requests must
include (1) original signatures of all registered owners;
(2) the name of the AIM Fund and your account number; (3) if
the transfer agent does not hold your shares, endorsed share
certificates or share certificates accompanied by an
executed stock power; and (4) signature guarantees, if
necessary (see below). The transfer agent may require that
you provide additional information, such as corporate
resolutions or powers of attorney, if applicable. If you are
redeeming from an IRA account, you must include a statement
of whether or not you are at least 59 1/2 years old and
whether you wish to have federal income tax withheld from
your proceeds. The transfer agent may require certain other
information before you can redeem from an employer-sponsored
retirement plan. Contact your employer for details.
By Telephone Call the transfer agent. You will be allowed to redeem by
telephone if (1) the proceeds are to be mailed to the
address on record 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.
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- 5 MCF--05/99
<PAGE> 96
-------------------
THE AIM FUNDS
-------------------
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, at its discretion, redeem the account and distribute the proceeds
to you.
EXCHANGING SHARES
You may, under certain circumstances, exchange shares in one AIM Fund for those
of another AIM Fund. Before requesting an exchange, review the prospectus of the
AIM Fund you wish to acquire. Exchange privileges also apply to holders of the
Connecticut General Guaranteed Account, established for tax-qualified group
annuities, for contracts purchased on or before June 30, 1992.
PERMITTED EXCHANGES
Except as otherwise stated below, you may exchange your shares for shares of the
same class of another AIM Fund. You 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 also may exchange AIM Cash Reserve Shares of AIM Money Market Fund for
Advisor Class shares, but only if you acquired the AIM Cash Reserve Shares
through an exchange from Advisor Class shares.
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;
MCF--05/99 A- 6
<PAGE> 97
-------------------
THE AIM FUNDS
-------------------
- - Exchanges must be made between accounts with identical registration
information;
- - The account you wish to exchange from must have a certified tax identification
number (or the Fund has received an appropriate Form W-8 or W-9);
- - Shares must have been held for at least one day prior to the exchange; 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 purchase of shares
being acquired in an exchange for up to five business days if it determines that
it would be materially disadvantaged by the immediate transfer of exchange
proceeds. There is no fee for exchanges. The exchange privilege is not an option
or right to purchase shares. Any of the participating AIM Funds or the
distributor may modify or discontinue this privilege at any time.
BY MAIL
If you wish to make an exchange by mail, you must include original signatures of
each registered owner exactly as the shares are registered, the account
registration and account number, the dollar amount or number of shares to be
exchanged and the names of the AIM Funds from which and into which the exchange
is to be made.
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. TO PROTECT THE INTERESTS OF
INVESTORS, EACH AIM FUND AND THE DISTRIBUTOR MAY REJECT ANY ORDER CONSIDERED
MARKET-TIMING ACTIVITY.
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 of 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, as allowed by the Securities and Exchange Commission, such as
when the NYSE restricts or suspends trading.
A- 7 MCF--05/99
<PAGE> 98
-------------------
THE AIM FUNDS
-------------------
TAXES
In general, dividends and distributions you receive are taxable as ordinary
income or long-term capital gains for federal income tax purposes, whether you
reinvest them in additional shares or take them in cash. Distributions are
taxable to you at different rates depending on the length of time the fund holds
its assets. Different tax rates apply to ordinary income and long-term capital
gain distributions, regardless of how long you have held your shares. Every
year, you will be sent information showing the amount of dividends and
distributions you received from each AIM Fund during the prior year.
Any long-term or short-term capital gains realized from redemptions of AIM
Fund shares will be subject to federal income tax. Exchanges of shares for
shares of another AIM Fund are treated as a sale, and any gain realized on the
transaction will generally be subject to federal income tax.
The foreign, state and local tax consequences of investing in AIM Fund shares
may differ materially from the federal income tax consequences described above.
You should consult your tax advisor before investing.
MCF--05/99 A- 8
<PAGE> 99
-------------------------
AIM SMALL CAP GROWTH FUND
-------------------------
OBTAINING ADDITIONAL INFORMATION
- --------------------------------------------------------------------------------
More information may be obtained free of charge upon request. The Statement of
Additional Information (SAI), a current version of which is on file with the
Securities and Exchange Commission (SEC), contains more details about the fund
and is incorporated by reference into the prospectus (is legally a part of this
prospectus). Annual and semiannual reports to shareholders contain additional
information about the fund's investments. The fund's annual report also
discusses the market conditions and investment strategies that significantly
affected the fund's performance during its last fiscal year.
If you have questions about this fund, another fund in The AIM Family of
Funds--Registered Trademark-- or your account, or wish to obtain free copies
of the fund's current SAI or annual or semiannual reports, please contact us
- ---------------------------------------------------------
<TABLE>
<S> <C>
BY MAIL: A I M 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)
</TABLE>
- ---------------------------------------------------------
You also can obtain copies of the fund's SAI and other information at the SEC's
Public Reference Room in Washington, DC, 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, DC 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
[AIM LOGO APPEARS HERE] www.aimfunds.com SCG-PRO-1 INVEST WITH DISCIPLINE
--Registered Trademark--
<PAGE> 100
AIM BASIC VALUE FUND
- --------------------------------------------------------------------------------
ADVISOR CLASS
AIM Basic Value Fund seeks to provide long-term growth of capital.
PROSPECTUS
MAY 3, 1999
This prospectus contains important
information. Please read it before
investing and keep it for future
reference.
The Advisor Class is closed to new
investors.
As with all other mutual fund
securities, the Securities and
Exchange Commission has not approved
or disapproved these securities or
determined whether the information
in this prospectus is adequate or
accurate. Anyone who tells you
otherwise is committing a crime.
[AIM LOGO APPEARS HERE] INVEST WITH DISCIPLINE
--Registered Trademark--
<PAGE> 101
--------------------
AIM BASIC VALUE FUND
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TABLE OF CONTENTS
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
INVESTMENT OBJECTIVE AND STRATEGIES 1
- - - - - - - - - -- - - - - - - - - - - - - - -
PRINCIPAL RISKS OF INVESTING IN THE FUND 1
- - - - - - - - - -- - - - - - - - - - - - - - -
PERFORMANCE INFORMATION 2
- - - - - - - - - - - - - - - - - - - - - - - - -
Annual Total Returns 2
Performance Table 2
FEE TABLE AND EXPENSE EXAMPLE 3
- - - - - - - - - - - - - - - - - - - - - - - -
Fee Table 3
Expense Example 3
FUND MANAGEMENT 4
- - - - - - - - - - - - - - - - - - - - - - - -
The Advisor 4
Advisor Compensation 4
Portfolio Managers 4
OTHER INFORMATION 4
- - - - - - - - - - - - - - - - - - - - - - - -
Dividends and Distributions 4
FINANCIAL HIGHLIGHTS 5
- - - - - - - - - - - - - - - - - - - - - - - -
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
- - - - - - - - - - - - - - - - - - - - - - - -
</TABLE>
The AIM Family of Funds, The AIM Family of Funds and Design (i.e., the AIM
logo), AIM and Design, AIM, AIM LINK, AIM Institutional Funds, aimfunds.com, La
Familia AIM de Fondos, La Familia AIM de Fondos and Design and Invest with
Discipline are registered service marks and AIM Bank Connection is a service
mark of A I M Management Group Inc.
No dealer, salesperson or any other person has been authorized to give any
information or to make any representations other than those contained in this
prospectus, and you should not rely on such other information or
representations.
<PAGE> 102
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AIM BASIC VALUE FUND
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INVESTMENT OBJECTIVE AND STRATEGIES
- --------------------------------------------------------------------------------
The fund's investment objective is long-term growth of capital.
The fund seeks to meet this 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, all of which are issued by
U.S. issuers. The portfolio may also invest up to 25% of its total assets in
foreign 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 available in the marketplace. The portfolio managers
consider whether to 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, money market instruments, or high-quality 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 prices of equity
securities change in response to many factors, including the historical and
prospective earnings of the issuer, the value of its assets, general economic
conditions, interest rates, investor perceptions, and market liquidity.
Foreign securities have additional risks, including exchange rate changes,
political and economic upheaval, the relative lack of information about these
companies, relatively low market liquidity and the potential lack of strict
financial and accounting controls and standards.
The value of your shares could be adversely affected if the computer systems
used by the portfolio's investment advisor and other service providers are
unable to distinguish the year 2000 from the year 1900.
The portfolio's investment advisor and independent technology consultants are
working to avoid year 2000-related problems in its systems and to obtain
assurances that other service providers are taking similar steps. Year 2000
problems may also affect issuers in whose securities the portfolio invests.
An investment in the fund is not a deposit of a bank and is not insured or
guaranteed by the Federal Deposit Insurance Corporation or any other government
agency.
1
<PAGE> 103
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AIM BASIC VALUE FUND
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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]
<TABLE>
<CAPTION>
Annual
Year Ended Total
December 31 Return
- ----------- ------
<S> <C>
1996 ....................................... 15.58%
1997 ....................................... 27.78%
1997 ....................................... 7.43%
</TABLE>
During the periods shown in the bar chart, the highest quarterly return was
15.11% (quarter ended December 31, 1998) and the lowest quarterly return was
- -12.52% (quarter ended September 30, 1998).
PERFORMANCE TABLE
The following performance table compares the fund's performance to that of a
broad-based securities market index.
<TABLE>
<CAPTION>
AVERAGE ANNUAL TOTAL RETURNS
- ------------------------------------------------------------------------------------
(for the periods ended SINCE INCEPTION
December 31, 1998) 1 YEAR INCEPTION DATE
- ------------------------------------------------------------------------------------
<S> <C> <C> <C>
Advisor Class 7.43% 19.57% 10/18/95
Russell 1000--Registered Trademark--
Index(1) 27.02 28.08(2) 10/31/95(2)
- ------------------------------------------------------------------------------------
</TABLE>
(1) The Russell 1000--Registered Trademark-- Index is a widely recognized,
unmanaged index of common stocks that measures the performance of the 1,000
largest companies in the Russell 3000--Registered Trademark-- Index, which
measures the performance of the 3,000 largest U.S. companies based on total
market capitalization.
(2) The average annual total return given is since the date closest to the
inception date of the Advisor Class.
2
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FEE TABLE AND EXPENSE EXAMPLE
- --------------------------------------------------------------------------------
FEE TABLE
This table describes the fees and expenses that you may pay if you buy and hold
shares of the fund:
<TABLE>
<CAPTION>
SHAREHOLDER FEES
- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -
(fees paid directly from
your investment) ADVISOR CLASS
- ---------------------------------------------------
<S> <C> <C>
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
- ---------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
ANNUAL FUND OPERATING EXPENSES
- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -
(expenses that are deducted
from fund assets)(1) ADVISOR CLASS
- ---------------------------------------------------
<S> <C>
Management Fees 0.73%
Distribution and/or Service
(12b-1) Fees None
Other Expenses 1.03
Total Annual Fund Operating
Expenses 1.76
Expense Reimbursement(2) 0.36
Net Expenses 1.40
- ---------------------------------------------------
</TABLE>
(1) This fee table, and the expense example below, reflect the expenses of both
the fund and the portfolio.
(2) The investment advisor has contractually agreed to limit net expenses.
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 gross operating expenses remain the same. To the extent fees are waived
or expenses are reimbursed, the expenses will be lower. Although your actual
returns and costs may be higher or lower, based on these assumptions your costs
would be:
<TABLE>
<CAPTION>
1 YEAR 3 YEARS 5 YEARS 10 YEARS
- ----------------------------------------------------
<S> <C> <C> <C> <C>
Advisor Class $179 $554 $954 $2,073
- ----------------------------------------------------
</TABLE>
3
<PAGE> 105
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AIM BASIC VALUE FUND
--------------------
FUND MANAGEMENT
- --------------------------------------------------------------------------------
THE ADVISOR
A I M Advisors, Inc. (the advisor) serves as the investment advisor for the
Value Portfolio (the portfolio) 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 portfolio'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 portfolio, encompassing a broad range of
investment objectives.
ADVISOR COMPENSATION
During the fiscal year ended December 31, 1998, the advisor and Chancellor LGT
Asset Management, Inc. (the advisor for the period January 1, 1998 through May
28, 1998) together received compensation of 0.75% of average daily net assets,
consisting of a management and administrative fee of 0.73% and an accounting fee
of 0.02%.
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 are
- - 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 of
Van Kampen American Capital Asset Management, Inc.
- - 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 of
Van Kampen American Capital Asset Management, Inc.
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.
4
<PAGE> 106
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AIM BASIC VALUE FUND
--------------------
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
The financial highlights table is intended to help you understand the fund's
financial performance. Certain information reflects financial results for a
single fund share.
The total returns in the table represent the rate that an investor would have
earned (or lost) on an investment in the fund (assuming reinvestment of all
dividends and distributions).
This information has been audited by 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>
ADVISOR CLASS
----------------------------------------
OCTOBER 18,
YEAR ENDED DECEMBER 31, TO
------------------------- DECEMBER 31,
1998(a) 1997 1996 1995
- ------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Net asset value, beginning of period $17.37 $14.72 $12.77 $ 11.43
Income from investment operations:
Net investment income(b) 0.07 0.15(c) 0.03(c) 0.04(c)
Net gains on securities (both realized and
unrealized) 1.21 3.91 1.96 1.30
Total from investment operations 1.28 4.06 1.99 1.34
Less distributions:
Dividends from net investment income -- (0.07) -- --
Distributions from net realized gains (0.32) (1.34) (0.04) --
Total distributions (0.32) (1.41) (0.04) --
Net asset value, end of period $18.33 $17.37 $14.72 $ 12.77
Total return(d) 7.43% 27.78% 15.58% 11.72%
- ------------------------------------------------------------------------------------------
Ratios/supplemental data:
Net assets, end of period (000s omitted) $1,038 $ 439 $ 191 $ 81
Ratio of expenses to average net assets:
With expense reductions and/or reimbursement 1.39%(e) 1.64% 1.65% 1.65%(f)
Without expense reductions and/or
reimbursement 1.76%(e) 2.62% 5.16% 50.19%(f)
Ratio of net investment income to average net
assets:
With expense reductions and/or reimbursement 0.60%(e) 0.91% 0.25% 1.45%(f)
Without expense reductions and/or
reimbursement 0.23%(e) 0.07)% (3.26)% (47.09)%(f)
Ratio of interest expense to average net
assets(g) -- 0.03% -- --
Portfolio turnover rate(g) 148% 93% 256% --
- ------------------------------------------------------------------------------------------
</TABLE>
(a) The Portfolio changed investment advisors on May 29, 1998.
(b) Before reimbursement the net investment income (loss) per share would have
been $0.02, $(0.01), $(0.46) and $(1.10) for 1998-1995, respectively.
(c) Calculated based upon average shares outstanding during the period.
(d) Not annualized for periods less than one year.
(e) Ratios are based on average net assets of $783,941.
(f) Annualized.
(g) Portfolio turnover rates and ratio of interest expense to average net assets
are calculated on the basis of the Portfolio as a whole without
distinguishing between the classes of shares issued.
5
<PAGE> 107
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THE AIM FUNDS
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SHAREHOLDER INFORMATION FOR ADVISOR CLASS SHARES
- --------------------------------------------------------------------------------
In addition to the fund, A I M Advisors, Inc. serves as investment advisor to
many other mutual funds (the AIM Funds). The following information is about
Advisor Class shares of all the AIM Funds.
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 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.
PURCHASE OPTIONS
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------
OPENING AN ACCOUNT ADDING TO AN ACCOUNT
- ----------------------------------------------------------------------------------------------------------
<S> <C> <C>
Through a Financial Consultant Contact your financial consultant. Same
By Mail 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--05/99
<PAGE> 108
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THE AIM FUNDS
-------------
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.
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. TO PROTECT THE INTERESTS OF
INVESTORS, EACH AIM FUND AND THE DISTRIBUTOR MAY REJECT ANY ORDER CONSIDERED
MARKET TIMING ACTIVITY.
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--05/99 A-2
<PAGE> 109
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THE AIM FUNDS
-------------
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. You also may exchange Advisor
Class shares for AIM Cash Reserve shares of AIM Money Market 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 purchase of shares
being acquired in an exchange for up to five business days if it determines that
it would be materially disadvantaged by the immediate transfer of exchange
proceeds.
There is no fee for exchanges. The exchange privilege is not an option or
right to purchase shares. Any of the participating AIM Funds or the distributor
may modify or discontinue this privilege at any time.
BY MAIL
If you wish to make an exchange by mail, you must include original signatures of
each registered owner exactly as the shares are registered, the account
registration and account number, the dollar amount or number of shares to be
exchanged and the names of the AIM Funds from which and into which the exchange
is to be made.
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
A-3 ADV--05/99
<PAGE> 110
-------------
THE AIM FUNDS
-------------
allowed to exchange by telephone even if you have changed your address of record
within the preceding 30 days.
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, as allowed by the Securities and Exchange Commission, such as
when the NYSE restricts or suspends trading.
TAXES
In general, dividends and distributions you receive are taxable as ordinary
income or long-term capital gains for federal income tax purposes, whether you
reinvest them in additional shares or take them in cash. Distributions are
taxable to you at different rates depending on the length of time the fund holds
its assets. Different 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--05/99 A-4
<PAGE> 111
--------------------
AIM BASIC VALUE FUND
--------------------
OBTAINING ADDITIONAL INFORMATION
- --------------------------------------------------------------------------------
More information may be obtained free of charge upon request. The Statement of
Additional Information (SAI), a current version of which is on file with the
Securities and Exchange Commission (SEC), contains more details about the fund
and is incorporated by reference into the prospectus (is legally a part of this
prospectus). Annual and semiannual reports to shareholders contain additional
information about the fund's investments. The fund's annual report also
discusses the market conditions and investment strategies that significantly
affected the fund's performance during its last fiscal year.
If you have questions about this fund, another fund in The AIM Family of
Funds--Registered Trademark-- or your account, or wish to obtain free copies of
the fund's current SAI or annual or semiannual reports, please contact us
- ---------------------------------------------------------
<TABLE>
<S> <C>
BY MAIL: A I M 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)
</TABLE>
- ---------------------------------------------------------
You also can obtain copies of the fund's SAI and other information at the SEC's
Public Reference Room in Washington, DC, 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, DC 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
- ------------------------------------
[AIM LOGO APPEARS HERE] www.aimfunds.com BVA-PRO-2 INVEST WITH DISCIPLINE
--Registered Trademark--
<PAGE> 112
AIM EUROPE GROWTH FUND
------------------------------------------------------------------------
Advisor Class
AIM Europe Growth Fund seeks to provide long-term growth of capital.
PROSPECTUS
MAY 3, 1999
This prospectus contains important
information. Please read it before
investing and keep it for future
reference.
The Advisor Class is closed to new
investors.
As with all other mutual fund
securities, the Securities and
Exchange Commission has not approved
or disapproved these securities or
determined whether the information
in this prospectus is adequate or
accurate. Anyone who tells you
otherwise is committing a crime.
[AIM LOGO APPEARS HERE] INVEST WITH DISCIPLINE
--Registered Trademark--
<PAGE> 113
----------------------
AIM EUROPE GROWTH FUND
----------------------
TABLE OF CONTENTS
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
INVESTMENT OBJECTIVE AND STRATEGIES 1
- - - - - - - - - - - - - - - - - - - - - - - - -
PRINCIPAL RISKS OF INVESTING IN THE
FUND 1
- - - - - - - - - - - - - - - - - - - - - - - - -
PERFORMANCE INFORMATION 2
- - - - - - - - - - - - - - - - - - - - - - - - -
Annual Total Returns 2
Performance Table 2
FEE TABLE AND EXPENSE EXAMPLE 3
- - - - - - - - - - - - - - - - - - - - - - - - -
Fee Table 3
Expense Example 3
FUND MANAGEMENT 4
- - - - - - - - - - - - - - - - - - - - - - - - -
The Advisors 4
Advisor Compensation 4
Portfolio Manager 4
OTHER INFORMATION 4
- - - - - - - - - - - - - - - - - - - - - - - - -
Dividends and Distributions 4
FINANCIAL HIGHLIGHTS 5
- - - - - - - - - - - - - - - - - - - - - - - - -
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
- - - - - - - - - - - - - - - - - - - - - - - - -
</TABLE>
The AIM Family of Funds, The AIM Family of Funds and Design (i.e., the AIM
logo), AIM and Design, AIM, AIM LINK, AIM Institutional Funds, aimfunds.com, La
Familia AIM de Fondos, La Familia AIM de Fondos and Design and Invest with
Discipline are registered service marks and AIM Bank Connection is a service
mark of A I M Management Group Inc.
No dealer, salesperson or any other person has been authorized to give any
information or to make any representations other than those contained in this
prospectus, and you should not rely on such other information or
representations.
<PAGE> 114
----------------------
AIM EUROPE GROWTH FUND
----------------------
INVESTMENT OBJECTIVE AND STRATEGIES
- --------------------------------------------------------------------------------
The fund's investment objective is long-term growth of capital.
The fund seeks to meet this 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 normally considers a company to be
domiciled in a particular country if it (1) is organized under the laws of a
particular country or has its principal office in a particular country; or (2)
derives 50% or more of its total revenues from business in that country,
provided that, in the view of the portfolio manager, the value of the issuer's
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 or in U.S. and foreign
investment-grade debt securities, or securities deemed by the portfolio manager
to be of comparable quality. The fund may also invest in securities of issuers
located in developing countries, i.e., those that are in the initial stages of
their industrial cycles.
In selecting investments, the portfolio manager seeks to identify those
countries and industries where political and economic factors, including
currency movements, are likely to produce above-average growth rates. The
portfolio manager then balances the potential benefits with the risks of
investing in those countries and industries. The portfolio manager allocates
investments among fixed-income securities based on his views as to the best
values then available in the marketplace. The portfolio manager considers
whether to 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 currency or multinational currency units), money market
investments, or high-quality debt securities. In anticipation of or in response
to adverse market conditions, the fund may also invest up to 100% of its total
assets in the securities of U.S. issuers and denominated in U.S. dollars. 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 prices of equity
securities change in response to many factors, including the historical and
prospective earnings of the issuer, the value of its assets, general economic
conditions, interest rates, investor perceptions, and market liquidity.
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:
- - 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.
- - Political and economic conditions--The value of the fund's investments may be
adversely affected by political and social instability in their home countries
and by changes in economic or taxation policies.
- - Regulations--Foreign companies generally are subject to less stringent
regulations, including financial and accounting controls, than are U.S.
companies. As a result, there generally is less publicly available information
about foreign companies than about U.S. companies.
- - 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.
These factors may affect the prices of securities issued by foreign companies
located in developing countries more than those in countries with mature
economies. 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.
The value of your shares could be adversely affected if the computer systems
used by the fund's investment advisor and other service providers are unable to
distinguish the year 2000 from the year 1900.
The fund's investment advisor and independent technology consultants are
working to avoid year 2000-related problems in its systems and to obtain
assurances that other service providers are taking similar steps. Year 2000
problems may also affect issuers in whose securities the fund invests.
An investment in the fund is not a deposit of a bank and is not insured or
guaranteed by the Federal Deposit Insurance Corporation or any other government
agency.
1
<PAGE> 115
----------------------
AIM EUROPE GROWTH FUND
----------------------
PERFORMANCE INFORMATION
- --------------------------------------------------------------------------------
The bar chart and table shown below provide an indication of the risks of
investing in the fund. The fund's past performance is not necessarily an
indication of its future performance.
ANNUAL TOTAL RETURNS
- --------------------------------------------------------------------------------
The following bar chart shows changes in the performance of the fund's Advisor
Class shares from year to year.
[GRAPH]
<TABLE>
<CAPTION>
Annual
Year Ended Total
December 31 Return
- ----------- ------
<S> <C>
1996 ....................................... 20.21%
1997 ....................................... 11.64%
1998 ....................................... 16.88%
</TABLE>
During the periods shown in the bar chart, the highest quarterly return was
23.46% (quarter ended March 31, 1998) and the lowest quarterly return was
- -21.06% (quarter ended September 30, 1998).
PERFORMANCE TABLE
The following performance table compares the fund's performance to that of a
broad-based securities market index.
<TABLE>
<CAPTION>
AVERAGE ANNUAL TOTAL RETURNS
- -----------------------------------------------------------------------
(for the periods ended SINCE INCEPTION
December 31, 1998) 1 YEAR INCEPTION DATE
- -----------------------------------------------------------------------
<S> <C> <C> <C>
Advisor Class 16.88% 15.55% 6/1/95
MSCI AC Europe Index(1) 27.18 22.94(2) 5/31/95(2)
- -----------------------------------------------------------------------
</TABLE>
(1) The Morgan Stanley Capital International All Country Europe Index is an
unmanaged index that is designed to represent the performance of stock
markets in Europe, including both developed and emerging markets.
(2) The average annual total return given is since the date closest to the
inception date of the Advisor Class.
2
<PAGE> 116
----------------------
AIM EUROPE GROWTH FUND
----------------------
FEE TABLE AND EXPENSE EXAMPLE
- --------------------------------------------------------------------------------
FEE TABLE
This table describes the fees and expenses that you may pay if you buy and hold
shares of the fund:
<TABLE>
<CAPTION>
SHAREHOLDER FEES
- -------------------------------------------------------------------------------
(fees paid directly from
your investment) ADVISOR CLASS
- ---------------------------------------------------
<S> <C>
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
- ---------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
ANNUAL FUND OPERATING EXPENSES
- -------------------------------------------------------------------------------
(expenses that are deducted
from fund assets) ADVISOR CLASS
- ---------------------------------------------------
<S> <C>
Management Fees 0.98%
Distribution and/or Service
(12b-1) Fees None
Other Expenses:
Other 0.42
Interest 0.27
Total Other Expenses 0.69
Total Annual Fund Operating
Expenses 1.67
- ---------------------------------------------------
</TABLE>
EXPENSE EXAMPLE
This example is intended to help you compare the costs 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 $170 $526 $907 $1,976
- ----------------------------------------------------
</TABLE>
3
<PAGE> 117
----------------------
AIM EUROPE GROWTH FUND
----------------------
FUND MANAGEMENT
- --------------------------------------------------------------------------------
THE ADVISORS
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
1967. 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 and Chancellor LGT
Asset Management, Inc. (the advisor for the period January 1, 1998 through May
28, 1998) together received compensation of 1.01% of average daily net assets,
consisting of a management and administrative fee of 0.98% and an accounting fee
of 0.03%.
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 is
- - 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.
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.
4
<PAGE> 118
----------------------
AIM EUROPE GROWTH FUND
----------------------
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
The financial highlights table is intended to help you understand the fund's
financial performance. Certain information reflects financial results for a
single fund share.
The total returns in the table represent the rate that an investor would have
earned (or lost) on an investment in the fund (assuming reinvestment of all
dividends and distributions).
This information has been audited by 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>
ADVISOR CLASS(a)
------------------------------------------
YEAR ENDED DECEMBER 31, JUNE 1, TO
--------------------------- DECEMBER 31,
1998(b) 1997(b) 1996(b) 1995(b)
- --------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Per Share Operating Performance:
Net asset value, beginning of period $14.41 $12.92 $10.85 $10.24
Income from investment operations:
Net investment income (loss) 0.02 0.01 0.01 0.08
Net realized and unrealized gain (loss) on
investments 2.36 1.49 2.18 0.71
Net increase (decrease) from investment
operations 2.38 1.50 2.19 0.79
Distributions to shareholders:
From net investment income -- -- -- (0.14)
From net realized gain on investments (0.97) (0.01) (0.12) (0.04)
In excess of net realized gain on investments -- -- -- --
Total distributions (0.97) (0.01) (0.12) (0.18)
Net asset value, end of period $15.82 $14.41 $12.92 $10.85
Total investment return(c) 16.88% 11.64% 20.21% 7.75%(d)
- --------------------------------------------------------------------------------------------
Ratios/supplemental data:
Net assets, end of period (in 000s) $1,643 $3,239 $1,416 $ 718
Ratio of net investment income (loss) to average
net assets 0.15% 0.06% 0.09% 0.73%(e)
Ratio of expenses to average net assets
excluding interest expense:
With expense reductions 1.40% 1.40% 1.47% 1.48%(e)
Without expense reductions 1.40% 1.54% 1.53% 1.54%(e)
Ratio of interest expense to average net
assets(f) 0.27% N/A N/A N/A
Portfolio turnover rate(f) 97% 107% 123% 108%(e)
- --------------------------------------------------------------------------------------------
</TABLE>
(a) Commencing June 1, 1995, the Fund began offering Advisor Class shares.
(b) These selected per share data were calculated based upon average shares
outstanding during the period.
(c) Total investment return does not include sales charges.
(d) Not annualized
(e) Annualized
(f) Portfolio turnover rates and ratio of interest expense to average net assets
are calculated on the basis of the Fund as a whole without distinguishing
between the classes of shares issued.
N/A Not Applicable.
5
<PAGE> 119
-------------
THE AIM FUNDS
-------------
SHAREHOLDER INFORMATION FOR ADVISOR CLASS SHARES
- --------------------------------------------------------------------------------
In addition to the fund, A I M Advisors, Inc. serves as investment advisor to
many other mutual funds (the AIM Funds). The following information is about
Advisor Class shares of all the AIM Funds.
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 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.
PURCHASE OPTIONS
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------
OPENING AN ACCOUNT ADDING TO AN ACCOUNT
- ----------------------------------------------------------------------------------------------------------
<S> <C> <C>
Through a Financial Consultant Contact your financial consultant. Same
By Mail 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--05/99
<PAGE> 120
-------------
THE AIM FUNDS
-------------
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.
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. TO PROTECT THE INTERESTS OF
INVESTORS, EACH AIM FUND AND THE DISTRIBUTOR MAY REJECT ANY ORDER CONSIDERED
MARKET TIMING ACTIVITY.
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--05/99 A-2
<PAGE> 121
-------------
THE AIM FUNDS
-------------
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. You also may exchange Advisor
Class shares for AIM Cash Reserve shares of AIM Money Market 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 purchase of shares
being acquired in an exchange for up to five business days if it determines that
it would be materially disadvantaged by the immediate transfer of exchange
proceeds.
There is no fee for exchanges. The exchange privilege is not an option or
right to purchase shares. Any of the participating AIM Funds or the distributor
may modify or discontinue this privilege at any time.
BY MAIL
If you wish to make an exchange by mail, you must include original signatures of
each registered owner exactly as the shares are registered, the account
registration and account number, the dollar amount or number of shares to be
exchanged and the names of the AIM Funds from which and into which the exchange
is to be made.
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
A-3 ADV--05/99
<PAGE> 122
-------------
THE AIM FUNDS
-------------
allowed to exchange by telephone even if you have changed your address of record
within the preceding 30 days.
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, as allowed by the Securities and Exchange Commission, such as
when the NYSE restricts or suspends trading.
TAXES
In general, dividends and distributions you receive are taxable as ordinary
income or long-term capital gains for federal income tax purposes, whether you
reinvest them in additional shares or take them in cash. Distributions are
taxable to you at different rates depending on the length of time the fund holds
its assets. Different 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--05/99 A-4
<PAGE> 123
----------------------
AIM EUROPE GROWTH FUND
----------------------
OBTAINING ADDITIONAL INFORMATION
- --------------------------------------------------------------------------------
More information may be obtained free of charge upon request. The Statement of
Additional Information (SAI), a current version of which is on file with the
Securities and Exchange Commission (SEC), contains more details about the fund
and is incorporated by reference into the prospectus (is legally a part of this
prospectus). Annual and semiannual reports to shareholders contain additional
information about the fund's investments. The fund's annual report also
discusses the market conditions and investment strategies that significantly
affected the fund's performance during its last fiscal year.
If you have questions about this fund, another fund in The AIM Family of
Funds--Registered Trademark-- or your account, or wish to obtain free copies of
the fund's current SAI or annual or semiannual reports, please contact us
- ---------------------------------------------------------
<TABLE>
<S> <C>
BY MAIL: A I M 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)
</TABLE>
- ---------------------------------------------------------
You also can obtain copies of the fund's SAI and other information at the SEC's
Public Reference Room in Washington, DC, 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, DC 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
- --------------------------------------
[AIM LOGO APPEARS HERE] www.aimfunds.com ERG-PRO-2 INVEST WITH DISCIPLINE
--Registered Trademark--
<PAGE> 124
AIM JAPAN GROWTH FUND
------------------------------------------------------------------------
ADVISOR CLASS
AIM Japan Growth Fund seeks to provide long-term growth of capital.
PROSPECTUS
MAY 3, 1999
This prospectus contains important
information. Please read it before
investing and keep it for future
reference.
The Advisor Class is closed to new
investors.
As with all other mutual fund
securities, the Securities and
Exchange Commission has not approved
or disapproved these securities or
determined whether the information
in this prospectus is adequate or
accurate. Anyone who tells you
otherwise is committing a crime.
[AIM LOGO APPEARS HERE] INVEST WITH DISCIPLINE
-- Registered Trademark --
<PAGE> 125
---------------------
AIM JAPAN GROWTH FUND
---------------------
TABLE OF CONTENTS
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
INVESTMENT OBJECTIVE AND STRATEGIES 1
- - - - - - - - - - - - - - - - - - - - - - - - -
PRINCIPAL RISKS OF INVESTING IN THE FUND 1
- - - - - - - - - - - - - - - - - - - - - - - - -
PERFORMANCE INFORMATION 2
- - - - - - - - - - - - - - - - - - - - - - - - -
Annual Total Returns 2
Performance Table 2
FEE TABLE AND EXPENSE EXAMPLE 3
- - - - - - - - - - - - - - - - - - - - - - - - -
Fee Table 3
Expense Example 3
FUND MANAGEMENT 4
- - - - - - - - - - - - - - - - - - - - - - - - -
The Advisors 4
Advisor Compensation 4
Portfolio Manager 4
OTHER INFORMATION 4
- - - - - - - - - - - - - - - - - - - - - - - - -
Dividends and Distributions 4
FINANCIAL HIGHLIGHTS 5
- - - - - - - - - - - - - - - - - - - - - - - - -
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
- - - - - - - - - - - - - - - - - - - - - - - - -
</TABLE>
The AIM Family of Funds, The AIM Family of Funds and Design (i.e., the AIM
logo), AIM and Design, AIM, AIM LINK, AIM Institutional Funds, aimfunds.com, La
Familia AIM de Fondos, La Familia AIM de Fondos and Design and Invest with
Discipline are registered service marks and AIM Bank Connection is a service
mark of A I M Management Group Inc.
No dealer, salesperson or any other person has been authorized to give any
information or to make any representations other than those contained in this
prospectus, and you should not rely on such information or representations.
<PAGE> 126
---------------------
AIM JAPAN GROWTH FUND
---------------------
INVESTMENT OBJECTIVE AND STRATEGIES
- --------------------------------------------------------------------------------
The fund's investment objective is long-term growth of capital.
The fund seeks to meet this 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 (1) 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 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 of 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 portfolio manager to be of comparable quality.
The fund may also invest in securities of issuers located in developing
countries, i.e., those that are in the initial stages of their industrial
cycles.
In selecting investments, the portfolio manager seeks to identify industries
that, in view of political and economic considerations, including currency
movements, are likely to produce above-average growth rates. The portfolio
manager then balances the potential benefits with the risks of investing in
those industries. The portfolio manager further allocates investments among
fixed-income securities of particular issuers on the basis of their views as to
the best values then available in the marketplace. The portfolio manager
considers whether to 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
instruments, or high-quality debt securities. 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 prices of equity
securities change in response to many factors, including the historical and
prospective earnings of the issuer, the value of its assets, general economic
conditions, interest rates, investor perceptions, and market liquidity.
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 market prices of Japanese
securities may be distorted to serve political or other purposes, and
shareholders' rights are not always equally enforced.
The prices of foreign securities may be further affected by other factors,
including:
- - 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.
- - 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.
- - Regulations--Foreign companies generally are subject to less stringent
regulations, including financial and accounting controls, than are U.S.
companies. As a result, there generally is less publicly available information
about foreign companies than about U.S. companies.
- - 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.
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 value of your shares could be adversely affected if the computer systems
used by the fund's investment advisor and other service providers are unable to
distinguish the year 2000 from the year 1900.
The fund's investment advisor and independent technology consultants are
working to avoid year 2000-related problems in its systems and to obtain
assurances that other service providers are taking similar steps. Year 2000
problems may also affect issuers in whose securities the fund invests.
An investment in the fund is not a deposit of a bank and is not insured or
guaranteed by the Federal Deposit Insurance Corporation or any other government
agency.
1
<PAGE> 127
---------------------
AIM JAPAN GROWTH FUND
---------------------
PERFORMANCE INFORMATION
- --------------------------------------------------------------------------------
The bar chart and table shown below provide an indication of the risks of
investing in the fund. The fund's past performance is not necessarily an
indication of its future performance.
ANNUAL TOTAL RETURNS
- --------------------------------------------------------------------------------
The following bar chart shows changes in the performance of the fund's Advisor
Class shares from year to year.
[GRAPH]
<TABLE>
<CAPTION>
Annual
Year Ended Total
December 31 Return
- ----------- ------
<S> <C>
1996 ........................................... -7.14%
1997 ........................................... -7.54%
1998 ........................................... -0.31%
</TABLE>
During the periods shown in the bar chart, the highest quarterly return was
14.74% (quarter ended June 30, 1997) and the lowest quarterly return was -9.02%
(quarter ended December 31, 1997).
PERFORMANCE TABLE
The following performance table compares the fund's performance to that of a
broad-based securities market index.
<TABLE>
<CAPTION>
AVERAGE ANNUAL TOTAL RETURNS
- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -
(for the periods ended SINCE INCEPTION
December 31, 1998) 1 YEAR INCEPTION DATE
- -----------------------------------------------------------
<S> <C> <C> <C> <C>
Advisor Class (0.31)% 0.13% 6/1/95
MSCI Japan Index(1) 5.05 (9.16)(2) 5/31/95(2)
- -----------------------------------------------------------
</TABLE>
(1) The Morgan Stanley Capital International Japan Index measures 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 Advisor Class.
2
<PAGE> 128
---------------------
AIM JAPAN GROWTH FUND
---------------------
FEE TABLE AND EXPENSE EXAMPLE
- --------------------------------------------------------------------------------
FEE TABLE
This table describes the fees and expenses that you may pay if you buy and hold
shares of the fund:
<TABLE>
<CAPTION>
SHAREHOLDER FEES
- - - - - - - - - - - - - - - - - - - - - - - - - - -
(fees paid directly from
your investment) ADVISOR CLASS
- ---------------------------------------------------
<S> <C>
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
- ---------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
ANNUAL FUND OPERATING EXPENSES
- - - - - - - - - - - - - - - - - - - - - - - - - - -
(expenses that are deducted
from fund assets) ADVISOR CLASS
- ---------------------------------------------------
<S> <C>
Management Fees 0.98%
Distribution and/or
Service (12b-1) Fees None
Other Expenses 1.00
Total Annual Fund
Operating Expenses 1.98
Expense Reimbursements(1) 0.33
Net Expenses 1.65
- ---------------------------------------------------
</TABLE>
(1) The investment advisor has contractually agreed to limit net expenses.
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 gross operating expenses remain the same. To the extent fees are waived
or expenses are reimbursed, the expenses will be lower. Although your actual
returns and costs may be higher or lower, based on these assumptions your costs
would be:
<TABLE>
<CAPTION>
1 YEAR 3 YEARS 5 YEARS 10 YEARS
- ----------------------------------------------------
<S> <C> <C> <C> <C>
Advisor Class $201 $621 $1,068 $2,306
- ----------------------------------------------------
</TABLE>
3
<PAGE> 129
---------------------
AIM JAPAN GROWTH FUND
---------------------
FUND MANAGEMENT
- --------------------------------------------------------------------------------
THE ADVISORS
A I M Advisors, Inc. (the advisor) serves as the fund's investment advisor.
INVESCO Asset Management (Japan) Limited (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 Imperial Tower, 1-1-1
Uchisaiwai-cho, Chiyoda-Ku, Tokyo 100-0011. 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
1990. 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 and Chancellor LGT
Asset Management, Inc. (the advisor for the period January 1, 1998 through May
28, 1998) together received compensation of 1.01% of average daily net assets,
consisting of a management and administrative fee of 0.98% and an accounting fee
of 0.03%.
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 is
- - 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.
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.
4
<PAGE> 130
---------------------
AIM JAPAN GROWTH FUND
---------------------
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
The financial highlights table is intended to help you understand the fund's
financial performance. Certain information reflects financial results for a
single fund share.
The total returns in the table represent the rate that an investor would have
earned (or lost) on an investment in the fund (assuming reinvestment of all
dividends and distributions).
This information has been audited by 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>
ADVISOR CLASS(a)
-------------------------------- JUNE 1,
YEAR ENDED DECEMBER 31, TO
-------------------------------- DECEMBER 31,
1998(b) 1997(b) 1996(b) 1995(b)
- -------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Per Share Operating Performance:
Net asset value, beginning of period $ 9.05 $ 9.81 $11.02 $ 10.50
Income from investment operations:
Net investment income (loss) 0.01(c) (0.01) (0.01) (0.00)
Net realized and unrealized gain (loss) on
investments (0.04) (0.73) (0.77) 1.89
Net increase (decrease) from investment
operations (0.03) (0.74) (0.78) 1.89
Distributions to shareholders:
From net realized gain on investments (0.01) (0.02) (0.43) (1.37)
In excess of net realized gain on investments -- -- -- --
Total distributions (0.01) (0.02) (0.43) (1.37)
Net asset value, end of period $ 9.01 $ 9.05 $ 9.81 $ 11.02
- -------------------------------------------------------------------------------------------------
Total investment return (0.31)% (7.54)% (7.14)% 18.14%(d)
Ratios/supplemental data:
Net assets, end of period (in 000s) $ 1,973 $ 30,351 $ 413 $ 558
Ratio of net investment income (loss) to average
net assets 0.16% (0.26)% (0.05)% (0.05)%(e)
Ratio of operating expenses to average net
assets:
With expense reductions and/or reimbursement 1.61% 1.64% 1.49% 1.64%(e)
Without expense reductions and/or
reimbursement 1.98% 1.71% 1.59% 1.79%(e)
Portfolio turnover rate(f) 67% 58% 31% 67%(e)
- -------------------------------------------------------------------------------------------------
</TABLE>
(a) Commencing June 1, 1995, the Fund began offering Advisor Class Shares.
(b) These selected per share data were calculated based upon average shares
outstanding during the period.
(c) Includes reimbursement of Fund operating expenses per share of $0.03.
(d) Not Annualized
(e) Annualized
(f) Portfolio turnover rates are calculated on the basis of the Fund as a whole
without distinguishing between the classes of shares issued.
5
<PAGE> 131
-------------
THE AIM FUNDS
-------------
SHAREHOLDER INFORMATION FOR ADVISOR CLASS SHARES
- --------------------------------------------------------------------------------
In addition to the fund, A I M Advisors, Inc. serves as investment advisor to
many other mutual funds (the AIM Funds). The following information is about
Advisor Class shares of all the AIM Funds.
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 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.
PURCHASE OPTIONS
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------
OPENING AN ACCOUNT ADDING TO AN ACCOUNT
- ----------------------------------------------------------------------------------------------------------
<S> <C> <C>
Through a Financial Consultant Contact your financial consultant. Same
By Mail 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--05/99
<PAGE> 132
-------------
THE AIM FUNDS
-------------
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.
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. TO PROTECT THE INTERESTS OF
INVESTORS, EACH AIM FUND AND THE DISTRIBUTOR MAY REJECT ANY ORDER CONSIDERED
MARKET TIMING ACTIVITY.
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--05/99 A-2
<PAGE> 133
-------------
THE AIM FUNDS
-------------
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. You also may exchange Advisor
Class shares for AIM Cash Reserve shares of AIM Money Market 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 purchase of shares
being acquired in an exchange for up to five business days if it determines that
it would be materially disadvantaged by the immediate transfer of exchange
proceeds.
There is no fee for exchanges. The exchange privilege is not an option or
right to purchase shares. Any of the participating AIM Funds or the distributor
may modify or discontinue this privilege at any time.
BY MAIL
If you wish to make an exchange by mail, you must include original signatures of
each registered owner exactly as the shares are registered, the account
registration and account number, the dollar amount or number of shares to be
exchanged and the names of the AIM Funds from which and into which the exchange
is to be made.
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
A-3 ADV--05/99
<PAGE> 134
-------------
THE AIM FUNDS
-------------
allowed to exchange by telephone even if you have changed your address of record
within the preceding 30 days.
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, as allowed by the Securities and Exchange Commission, such as
when the NYSE restricts or suspends trading.
TAXES
In general, dividends and distributions you receive are taxable as ordinary
income or long-term capital gains for federal income tax purposes, whether you
reinvest them in additional shares or take them in cash. Distributions are
taxable to you at different rates depending on the length of time the fund holds
its assets. Different 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--05/99 A-4
<PAGE> 135
---------------------
AIM JAPAN GROWTH FUND
---------------------
OBTAINING ADDITIONAL INFORMATION
- --------------------------------------------------------------------------------
More information may be obtained free of charge upon request. The Statement of
Additional Information (SAI), a current version of which is on file with the
Securities and Exchange Commission (SEC), contains more details about the fund
and is incorporated by reference into the prospectus (is legally a part of this
prospectus). Annual and semiannual reports to shareholders contain additional
information about the fund's investments. The fund's annual report also
discusses the market conditions and investment strategies that significantly
affected the fund's performance during its last fiscal year.
If you have questions about this fund, another fund in The AIM Family of
Funds--Registered Trademark-- or your account, or wish to obtain free copies of
the fund's current SAI or annual or semiannual reports, please contact us
- ---------------------------------------------------------
<TABLE>
<S> <C>
BY MAIL: A I M 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)
</TABLE>
- ---------------------------------------------------------
You also can obtain copies of the fund's SAI and other information at the SEC's
Public Reference Room in Washington, DC, 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, DC 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
- ---------------------------------------
[AIM LOGO APPEARS HERE] www.aimfunds.com JPG-PRO-2 INVEST WITH DISCIPLINE
-- Registered Trademark --
<PAGE> 136
AIM MID CAP EQUITY FUND
- --------------------------------------------------------------------------------
Advisor Class
AIM Mid Cap Equity Fund seeks to provide long-term growth of capital.
PROSPECTUS
MAY 3, 1999
This prospectus contains important
information. Please
read it before investing and keep it
for future reference.
The Advisor Class is closed to new
investors.
As with all other mutual fund
securities, the Securities and
Exchange Commission has not approved
or disapproved these securities or
determined whether the information
in this prospectus is adequate or
accurate. Anyone who tells you
otherwise is committing a crime.
[AIM LOGO APPEARS HERE] INVEST WITH DISCIPLINE
--Registered Trademark--
<PAGE> 137
-----------------------
AIM MID CAP EQUITY FUND
-----------------------
TABLE OF CONTENTS
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
INVESTMENT OBJECTIVE AND STRATEGIES 1
- - - - - - - - - - - - - - - - - - - - - - - - -
PRINCIPAL RISKS OF INVESTING IN THE
FUND 1
- - - - - - - - - - - - - - - - - - - - - - - - -
PERFORMANCE INFORMATION 2
- - - - - - - - - - - - - - - - - - - - - - - - -
Annual Total Returns 2
Performance Table 2
FEE TABLE AND EXPENSE EXAMPLE 3
- - - - - - - - - - - - - - - - - - - - - - - - -
Fee Table 3
Expense Example 3
FUND MANAGEMENT 4
- - - - - - - - - - - - - - - - - - - - - - - - -
The Advisor 4
Advisor Compensation 4
Portfolio Managers 4
OTHER INFORMATION 4
- - - - - - - - - - - - - - - - - - - - - - - - -
Dividends and Distributions 4
FINANCIAL HIGHLIGHTS 5
- - - - - - - - - - - - - - - - - - - - - - - - -
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
- - - - - - - - - - - - - - - - - - - - - - - - -
</TABLE>
The AIM Family of Funds, The AIM Family of Funds and Design (i.e., the AIM
logo), AIM and Design, AIM, AIM LINK, AIM Institutional Funds, aimfunds.com, La
Familia AIM de Fondos, La Familia AIM de Fondos and Design and Invest with
Discipline are registered service marks and AIM Bank Connection is a service
mark of A I M Management Group Inc.
No dealer, salesperson or any other person has been authorized to give any
information or to make any representations other than those contained in this
prospectus, and you should not rely on such other information or
representations.
<PAGE> 138
-----------------------
AIM MID CAP EQUITY FUND
-----------------------
INVESTMENT OBJECTIVE AND STRATEGIES
- --------------------------------------------------------------------------------
The fund's investment objective is long-term growth of capital.
The fund seeks to meet this objective by investing, normally, at least 65% of
its total assets in equity securities of U.S. issuers that have market
capitalizations within the range of market capitalizations of companies included
in the Russell Midcap --Registered Trademark-- Index.
The fund may invest up to 35% of its total assets in equity securities of
other U.S. issuers or investment-grade debt securities of U.S. issuers. The Fund
may also invest up to 25% of its total assets in foreign securities.
In selecting investments, the portfolio managers seek to identify those
companies that are, in the portfolio managers' view, undervalued relative to
current or projected earnings, or the current market value of assets owned by
the company. The primary emphasis of the portfolio managers' 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. The portfolio managers consider whether to sell a
particular security when any of these 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 multi-national currency units), money
market instruments, or high-quality debt securities. 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 prices of equity
securities change in response to many factors, including the historical and
prospective earnings of the issuer, the value of its assets, general economic
conditions, interest rates, investor perceptions, and market liquidity.
Foreign securities have additional risks, including exchange rate changes,
political and economic upheaval, the relative lack of information about these
companies, relatively low market liquidity, and the potential lack of
strict financial and accounting controls and standards.
The value of your shares could be adversely affected if the computer systems
used by the fund's investment advisor and other service providers are unable to
distinguish the year 2000 from the year 1900.
The fund's investment advisor and independent technology consultants are
working to avoid year 2000-related problems in its systems and to obtain
assurances that other service providers are taking similar steps. Year 2000
problems may also affect issuers in whose securities the fund invests.
An investment in the fund is not a deposit of a bank and is not insured or
guaranteed by the Federal Deposit Insurance Corporation or any other government
agency.
1
<PAGE> 139
-----------------------
AIM MID CAP EQUITY FUND
-----------------------
PERFORMANCE INFORMATION
- --------------------------------------------------------------------------------
The bar chart and table shown below provide an indication of the risks of
investing in the fund. The fund's past performance is not necessarily an
indication of its future performance.
ANNUAL TOTAL RETURNS
- --------------------------------------------------------------------------------
The following bar chart shows changes in the performance of the fund's Advisor
Class shares from year to year.
[GRAPH]
<TABLE>
ANNUAL
YEAR ENDED TOTAL
DECEMBER 31 RETURN
----------- -------
<S> <C>
1996 15.72%
1997 14.54%
1998 -4.59%
</TABLE>
During the periods shown in the bar chart, the highest quarterly return was
16.96% (quarter ended September 30, 1997) and the lowest quarterly return was
- -25.04% (quarter ended September 30, 1998).
PERFORMANCE TABLE
The following performance table compares the fund's performance to that of a
broad-based securities market index.
<TABLE>
<CAPTION>
AVERAGE ANNUAL TOTAL RETURNS
- --------------------------------------------------------------------------------
(for the periods ended SINCE INCEPTION
December 31, 1998) 1 YEAR INCEPTION DATE
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
Advisor Class (4.59)% 8.26% 6/01/95
Russell Midcap--Registered Trademark --
Index(1) 10.09 20.71(2) 5/31/95(2)
- --------------------------------------------------------------------------------
</TABLE>
1 The Russell Midcap--Registered Trademark-- Index measures the performance of
the smallest 800 companies in the Russell 1000--Registered Trademark-- Index.
These companies are considered representative of medium-sized companies.
2 The average annual total return given is since the date closest to the
inception date of the Advisor Class.
2
<PAGE> 140
-----------------------
AIM MID CAP EQUITY FUND
-----------------------
FEE TABLE AND EXPENSE EXAMPLE
- --------------------------------------------------------------------------------
FEE TABLE
This table describes the fees and expenses that you may pay if you buy and hold
shares of the fund:
<TABLE>
<CAPTION>
SHAREHOLDER FEES
- - - - - - - - - - - - - - - - - - - - - - - - -
(fees paid directly from
your investment) ADVISOR CLASS
- -----------------------------------------------
<S> <C> <C>
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
- -----------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
ANNUAL FUND OPERATING EXPENSES
- - - - - - - - - - - - - - - - - - - - - - - - -
(expenses that are deducted
from fund assets) ADVISOR CLASS
- -----------------------------------------------
<S> <C> <C>
Management Fees 0.73%
Distribution and/or
Service (12b-1) Fees None
Other Expenses 0.49
Total Annual Fund
Operating Expenses 1.22
- -----------------------------------------------
</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 $124 $387 $670 $1,477
- ----------------------------------------------------
</TABLE>
3
<PAGE> 141
-----------------------
AIM MID CAP EQUITY FUND
-----------------------
FUND MANAGEMENT
- --------------------------------------------------------------------------------
THE ADVISOR
A I M Advisors, Inc. (the advisor) serves as the fund's investment advisor and
is responsible for its day-to-day management. The advisor is located at 11
Greenway Plaza, Suite 100, Houston, Texas 77046-1173. The advisor supervises all
aspects of the fund's operations and provides investment advisory services to
the fund, including obtaining and evaluating economic, statistical and financial
information to formulate and implement investment programs for the fund.
The advisor has acted as an investment advisor since its organization in 1976.
Today, the advisor, together with its subsidiaries, advises or manages over 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 and Chancellor LGT
Asset Management, Inc. (the advisor for the period January 1, 1998 through May
28, 1998) together received compensation of 0.76% of average daily net assets,
consisting of a management and administrative fee of 0.73% and an accounting fee
of 0.03%.
PORTFOLIO MANAGERS
The advisor uses a team approach to investment management. The individual
members of the team who are primarily responsible for the day-to-day management
of the fund's portfolio are
- - 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.
- - 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.
- - 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.
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.
4
<PAGE> 142
-----------------------
AIM MID CAP EQUITY FUND
-----------------------
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
The financial highlights table is intended to help you understand the fund's
financial performance. Certain information reflects financial results for a
single fund share.
The total returns in the table represent the rate that an investor would have
earned (or lost) on an investment in the fund (assuming reinvestment of all
dividends and distributions).
This information has been audited by 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>
ADVISOR CLASS
----------------------------------------
YEAR ENDED DECEMBER 31, JUNE 1, TO
------------------------- DECEMBER 31,
1998(a) 1997 1996 1995
- ------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Net asset value, beginning of period $21.10 $20.76 $19.05 $20.61
Income from investment operations:
Net investment income (0.17)(b) (0.15) 0.09 0.21
Net gains (losses) on securities (both
realized and unrealized) (0.86) 3.05 2.91 1.09
Total from investment operations (1.03) 2.90 3.00 1.30
Less distributions:
Dividends from net investment income -- -- -- (0.28)
Distributions from net realized gains (0.99) (2.56) (1.29) (2.58)
Total distributions (0.99) (2.56) (1.29) (2.86)
Net asset value, end of period $19.08 $21.10 $20.76 $19.05
Total return(c) (4.59)% 14.54% 15.72% 6.01%
- ------------------------------------------------------------------------------------------
Ratios/supplemental data:
Net assets, end of period (000s omitted) $ 913 $1,140 $1,986 $1,394
Ratio of expenses to average net assets:
With expense reductions and/or reimbursement 1.21%(d) 1.02% 1.01% 1.11%(e)
Without expense reductions and/or
reimbursement 1.22%(d) 1.13% 1.06% --
Ratio of net investment income to average net
assets
With expense reductions and/or reimbursement (0.74)%(d) 0.55% 0.47% 1.59%(e)
Without expense reductions and/or
reimbursement (0.75)%(d) (0.66)% 0.42% --
Portfolio turnover rate(f) 168% 190% 253% 71%
- ------------------------------------------------------------------------------------------
</TABLE>
(a) The Fund changed investment advisors on May 29, 1998.
(b) Calculated using average shares outstanding.
(c) Not annualized for periods less than one year.
(d) Ratios are based on average net assets of $1,120,683.
(e) Annualized.
(f) Portfolio turnover rates are calculated on the basis of the Fund as a whole
without distinguishing between the classes of shares issued.
5
<PAGE> 143
-------------
THE AIM FUNDS
-------------
SHAREHOLDER INFORMATION FOR ADVISOR CLASS SHARES
- --------------------------------------------------------------------------------
In addition to the fund, A I M Advisors, Inc. serves as investment advisor to
many other mutual funds (the AIM Funds). The following information is about
Advisor Class shares of all the AIM Funds.
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 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.
PURCHASE OPTIONS
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------
OPENING AN ACCOUNT ADDING TO AN ACCOUNT
- ----------------------------------------------------------------------------------------------------------
<S> <C> <C>
Through a Financial Consultant Contact your financial consultant. Same
By Mail 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--05/99
<PAGE> 144
-------------
THE AIM FUNDS
-------------
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.
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. TO PROTECT THE INTERESTS OF
INVESTORS, EACH AIM FUND AND THE DISTRIBUTOR MAY REJECT ANY ORDER CONSIDERED
MARKET TIMING ACTIVITY.
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--05/99 A-2
<PAGE> 145
-------------
THE AIM FUNDS
-------------
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. You also may exchange Advisor
Class shares for AIM Cash Reserve shares of AIM Money Market 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 purchase of shares
being acquired in an exchange for up to five business days if it determines that
it would be materially disadvantaged by the immediate transfer of exchange
proceeds.
There is no fee for exchanges. The exchange privilege is not an option or
right to purchase shares. Any of the participating AIM Funds or the distributor
may modify or discontinue this privilege at any time.
BY MAIL
If you wish to make an exchange by mail, you must include original signatures of
each registered owner exactly as the shares are registered, the account
registration and account number, the dollar amount or number of shares to be
exchanged and the names of the AIM Funds from which and into which the exchange
is to be made.
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
A-3 ADV--05/99
<PAGE> 146
-------------
THE AIM FUNDS
-------------
allowed to exchange by telephone even if you have changed your address of record
within the preceding 30 days.
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, as allowed by the Securities and Exchange Commission, such as
when the NYSE restricts or suspends trading.
TAXES
In general, dividends and distributions you receive are taxable as ordinary
income or long-term capital gains for federal income tax purposes, whether you
reinvest them in additional shares or take them in cash. Distributions are
taxable to you at different rates depending on the length of time the fund holds
its assets. Different 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--05/99 A-4
<PAGE> 147
-----------------------
AIM MID CAP EQUITY FUND
-----------------------
OBTAINING ADDITIONAL INFORMATION
- --------------------------------------------------------------------------------
More information may be obtained free of charge upon request. The Statement of
Additional Information (SAI), a current version of which is on file with the
Securities and Exchange Commission (SEC), contains more details about the fund
and is incorporated by reference into the prospectus (is legally a part of this
prospectus). Annual and semiannual reports to shareholders contain additional
information about the fund's investments. The fund's annual report also
discusses the market conditions and investment strategies that significantly
affected the fund's performance during its last fiscal year.
If you have questions about this fund, another fund in The AIM Family of
Funds--Registered Trademark-- or your account, or wish to obtain free copies of
the fund's current SAI or annual or semiannual reports, please contact us
- ---------------------------------------------------------
<TABLE>
<S> <C>
BY MAIL: A I M 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)
</TABLE>
- ---------------------------------------------------------
You also can obtain copies of the fund's SAI and other information at the SEC's
Public Reference Room in Washington, DC, 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, DC 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
- ---------------------------------------
[AIM LOGO APPEARS HERE] www.aimfunds.com MCE-PRO-2 INVEST WITH DISCIPLINE
-- Registered Trademark --
<PAGE> 148
AIM NEW PACIFIC GROWTH FUND
------------------------------------------------------------------------
ADVISOR CLASS
AIM New Pacific Growth Fund seeks to provide long-term growth of
capital.
PROSPECTUS
MAY 3, 1999
This prospectus contains important
information. Please read it before
investing and keep it for future
reference.
The Advisor Class is closed to new
investors.
As with all other mutual fund
securities, the Securities and
Exchange Commission has not approved
or disapproved these securities or
determined whether the information
in this prospectus is adequate or
accurate. Anyone who tells you
otherwise is committing a crime.
[AIM LOGO APPEARS HERE] INVEST WITH DISCIPLINE
-- Registered Trademark --
<PAGE> 149
---------------------------
AIM NEW PACIFIC GROWTH FUND
---------------------------
TABLE OF CONTENTS
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
INVESTMENT OBJECTIVE AND STRATEGIES 1
- - - - - - - - - - - - - - - - - - - - - - - - -
PRINCIPAL RISKS OF INVESTING IN THE FUND 1
- - - - - - - - - - - - - - - - - - - - - - - - -
PERFORMANCE INFORMATION 2
- - - - - - - - - - - - - - - - - - - - - - - - -
Annual Total Returns 2
Performance Table 2
FEE TABLE AND EXPENSE EXAMPLE 3
- - - - - - - - - - - - - - - - - - - - - - - - -
Fee Table 3
Expense Example 3
FUND MANAGEMENT 4
- - - - - - - - - - - - - - - - - - - - - - - - -
The Advisors 4
Advisor Compensation 4
Portfolio Managers 4
OTHER INFORMATION 4
- - - - - - - - - - - - - - - - - - - - - - - - -
Dividends and Distributions 4
FINANCIAL HIGHLIGHTS 5
- - - - - - - - - - - - - - - - - - - - - - - - -
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
- - - - - - - - - - - - - - - - - - - - - - - - -
</TABLE>
The AIM Family of Funds, The AIM Family of Funds and Design (i.e., the AIM
logo), AIM and Design, AIM, AIM LINK, AIM Institutional Funds, aimfunds.com, La
Familia AIM de Fondos, La Familia AIM de Fondos and Design and Invest with
Discipline are registered service marks and AIM Bank Connection is a service
mark of A I M Management Group Inc.
No dealer, salesperson or any other person has been authorized to give any
information or to make any representations other than those contained in this
prospectus, and you should not rely on such other information or
representations.
<PAGE> 150
---------------------------
AIM NEW PACIFIC GROWTH FUND
---------------------------
INVESTMENT OBJECTIVE AND STRATEGIES
- --------------------------------------------------------------------------------
The fund's investment objective is long-term growth of capital.
The fund seeks to meet this 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, including developing countries,
i.e., those that are in the initial stages of their industrial cycles. 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 (1) is
organized under the laws of a particular country or has a principal office in a
particular country; or (2) derives 50% or more of its total revenues from
business in that country, provided that, in the view of the 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, including developing
countries. 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 portfolio
managers to be of comparable quality. The fund may invest in securities of
issuers located in developing countries, i.e., those that are in the initial
stages of their industrial cycles.
In selecting investments, the 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
portfolio managers then balance the potential benefits with the risks of
investing in those countries and industries. 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 available in the marketplace.
The portfolio managers consider whether to 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
instruments, or high-quality debt securities. 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 prices of equity
securities change in response to many factors, including the historical and
prospective earnings of the issuer, the value of its assets, general economic
conditions, interest rates, investor perceptions, and market liquidity.
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:
- - 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.
- - 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.
- - Regulations--Foreign companies generally are subject to less stringent
regulations, including financial and accounting controls, than are U.S.
companies. As a result, there generally is less publicly available information
about foreign companies than about U.S. companies.
- - 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.
These factors may affect the prices of securities issued by foreign companies
located in developing countries more than those in countries with mature
economies. For example, many developing countries have, in the past, experienced
high rates of inflation or sharply devaluated 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.
The value of your shares could be adversely affected if the computer systems
used by the fund's investment advisor and other service providers are unable to
distinguish the year 2000 from the year 1900.
The fund's investment advisor and independent technology consultants are
working to avoid year 2000-related problems in its systems and to obtain
assurances that other service providers are taking similar steps. Year 2000
problems may also affect issuers in whose securities the fund invests.
An investment in the fund is not a deposit of a bank and is not insured or
guaranteed by the Federal Deposit Insurance Corporation or any other government
agency.
1
<PAGE> 151
---------------------------
AIM NEW PACIFIC GROWTH FUND
---------------------------
PERFORMANCE INFORMATION
- --------------------------------------------------------------------------------
The bar chart and table shown below provide an indication of the risks of
investing in the fund. The fund's past performance is not necessarily an
indication of its future performance.
ANNUAL TOTAL RETURNS
- --------------------------------------------------------------------------------
The following bar chart shows changes in the performance of the fund's Advisor
Class shares from year to year.
[GRAPH]
<TABLE>
<CAPTION>
Annual
Year Ended Total
December 31 Return
- ----------- ------
<S> <C>
1996 ................................. 20.56%
1997 ................................. -44.26%
1998 ................................. -18.51%
</TABLE>
During the periods shown in the bar chart, the highest quarterly return was
17.58% (quarter ended December 31, 1998) and the lowest quarterly return was
- -31.57% (quarter ended December 31, 1997.
PERFORMANCE TABLE
The following performance table compares the fund's performance to that of a
broad-based securities market index.
<TABLE>
<CAPTION>
AVERAGE ANNUAL TOTAL RETURNS
- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -
(for the periods ended SINCE INCEPTION
December 31, 1998) 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) (8.76)(2) 5/31/95(2)
- -------------------------------------------------------------------------------------------------
</TABLE>
(1) The Morgan Stanley Capital International All Country Pacific Free ex-Japan
Index measures the performance of 11 developed and emerging markets in the
Pacific rim, excluding Japan. The index excludes shares that are not readily
purchased by non-local investors.
(2) The average annual total return given is since the date closest to the
inception date of the Advisor Class.
2
<PAGE> 152
---------------------------
AIM NEW PACIFIC GROWTH FUND
---------------------------
FEE TABLE AND EXPENSE EXAMPLE
- --------------------------------------------------------------------------------
FEE TABLE
This table describes the fees and expenses that you may pay if you buy and hold
shares of the fund:
<TABLE>
<CAPTION>
SHAREHOLDER FEES
- - - - - - - - - - - - - - - - - - - - - - - - - - -
(fees paid directly from your
investment) ADVISOR CLASS
- ---------------------------------------------------
<S> <C>
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
- ---------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
ANNUAL FUND OPERATING EXPENSES
- - - - - - - - - - - - - - - - - - - - - - - - - - -
(expenses that are deducted
from fund assets) ADVISOR CLASS
- ---------------------------------------------------
<S> <C>
Management Fees 0.98%
Distribution and/or
Service (12b-1) Fees None
Other Expenses 1.07
Total Annual Fund
Operating Expenses 2.05
Expense Reimbursement(1) 0.40
Net Expenses 1.65
- ---------------------------------------------------
</TABLE>
(1) The investment advisor has contractually agreed to limit net expenses.
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 gross operating expenses remain the same. To the extent fees are waived
or expenses are reimbursed, the expense will be lower. Although your actual
returns and costs may be higher or lower, based on these assumptions your costs
would be:
<TABLE>
<CAPTION>
1 YEAR 3 YEARS 5 YEARS 10 YEARS
- ----------------------------------------------------
<S> <C> <C> <C> <C>
Advisor Class $208 $643 $1,103 $2,379
- ----------------------------------------------------
</TABLE>
3
<PAGE> 153
---------------------------
AIM NEW PACIFIC GROWTH FUND
---------------------------
FUND MANAGEMENT
- --------------------------------------------------------------------------------
THE ADVISORS
A I M Advisors, Inc. (the advisor) serves as the fund's investment advisor.
INVESCO Asia Limited (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 12/F, Three Exchange Square, 8 Connaught Place, Hong
Kong. 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
1972. 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 and Chancellor LGT
Asset Management, Inc. (the advisor for the period January 1, 1998 through May
28, 1998) together received compensation of 1.01% of average daily net assets,
consisting of a management and administrative fee of 0.98% and an accounting fee
of 0.03%.
PORTFOLIO MANAGERS
The advisor uses a team approach to investment management. The individual
members of the team who are primarily responsible for the day-to-day management
of the fund's portfolio are
- - 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.
- - 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).
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.
4
<PAGE> 154
---------------------------
AIM NEW PACIFIC GROWTH FUND
---------------------------
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
The financial highlights table is intended to help you understand the fund's
financial performance. Certain information reflects financial results for a
single fund share.
The total returns in the table represent the rate that an investor would have
earned (or lost) on an investment in the fund (assuming reinvestment of all
dividends and distributions).
This information has been audited by 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>
ADVISOR CLASS(a)
------------------------------------------
YEAR ENDED DECEMBER 31, JUNE 1, TO
--------------------------- DECEMBER 31,
1998(b) 1997(b) 1996(b) 1995(b)
- --------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Per Share Operating Performance:
Net asset value, beginning of period $ 6.45 $13.16 $12.45 $12.89
Income from investment operations:
Net investment income (loss) 0.08(c) 0.08 0.07 0.09
Net realized and unrealized gain (loss) on
investments (1.28) (5.89) 2.45 0.05
Net increase (decrease) from investment
operations (1.20) (5.81) 2.52 0.14
Distributions to shareholders:
From net investment income (0.07) (0.08) -- (0.15)
From net realized gain on investments -- (0.82) (1.81) (0.43)
In excess of net investment income -- -- -- --
In excess of net realized gain on investments -- -- -- --
Total distributions (0.07) (0.90) (1.81) (0.58)
Net asset value, end of period $ 5.18 $ 6.45 $13.16 $12.45
Total investment return (18.51)% (44.26)% 20.56% 1.07%(d)
- --------------------------------------------------------------------------------------------
Ratios/supplemental data:
Net assets, end of period (in 000s) $1,402 $1,488 $1,575 $ 935
Ratio of net investment income (loss) to average
net assets 1.65% 0.76% 0.52% 1.26%(e)
Ratio of expenses to average net assets:
With expense reductions and/or reimbursement 1.65% 1.31% 1.51% 1.54%(e)
Without expense reductions and/or
reimbursement 2.05% 1.58% 1.64% 1.59%(e)
Portfolio turnover rate(f) 96% 80% 93% 63%(e)
- --------------------------------------------------------------------------------------------
</TABLE>
(a) Commencing June 1, 1995, the Fund began offering Advisor Class shares.
(b) These selected per share data were calculated based upon average shares
outstanding during the period.
(c) Includes reimbursement of Fund operating expenses per share of $0.02.
(d) Not annualized.
(e) Annualized.
(f) Portfolio turnover is calculated on the basis of the Fund as a whole without
distinguishing between the classes of shares issued.
5
<PAGE> 155
-------------
THE AIM FUNDS
-------------
SHAREHOLDER INFORMATION FOR ADVISOR CLASS SHARES
- --------------------------------------------------------------------------------
In addition to the fund, A I M Advisors, Inc. serves as investment advisor to
many other mutual funds (the AIM Funds). The following information is about
Advisor Class shares of all the AIM Funds.
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 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.
PURCHASE OPTIONS
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------
OPENING AN ACCOUNT ADDING TO AN ACCOUNT
- ----------------------------------------------------------------------------------------------------------
<S> <C> <C>
Through a Financial Consultant Contact your financial consultant. Same
By Mail 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--05/99
<PAGE> 156
-------------
THE AIM FUNDS
-------------
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.
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. TO PROTECT THE INTERESTS OF
INVESTORS, EACH AIM FUND AND THE DISTRIBUTOR MAY REJECT ANY ORDER CONSIDERED
MARKET TIMING ACTIVITY.
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--05/99 A-2
<PAGE> 157
-------------
THE AIM FUNDS
-------------
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. You also may exchange Advisor
Class shares for AIM Cash Reserve shares of AIM Money Market 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 purchase of shares
being acquired in an exchange for up to five business days if it determines that
it would be materially disadvantaged by the immediate transfer of exchange
proceeds.
There is no fee for exchanges. The exchange privilege is not an option or
right to purchase shares. Any of the participating AIM Funds or the distributor
may modify or discontinue this privilege at any time.
BY MAIL
If you wish to make an exchange by mail, you must include original signatures of
each registered owner exactly as the shares are registered, the account
registration and account number, the dollar amount or number of shares to be
exchanged and the names of the AIM Funds from which and into which the exchange
is to be made.
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
A-3 ADV--05/99
<PAGE> 158
-------------
THE AIM FUNDS
-------------
allowed to exchange by telephone even if you have changed your address of record
within the preceding 30 days.
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, as allowed by the Securities and Exchange Commission, such as
when the NYSE restricts or suspends trading.
TAXES
In general, dividends and distributions you receive are taxable as ordinary
income or long-term capital gains for federal income tax purposes, whether you
reinvest them in additional shares or take them in cash. Distributions are
taxable to you at different rates depending on the length of time the fund holds
its assets. Different 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--05/99 A-4
<PAGE> 159
---------------------------
AIM NEW PACIFIC GROWTH FUND
---------------------------
OBTAINING ADDITIONAL INFORMATION
- --------------------------------------------------------------------------------
More information may be obtained free of charge upon request. The Statement of
Additional Information (SAI), a current version of which is on file with the
Securities and Exchange Commission (SEC), contains more details about the fund
and is incorporated by reference into the prospectus (is legally a part of this
prospectus). Annual and semiannual reports to shareholders contain additional
information about the fund's investments. The fund's annual report also
discusses the market conditions and investment strategies that significantly
affected the fund's performance during its last fiscal year.
If you have questions about this fund, another fund in The AIM Family of
Funds--Registered Trademark-- or your account, or wish to obtain free copies of
the fund's current SAI or annual or semiannual reports, please contact us
- ---------------------------------------------------------
<TABLE>
<S> <C>
BY MAIL: A I M 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)
</TABLE>
- ---------------------------------------------------------
You also can obtain copies of the fund's SAI and other information at the SEC's
Public Reference Room in Washington, DC, 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, DC 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
- --------------------------------------------
[AIM LOGO APPEARS HERE] www.aimfunds.com NPG-PRO-2 INVEST WITH DISCIPLINE
-- Registered Trademark --
<PAGE> 160
AIM SMALL CAP GROWTH FUND
------------------------------------------------------------------------
ADVISOR CLASS
AIM Small Cap Growth Fund seeks to provide long-term growth of capital.
PROSPECTUS
MAY 3, 1999
This prospectus contains important
information. Please read it before
investing and keep it for future
reference.
The Advisor Class is closed to new
investors.
As with all other mutual fund
securities, the Securities and
Exchange Commission has not approved
or disapproved these securities or
determined whether the information
in this prospectus is adequate or
accurate. Anyone who tells you
otherwise is committing a crime.
[AIM LOGO APPEARS HERE] INVEST WITH DISCIPLINE
-- Registered Trademark --
<PAGE> 161
-------------------------
AIM SMALL CAP GROWTH FUND
-------------------------
TABLE OF CONTENTS
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
INVESTMENT OBJECTIVE AND STRATEGIES 1
- - - - - - - - - - - - - - - - - - - - - - - - -
PRINCIPAL RISKS OF INVESTING IN THE FUND 1
- - - - - - - - - - - - - - - - - - - - - - - - -
PERFORMANCE INFORMATION 2
- - - - - - - - - - - - - - - - - - - - - - - - -
Annual Total Returns 2
Performance Table 2
FEE TABLE AND EXPENSE EXAMPLE 3
- - - - - - - - - - - - - - - - - - - - - - - - -
Fee Table 3
Expense Example 3
FUND MANAGEMENT 4
- - - - - - - - - - - - - - - - - - - - - - - - -
The Advisor 4
Advisor Compensation 4
Portfolio Managers 4
OTHER INFORMATION 4
- - - - - - - - - - - - - - - - - - - - - - - - -
Dividends and Distributions 4
FINANCIAL HIGHLIGHTS 5
- - - - - - - - - - - - - - - - - - - - - - - - -
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
- - - - - - - - - - - - - - - - - - - - - - - - -
</TABLE>
The AIM Family of Funds, The AIM Family of Funds and Design (i.e., the AIM
logo), AIM and Design, AIM, AIM LINK, AIM Institutional Funds, aimfunds.com, La
Familia AIM de Fondos, La Familia AIM de Fondos and Design and Invest with
Discipline are registered service marks and AIM Bank Connection is a service
mark of A I M Management Group Inc.
No dealer, salesperson or any other person has been authorized to give any
information or to make any representations other than those contained in this
prospectus, and you should not rely on such other information or
representations.
<PAGE> 162
-------------------------
AIM SMALL CAP GROWTH FUND
-------------------------
INVESTMENT OBJECTIVE AND STRATEGIES
- --------------------------------------------------------------------------------
The fund's investment objective is long-term growth of capital.
The fund seeks to meet this 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 25% of its total assets in foreign 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 available in the marketplace. The portfolio managers
consider whether to 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, money market instruments, or high-quality 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 prices of equity
securities change 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 portfolio
to sell securities at a desirable price.
Foreign securities have additional risks, including exchange rate changes,
political and economic upheaval, the relative lack of information about these
companies, relatively low market liquidity and the potential lack of strict
financial and accounting controls and standards.
If the seller of a repurchase agreement in which the portfolio invests
defaults on its obligation or declares bankruptcy, the portfolio may experience
delays in selling the securities underlying the repurchase agreement. As a
result, the portfolio may incur losses arising from decline in the value of
those securities, reduced levels of income and expenses of enforcing its rights.
The value of your shares could be adversely affected if the computer systems
used by the portfolio's investment advisor and other service providers are
unable to distinguish the year 2000 from the year 1900.
The portfolio's investment advisor and independent technology consultants are
working to avoid year 2000-related problems in its systems and to obtain
assurances that other service providers are taking similar steps. Year 2000
problems may also affect issuers in whose securities the portfolio invests.
An investment in the fund is not a deposit of a bank and is not insured or
guaranteed by the Federal Deposit Insurance Corporation or any other government
agency.
1
<PAGE> 163
-------------------------
AIM SMALL CAP GROWTH FUND
-------------------------
PERFORMANCE INFORMATION
- --------------------------------------------------------------------------------
The bar chart and table shown below provide an indication of the risks of
investing in the fund. The fund's past performance is not necessarily an
indication of its future performance.
ANNUAL TOTAL RETURNS
- --------------------------------------------------------------------------------
The following bar chart shows changes in the performance of the fund's Advisor
Class shares from year to year.
[GRAPH]
<TABLE>
<CAPTION>
Annual
Year Ended Total
December 31 Return
- ----------- ------
<S> <C>
1996 ........................................... 14.22%
1997 ........................................... 16.63%
1998 ........................................... 23.38%
</TABLE>
During the periods shown in the bar chart, the highest quarterly return was
30.45% (quarter ended December 31, 1998) and the lowest quarterly return was
- -20.18% (quarter ended September 30, 1998).
PERFORMANCE TABLE
The following performance table compares the fund's performance to that of a
broad-based securities market index.
<TABLE>
<CAPTION>
AVERAGE ANNUAL TOTAL RETURNS
- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -
(for the periods ended SINCE INCEPTION
December 31, 1998) 1 YEAR INCEPTION DATE
- -------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Advisor Class 23.38% 17.98% 10/18/95
Russell 2000--Registered Trademark-- Index(1) (2.55) 13.32(2) 10/31/95(2)
- -------------------------------------------------------------------------------------------------
</TABLE>
(1) The Russell 2000--Registered Trademark-- Index is a widely recognized,
unmanaged index of common stocks that measures the performance of the 2,000
smallest companies in the Russell 3000--Registered Trademark-- Index, which
measures the performance of the 3,000 largest 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.
2
<PAGE> 164
-------------------------
AIM SMALL CAP GROWTH FUND
-------------------------
FEE TABLE AND EXPENSE EXAMPLE
- --------------------------------------------------------------------------------
FEE TABLE
This table describes the fees and expenses that you may pay if you buy and hold
shares of the fund:
<TABLE>
<CAPTION>
SHAREHOLDER FEES
- - - - - - - - - - - - - - - - - - - - - - - - - -
(fees paid directly from your
investment) ADVISOR CLASS
- -------------------------------------------------
<S> <C>
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
- -------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
ANNUAL FUND OPERATING EXPENSES
- - - - - - - - - - - - - - - - - - - - - - - - - -
(expenses that are deducted from
fund assets)(1) ADVISOR CLASS
- -------------------------------------------------
<S> <C>
Management Fees 0.72%
Distribution and/or Service
(12b-1) Fees None
Other Expenses:
Other 1.12
Interest 0.01
Total Other Expenses 1.13
Total Annual Fund Operating
Expenses 1.85
Expense Reimbursement(2) 0.44
Net Expenses 1.41
- -------------------------------------------------
</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 contractually agreed to limit net expenses.
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 gross operating expenses remain the same. To the extent fees are waived
or expenses are reimbursed, the expenses will be lower. Although your actual
returns and costs may be higher or lower, based on these assumptions your costs
would be:
<TABLE>
<CAPTION>
1 YEAR 3 YEARS 5 YEARS 10 YEARS
- ----------------------------------------------------
<S> <C> <C> <C> <C>
Advisor Class $188 $582 $1,001 $2,169
- ----------------------------------------------------
</TABLE>
3
<PAGE> 165
-------------------------
AIM SMALL CAP GROWTH FUND
-------------------------
FUND MANAGEMENT
- --------------------------------------------------------------------------------
THE ADVISOR
A I M Advisors, Inc. (the advisor) serves as the investment advisor for the
Small Cap Portfolio (the portfolio), 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 portfolio'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 portfolio, encompassing a broad range of
investment objectives.
ADVISOR COMPENSATION
During the fiscal year ended December 31, 1998, the advisor and Chancellor LGT
Asset Management, Inc. (the advisor for the period January 1, 1998 through May
28, 1998) together received compensation of 0.74% of average daily net assets,
consisting of a management and administrative fee of 0.72% and an accounting fee
of 0.02%.
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 are
- - 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.
- - 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.
- - Ryan E. Crane, Portfolio Manager, who has been responsible for the fund since
1999 and has been associated with the advisor and/or its affiliates since
1994.
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.
4
<PAGE> 166
-------------------------
AIM SMALL CAP GROWTH FUND
-------------------------
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
The financial highlights table is intended to help you understand the fund's
financial performance. Certain information reflects financial results for a
single fund share.
The total returns in the table represent the rate that an investor would have
earned (or lost) on an investment in the fund (assuming reinvestment of all
dividends and distributions).
This information has been audited by 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>
ADVISOR CLASS
- ------------------------------------------------------------------------------------------
OCTOBER 18,
YEAR ENDED DECEMBER 31, TO
------------------------- DECEMBER 31,
1998(a) 1997 1996 1995
- ------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Net asset value, beginning of period $14.39 $12.58 $11.81 $ 11.43
Income from investment operations:
Net investment income(b) (0.14)(c) (0.14)(c) -- 0.05(c)
Net gains on securities (both realized and
unrealized) 3.46 2.22 1.69 0.33
Total from investment operations 3.32 2.08 1.69 0.38
Less distributions:
Distributions from net realized gains (0.50) (0.27) (0.92) --
Total distributions (0.50) (0.27) (0.92) --
Net asset value, end of period $17.21 $14.39 $12.58 $ 11.81
Total return(d) 23.38% 16.63% 14.22% 3.32%
- ------------------------------------------------------------------------------------------
Ratios/supplemental data:
Net assets, end of period (000s omitted) $1,045 $1,592 $ 435 $ 52
Ratio of expenses to average net assets:
With expense reductions and/or reimbursement 1.40%(e) 1.57% 1.65% 1.65%(f)
Without expense reductions and/or
reimbursement 1.84%(e) 2.17% 2.74% 23.85%(f)
Ratio of net investment income to average net
assets:
With expense reductions and/or reimbursement (0.94)%(e) (1.05)% (0.03)% (2.03)%(f)
Without expense reductions and/or
reimbursement (1.38)%(e) (1.65)% (1.12)% (20.17)%(f)
Ratio of interest expense to average net
assets(g) 0.01% -- -- --
Portfolio turnover rate(g) 190% 233% 150% --
- ------------------------------------------------------------------------------------------
</TABLE>
(a) The Portfolio changed investment advisors on May 29, 1998.
(b) Before reimbursement the net investment loss per share would have been
$(0.20), $(0.21), $(0.14), and $(0.46) for 1998-1995, respectively.
(c) Calculated using average shares outstanding.
(d) Not annualized for periods less than one year.
(e) Ratios are based on average net assets of $1,783,361.
(f) Annualized.
(g) Portfolio turnover rates and ratio of interest expense to average net assets
are calculated on the basis of the Portfolio as a whole without
distinguishing between the classes of shares issued.
5
<PAGE> 167
-------------
THE AIM FUNDS
-------------
SHAREHOLDER INFORMATION FOR ADVISOR CLASS SHARES
- --------------------------------------------------------------------------------
In addition to the fund, A I M Advisors, Inc. serves as investment advisor to
many other mutual funds (the AIM Funds). The following information is about
Advisor Class shares of all the AIM Funds.
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 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.
PURCHASE OPTIONS
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------
OPENING AN ACCOUNT ADDING TO AN ACCOUNT
- ----------------------------------------------------------------------------------------------------------
<S> <C> <C>
Through a Financial Consultant Contact your financial consultant. Same
By Mail 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--05/99
<PAGE> 168
-------------
THE AIM FUNDS
-------------
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.
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. TO PROTECT THE INTERESTS OF
INVESTORS, EACH AIM FUND AND THE DISTRIBUTOR MAY REJECT ANY ORDER CONSIDERED
MARKET TIMING ACTIVITY.
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>
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ADV--05/99 A-2
<PAGE> 169
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THE AIM FUNDS
-------------
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. You also may exchange Advisor
Class shares for AIM Cash Reserve shares of AIM Money Market 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 purchase of shares
being acquired in an exchange for up to five business days if it determines that
it would be materially disadvantaged by the immediate transfer of exchange
proceeds.
There is no fee for exchanges. The exchange privilege is not an option or
right to purchase shares. Any of the participating AIM Funds or the distributor
may modify or discontinue this privilege at any time.
BY MAIL
If you wish to make an exchange by mail, you must include original signatures of
each registered owner exactly as the shares are registered, the account
registration and account number, the dollar amount or number of shares to be
exchanged and the names of the AIM Funds from which and into which the exchange
is to be made.
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
A-3 ADV--05/99
<PAGE> 170
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THE AIM FUNDS
-------------
allowed to exchange by telephone even if you have changed your address of record
within the preceding 30 days.
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, as allowed by the Securities and Exchange Commission, such as
when the NYSE restricts or suspends trading.
TAXES
In general, dividends and distributions you receive are taxable as ordinary
income or long-term capital gains for federal income tax purposes, whether you
reinvest them in additional shares or take them in cash. Distributions are
taxable to you at different rates depending on the length of time the fund holds
its assets. Different 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--05/99 A-4
<PAGE> 171
-------------------------
AIM SMALL CAP GROWTH FUND
-------------------------
OBTAINING ADDITIONAL INFORMATION
- --------------------------------------------------------------------------------
More information may be obtained free of charge upon request. The Statement of
Additional Information (SAI), a current version of which is on file with the
Securities and Exchange Commission (SEC), contains more details about the fund
and is incorporated by reference into the prospectus (is legally a part of this
prospectus). Annual and semiannual reports to shareholders contain additional
information about the fund's investments. The fund's annual report also
discusses the market conditions and investment strategies that significantly
affected the fund's performance during its last fiscal year.
If you have questions about this fund, another fund in The AIM Family of
Funds--Registered Trademark-- or your account, or wish to obtain free copies of
the fund's current SAI or annual or semiannual reports, please contact us
- ---------------------------------------------------------
<TABLE>
<S> <C>
BY MAIL: A I M 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)
</TABLE>
- ---------------------------------------------------------
You also can obtain copies of the fund's SAI and other information at the SEC's
Public Reference Room in Washington, DC, 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, DC 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
- -------------------------------------------
[AIM LOGO APPEARS HERE] www.aimfunds.com SCE-PRO-2 INVEST WITH DISCIPLINE
-- Registered Trademark --
<PAGE> 172
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
PROSPECTUS, THE AIM MID CAP EQUITY FUND PROSPECTUS AND THE AIM NEW PACIFIC
GROWTH FUND PROSPECTUS EACH DATED MAY 3, 1999
<PAGE> 173
TABLE OF CONTENTS
<TABLE>
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PAGE
<S> <C>
INTRODUCTION................................................ 4
GENERAL INFORMATION ABOUT THE FUNDS......................... 4
The Trust and Its Shares.................................. 4
INVESTMENT POLICIES......................................... 5
Selection of Investments.................................. 6
Investments in Other Investment Companies................. 6
Samurai and Yankee Bonds.................................. 7
Depositary Receipts....................................... 7
Warrants or Rights........................................ 8
Lending of Portfolio Securities........................... 8
Commercial Bank Obligations............................... 8
Privatizations............................................ 8
Repurchase Agreements..................................... 8
Borrowing, Reverse Repurchase Agreements and "Roll"
Transactions........................................... 9
When-Issued or Forward Commitment Securities.............. 9
Temporary Defensive Strategies............................ 10
OPTIONS, FUTURES AND CURRENCY STRATEGIES.................... 10
Special Risks of Options, Futures and Currency
Strategies............................................. 10
Writing Call Options...................................... 10
Writing Put Options....................................... 11
Purchasing Put Options.................................... 12
Purchasing Call Options................................... 12
Index Options............................................. 13
Interest Rate, Currency and Stock Index Futures
Contracts.............................................. 14
Options on Futures Contracts.............................. 16
Limitations on Use of Futures, Options on Futures and
Certain Options on Currencies.......................... 16
Forward Contracts......................................... 16
Foreign Currency Strategies -- Special Considerations..... 17
Cover..................................................... 18
RISK FACTORS................................................ 18
Concentration............................................. 18
Illiquid Securities....................................... 18
Foreign Securities........................................ 19
Debt Securities........................................... 23
Equity Securities......................................... 24
INVESTMENT LIMITATIONS...................................... 24
EXECUTION OF PORTFOLIO TRANSACTIONS......................... 25
Portfolio Trading and Turnover............................ 27
MANAGEMENT.................................................. 27
Trustees and Executive Officers........................... 27
Investment Management and Administration Services......... 29
Expenses of the Funds..................................... 30
THE DISTRIBUTION PLANS...................................... 31
The Class A and C Plan.................................... 31
The Class B Plan.......................................... 31
Both Plans................................................ 31
</TABLE>
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<PAGE> 174
<TABLE>
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PAGE
<S> <C>
THE DISTRIBUTOR............................................. 34
Sales Charges and Dealer Concessions...................... 36
Reductions in Initial Sales Charges....................... 38
Purchases At Net Asset Value.............................. 40
Contingent Deferred Sales Charge Exceptions............... 41
NET ASSET VALUE DETERMINATION............................... 42
HOW TO PURCHASE AND REDEEM SHARES........................... 43
Backup Withholding........................................ 44
DIVIDEND ORDER.............................................. 45
DIVIDENDS, DISTRIBUTIONS AND TAX MATTERS.................... 45
Reinvestment of Dividends and Distributions............... 45
Tax Matters............................................... 45
General................................................... 45
Reinstatement Privileges.................................. 46
Foreign Taxes............................................. 46
Passive Foreign Investment Companies...................... 46
Non-U.S. Shareholders..................................... 47
Options, Futures and Foreign Currency Transactions........ 47
SHAREHOLDER INFORMATION..................................... 48
MISCELLANEOUS INFORMATION................................... 50
Charges for Certain Account Information................... 50
Custodian................................................. 50
Transfer Agency and Accounting Agency Services............ 50
Independent Accountants................................... 50
Legal Matters............................................. 50
Shareholder Liability..................................... 50
Names..................................................... 51
Control Persons and Principal Holders of Securities....... 51
INVESTMENT RESULTS.......................................... 53
Total Return Quotations................................... 53
Performance Information................................... 57
APPENDIX.................................................... 59
Description of Bond Ratings............................... 59
Description of Commercial Paper Ratings................... 60
Absence of Rating......................................... 60
FINANCIAL STATEMENTS........................................ FS
</TABLE>
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<PAGE> 175
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 Asset
Management (Japan) Limited ("INVESCO Japan") serves as the investment
sub-advisor of Japan Fund. INVESCO Asia Limited ("INVESCO Asia") serves as the
investment sub-advisor of Pacific Fund. INVESCO Asset Management Ltd. ("INVESCO
AML") serves as the investment sub-advisor of Europe Fund. INVESCO Japan,
INVESCO Asia 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 GT 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 four 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 GT 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 (the "Board") 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.
Other than the automatic conversion of Class B shares to Class A shares, there
are no conversion rights.
Shareholders of the Funds and of the Trust's other series do not have
cumulative voting rights, and therefore the holders of more than 50% of the
outstanding shares of all Funds and of the Trust's other series voting together
for
4
<PAGE> 176
election of trustees may elect all of the members of the Trust's Board. In such
event, the remaining holders cannot elect any trustees of the Trust.
On any matter submitted to a vote of shareholders, shares of a Fund will be
voted by the Fund's shareholders individually when the matter affects the
specific interest of the Fund only, such as approval of the Fund's investment
management arrangements. In addition, shares of a particular class of a Fund may
vote on matters affecting only that class. The shares of a Fund and of the
Trust's other series will be voted in the aggregate on other matters, such as
the election of Trustees and ratification of the selection of the Trust's
independent accountants.
Normally there will be no annual meeting of shareholders for any of the Funds
in any year, except as required under the Investment Company Act of 1940, as
amended (the "1940 Act"). A Trustee may be removed at any meeting of the
shareholders of the Trust by a vote of the shareholders owning at least
two-thirds of the outstanding shares. Any Trustee may call a special meeting of
shareholders for any purpose. Furthermore, Trustees shall promptly call a
meeting of shareholders solely for the purpose of removing one or more Trustees
when requested in writing to do so by shareholders holding 10% of the Trust's
outstanding shares.
Pursuant to the Trust's Agreement and Declaration of Trust, the Trust may
issue an unlimited number of shares of each Fund. Each share of a Fund
represents an interest in the Fund only, has a par value of $0.01 per share,
represents an equal proportionate interest in the Fund with other shares of the
Fund and is entitled to such dividends and distributions out of the income
earned and gain realized on the assets belonging to the Fund as may be declared
by the Board of Trustees. Each share of a Fund is equal in earnings, assets and
voting privileges except that each class normally has exclusive voting rights
with respect to its distribution plan and bears the expenses, if any, related to
the distribution of its shares. Shares of a Fund, when issued, are fully paid
and nonassessable.
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. Unless
specifically noted, the Fund's investment policies described in this Statement
of Additional Information are not fundamental policies and may be changed by
vote of the Trust's Board of Trustees, without shareholder approval.
Pacific Growth Fund's primary investment area includes: Australia, Hong Kong,
India, Indonesia, Malaysia, New Zealand, Pakistan, the Philippines, Singapore,
South Korea, Taiwan and Thailand. Europe Growth Fund's primary investment area
includes: Austria, Belgium, Denmark, Finland, France, Germany, Greece, Ireland,
Italy, Luxembourg, the Netherlands, Norway, Portugal, Spain, Sweden,
Switzerland, Turkey and the United Kingdom.
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. 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. Accordingly, the Funds are regional funds for investors
interested in a more geographically concentrated investment but still desiring
to diversify across multiple markets.
For purposes of the Prospectuses 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.
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<PAGE> 177
There is no assurance that the Funds will achieve their investment objectives.
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.
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.
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.
Equity securities in which the Funds may invest include common stocks,
preferred stocks, convertible debt securities and warrants to acquire such
securities.
Mid Cap Fund. The Fund may 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 Midcap Index(TM);
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.
As of June 30, 1998, the market capitalizations of companies comprising the
Russell Midcap Index(TM) ranged from approximately $1.4 to $10.3 billion. 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.
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 Prospectuses 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
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<PAGE> 178
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 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, a 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, such 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 foreign securities. Such investments may include American
Depositary Receipts ("ADRs"), American Depositary Shares ("ADSs"), Global
Depositary Receipts ("GDRs") and European Depositary Receipts ("EDRs"). 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 Fund's investment policies, its investments in ADRs,
ADSs, GDRs and EDRs will be deemed to be investments in the underlying foreign
equity securities.
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.
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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. While a loan is
outstanding, the borrower must maintain with the Fund's custodian collateral
consisting of cash, U.S. government securities or certain irrevocable letters of
credit equal to at least the value of the borrowed securities, plus any accrued
interest or such other collateral as permitted by the Fund's investment program
and regulatory agencies, and as approved by the Board. The risks of lending
portfolio securities, as with other extensions of secured credit, consist of
possible delay in receiving additional collateral or in recovery of the
securities and possible loss of rights in the collateral should the borrower
fail financially. 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 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,
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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. 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. A Fund may borrow in connection with meeting requests for the
redemption of a Fund's shares. 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, 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. A Fund may
borrow through reverse repurchase agreements and "roll" transactions in
connection with meeting requests for the redemption of a Fund's shares.
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.
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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.
(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
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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.
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.
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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 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
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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 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.
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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 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 deutschmarks 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 deutschmarks on the same
exchange. In such instance, the difference between the price at which the
Futures
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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 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
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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%.
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.
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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.
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
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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.
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. ("NASD"). An insufficient number of qualified
institutional buyers interested in purchasing Rule 144A-eligible restricted
securities held by a Fund, however, could affect adversely the
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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. Moreover, individual foreign
economies may differ favorably or unfavorably from the U.S. economy in such
respects as growth of gross national product, rate of inflation, rate of savings
and capital reinvestment, resource self-sufficiency and balance of payments
positions.
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 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. Additionally, certain costs attributable to
foreign investing, such as custody charges, are higher than those attributable
to domestic investing.
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
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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. Currencies generally are evaluated on
the basis of fundamental economic criteria (e.g., relative inflation and
interest rate levels and trends, growth rate forecasts, balance of payments
status and economic policies) as well as technical and political data. The
exchange rates between the U.S. dollar and other currencies are determined by
supply and demand in the currency exchange markets, the international balance of
payments, governmental intervention, speculation and other economic and
political conditions.
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, 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 a 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
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of its shares for any period during which an emergency exists, as determined by
the SEC. Accordingly, when a 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 a
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."
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,
the 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 of these Common Market reforms will be or what their effect 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 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
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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").
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
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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 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. There also may be a lower level of monitoring and regulation of emerging
securities markets and the activities of investors in such markets, and
enforcement of existing regulations has been extremely limited.
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 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
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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;
(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.
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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.
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
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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 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 any of the Sub-advisors. The Trust's Board 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 years ended December 31, 1998 and 1997, 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....................................... $1,989,166 $2,217,385 $2,711,139
Japan Fund........................................ $ 235,325 $ 218,841 $ 253,623
Mid Cap Fund...................................... $1,528,607 $2,193,539 $2,760,768
Pacific Fund...................................... $ 930,036 $2,767,789 $5,151,533
</TABLE>
26
<PAGE> 198
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. High portfolio turnover (over
100%) 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................................................. 97% 107%
Japan Fund.................................................. 67% 58%
Mid Cap Fund................................................ 168% 190%
Pacific Fund................................................ 96% 80%
</TABLE>
MANAGEMENT
The Trust's Board of Trustees has overall responsibility for the operation of
the Funds. The Board 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.
- ------------------------------------------------------------------------------------------------------
</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> 199
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------
NAME, ADDRESS AND AGE POSITIONS HELD WITH REGISTRANT PRINCIPAL OCCUPATION DURING PAST 5 YEARS
- ------------------------------------------------------------------------------------------------------
<S> <C> <C>
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.
- ------------------------------------------------------------------------------------------------------
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.
- ------------------------------------------------------------------------------------------------------
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.
- ------------------------------------------------------------------------------------------------------
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.
- ------------------------------------------------------------------------------------------------------
DANA R. SUTTON (39) Vice President and Treasurer Vice President and Fund Controller,
A I M Advisors, Inc.; and Assistant Vice
President and Assistant Treasurer, Fund
Management Company.
- ------------------------------------------------------------------------------------------------------
</TABLE>
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
28
<PAGE> 200
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 an annual retainer component plus a per-meeting fee
component, 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 $13,300, $10,900, $12,100 and $13,300, 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 $106,850, $90,650, $98,600 and $99,500,
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 1, 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, 11 Greenway Plaza, Suite 100, Houston, Texas 77046, was organized in 1976
and, together with its subsidiaries, manages or advises approximately 110
investment portfolios encompassing a broad range of investment objectives.
INVESCO Asset Management Limited, 11 Devonshire Square, London, EC2M 4YR,
England, has provided investment management and/or administrative services to
pension funds, insurance funds, index funds, unit trusts, offshore funds and a
variety of institutional accounts since 1967. INVESCO Asset Management (Japan)
Limited, Imperial Tower, 1-1-1 Uchisaiwai-cho, Chiyoda-Ku, Tokyo, 100-0011, has
provided investment management services since 1990. INVESCO Asia Limited, 12/F,
Three Exchange Square, 8 Connaught Place, Hong Kong, has provided investment
management services since 1972. AIM, the Sub-advisors and their world-wide asset
management affiliates provide investment management and/or administrative
services to institutional, corporate and individual clients around the world.
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 also the sole shareholder of the Funds' principal
underwriter, AIM Distributors.
AIM Management, AIM and the Sub-Advisors are indirect wholly owned
subsidiaries of AMVESCAP PLC, 11 Devonshire Square, London, EC2M 4YR, England.
AMVESCAP PLC and its subsidiaries are an independent management group that has 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.
In addition to the investment resources of their Houston and London offices,
AIM and the Sub-advisors draw upon the expertise, personnel, data and systems of
other offices in Atlanta, Boston, Dallas, Denver, Louisville, Miami, New York,
Portland (Oregon), Frankfurt, Hong Kong, London, Singapore, Sydney, Tokyo and
Toronto. In managing the Funds and the Portfolio, the Sub-advisors employ a team
approach, taking advantage of its investment resources around the world.
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 Japan serves as the sub-advisor to Japan Fund
under a sub-advisory Contract between AIM and INVESCO Japan ("Sub-Management
Contract"). INVESCO Asia serves as the sub-advisor to Pacific Fund under a
sub-advisory contract between AIM and INVESCO Asia ("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"). The
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
29
<PAGE> 201
other party. The Management Contracts terminate automatically in the event of
their assignment (as defined in the 1940 Act).
For these services, each Fund (other than Mid Cap Fund) pays AIM investment
management and administrative fees, computed daily and paid monthly, based on
its average daily net assets, at the annualized rate of 0.975% on the first $500
million, 0.95% on the next $500 million, 0.925% on the next $500 million and
0.90% on the amounts thereafter. Mid Cap Fund pays AIM investment management and
administration fees, computed daily and paid monthly, based on its average daily
net assets, at the annualized rate of 0.725% on the first $500 million, 0.70% on
the next $500 million, 0.675% on the next $500 million and 0.65% on amounts
thereafter. AIM pays each Sub-advisor sub-advisory fees, computed weekly and
paid monthly, based on each Fund's average daily net assets, at the annualized
rate of 0.39% of the first $500 million, 0.38% on the next $500 million, 0.37%
on the next $500 million, and 0.36% on the amounts thereafter. The investment
management and administration fees paid by the Funds are higher than those paid
by most mutual funds. The Funds pay all expenses not assumed by AIM, the
Sub-advisors, AIM Distributors or other agents. AIM has undertaken to limit
expenses of each of Europe Fund, Japan Fund and Pacific Fund (exclusive of
brokerage commissions, taxes, interest and extraordinary expenses) to the annual
rate of 2.00%, 2.65% and 2.65% of the average daily net assets of each Fund's
Class A, Class B and Class C shares, respectively, and has undertaken to limit
expenses of Mid Cap Fund to the annual rate of 1.75%, 2.40% and 2.40% of the
average daily net assets of Class A, Class B and Class C shares, respectively,
until May 31, 2000.
AIM may from time to time waive or reduce its fee. Voluntary fee waivers or
reductions may be rescinded at any time without further notice to investors.
During periods of voluntary fee waivers or reductions, AIM will retain its
ability to be reimbursed for such fee prior to the end of each fiscal year.
Contractual fee waivers or reductions set forth in the Fee Tables in a
Prospectus may not be terminated or amended to the Funds' detriment during the
period stated in the agreement between AIM and the Fund.
AIM also serves as the Funds' pricing and accounting agent. For these
services, AIM receives a fee based on the aggregate net assets of the funds
which comprise the following investment companies: AIM Growth Series, AIM
Investment Funds, AIM Investment Portfolios, AIM Series Trust, GT Global
Variable Investment Series and GT Global Variable Investment Trust. The fee is
calculated at the rate of 0.03% of the first $5 billion of assets, and 0.02% of
the assets in excess of $5 billion. An amount is allocated to and paid by each
such fund based on its relative average daily net assets.
In placing securities for a Fund's portfolio transactions, the Sub-advisors
seek to obtain the best net results. Consistent with its obligation to obtain
the best net results, the Sub-advisors may consider a broker/dealer's sale of
shares of the AIM Funds as a factor in considering through whom portfolio
transactions will be effected. Brokerage transactions may be executed through
affiliates of AIM or the Sub-advisors.
For the fiscal years ended December 31, 1998, 1997 and 1996, each Fund paid
the current and former Advisors the following investment management and
administration fees:
<TABLE>
<CAPTION>
FUND 1998 1997 1996
---- ---------- ---------- ----------
<S> <C> <C> <C>
Europe Fund....................................... $5,643,072 $5,228,246 $5,416,280
Japan Fund........................................ $ 740,164 $1,017,788 $1,367,702
Mid Cap Fund...................................... $3,140,938 $3,999,732 $4,982,969
Pacific Fund...................................... $1,447,661 $3,736,264 $5,260,774
</TABLE>
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, other than Mid Cap Fund, 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.
30
<PAGE> 202
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 NASD. The Class A and C Plan imposes a cap on the total amount
of sales charges, including asset-based sales charges, that may be paid by the
Trust with respect to a Fund. The Class A and C Plan does not obligate the Fund
to reimburse AIM Distributors for the actual expenses AIM Distributors may incur
in fulfilling its obligations under the Class A and C Plan on behalf of a Fund.
Thus under the Class A and C Plan, even if AIM Distributors' actual expenses
exceed the fee payable to AIM Distributors thereunder at any given time, a Fund
will not be obligated to pay more than that fee. If AIM Distributors' expenses
are less than the fee it receives, AIM Distributors will retain the full amount
of the fee.
THE 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.
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
31
<PAGE> 203
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 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 NASD. The Plans conform to rules of the NASD by limiting
payments made to dealers and other financial institutions who provide continuing
personal shareholder services to their customers who purchase and own shares of
the Funds to no more than 0.25% per annum of the average daily net assets of the
Funds attributable to the customers of such dealers or financial institutions,
and by imposing a cap on the total sales charges, including asset based sales
charges, that may be paid by the Funds and their respective classes.
AIM Distributors may from time to time waive or reduce any portion of its
12b-1 fee for Class A and Class C shares. Voluntary fee waivers or reductions
may be rescinded at any time without further notice to investors. During periods
of voluntary fee waivers or reductions, AIM Distributors will retain its ability
to be reimbursed for such fee prior to the end of each fiscal year. Contractual
fee waivers or reductions set forth in the Fee Table in a Prospectus may not be
terminated or amended to the Funds' detriment during the period stated in the
agreement between AIM Distributors and the Fund.
Under the Plans, certain financial institutions which have entered into
service agreements and which sell shares of the Funds on an agency basis, may
receive payments from the Funds pursuant to the respective Plans. AIM
Distributors does not act as principal, but rather as agent for the Funds, in
making dealer incentive and shareholder servicing payments under the Plans.
These payments are an obligation of the Funds and not of AIM Distributors.
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 a Fund 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 operated under a "reimbursement-type" Rule
12b-1 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.
32
<PAGE> 204
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............................................ $698,394 $ 431,096 0.35% 1.00%
Japan Fund............................................. $ 67,260 $ 103,394 0.35% 1.00%
Mid Cap Fund........................................... $367,044 $1,037,786 0.35% 1.00%
Pacific Fund........................................... $189,463 $ 210,048 0.35% 1.00%
</TABLE>
Class C shares had not commenced operations as of December 31, 1998.
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............................................ $951,223 $ 621,412 0.35% 1.00%
Japan Fund............................................. $ 82,732 $ 132,930 0.35% 1.00%
Mid Cap Fund........................................... $393,915 $1,110,465 0.35% 1.00%
Pacific Fund........................................... $181,354 $ 200,840 0.35% 1.00%
</TABLE>
Class C shares had not commenced operations as of December 31, 1998.
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..................................... $ 339,942 $ 27,397 $201,154 $ 72,012
Printing and mailing prospectuses, semi-annual
reports and annual reports (other than to
current shareholders)........................ 34,640 2,482 24,977 7,122
Seminars........................................ 72,167 6,895 25,697 16,187
Compensation to Underwriters to partially offset
other marketing expenses..................... 0 0 0 0
Compensation to Dealers including finder's
fees......................................... 1,202,868 113,218 509,131 275,496
Compensation to Sales Personnel................. 0 0 0 0
Annual Report Total............................. 1,649,617 149,992 760,959 370,817
</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...................................... $ 6,682 $ 2,588 $ 13,007 $ 3,633
Printing and mailing prospectuses, semi-annual
reports and annual reports (other than to
current shareholders)......................... 717 165 1,949 416
Seminars......................................... 1,328 918 1,031 578
Compensation to Underwriters to partially offset
other marketing expenses...................... 789,381 177,243 1,611,189 308,166
Compensation to Dealers.......................... 254,400 55,410 521,076 98,095
Compensation to Sales Personnel.................. 0 0 0 0
Annual Report Totals............................. 1,052,508 236,324 2,148,252 410,888
</TABLE>
Class C shares had not commenced operations as of December 31, 1998.
33
<PAGE> 205
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.
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 10, 1998. Both such Master Distribution
Agreements are hereinafter collectively referred to as the "Distribution
Agreements."
The Distribution Agreements provide that AIM Distributors will bear the
expenses of printing from the final proof and distributing 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.
34
<PAGE> 206
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.
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 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................................... $ 47,671 $ 789 $ 70,428 $ 4,461
Japan Fund.................................... 16,618 8,184 $ 62,977 $23,200
Mid Cap Fund.................................. 56,587 17,303 $170,104 $38,700
Pacific Fund.................................. 27,917 0 $145,896 $21,605
</TABLE>
Each Fund pays AIM Distributors sales charges on sales of Class A shares of
the Funds, retains certain amounts of such charges and reallows other amounts of
such charges to brokers/dealers who sell shares.
The following chart reflects the total sales charges paid in connection with
the sale of Class A shares of each Fund and the amount retained by AIM
Distributors for the period of June 1, 1998 to December 31, 1998.
35
<PAGE> 207
<TABLE>
<CAPTION>
JUNE 1, 1998 TO
DECEMBER 31, 1998
------------------
SALES AMOUNT
CHARGES RETAINED
------- --------
<S> <C> <C>
Europe Fund................................................. $55,808 $55,381
Japan Fund.................................................. $20,307 $18,903
Mid Cap Fund................................................ $10,378 $ 4,819
Pacific Fund................................................ $25,540 $23,466
</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:
<TABLE>
<CAPTION>
1998 1997 1996
---------- ---------- ----------
<S> <C> <C> <C>
Europe Fund....................................... $ 407,129 $ 516,795 $ 382,130
Japan Fund........................................ $ 181,703 $ 284,394 $ 349,093
Mid Cap Fund...................................... $ 962,327 $2,340,777 $1,941,095
Pacific Fund...................................... $ 236,944 $ 936,835 $ 665,740
</TABLE>
Class C shares had not commenced operations as of December 31, 1998.
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 Mid Cap Opportunities Fund, AIM New Pacific Growth Fund, AIM
Select Growth Fund, AIM Small Cap Growth Fund, AIM Small Cap Opportunities Fund,
AIM Value Fund and AIM Weingarten Fund.
<TABLE>
<CAPTION>
DEALER
CONCESSION
INVESTOR'S SALES CHARGE ----------
--------------------------- AS A
AS A AS A PERCENTAGE
PERCENTAGE PERCENTAGE OF THE
OF THE PUBLIC OF THE NET PUBLIC
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.
36
<PAGE> 208
<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.
All Groups of AIM Funds. AIM Distributors may elect to re-allow the entire
initial sales charge to dealers for all sales with respect to which orders are
placed with AIM Distributors during a particular period. Dealers to whom
substantially the entire sales charge is re-allowed may be deemed to be
"underwriters" as that term is defined under the Securities Act of 1933.
In addition to amounts paid to dealers as a dealer concession out of the
initial sales charge paid by investors, AIM Distributors may, from time to time,
at its expense or as an expense for which it may be compensated under a
distribution plan, if applicable, pay a bonus or other consideration or
incentive to dealers who sell a minimum dollar amount of the shares of the AIM
Funds during a specified period of time. At the option of the dealer, such
incentives may take the form of payment for travel expenses, including lodging,
incurred in connection with trips taken by qualifying registered representatives
and their families to places within or outside the United States. The total
amount of such additional bonus payments or other consideration shall not exceed
0.25% of the public offering price of the shares sold. Any such bonus or
incentive programs will not change the price paid by investors for the purchase
of the applicable AIM Fund's shares or the amount that any particular AIM Fund
will receive as proceeds from such sales. Dealers may not use sales of the AIM
Funds' shares to qualify for any incentives to the extent that such incentives
may be prohibited by the laws of any state.
AIM Distributors may make payments to dealers and institutions who are dealers
of record for purchases of $1 million or more of Class A shares (or shares which
normally involve payment of initial 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.
37
<PAGE> 209
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 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
38
<PAGE> 210
- 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, (ii) Class B and Class C shares of the AIM Funds) and (iii) AIM
Floating Rate Fund within the following 13 consecutive months. By marking the
LOI section on the account application and by signing the account application,
the purchaser indicates that he understands and agrees to the terms of the LOI
and is bound by the provisions described below.
Each purchase of fund shares normally subject to an initial sales charge made
during the 13-month period will be made at the public offering price applicable
to a single transaction of the total dollar amount indicated by the LOI, as
described under "Sales Charges and Dealer Concessions." It is the purchaser's
responsibility at the time of purchase to specify the account numbers that
should be considered in determining the appropriate sales charge. The offering
price may be further reduced as described under "Rights of Accumulation" if the
Transfer Agent is advised of all other accounts at the time of the Investment.
Shares acquired through reinvestment of dividends and capital gains
distributions will not be applied to the LOI. At any time during the 13-month
period after meeting the original obligation, a purchaser may revise his
intended investment amount upward by submitting a written and signed request.
Such a revision will not change the original expiration date. By signing an LOI,
a purchaser is not making a binding commitment to purchase additional shares,
but if purchases made within the 13-month period do not total the amount
specified, the investor will pay the increased amount of sales charge as
described below. Purchases made within 90 days before signing an LOI will be
applied toward completion of the LOI. The LOI effective date will be the date of
the first purchase within the 90-day period. The Transfer Agent will process
necessary adjustments upon the expiration or completion date of the LOI.
Purchases made more than 90 days before signing an LOI will be applied toward
completion of the LOI based on the value of the shares purchased calculated at
the public offering price on the effective date of the LOI.
To assure compliance with the provisions of the 1940 Act, out of the initial
purchase (or subsequent purchases if necessary) the Transfer Agent will escrow
in the form of shares an appropriate dollar amount (computed to the nearest full
share). All dividends and any capital gain distributions on the escrowed shares
will be credited to the purchaser. All shares purchased, including those
escrowed, will be registered in the purchaser's name. If the total investment
specified under this LOI Is completed within the 13-month period, the escrowed
shares will be promptly released. If the intended investment is not completed,
the purchaser will pay the Transfer Agent the difference between the sales
charge on the specified amount and the amount actually purchased. If the
purchaser does not pay such difference within 20 days of the expiration date, he
irrevocably constitutes and appoints the Transfer Agent as his attorney to
surrender for redemption any or all shares, to make up such difference within 60
days of the expiration date.
If at any time before completing the LOI Program, the purchaser wishes to
cancel the agreement, he must give written notice to AIM Distributors. If at any
time before completing the LOI Program the purchaser requests the Transfer Agent
to liquidate or transfer beneficial ownership of his total shares, a
cancellation of the LOI will automatically be effected. If the total amount
purchased is less than the amount specified in the LOI, the Transfer Agent will
redeem an appropriate number of escrowed shares equal to the difference between
the sales charge actually paid and the sales charge that would have been paid if
the total purchases had been made at a single time.
2. Rights of Accumulation. A "purchaser," as previously defined, may also
qualify for reduced initial sales charges based upon such purchaser's existing
investment in shares of any of the AIM Funds (except for (i) Class A shares of
AIM Tax-Exempt Cash Fund and AIM Cash Reserve Shares of AIM Money Market Fund
and (ii) Class B and Class C shares of the AIM Funds) 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
39
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AIM Funds (except for (i) Class A shares of AIM Tax-Exempt Cash Fund and AIM
Cash Reserve Shares of AIM Money Market Fund, (ii) Class B and Class C shares
of the AIM Funds) and (iii) AIM Floating Rate Fund owned by such purchaser,
calculated at their then current public offering price. If a purchaser so
qualifies for a reduced sales charge, the reduced sales charge applies to the
total amount of money then being invested by such purchaser and not just to the
portion that exceeds the breakpoint above which a reduced sales charge applies.
For example, if a purchaser already owns qualifying shares of any AIM Fund with
a value of $20,000 and wishes to invest an additional $20,000 in a fund, with a
maximum initial sales charge of 5.50%, the reduced initial sales charge of 5.25%
will apply to the full $20,000 purchase and not just to the $15,000 in excess of
the $25,000 breakpoint. To qualify for obtaining the discount applicable to a
particular purchase, the purchaser or his dealer must furnish AFS with a list of
the account numbers and the names in which such accounts of the purchaser are
registered at the time the purchase is made.
PURCHASES AT NET ASSET VALUE
Purchases of shares of any of the AIM Funds at net asset value (without
payment of an initial sales charge) may be made in connection with: (a) the
reinvestment of dividends and distributions from a fund; (b) exchanges of shares
of certain 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:
- 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;
- 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 purchasers as defined above, and
non-qualified plans offered in conjunction therewith, provided the initial
investment in the plan(s) is at least $1 million; the sponsor signs a $1
million LOI; the employer-sponsored plan has at least 100 eligible
employees; or all plan transactions are executed through a single omnibus
account per Fund and the financial institution or service organization has
entered into the appropriate agreement with the distributor. Section 403(b)
plans sponsored by public educational institutions are not eligible for a
sales charge exception based on the aggregate investment made by the plan or
the number of eligible employees. Purchases of AIM Small Cap Opportunities
Fund by such plans are subject to initial sales charges;
- 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.
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CONTINGENT DEFERRED SALES CHARGE EXCEPTIONS
Former GT Global funds Class A shares that are subject to a contingent
deferred sales charge and that were purchased before June 1, 1998 are entitled
to the following waivers from the contingent deferred sales charge otherwise
due upon redemption: (1) minimum required distributions made in connection
with an IRA, Keogh Plan or custodial account under Section 403(b) of the Code
or other retirement plan following attainment of age 70 1/2; (2) total or
partial redemptions resulting from a distribution following retirement in the
case of a tax-qualified employer-sponsored retirement plan; (3) when a
redemption results from a tax-free return of an excess contribution pursuant
to Section 408(d)(4) or (5) of the Code or from the death or disability of the
employee; (4) redemptions pursuant to a Fund's right to liquidate a
shareholder's account involuntarily; (5) redemptions pursuant to distributions
from a tax-qualified employer-sponsored retirement plan, which is invested in
the former GT Global funds, which are permitted to be made without penalty
pursuant to the Code, other than tax-free rollovers or transfers of assets,
and the proceeds of which are reinvested in the former GT Global funds; (6)
redemptions made in connection with participant-directed exchanges between
options in an employer-sponsored benefit plan; (7) redemptions made for the
purpose of providing cash to fund a loan to a participant in a tax-qualified
retirement plan; (8) redemptions made in connection with a distribution from
any retirement plan or account that is permitted in accordance with the
provisions of Section 72(t)(2) of the Code, and the regulations promulgated the
reunder; (9) redemptions made in connection with a distribution from any
retirement plan or account that involves the return of an excess deferral
amount pursuant to Section 401(k)(8) or Section 402(g)(2) of the Code; (10)
redemptions made in connection with a distribution from a qualified
profit-sharing or stock bonus plan described in Section 401(k) of the
Code to a participant or beneficiary under Section 401(k)(2)(B)(IV) of the Code
upon hardship of the covered employee (determined pursuant to Treasury
Regulation Section 1.401(k)-1(d)(2)); and (11) redemptions made by or for the
benefit of certain states, counties or cities, or any instrumentalities,
departments or authorities thereof where such entities are prohibited or limited
by applicable law from paying a sales charge or commission.
Former GT Global funds Class B shares purchased before June 1, 1998 are
subject to the following waivers from the contingent deferred sales charge
otherwise due upon redemption in addition to the waivers provided for
redemptions of currently issued Class B shares as described in a Prospectus:
(1) total or partial redemptions resulting from a distribution following
retirement in the case of a tax-qualified employer-sponsored retirement; (2)
minimum required distributions made in connection with an IRA, Keogh
Plan or custodial account under Section 403(b) of the Code or other retirement
plan following attainment of age 70 1/2; (3) a one-time reinvestment in Class B
shares of a Fund within 180 days of a prior redemption; (4) redemptions pursuant
to distributions from a tax-qualified employer-sponsored retirement plan, which
is invested in the former GT Global Funds, which are permitted to be made
without penalty pursuant to the Code, other than tax-free rollovers or transfers
of assets, and the proceeds of which are reinvested in the former GT Global
Funds; (5) redemptions made in connection with participant-directed exchanges
between options in an employer-sponsored benefit plan; (6) redemptions made for
the purpose of providing cash to fund a loan to a participant in a tax-qualified
retirement plan; (7) 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; (8)
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 (9) redemptions made by or for the benefit of
certain states, counties or cities, or any instrumentalities, departments or
authorities thereof where such entities are prohibited or limited by applicable
law from paying a sales charge or commission.
CDSCs will not apply to the following:
- 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
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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 of record notifies the
distributor prior to the time of investment that the dealer waives the
payment otherwise payable to him.
Upon the redemption of shares 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.
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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 "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 under the caption "Reductions
in Initial Sales Charges -- Purchases At Net Asset Value."
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 "Exchanging Shares."
Information concerning redemption of the Funds' shares is set forth in the
Prospectuses under the heading "Redeeming 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.
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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
nonresident aliens) or Form W-9 (certifying exempt status) accompanying the
registration information will generally be subject to backup withholding.
Each AIM Fund, and other payers, must, according to IRS regulations, withhold
31% of redemption payments and reportable dividends (whether paid or accrued) in
the case of any shareholder who fails to provide the Fund with a taxpayer
identification number ("TIN") and a certification that he is not subject to
backup withholding.
An investor is subject to backup withholding if:
(1) the investor fails to furnish a correct TIN to the Fund, or
(2) the IRS notifies the Fund that the investor furnished an incorrect
TIN, or
(3) the investor 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 or their tax advisor 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.
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 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.
DIVIDENDS, DISTRIBUTIONS AND TAX MATTERS
REINVESTMENT OF DIVIDENDS AND DISTRIBUTIONS
Income dividends and capital gains distributions are automatically reinvested
in additional shares of the same class of each Fund unless the shareholder has
requested in writing to receive such dividends and distributions in cash or that
they be invested in shares of another AIM Fund, subject to the terms and
conditions set forth herein under the caption "Shareholder Information." If a
shareholder's account does not have any shares in it on a dividend or capital
gains distribution payment date, the dividend or distribution will be paid in
cash whether or not the shareholder has elected to have such dividends or
distributions reinvested.
TAX MATTERS
The following is only a summary of certain additional tax considerations
generally affecting the Funds and their shareholders that are not described in
the Prospectus. No attempt is made to present a detailed explanation of the tax
treatment of each Fund or its shareholders, and the discussion here and in the
Prospectus is not intended as a substitute for careful tax planning.
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.
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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.
REINSTATEMENT PRIVILEGE
For federal income tax purposes, exercise of your reinstatement privilege may
increase the amount of gain or reduce the amount of loss recognized in the
original redemption transaction, because the initial sales charge will not be
taken into account in determining such gain or loss to the extent there has been
a reduction in the initial sales charge payable upon reinstatement.
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 IRS 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 foreign tax
credit limitation and will be able to claim a foreign tax credit without having
to file the 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.
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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
Ordinary dividends and return of capital distributions 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 distribution 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 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 -- 20% (10% for taxpayers in the 15% marginal tax bracket) for gain
recognized on capital assets held for more than 12 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 unless the
completed transaction exception applies. 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.
47
<PAGE> 219
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 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. 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 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.
48
<PAGE> 220
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.
49
<PAGE> 221
MISCELLANEOUS INFORMATION
CHARGES FOR CERTAIN ACCOUNT INFORMATION
The Transfer Agent may impose certain copying charges for requests for copies
of shareholder account statements and other historical account information older
than the current year and the immediately preceding year.
CUSTODIAN
State Street Bank and Trust Company (the "Custodian"), 225 Franklin Street,
Boston, Massachusetts 02110, is custodian of all securities and cash of the
Funds. The Custodian attends to the collection of principal and income, pays and
collects all monies for securities bought and sold by the Funds and performs
certain other ministerial duties. The Custodian 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
A I M Funds Services, Inc., is a wholly owned subsidiary of AIM, acts as
transfer agent and dividend disbursing agent for the Funds. The Transfer Agency
and Service Agreement between the Trust and AFS 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), Inc., 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*........................................... $156,561 $138,072 $139,442
Japan Fund............................................. $ 20,629 $ 26,210 $ 35,119
Mid Cap Fund........................................... $118,894 $142,274 $173,767
Pacific Fund........................................... $ 40,387 $ 99,321 $135,182
</TABLE>
- ---------------
* INVESCO AML became the Funds Sub-Advisor on December 14, 1998. The fees
reflected represent fees received by both Sub-Advisors.
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
50
<PAGE> 222
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 1, 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 LGT Asset Management 401(K) Plan 83.311%
Judy Creel, Arthur Sprague or
Robert Alley, TTEES
11 Greenway Plaza, Suite 100
Houston, TX 77046-1173
LGT Asset Management SERP Plan 7.919%
Judy Creel, Arthur Sprague, or
Robert Alley, TTEES
Attn: Debbie Nettles
11 Greenway Plaza, Suite 100
Houston, TX 77046-1173
Europe Growth Fund -- Class A MLPF&S for the Sole Benefit of Its 13.536%
Customers
Attn: Fund Administration
4800 Deer Lake Drive East, 2nd Floor
Jacksonville, FL 32246-6484
Europe Growth Fund -- Class B MLPF&S for the Sole Benefit of Its 8.231%
Customers
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>
51
<PAGE> 223
<TABLE>
<CAPTION>
PERCENT
PERCENT OWNED OF
OWNED OF RECORD AND
FUND NAME AND ADDRESS OF OWNER RECORD* BENEFICIALLY
- ---- ------------------------- -------- ------------
<S> <C> <C> <C>
Japan Fund -- Advisor Class Prudential Securities Inc. 33.065%
Special Custody Acct. For the
Exclusive Benefit of Customers-PC
Attn: Mutual Funds
1 New York Plaza
New York, NY 10004-1901
FTC & Co. 23.407%
Attn: Datalynx #147
P.O. Box 173736
Denver, CO 80217
Charles Schwab & Co. Inc. 20.429%
Reinvestment Account
101 Montgomery St.
San Francisco, CA 94104
LGT Asset Management 401(K) Plan 9.002%
Judy Creel, Arthur Sprague, or
Robert Alley, TTEES
11 Greenway Plaza, Suite 100
Houston, TX 77046-1173
Japan Growth Fund -- Class A MLPF&S for the Sole Benefit of Its 10.159%
Customers
Attn: Fund Administration
4800 Deer Lake Drive East, 2nd Floor
Jacksonville, FL 32246-6484
Japan Growth Fund -- Class B MLPF&S for the Sole Benefit of Its 16.337%
Customers
Attn: Fund Administration
4800 Deer Lake Drive East, 2nd Floor
Jacksonville, FL 32246-6484
Mid Cap Equity Fund -- Advisor Class LGT Asst Management 401(K) Plan 55.877%
Judy Creel, Arthur Sprague, or
Robert Alley, TTEES
11 Greenway Plaza, Suite 100
Houston, TX 77046-1173
LGT Asset Management SERP Plan 44.066%
Judy Creel, Arthur Sprague, or
Robert Alley, TTEES
Attn: Debbie Nettles
11 Greenway Plaza, Suite 100
Houston, TX 77046-1173
Mid Cap Equity Fund -- Class A MLPF&S for the Sole Benefit of its 10.472%
Customers
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>
52
<PAGE> 224
<TABLE>
<CAPTION>
PERCENT
PERCENT OWNED OF
OWNED OF RECORD AND
FUND NAME AND ADDRESS OF OWNER RECORD* BENEFICIALLY
- ---- ------------------------- -------- ------------
<S> <C> <C> <C>
Mid Cap Equity Fund -- Class B MLPF&S for the Sole Benefit of its 11.147%
Customers
Attn: Fund Administration
4800 Deer Lake Drive East, 2nd Floor
Jacksonville, FL 32246-6484
Pacific Fund -- Advisor Class LGT Asset Management 401(K) Plan 73.875%
Judy Creel, Arthur Sprague, or
Robert Alley, TTEES
11 Greenway Plaza, Suite 100
Houston, TX 77046-1173
LGT Asset Management SERP Plan 21.159%
Judy Creel, Arthur Sprague, or
Robert Alley, TTEES
Attn: Debbie Nettles
11 Greenway Plaza, Suite 100
Houston, TX 77046-1173
Pacific Fund -- Class A MLPF&S for the Sole Benefit of its 7.157%
Customers
Attn: Fund Administration
4800 Deer Lake Drive East, 2nd Floor
Jacksonville, FL 32246-6484
Pacific Fund -- Class B MLPF&S for the Sole Benefit of its 6.151%
Customers
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
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>
53
<PAGE> 225
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......................... (5.99)% (6.18)%
For the five years ended December 31, 1998.................. (2.76)% (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>
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>
54
<PAGE> 226
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.
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>
55
<PAGE> 227
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 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 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.................................................. 276.15% N/A
</TABLE>
The aggregate 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>
The aggregate 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.
56
<PAGE> 228
PERFORMANCE INFORMATION
All advertisements of a Fund will disclose the maximum sales charge (including
deferred sales charges) imposed on purchases of the Fund's shares. If any
advertised performance data does not reflect the maximum sales charge (if any),
such advertisement will disclose that the sales charge has not been deducted in
computing the performance data, and that, if reflected, the maximum sales charge
would reduce the performance quoted. Further information regarding the Fund's
performance is contained in the Fund's annual report to shareholders, which is
available upon request and without charge.
A Fund's total return is calculated in accordance with a standardized formula
for computation of annualized total return. Standardized total return for Class
A shares reflects the deduction of the Fund's maximum front-end sales charge at
the time of purchase. Standardized total return for Class B shares reflects the
deduction of the maximum applicable contingent deferred sales charge on a
redemption of shares held for the period.
A Fund's total return shows its overall change in value, including changes in
share price and assuming all the Fund's dividends and capital gain distributions
are reinvested. A cumulative total return reflects the Fund's performance over a
stated period of time. An average annual total return reflects the hypothetical
compounded annual rate of return that would have produced the same cumulative
total return if the Fund's performance had been constant over the entire period.
BECAUSE AVERAGE ANNUAL RETURNS TEND TO EVEN OUT VARIATIONS IN THE FUND'S RETURN,
INVESTORS SHOULD RECOGNIZE THAT SUCH RETURNS ARE NOT THE SAME AS ACTUAL
YEAR-BY-YEAR RESULTS. To illustrate the components of overall performance, the
Fund may separate its cumulative and average annual returns into income results
and capital gains or losses.
From time to time, AIM or its affiliates may waive all or a portion of their
fees and/or assume certain expenses of any Fund. Voluntary fee waivers or
reductions or commitments to assume expenses may be rescinded at any time
without further notice to investors. During periods of voluntary fee waivers or
reductions or commitments to assume expenses, AIM will retain its ability to be
reimbursed for such fee prior to the end of each fiscal year. Contractual fee
waivers or reductions or reimbursement of expenses set forth in the Fee Table in
a Prospectus may not be terminated or amended to the Funds' detriment during the
period stated in the agreement between AIM and the Fund. Fee waivers or
reductions or commitments to reduce expenses will have the effect of increasing
that Fund's yield and total return.
The performance of each Fund will vary from time to time and past results are
not necessarily indicative of future results. A Fund's performance is a function
of its portfolio management in selecting the type and quality of portfolio
securities and is affected by operating expenses of the Fund and market
conditions. A shareholder's investment in a Fund is not insured or guaranteed.
These factors should be carefully considered by the investor before making an
investment in any Fund.
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
57
<PAGE> 229
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 IBCA (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.
58
<PAGE> 230
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.
59
<PAGE> 231
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.
60
<PAGE> 232
FINANCIAL STATEMENTS
FS
<PAGE> 233
REPORT OF
INDEPENDENT ACCOUNTANTS
- --------------------------------------------------------------------------------
To the Shareholders of AIM Europe Growth Fund (formerly GT Global Europe Growth
Fund) and Board of Trustees of AIM Growth Series (formerly GT Global Growth
Series):
In our opinion, the accompanying statement of assets and liabilities, including
the portfolio of investments, and the related statements of operations and of
changes in net assets and the financial highlights present fairly, in all
material respects, the financial position of the AIM Europe Growth Fund at
December 31, 1998, and the results of its operations, the changes in its net
assets and the financial highlights for the periods indicated, in conformity
with generally accepted accounting principles. These financial statements and
financial highlights (hereafter referred to as "financial statements") are the
responsibility of the Fund's management; our responsibility is to express an
opinion on these financial statements based on our audits. We conducted our
audits of these financial statements in accordance with generally accepted
auditing standards which require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements, assessing the
accounting principles used and significant estimates made by management, and
evaluating the overall financial statement presentation. We believe that our
audits, which included confirmation of securities at December 31, 1998 by
correspondence with the custodian and brokers, provide a reasonable basis for
the opinion expressed above.
/s/ PRICEWATERHOUSECOOPERS LLP
PRICEWATERHOUSECOOPERS LLP
BOSTON, MASSACHUSETTS
FEBRUARY 19, 1999
FS-1
<PAGE> 234
PORTFOLIO OF INVESTMENTS
December 31, 1998
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
VALUE % OF NET
EQUITY INVESTMENTS COUNTRY SHARES (NOTE 1) ASSETS
- ------------------------------------------------------------- -------- ----------- ------------ -------------
<S> <C> <C> <C> <C>
Services (29.2%)
Orange PLC-/- ............................................. UK 1,543,401 $ 17,800,947 3.4
WIRELESS COMMUNICATIONS
TNT Post Group N.V. ....................................... NETH 488,041 15,720,626 3.0
TRANSPORTATION - SHIPPING
Vodafone Group PLC ........................................ UK 898,220 14,539,401 2.8
WIRELESS COMMUNICATIONS
MobilCom AG ............................................... GER 39,499 12,562,692 2.4
TELECOM - OTHER
Mannesmann AG ............................................. GER 99,250 11,375,870 2.2
WIRELESS COMMUNICATIONS
Telecel - Comunicacaoes Pessoais S.A. ..................... PORT 51,227 10,480,844 2.0
WIRELESS COMMUNICATIONS
Swisscom AG-/- ............................................ SWTZ 24,728 10,354,355 2.0
TELEPHONE NETWORKS
Telecom Italia SpA ........................................ ITLY 1,189,452 10,125,492 2.0
TELEPHONE NETWORKS
Telecom Italia Mobile SpA ................................. ITLY 1,359,699 10,039,576 1.9
TELEPHONE NETWORKS
Helsingin Puhelin Oyj (Helsinki Telephone Corp.) .......... FIN 152,600 9,072,461 1.8
TELEPHONE NETWORKS
Corporate Services Group PLC .............................. UK 3,380,455 8,511,236 1.6
BUSINESS & PUBLIC SERVICES
STET Hellas Telecommunications S.A. - ADR-/- {\/} ......... GREC 196,532 6,362,724 1.2
WIRELESS COMMUNICATIONS
EM.TV & Merchandising AG .................................. GER 11,063 6,306,919 1.2
BROADCASTING & PUBLISHING
ASSA Abloy AB "B" ......................................... SWDN 122,267 4,667,829 0.9
BUSINESS & PUBLIC SERVICES
Esat Telecom Group PLC - ADR-/- {\/} ...................... IRE 77,500 2,983,750 0.6
TELEPHONE NETWORKS
Panafon Hellenic Telecom S.A.-/- .......................... GREC 31,411 842,178 0.2
WIRELESS COMMUNICATIONS
------------
151,746,900
------------
Finance (22.3%)
Axa - UAP ................................................. FR 82,862 12,007,911 2.3
INSURANCE - MULTI-LINE
Zurich Allied AG .......................................... SWTZ 13,853 10,259,613 2.0
INSURANCE - MULTI-LINE
ING Groep N.V. ............................................ NETH 166,578 10,155,032 2.0
OTHER FINANCIAL
UBS AG - Registered ....................................... SWTZ 32,455 9,973,791 1.9
BANKS-MONEY CENTER
Unicredito Italiano SpA ................................... ITLY 1,680,892 9,927,505 1.9
OTHER FINANCIAL
Abbey National PLC ........................................ UK 456,001 9,753,246 1.9
BANKS-SUPER REGIONAL
Safra Republic Holdings S.A.{\/} .......................... LUX 156,000 8,502,000 1.6
OTHER FINANCIAL
</TABLE>
The accompanying notes are an integral part of the financial statements.
FS-2
<PAGE> 235
PORTFOLIO OF INVESTMENTS (cont'd)
December 31, 1998
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
VALUE % OF NET
EQUITY INVESTMENTS COUNTRY SHARES (NOTE 1) ASSETS
- ------------------------------------------------------------- -------- ----------- ------------ -------------
<S> <C> <C> <C> <C>
Finance (Continued)
Lloyds TSB Group PLC ...................................... UK 575,860 $ 8,163,394 1.6
BANKS-MONEY CENTER
Nordbanken Holding AB ..................................... SWDN 1,135,143 7,269,389 1.4
BANKS-REGIONAL
ForeningsSparbanken AB .................................... SWDN 255,682 6,612,466 1.3
BANKS-REGIONAL
Mediolanum SpA ............................................ ITLY 875,230 6,493,129 1.3
INSURANCE-LIFE
Skandia Forsakrings AB Free ............................... SWDN 414,494 6,329,711 1.2
INSURANCE - MULTI-LINE
CGU PLC ................................................... UK 327,013 5,105,833 1.0
INSURANCE - MULTI-LINE
BPI-SGPS S.A. ............................................. PORT 141,607 4,809,890 0.9
BANKS-MONEY CENTER
------------
115,362,910
------------
Technology (15.9%)
Dassault Systemes S.A. .................................... FR 247,694 11,641,330 2.3
COMPUTERS & PERIPHERALS
Equant N.V.-/- {V} ........................................ NETH 163,518 11,377,073 2.2
NETWORKING
TT Tieto Oy "B" ........................................... FIN 228,328 10,169,814 2.0
COMPUTERS & PERIPHERALS
Saville Systems PLC - ADR{\/} ............................. IRE 467,000 8,873,000 1.7
TELECOM TECHNOLOGY
SAP AG Non-Voting ......................................... GER 18,153 8,662,545 1.7
COMPUTERS & PERIPHERALS
Misys PLC ................................................. UK 1,120,686 8,176,234 1.6
SOFTWARE
Mobistar S.A.-/- .......................................... BEL 151,688 7,617,328 1.5
TELECOM TECHNOLOGY
Computacenter PLC-/- ...................................... UK 869,978 6,361,592 1.2
COMPUTERS & PERIPHERALS
Sonera Group Oyj-/- ....................................... FIN 194,800 3,440,008 0.7
TELECOM TECHNOLOGY
Energis PLC-/- ............................................ UK 151,300 3,381,941 0.7
TELECOM TECHNOLOGY
JBA Holdings PLC .......................................... UK 515,660 1,585,404 0.3
SOFTWARE
------------
81,286,269
------------
Health Care (11.1%)
Novartis AG ............................................... SWTZ 7,389 14,528,328 2.8
PHARMACEUTICALS
Roche Holding AG .......................................... SWTZ 864 10,545,179 2.0
PHARMACEUTICALS
SmithKline Beecham PLC .................................... UK 732,592 10,269,566 2.0
PHARMACEUTICALS
Glaxo Wellcome PLC ........................................ UK 292,286 10,040,453 1.9
PHARMACEUTICALS
</TABLE>
The accompanying notes are an integral part of the financial statements.
FS-3
<PAGE> 236
PORTFOLIO OF INVESTMENTS (cont'd)
December 31, 1998
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
VALUE % OF NET
EQUITY INVESTMENTS COUNTRY SHARES (NOTE 1) ASSETS
- ------------------------------------------------------------- -------- ----------- ------------ -------------
<S> <C> <C> <C> <C>
Health Care (Continued)
Nycomed Amersham PLC ...................................... UK 1,034,910 $ 7,137,654 1.4
PHARMACEUTICALS
Genset - ADR-/- {\/} ...................................... FR 159,794 4,414,309 0.9
BIOTECHNOLOGY
Primamedic Ltd.-/- ........................................ ASTRI 618,200 685,541 0.1
PHARMACEUTICALS
------------
57,621,030
------------
Capital Goods (7.4%)
Nokia Oyj "A" ............................................. FIN 205,148 24,956,688 4.8
TELECOM EQUIPMENT
Telefonaktiebolaget LM Ericsson "B" ....................... SWDN 495,180 11,769,672 2.3
TELECOM EQUIPMENT
Altran Technologies S.A. .................................. FR 6,074 1,464,845 0.3
MACHINERY & ENGINEERING
------------
38,191,205
------------
Consumer Non-Durables (7.3%)
Nestle S.A. - Registered .................................. SWTZ 4,534 9,872,313 1.9
FOOD
Cadbury Schweppes PLC ..................................... UK 572,834 9,748,405 1.9
FOOD
Tabacalera S.A. "A" ....................................... SPN 265,300 6,685,254 1.3
TOBACCO
Diageo PLC ................................................ UK 499,547 5,607,981 1.1
BEVERAGES - ALCOHOLIC
Raisio Group PLC-/- ....................................... FIN 500,807 5,502,834 1.1
FOOD
------------
37,416,787
------------
Energy (3.3%)
BP Amoco PLC .............................................. UK 471,997 7,036,173 1.4
OIL
Petroleum Geo-Services ASA-/- ............................. NOR 422,448 5,393,758 1.0
ENERGY EQUIPMENT & SERVICES
Coflexip - ADR{\/} ........................................ FR 150,769 4,843,454 0.9
ENERGY EQUIPMENT & SERVICES
------------
17,273,385
------------
Consumer Durables (1.7%)
Porsche AG Preferred-/- ................................... GER 3,741 8,530,845 1.7
AUTOMOBILES
------------ -----
TOTAL EQUITY INVESTMENTS (cost $441,896,026) ................ 507,429,331 98.2
------------ -----
</TABLE>
The accompanying notes are an integral part of the financial statements.
FS-4
<PAGE> 237
PORTFOLIO OF INVESTMENTS (cont'd)
December 31, 1998
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
VALUE % OF NET
REPURCHASE AGREEMENT (NOTE 1) ASSETS
- ------------------------------------------------------------- ------------ -------------
<S> <C> <C> <C> <C>
Dated December 31, 1998, with State Street Bank & Trust
Co., due January 4, 1999, for an effective yield of 4.50%,
collateralized by $10,370,000 U.S. Treasury Bonds, 8.75%
due 5/15/17 (market value of collateral is $14,513,396,
including accrued interest) (cost $14,223,000) ........... $ 14,223,000 2.8
------------ -----
TOTAL INVESTMENTS (cost $456,119,026) * .................... 521,652,331 101.0
Other Assets and Liabilities ................................ (5,000,159) (1.0)
------------ -----
NET ASSETS .................................................. $516,652,172 100.0
------------ -----
------------ -----
</TABLE>
- --------------
-/- Non-income producing security.
{\/} U.S. currency denominated.
{V} Security is denominated in French Francs.
* For Federal income tax purposes, cost is $461,177,839 and
appreciation (depreciation) is as follows:
<TABLE>
<S> <C>
Unrealized appreciation: $ 96,242,133
Unrealized depreciation: (35,767,641)
-------------
Net unrealized appreciation: $ 60,474,492
-------------
-------------
</TABLE>
Abbreviation:
ADR--American Depositary Receipt
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
The Fund's Portfolio of Investments at December 31, 1998, was concentrated in
the following countries:
<TABLE>
<CAPTION>
PERCENTAGE OF NET ASSETS {D}
------------------------------
SHORT-TERM
COUNTRY (COUNTRY CODE/CURRENCY CODE) EQUITY & OTHER TOTAL
- -------------------------------------- ------ ------------- -----
<S> <C> <C> <C>
Austria (ASTRI/ATS) .................. 0.1 0.1
Belgium (BEL/BEF) .................... 1.5 1.5
Finland (FIN/FIM) .................... 10.4 10.4
France (FR/FRF) ...................... 6.7 6.7
Germany (GER/DEM) .................... 9.2 9.2
Greece (GREC/GRD) .................... 1.4 1.4
Ireland (IRE/IEP) .................... 2.3 2.3
Italy (ITLY/ITL) ..................... 7.1 7.1
Luxembourg (LUX/LUF) ................. 1.6 1.6
Netherlands (NETH/NLG) ............... 7.2 7.2
Norway (NOR/NOK) ..................... 1.0 1.0
Portugal (PORT/PTE) .................. 2.9 2.9
Spain (SPN/ESP) ...................... 1.3 1.3
Sweden (SWDN/SEK) .................... 7.1 7.1
Switzerland (SWTZ/CHF) ............... 12.6 12.6
United Kingdom (UK/GBP) .............. 25.8 25.8
United States (US/USD) ............... 1.8 1.8
------ ----- -----
Total ............................... 98.2 1.8 100.0
------ ----- -----
------ ----- -----
</TABLE>
- --------------
{d} Percentages indicated are based on net assets of $516,652,172.
The accompanying notes are an integral part of the financial statements.
FS-5
<PAGE> 238
STATEMENT OF ASSETS
AND LIABILITIES
December 31, 1998
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C>
Assets:
Investments in securities, at value (cost $456,119,026) (Note 1)............................ $521,652,331
U.S. currency.................................................................... $ 891
Foreign currencies (cost $566,885)............................................... 572,681 573,572
---------
Receivable for Fund shares sold............................................................. 6,979,690
Dividends and dividend withholding tax reclaims receivable.................................. 438,913
Miscellaneous and interest receivable....................................................... 5,208
-----------
Total assets.............................................................................. 529,649,714
-----------
Liabilities:
Payable for Fund shares repurchased......................................................... 11,326,788
Payable for securities purchased............................................................ 572,681
Payable for service and distribution expenses (Note 2)...................................... 488,767
Payable for investment management and administration fees (Note 2).......................... 431,502
Payable for transfer agent fees (Note 2).................................................... 104,812
Payable for custodian fees.................................................................. 19,043
Payable for professional fees............................................................... 15,518
Payable for fund accounting fees (Note 2)................................................... 11,935
Payable for printing and postage expenses................................................... 10,316
Payable for registration and filing fees.................................................... 5,169
Payable for Trustees' fees and expenses (Note 2)............................................ 5,106
Other accrued expenses...................................................................... 5,905
-----------
Total liabilities......................................................................... 12,997,542
-----------
Net assets.................................................................................... $516,652,172
-----------
-----------
Class A:
Net asset value and redemption price per share ($415,066,115 DIVIDED BY 26,485,045 shares
outstanding)................................................................................. $ 15.67
-----------
-----------
Maximum offering price per share (100 DIVIDED BY 94.5 of $15.67) *............................ $ 16.58
-----------
-----------
Class B:+
Net asset value and offering price per share ($99,943,136 DIVIDED BY 6,551,353 shares
outstanding)................................................................................. $ 15.26
-----------
-----------
Advisor Class:
Net asset value, offering price per share, and redemption price per share ($1,642,921 DIVIDED
BY 103,868 shares outstanding)............................................................... $ 15.82
-----------
-----------
Net assets consist of:
Paid in capital (Note 4).................................................................... $364,202,132
Accumulated net realized gain on investments and foreign currency transactions.............. 86,905,207
Net unrealized appreciation on translation of assets and liabilities in foreign
currencies................................................................................. 11,528
Net unrealized appreciation of investments.................................................. 65,533,305
-----------
Total -- representing net assets applicable to capital shares outstanding..................... $516,652,172
-----------
-----------
<FN>
- --------------
* On sales of $25,000 or more, the offering price is reduced.
+ Redemption price per share is equal to the net asset value per share less
any applicable contingent deferred sales charge.
</TABLE>
The accompanying notes are an integral part of the financial statements.
FS-6
<PAGE> 239
STATEMENT OF OPERATIONS
Year ended December 31, 1998
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C>
Investment income: (Note 1)
Dividend income (net of foreign withholding tax of $1,801,354)............................ $ 9,216,947
Interest income........................................................................... 782,335
Securities lending income................................................................. 563,149
-----------
Total investment income................................................................. 10,562,431
-----------
Expenses:
Investment management and administration fees (Note 2).................................... 5,643,072
Service and distribution expenses: (Note 2)
Class A.................................................................... $ 1,649,617
Class B.................................................................... 1,052,508 2,702,125
-----------
Interest expense (Note 1)................................................................. 1,549,511
Transfer agent fees....................................................................... 1,215,665
Custodian fees............................................................................ 414,640
Printing and postage expenses............................................................. 390,815
Registration and filing fees.............................................................. 163,150
Fund accounting fees (Note 2)............................................................. 158,561
Professional fees......................................................................... 157,950
Trustees' fees and expenses (Note 2)...................................................... 16,060
Other expenses............................................................................ 32,313
-----------
Total expenses before reductions........................................................ 12,443,862
-----------
Expense reductions (Note 5)........................................................... (30,709)
-----------
Total net expenses...................................................................... 12,413,153
-----------
Net investment loss......................................................................... (1,850,722)
-----------
Net realized and unrealized gain on investments and foreign currencies: (Note
1)
Net realized gain on investments............................................. 118,937,449
Net realized gain on foreign currency transactions........................... 119,748
-----------
Net realized gain during the year....................................................... 119,057,197
Net change in unrealized appreciation on translation of assets and
liabilities in foreign currencies........................................... 217,346
Net change in unrealized appreciation of investments......................... 6,189,915
-----------
Net unrealized appreciation during the year............................................. 6,407,261
-----------
Net realized and unrealized gain on investments and foreign currencies...................... 125,464,458
-----------
Net increase in net assets resulting from operations........................................ $123,613,736
-----------
-----------
</TABLE>
The accompanying notes are an integral part of the financial statements.
FS-7
<PAGE> 240
STATEMENTS OF CHANGES IN NET ASSETS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
YEAR ENDED YEAR ENDED
DECEMBER 31, DECEMBER 31,
1998 1997
-------------- --------------
<S> <C> <C>
Increase (Decrease) in net assets
Operations:
Net investment loss...................................................... $ (1,850,722) $ (2,163,876)
Net realized gain on investments and foreign currency transactions....... 119,057,197 107,144,938
Net change in unrealized appreciation (depreciation) on translation of
assets and liabilities in foreign currencies............................ 217,346 (237,701)
Net change in unrealized appreciation (depreciation) of investments...... 6,189,915 (31,970,694)
-------------- --------------
Net increase in net assets resulting from operations................... 123,613,736 72,772,667
-------------- --------------
Class A:
Distributions to shareholders: (Note 1)
From net realized gain on investments.................................... (28,578,354) (368,261)
Class B:
Distributions to shareholders: (Note 1)
From net realized gain on investments.................................... (6,161,419) (76,445)
Advisor Class:
Distributions to shareholders: (Note 1)
From net realized gain on investments.................................... (89,449) (1,099)
-------------- --------------
Total distributions.................................................... (34,829,222) (445,805)
-------------- --------------
Capital share transactions: (Note 4)
Increase from capital shares sold and reinvested......................... 5,304,793,872 2,415,165,409
Decrease from capital shares repurchased................................. (5,368,180,025) (2,538,538,626)
-------------- --------------
Net decrease from capital share transactions........................... (63,386,153) (123,373,217)
-------------- --------------
Total increase (decrease) in net assets.................................... 25,398,361 (51,046,355)
Net assets:
Beginning of year........................................................ 491,253,811 542,300,166
-------------- --------------
End of year *............................................................ $ 516,652,172 $ 491,253,811
-------------- --------------
-------------- --------------
* Includes undistributed net investment income............................ $ -- $ --
-------------- --------------
-------------- --------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
FS-8
<PAGE> 241
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
Contained below is per share operating performance data for a share outstanding
throughout the period, total investment return, ratios and supplemental data.
This information has been derived from information provided in the financial
statements.
<TABLE>
<CAPTION>
CLASS A
----------------------------------------------------------
YEAR ENDED DECEMBER 31,
----------------------------------------------------------
1998 (d) 1997 (d) 1996 (d) 1995 (d) 1994 (d)
---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C>
Per Share Operating Performance:
Net asset value, beginning of period.... $ 14.32 $ 12.89 $ 10.88 $ 10.03 $ 10.84
---------- ---------- ---------- ---------- ----------
Income from investment operations:
Net investment income (loss).......... (0.03) (0.04) (0.03) 0.04 0.06
Net realized and unrealized gain
(loss) on investments................ 2.35 1.48 2.16 0.95 (0.69)
---------- ---------- ---------- ---------- ----------
Net increase (decrease) from
investment operations.............. 2.32 1.44 2.13 0.99 (0.63)
---------- ---------- ---------- ---------- ----------
Distributions to shareholders:
From net investment income............ -- -- -- (0.10) (0.05)
From net realized gain on
investments.......................... (0.97) (0.01) (0.12) (0.04) --
In excess of net realized gain on
investments.......................... -- -- -- -- (0.13)
---------- ---------- ---------- ---------- ----------
Total distributions................. (0.97) (0.01) (0.12) (0.14) (0.18)
---------- ---------- ---------- ---------- ----------
Net asset value, end of period.......... $ 15.67 $ 14.32 $ 12.89 $ 10.88 $ 10.03
---------- ---------- ---------- ---------- ----------
---------- ---------- ---------- ---------- ----------
Total investment return (c)............. 16.63% 11.20% 19.61% 9.86% (5.8)%
Ratios and supplemental data:
Net assets, end of period (in 000's).... $ 415,066 $ 407,004 $ 453,792 $ 483,375 $ 646,313
Ratio of net investment income (loss) to
average net assets..................... (0.20)% (0.29)% (0.26)% 0.38% 0.61%
Ratio of expenses to average net assets
excluding interest expense:
With expense reductions (Note 5)...... 1.75% 1.75% 1.82% 1.83% 1.73%
Without expense reductions............ 1.75% 1.89% 1.88% 1.89% 1.81%
Ratio of interest expense to average net
assets++............................... 0.27% N/A N/A N/A N/A
Portfolio turnover rate++............... 97% 107% 123% 108% 91%
</TABLE>
- ----------------
(a) Annualized
(b) Not annualized
(c) Total investment return does not include sales charges.
(d) These selected per share data were calculated based upon average
shares outstanding during the period.
+ Commencing June 1, 1995, the Fund began offering Advisor Class shares.
++ Portfolio turnover rates and ratio of interest expense to average net
assets are calculated on the basis of the Fund as a whole without
distinguishing between the classes of shares issued.
N/A Not Applicable.
The accompanying notes are an integral part of the financial statements.
FS-9
<PAGE> 242
FINANCIAL HIGHLIGHTS (cont'd)
- --------------------------------------------------------------------------------
Contained below is per share operating performance data for a share outstanding
throughout the period, total investment return, ratios and supplemental data.
This information has been derived from information provided in the financial
statements.
<TABLE>
<CAPTION>
CLASS B
----------------------------------------------------------
YEAR ENDED DECEMBER 31,
----------------------------------------------------------
1998 (d) 1997 (d) 1996 (d) 1995 (d) 1994 (d)
---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C>
Per Share Operating Performance:
Net asset value, beginning of period.... $ 14.06 $ 12.73 $ 10.81 $ 9.97 $ 10.79
---------- ---------- ---------- ---------- ----------
Income from investment operations:
Net investment income (loss).......... (0.14) (0.13) (0.11) (0.03) --
Net realized and unrealized gain
(loss) on investments................ 2.31 1.47 2.15 0.94 (0.69)
---------- ---------- ---------- ---------- ----------
Net increase (decrease) from
investment operations.............. 2.17 1.34 2.04 0.91 (0.69)
---------- ---------- ---------- ---------- ----------
Distributions to shareholders:
From net investment income............ -- -- -- (0.03) --
From net realized gain on
investments.......................... (0.97) (0.01) (0.12) (0.04) --
In excess of net realized gain on
investments.......................... -- -- -- -- (0.13)
---------- ---------- ---------- ---------- ----------
Total distributions................. (0.97) (0.01) (0.12) (0.07) (0.13)
---------- ---------- ---------- ---------- ----------
Net asset value, end of period.......... $ 15.26 $ 14.06 $ 12.73 $ 10.81 $ 9.97
---------- ---------- ---------- ---------- ----------
---------- ---------- ---------- ---------- ----------
Total investment return (c)............. 15.80% 10.55% 18.79% 9.20% (6.38)%
Ratios and supplemental data:
Net assets, end of period (in 000's).... $ 99,943 $ 81,011 $ 87,092 $ 73,025 $ 81,602
Ratio of net investment income (loss) to
average net assets..................... (0.85)% (0.94)% (0.91)% (0.27)% (0.04)%
Ratio of expenses to average net assets
excluding interest expense:
With expense reductions (Note 5)...... 2.40% 2.40% 2.47% 2.48% 2.38%
Without expense reductions............ 2.40% 2.54% 2.53% 2.54% 2.46%
Ratio of interest expense to average net
assets++............................... 0.27% N/A N/A N/A N/A
Portfolio turnover rate++............... 97% 107% 123% 108% 91%
</TABLE>
- ----------------
(a) Annualized
(b) Not annualized
(c) Total investment return does not include sales charges.
(d) These selected per share data were calculated based upon average
shares outstanding during the period.
+ Commencing June 1, 1995, the Fund began offering Advisor Class shares.
++ Portfolio turnover rates and ratio of interest expense to average net
assets are calculated on the basis of the Fund as a whole without
distinguishing between the classes of shares issued.
N/A Not Applicable.
The accompanying notes are an integral part of the financial statements.
FS-10
<PAGE> 243
FINANCIAL HIGHLIGHTS (cont'd)
- --------------------------------------------------------------------------------
Contained below is per share operating performance data for a share outstanding
throughout the period, total investment return, ratios and supplemental data.
This information has been derived from information provided in the financial
statements.
<TABLE>
<CAPTION>
ADVISOR CLASS+
------------------------------------------------------
YEAR ENDED JUNE 1, 1995
DECEMBER 31, TO
--------------------------------------- DECEMBER 31,
1998 (d) 1997 (d) 1996 (d) 1995 (d)
------------- ----------- ----------- -------------
<S> <C> <C> <C> <C>
Per Share Operating Performance:
Net asset value, beginning of period.... $ 14.41 $ 12.92 $ 10.85 $ 10.24
------------- ----------- ----------- -------------
Income from investment operations:
Net investment income (loss).......... 0.02 0.01 0.01 0.08
Net realized and unrealized gain
(loss) on investments................ 2.36 1.49 2.18 0.71
------------- ----------- ----------- -------------
Net increase (decrease) from
investment operations.............. 2.38 1.50 2.19 0.79
------------- ----------- ----------- -------------
Distributions to shareholders:
From net investment income............ -- -- -- (0.14)
From net realized gain on
investments.......................... (0.97) (0.01) (0.12) (0.04)
In excess of net realized gain on
investments.......................... -- -- -- --
------------- ----------- ----------- -------------
Total distributions................. (0.97) (0.01) (0.12) (0.18)
------------- ----------- ----------- -------------
Net asset value, end of period.......... $ 15.82 $ 14.41 $ 12.92 $ 10.85
------------- ----------- ----------- -------------
------------- ----------- ----------- -------------
Total investment return (c)............. 16.88% 11.64% 20.21% 7.75%(b)
Ratios and supplemental data:
Net assets, end of period (in 000's).... $ 1,643 $ 3,239 $ 1,416 $ 718
Ratio of net investment income (loss) to
average net assets..................... 0.15% 0.06% 0.09% 0.73%(a)
Ratio of expenses to average net assets
excluding interest expense:
With expense reductions (Note 5)...... 1.40% 1.40% 1.47% 1.48%(a)
Without expense reductions............ 1.40% 1.54% 1.53% 1.54%(a)
Ratio of interest expense to average net
assets++............................... 0.27% N/A N/A N/A
Portfolio turnover rate++............... 97% 107% 123% 108%(a)
</TABLE>
- ----------------
(a) Annualized
(b) Not annualized
(c) Total investment return does not include sales charges.
(d) These selected per share data were calculated based upon average
shares outstanding during the period.
+ Commencing June 1, 1995, the Fund began offering Advisor Class shares.
++ Portfolio turnover rates and ratio of interest expense to average net
assets are calculated on the basis of the Fund as a whole without
distinguishing between the classes of shares issued.
N/A Not Applicable.
The accompanying notes are an integral part of the financial statements.
FS-11
<PAGE> 244
NOTES TO
FINANCIAL STATEMENTS
December 31, 1998
- --------------------------------------------------------------------------------
1. SIGNIFICANT ACCOUNTING POLICIES (SEE ALSO NOTE 2)
AIM Europe Growth Fund (the "Fund") formerly GT Global Europe Growth Fund, is a
separate series of AIM Growth Series (the "Trust") formerly GT Global Growth
Series. The Trust is organized as a Delaware business trust and is registered
under the Investment Company Act of 1940, as amended ("1940 Act"), as a
diversified, open-end management investment company. The Trust has eight series
of shares in operation, each series corresponding to a distinct portfolio of
investments.
The Fund offers Class A, Class B, and Advisor Class shares, each of which has
equal rights as to assets and voting privileges. Class A and Class B each has
exclusive voting rights with respect to its distribution plan. Investment
income, realized and unrealized capital gains and losses, and the common
expenses of the Fund are allocated on a pro rata basis to each class based on
the relative net assets of each class to the total net assets of the Fund. Each
class of shares differs in its respective distribution expenses, and may differ
in its transfer agent, registration, and certain other class-specific fees and
expenses.
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statements and
the reported amounts of income and expenses during the reporting period. Actual
results could differ from those estimates. The following is a summary of
significant accounting policies in conformity with generally accepted accounting
principles consistently followed by the Fund in the preparation of the financial
statements.
(A) PORTFOLIO VALUATION
The Fund calculates the net asset value of Fund shares and completes orders to
purchase, exchange or repurchase Fund shares on each business day, with the
exception of those days on which the New York Stock Exchange is closed.
Equity securities are valued at the last sale price on the exchange on which
such securities are traded or on the principal over-the-counter market in which
such securities are traded, as of the close of business on the day the
securities are being valued, or, lacking any sales, at the last available bid
price. In cases where securities are traded on more than one exchange, the
securities are valued on the exchange determined by A I M Advisors, Inc. (the
"Manager") to be the primary market.
Fixed income investments are valued at the mean of representative quoted bid and
asked prices for such investments or, if such prices are not available, at
prices for investments of comparative maturity, quality and type; however, when
the Manager deems it appropriate, prices obtained for the day of valuation from
a bond pricing service will be used. Short-term investments with a maturity of
60 days or less are valued to amortized cost, adjusted for foreign exchange
translation and market fluctuation, if any.
Investments for which market quotations are not readily available (including
restricted securities which are subject to limitations on their sale) are valued
at fair value as determined in good faith by or under the direction of the
Trust's Board of Trustees.
Portfolio securities which are primarily traded on foreign exchanges are
generally valued at the preceding closing values of such securities on their
respective exchanges, and those values are then translated into U.S. dollars at
the current exchange rates, except that when an occurrence subsequent to the
time a value was so established is likely to have materially changed such value,
then the fair value of those securities will be determined by consideration of
other factors by or under the direction of the Trust's Board of Trustees.
(B) FOREIGN CURRENCY TRANSLATION
The accounting records of the Fund are maintained in U.S. dollars. The market
values of foreign securities, currency holdings, other assets and liabilities
are recorded in the books and records of the Fund after translation to U.S.
dollars based on the exchange rates on that day. The cost of each security is
determined using historical exchange rates. Income and withholding taxes are
translated at prevailing exchange rates when earned or incurred.
The Fund does not isolate that portion of the results of operations resulting
from changes in foreign exchange rates on investments from the fluctuation
arising from changes in market prices of securities held. Such fluctuations are
included with the net realized and unrealized gain or loss from investments.
Reported net realized foreign exchange gains and losses arise from sales and
maturities of short-term securities, forward foreign currency contracts, sales
of foreign currencies, currency gains or losses realized between the trade and
settlement dates on securities transactions, and the differences between the
amounts of dividends, interest, and foreign withholding taxes recorded on the
Fund's books and the U.S. dollar equivalent of the amounts actually received or
paid. Net unrealized foreign exchange gains or losses arise from changes in the
value of assets and liabilities other than investments in securities at period
end, resulting from changes in exchange rates.
(C) REPURCHASE AGREEMENTS
With respect to repurchase agreements entered into by the Fund, it is the Fund's
policy to always receive, as collateral, U.S. government securities or other
high quality debt securities of which the value, including accrued interest, is
at least equal to the amount to be repaid to the Fund under each agreement at
its maturity.
(D) FORWARD FOREIGN CURRENCY CONTRACTS
A forward foreign currency contract ("Forward Contract") is an agreement between
two parties to buy and sell a currency at a set price on a future date. The
market value of the Forward Contract fluctuates with changes in currency
exchange rates. The Forward Contract is marked-to-market daily and the change in
market value is recorded by the Fund as an unrealized gain or loss. When the
Forward Contract is closed, the Fund records a realized gain or loss
FS-12
<PAGE> 245
equal to the difference between the value at the time it was opened and the
value at the time it was closed. The Fund could be exposed to risk if a counter
party is unable to meet the terms of a contract or if the value of the currency
changes unfavorably. The Fund may enter into Forward Contracts in connection
with planned purchases or sales of securities, or to hedge against adverse
fluctuations in exchange rates between currencies.
(E) OPTION ACCOUNTING PRINCIPLES
When the Fund writes a call or put option, an amount equal to the premium
received is included in the Fund's "Statement of Assets and Liabilities" as an
asset and an equivalent liability. The amount of the liability is subsequently
market-to-market to reflect the current market value of the option. The current
market value of an option listed on a traded exchange is valued at its last bid
price, or, in the case of on over-the-counter option, is valued at the average
of the last bid prices obtained from brokers, unless a quotation from only one
broker is available, in which case only that broker's price will be used. If an
option expires on its stipulated expiration date or if the Fund enters into a
closing purchase transaction, a gain or loss is realized without regard to any
unrealized gain or loss on the underlying security, and the liability related to
such option is extinguished. If a written call option is exercised, a gain or
loss is realized from the sale of the underlying security and the proceeds of
the sale are increased by the premium originally received. If a written put
option is exercised, the cost of the underlying security purchased would be
decreased by the premium originally received. The Fund can write options only on
a covered basis, which, for a call, requires that the Fund hold the underlying
security, and, for a put, requires the Fund to set aside cash, U.S. government
securities or other liquid securities in an amount not less than the exercise
price or otherwise provide adequate cover at all times while the put option is
outstanding. The Fund may use options to manage its exposure to the stock market
and to fluctuations in currency values or interest rates.
The premium paid by the Fund for the purchase of a call or put option is
included in the Fund's "Statement of Assets and Liabilities" as an investment
and subsequently "marked-to-market" to reflect the current market value of the
option. If an option which the Fund has purchased expires on the stipulated
expiration date, the Fund realizes a loss in the amount of the cost of the
option. If the Fund enters into a closing sale transaction, the Fund realizes a
gain or loss, depending on whether proceeds from the closing sale transaction
are greater or less than the cost of the option. If the Fund exercises a call
option, the cost of the securities acquired by exercising the call is increased
by the premium paid to buy the call. If the Fund exercises a put option, it
realizes a gain or loss from the sale of the underlying security, and the
proceeds from such sale are decreased by the premium originally paid.
The risk associated with purchasing options is limited to the premium originally
paid. The risk in writing a call option is that the Fund may forego the
opportunity of profit if the market value of the underlying security or index
increases and the option is exercised. The risk in writing a put option is that
the Fund may incur a loss if the market value of the underlying security or
index decreases and the option is exercised. In addition, there is the risk the
Fund may not be able to enter into a closing transaction because of an illiquid
secondary market.
(F) FUTURES CONTRACTS
A futures contract is an agreement between two parties to buy and sell a
security at a set price on a future date. Upon entering into such a contract the
Fund is required to pledge to the broker an amount of cash or securities equal
to the minimum "initial margin" requirements of the exchange on which the
contract is traded. Pursuant to the contract, the Fund agrees to receive from or
pay to the broker an amount of cash equal to the daily fluctuation in value of
the contract. Such receipts or payments are known as "variation margin" and are
recorded by the Fund as unrealized gains or losses. When the contract is closed,
the Fund records a realized gain or loss equal to the difference between the
value of the contract at the time it was opened and the value at the time it was
closed. The potential risk to the Fund is that the change in value of the
underlying securities may not correlate to the change in value of the contracts.
The Fund may use futures contracts to manage its exposure to the stock market
and to fluctuations in currency values or interest rates.
(G) SECURITY TRANSACTIONS AND RELATED INVESTMENT INCOME
Security transactions are accounted for on the trade date (date the order to buy
or sell is executed). The cost of securities sold is determined on a first-in,
first-out basis, unless otherwise specified. Dividends are recorded on the
ex-dividend date. Interest income is recorded on the accrual basis. Where a high
level of uncertainty exists as to its collection, income is recorded net of all
withholding tax with any rebate recorded when received. The Fund may trade
securities on other then normal settlement terms. This may increase the risk if
the other party to the transaction fails to deliver and causes the Fund to
subsequently invest at less advantageous prices.
(H) PORTFOLIO SECURITIES LOANED
At December 31, 1998, stocks with an aggregate value of approximately
$16,294,685 were on loan to brokers. The loans were secured by cash collateral
of $17,024,659, received by the Fund. For the year ended December 31, 1998, the
Fund received securities lending fees of $563,149.
For international securities, cash collateral is received by the Fund against
loaned securities in an amount at least equal to 105% of the market value of the
loaned securities at the inception of each loan. This collateral must be
maintained at not less than 103% of the market value of the loaned securities
during the period of the loan. For domestic securities, cash collateral is
received by the Fund against loaned securities in an amount at least equal to
102% of the market value of the loaned securities at the inception of each loan.
This collateral must be maintained at not less than 100% of the market value of
the loaned securities during the period of the loan. The cash collateral is
invested in a securities lending trust which consists of a portfolio of high
quality short duration securities whose average effective duration is restricted
to 120 days or less.
(I) TAXES
It is the policy of the Fund to meet the requirements for qualification as a
"regulated investment company" under the Internal Revenue Code of 1986, as
amended ("Code"). It is also the intention of the
FS-13
<PAGE> 246
Fund to make distributions sufficient to avoid imposition of any excise tax
under Section 4982 of the Code. Therefore, no provision has been made for
Federal taxes on income, capital gains, or unrealized appreciation of securities
held, or excise tax on income and capital gains.
(J) DISTRIBUTION TO SHAREHOLDERS
Distribution to shareholders are recorded by the Fund on the ex-date. Income and
capital gain distributions are determined in accordance with Federal income tax
regulations which may differ from generally accepted accounting principles.
These differences are primarily due to differing treatments of income and gains
on various investment securities held by the Fund and timing differences.
(K) FOREIGN SECURITIES
There are certain additional considerations and risks associated with investing
in foreign securities and currency transactions that are not inherent in
investments of domestic origin. The Fund's investments in emerging market
countries may involve greater risks than investments in more developed markets,
and the prices of such investments may be volatile. These risks of investing in
foreign and emerging markets may include foreign currency exchange rate
fluctuations, perceived credit risk, adverse political and economic developments
and possible adverse foreign government intervention.
(L) RESTRICTED SECURITIES
The Fund is permitted to invest in privately placed restricted securities. These
securities may be resold in transactions exempt from registration or to the
public if the securities are registered. Disposal of these securities may
involve time-consuming negotiations and expense, and prompt sale at an
acceptable price may be difficult.
(M) INDEXED SECURITIES
The Fund may invest in indexed securities whose value is linked either directly
or indirectly to changes in foreign currencies, interest rates, equities,
indices, or other reference instruments. Indexed securities may be more volatile
than the reference instrument itself, but any loss is limited to the amount of
the original investment.
(N) LINE OF CREDIT
The Fund, along with certain other funds advised and/or administered by the
Manager, has a line of credit with BankBoston and State Street Bank and Trust
Company. The arrangements with the banks allow the Fund and certain other funds
to borrow, on a first come, first served basis, an aggregate maximum amount of
$250,000,000. The Fund is limited to borrowing up to 33 1/3% of the value of the
Fund's total assets. On December 31, 1998, the Fund had no outstanding loans.
For the year ended December 31, 1998, the weighted average outstanding daily
balance of bank loans (based on the number of days the loans were outstanding)
was $40,237,214 with a weighted average interest rate of 6.26%. Interest expense
for the year ended December 31, 1998 was $1,539,318. Other interest expense
amounted to $10,193.
2. RELATED PARTIES
A I M Advisors, Inc. (the "Manager"), an indirect wholly-owned subsidiary of
AMVESCAP PLC, is the Fund's investment manager and administrator, and as of
December 14, 1998, sub-advisory and sub-administration responsibility for the
Fund was transferred from INVESCO (NY), Inc.,(formerly, Chancellor LGT Asset
Management, Inc.) to INVESCO Asset Management Ltd., both indirect wholly-owned
subsidiaries of AMVESCAP PLC. As of the close of business on May 29, 1998,
Liechtenstein Global Trust AG ("LGT"), the former indirect parent organization
of Chancellor LGT Asset Management, Inc. ("Chancellor LGT"), consummated a
purchase agreement with AMVESCAP PLC pursuant to which AMVESCAP PLC acquired
LGT's Asset Management Division, which included Chancellor LGT and certain other
affiliates. As a result of this transaction, Chancellor LGT was renamed INVESCO
(NY), Inc., and is now an indirect wholly-owned subsidiary of AMVESCAP PLC.
Also, as of the close of business on May 29, 1998, A I M Distributors, Inc.
("AIM Distributors"), a wholly-owned subsidiary of the Manager, became the
Fund's distributor, and the Trust was reorganized from a Massachusetts business
trust into a Delaware business trust. Finally, A I M Fund Services, Inc.
("AFS"), an affiliate of the Manager and AIM Distributors, replaced GT Global
Investor Services, Inc. ("GT Services") as transfer agent of the Fund as of the
close of business on September 4, 1998.
The Fund pays investment management and administration fees to the Manager at
the following annualized rates: 0.975% on the first $500 million of the average
daily net assets of the Fund; 0.95% on the next $500 million; 0.925% on the next
$500 million and 0.90% on amounts thereafter. These fees are computed daily and
paid monthly.
AIM Distributors serves as the Fund's distributor. For the period ended May 29,
1998, GT Global, Inc. ("GT Global"), an affiliate of the investment sub-advisor,
served as the Fund's distributor.
Class A shares are subject to initial sales charges imposed at the time of
purchase, in accordance with the schedule included in the Fund's current
prospectus. AIM Distributors collects the sales charges imposed on sales of
Class A shares, and reallows a portion of such charges to dealers through which
the sales are made. For the year ended December 31, 1998, AIM Distributors and
GT Global retained $55,381 and $789, respectively, of such sales charges.
Purchases of Class A shares exceeding $1,000,000 may be subject to a contingent
deferred sales charge ("CDSC") upon redemption, in accordance with the Fund's
current prospectus. AIM Distributors and GT Global collected such CDSCs in the
amount of $29,478 and $0, respectively, for the year ended December 31, 1998.
AIM Distributors also makes ongoing shareholder servicing and trail commission
payments to dealers whose clients hold Class A shares.
Class B shares are not subject to initial sales charges. When Class B shares are
sold, AIM Distributors from its own resources pays commissions to dealers
through which the sales are made. Certain redemptions of Class B shares made
within six years of purchase are subject to CDSCs, in accordance with the Fund's
current prospectus. During the year ended December 31, 1998, AIM Distributors
and GT Global collected such CDSCs in the amount of $199,555 and $178,096,
respectively. In addition, AIM Distributors makes ongoing shareholder servicing
and trail commission payments to dealers whose clients hold Class B shares.
FS-14
<PAGE> 247
For the period ended May 29, 1998, pursuant to the then effective separate
distribution plans adopted under the 1940 Act Rule 12b-1 by the Trust's Board of
Trustees with respect to the Fund's Class A shares ("Class A Plan") and Class B
shares ("Class B Plan"), the Fund reimbursed GT Global for a portion of its
shareholder servicing and distribution expenses. Under the Class A Plan, the
Fund was permitted to pay GT Global a service fee at the annualized rate of up
to 0.25% of the average daily net assets of the Fund's Class A shares for GT
Global's expenditures incurred in servicing and maintaining shareholder
accounts, and was permitted to pay GT Global a distribution fee at the
annualized rate of up to 0.35% of the average daily net assets of the Fund's
Class A shares, less any amounts paid by the Fund as the aforementioned service
fee, for its expenditures incurred in providing services as distributor. All
expenses for which GT Global was reimbursed under the Class A Plan would have
been incurred within one year of such reimbursement.
For the period ended May 29, 1998, pursuant to the Class B Plan, the Fund was
permitted to pay GT Global a service fee at the annualized rate of up to 0.25%
of the average daily net assets of the Fund's Class B shares for its
expenditures incurred in servicing and maintaining shareholder accounts, and was
permitted to pay GT Global a distribution fee at the annualized rate of up to
0.75% of the average daily net assets of the Fund's Class B shares for GT
Global's expenditures incurred in providing services as distributor. Expenses
incurred under the Class B Plan in excess of 1.00% annually were permitted to be
carried forward for reimbursement in subsequent years as long as that Plan
continued in effect.
Effective as of the close of business May 29, 1998, pursuant to Rule 12b-1 under
the 1940 Act, the Trust's Board of Trustees adopted a Master Distribution Plan
applicable to the Fund's Class A shares ("Class A Plan") and Class B shares
("Class B Plan"), pursuant to which a Fund compensates AIM Distributors for the
purpose of financing any activity that is intended to result in the sale of
Class A or Class B shares of the Fund. Under the Class A Plan, the Fund
compensates AIM Distributors at the annualized rate of 0.35% of the average
daily net assets of the Fund's Class A shares. Under the Class B Plan, the Fund
compensates AIM Distributors at an annualized rate of 1.00% of the average daily
net assets of the Fund's Class B shares. Of these amounts, the Fund may pay a
service fee of 0.25% of the average daily net assets of the Class A or Class B
shares to selected dealers and financial institutions who furnish continuing
personal shareholder services to their customers who purchase and own the
appropriate class of shares of the Fund. Any amounts not paid as a service fee
under the Plans would constitute an asset-based sales charge.
The Manager and AIM Distributors have voluntarily undertaken to limit the Fund's
expenses (exclusive of brokerage commissions, taxes,interest, and extraordinary
items) to the maximum annual level of 2.00%, 2.65%, and 1.65% of the average
daily net assets of the Fund's Class A, Class B, and Advisor Class shares,
respectively. If necessary, this limitation will be effected by waivers by the
Manager of investment management and administration fees, waivers by AIM
Distributors of payments under the Class A Plan and/or Class B Plan and/or
reimbursements by the Manager or AIM Distributors of portions of the Fund's
other operating expenses.
Effective as of the close of business September 4, 1998, the Fund, pursuant to a
transfer agency and service agreement, has agreed to pay AFS an annualized fee
of $24.85 per shareholder accounts that are open during any monthly period (this
fee includes all out-of-pocket expenses), and an annualized fee of $0.70 per
shareholder account that is closed during any monthly period. Both fees shall be
billed by AFS monthly in arrears on a prorated basis of 1/12 of the annualized
fee for all such accounts.
For the period January 1, 1998 to September 4, 1998, GT Services, an affiliate
of the Manager and AIM Distributors, was the transfer agent of the Fund. For
performing shareholder servicing, reporting, and general transfer agent
services, GT Services received an annual maintenance fee of $17.50 per account,
a new account fee of $4.00 per account, a per transaction fee of $1.75 for all
transactions other than exchanges and a per exchange fee of $2.25. GT Services
also was reimbursed by the Fund for its out-of-pocket expenses for such items as
postage, forms, telephone charges, stationery and office supplies.
The Manager is the pricing and accounting agent for the Fund. The monthly fee
for these services to the Manager is a percentage, not to exceed 0.03% annually,
of the Fund's average daily net assets. The annual fee rate is derived based on
the aggregate net assets of the funds which comprise the following investment
companies: AIM Growth Series, AIM Investment Funds, AIM Investment Portfolios,
AIM Series Trust, G.T. Global Variable Investment Series and G.T. Global
Variable Investment Trust. The fee is calculated at the rate of 0.03% to the
first $5 billion of assets and 0.02% to the assets in excess of $5 billion. An
amount is allocated to and paid by each such fund based on its relative average
daily net assets.
The Trust pays each of its Trustees who is not an employee, officer or director
of the Manager, AIM Distributors or GT Services $5,000 per year plus $300 for
each meeting of the board or any committee thereof attended by the Trustee.
3. PURCHASES AND SALES OF SECURITIES
For the year ended December 31, 1998, purchases and sales of investment
securities by the Fund, other than U.S. government obligations and short-term
investments, aggregated $551,235,800 and $637,985,802, respectively. There were
no purchases or sales of U.S. government obligations by the Fund during the
period.
FS-15
<PAGE> 248
4. CAPITAL SHARES
At December 31, 1998, there were an unlimited number of shares of beneficial
interest authorized, at no par value. Transactions in capital shares of the Fund
were as follows:
CAPITAL SHARE TRANSACTIONS
<TABLE>
<CAPTION>
YEAR ENDED YEAR ENDED
DECEMBER 31, 1998 DECEMBER 31, 1997
--------------------------------- ---------------------------------
CLASS A SHARES AMOUNT SHARES AMOUNT
- ------------------------------ --------------- --------------- --------------- ---------------
<S> <C> <C> <C> <C>
Shares sold................... 284,179,353 $ 4,678,178,730 146,863,882 $ 2,008,141,712
Shares issued in connection
with reinvestment of
distributions............... 1,565,424 23,371,501 20,229 286,488
--------------- --------------- --------------- ---------------
285,744,777 4,701,550,231 146,884,111 2,008,428,200
Shares repurchased............ (287,680,343) (4,771,589,437) (153,681,853) (2,115,903,158)
--------------- --------------- --------------- ---------------
Net decrease.................. (1,935,566) $ (70,039,206) (6,797,742) $ (107,474,958)
--------------- --------------- --------------- ---------------
--------------- --------------- --------------- ---------------
<CAPTION>
CLASS B
- ------------------------------
<S> <C> <C> <C> <C>
Shares sold................... 29,683,015 $ 488,430,227 25,162,463 $ 340,605,118
Shares issued in connection
with reinvestment of
distributions............... 370,423 5,382,231 4,768 66,175
--------------- --------------- --------------- ---------------
30,053,438 493,812,458 25,167,231 340,671,293
Shares repurchased............ (29,265,734) (483,839,015) (26,243,592) (357,657,223)
--------------- --------------- --------------- ---------------
Net increase (decrease)....... 787,704 $ 9,973,443 (1,076,361) $ (16,985,930)
--------------- --------------- --------------- ---------------
--------------- --------------- --------------- ---------------
<CAPTION>
ADVISOR CLASS
- ------------------------------
<S> <C> <C> <C> <C>
Shares sold................... 6,484,352 $ 109,346,851 4,798,844 $ 66,064,822
Shares issued in connection
with reinvestment of
distributions............... 5,605 84,332 77 1,094
--------------- --------------- --------------- ---------------
6,489,957 109,431,183 4,798,921 66,065,916
Shares repurchased............ (6,610,936) (112,751,573) (4,683,709) (64,978,245)
--------------- --------------- --------------- ---------------
Net increase (decrease)....... (120,979) $ (3,320,390) 115,212 $ 1,087,671
--------------- --------------- --------------- ---------------
--------------- --------------- --------------- ---------------
</TABLE>
5. EXPENSE REDUCTIONS
The Manager has directed certain portfolio trades to brokers who then paid a
portion of the Fund's expenses. For the year ended December 31, 1998, the Fund's
expenses were reduced by $30,709 under these arrangements.
- --------------
FEDERAL TAX INFORMATION (UNAUDITED):
For the fiscal year ended December 31, 1998, the amount of income received by
the Fund from sources within foreign countries and possessions of the United
States was $.3013 per share (representing a total of $10,719,966). The amount of
taxes paid by the Fund to such countries for the fiscal year ended December 31,
1998 was $.0505 per share (representing a total of $1,795,341). The following
table provides a breakdown by country of ordinary income dividends and foreign
taxes paid by the Fund during the fiscal year ended December 31, 1998:
<TABLE>
<CAPTION>
COUNTRY GROSS INCOME % FOREIGN TAX PAID %
- ------------------------------ -------------- ------------------
<S> <C> <C>
Finland....................... 0.76 2.65
France........................ 2.94 22.91
Germany....................... 0.49 1.15
Italy......................... 1.31 4.56
Netherlands................... 2.86 8.44
Portugal...................... 0.47 1.90
Sweden........................ 3.40 11.85
Switzerland................... 3.03 20.14
United Kingdom................ 10.33 25.92
------- -------
25.59 99.52
Nonqualifying................. 0.02 0.48
United States................. 74.39 --
------- -------
100.00% 100.00%
------- -------
------- -------
</TABLE>
Pursuant to Section 852 of the Internal Revenue Code, the Fund designates
$59,633,841 as a capital gain dividend for the fiscal year ended December 31,
1998.
FS-16
<PAGE> 249
REPORT OF
INDEPENDENT ACCOUNTANTS
- --------------------------------------------------------------------------------
To the Shareholders of AIM Japan Growth Fund (formerly GT Global Japan Growth
Fund) and Board of Trustees of AIM Growth Series (formerly GT Global Growth
Series):
In our opinion, the accompanying statement of assets and liabilities, including
the portfolio of investments, and the related statements of operations and of
changes in net assets and the financial highlights present fairly, in all
material respects, the financial position of the AIM Japan Growth Fund at
December 31, 1998, and the results of its operations, the changes in its net
assets and the financial highlights for the periods indicated, in conformity
with generally accepted accounting principles. These financial statements and
financial highlights (hereafter referred to as 'financial statements') are the
responsibility of the Fund's management; our responsibility is to express an
opinion on these financial statements based on our audits. We conducted our
audits of these financial statements in accordance with generally accepted
auditing standards which require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements, assessing the
accounting principles used and significant estimates made by management, and
evaluating the overall financial statement presentation. We believe that our
audits, which included confirmation of securities at December 31, 1998 by
correspondence with the custodian and brokers, provide a reasonable basis for
the opinion expressed above.
/s/ PRICEWATERHOUSECOOPERS LLP
PRICEWATERHOUSECOOPERS LLP
BOSTON, MASSACHUSETTS
FEBRUARY 19, 1999
FS-17
<PAGE> 250
PORTFOLIO OF INVESTMENTS
December 31, 1998
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
VALUE % OF NET
EQUITY INVESTMENTS SHARES (NOTE 1) ASSETS
- ----------------------------------------------------------------------- ----------- ----------- -------------
<S> <C> <C> <C>
Services (24.9%)
Ito-Yokado Co., Ltd.{z} ............................................. 55,000 $ 3,845,813 6.2
RETAILERS-OTHER
NTT Mobile Communications{z} ........................................ 75 3,086,830 4.9
WIRELESS COMMUNICATIONS
Yoshinoya D&C Co., Ltd. ............................................. 160 1,741,901 2.8
RESTAURANTS
Secom Co., Ltd. ..................................................... 18,000 1,491,237 2.4
CONSUMER SERVICES
Fast Retailing Co., Ltd. ............................................ 80,000 1,414,764 2.3
RETAILERS-APPAREL
Fuji Photo Film Co., Ltd. ........................................... 35,000 1,301,115 2.1
CONSUMER SERVICES
Ryohin Keikaku Co., Ltd. ............................................ 6,300 839,219 1.3
RETAILERS-APPAREL
Nippon Telegraph & Telephone Corp. .................................. 101 779,536 1.2
TELEPHONE NETWORKS
Tsutsumi Jewelry Co., Ltd. .......................................... 41,800 665,959 1.1
RETAILERS-OTHER
Southland Corp.{l} -/- {\/} ......................................... 185,600 353,800 0.6
RETAILERS-OTHER
-----------
15,520,174
-----------
Technology (16.0%)
Murata Manufacturing Co., Ltd. ...................................... 52,000 2,158,612 3.5
INSTRUMENTATION & TEST
Matsushita-Kotobuki Electronics Ltd. ................................ 95,000 2,051,691 3.3
COMPUTERS & PERIPHERALS
Fujitsu Ltd. ........................................................ 134,000 1,785,006 2.9
COMPUTERS & PERIPHERALS
Rohm Co., Ltd. ...................................................... 16,000 1,457,249 2.3
SEMICONDUCTORS
TDK Corp. ........................................................... 15,000 1,371,482 2.2
COMPUTERS & PERIPHERALS
Nihon Unisys Ltd. ................................................... 80,000 1,125,863 1.8
COMPUTERS & PERIPHERALS
-----------
9,949,903
-----------
Consumer Durables (14.4%)
Sony Corp. .......................................................... 35,200 2,564,135 4.1
CONSUMER ELECTRONICS
Bridgestone Corp.{z} ................................................ 100,000 2,270,313 3.6
AUTO PARTS
Citizen Watch Co., Ltd. ............................................. 300,000 1,805,629 2.9
CONSUMER ELECTRONICS
Sekisui Chemical Co., Ltd. .......................................... 250,000 1,681,714 2.7
HOUSING
Toyota Motor Corp. .................................................. 25,000 679,324 1.1
AUTOMOBILES
-----------
9,001,115
-----------
</TABLE>
The accompanying notes are an integral part of the financial statements.
FS-18
<PAGE> 251
PORTFOLIO OF INVESTMENTS (cont'd)
December 31, 1998
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
VALUE % OF NET
EQUITY INVESTMENTS SHARES (NOTE 1) ASSETS
- ----------------------------------------------------------------------- ----------- ----------- -------------
<S> <C> <C> <C>
Health Care (11.9%)
Takeda Chemical Industries{z} ....................................... 105,000 $ 4,042,751 6.5
PHARMACEUTICALS
Yamanouchi Pharmaceutical Co., Ltd. ................................. 76,000 2,448,575 3.9
PHARMACEUTICALS
Taisho Pharmaceutical Co., Ltd. ..................................... 35,000 963,445 1.5
PHARMACEUTICALS
-----------
7,454,771
-----------
Finance (10.0%)
Nichiei Co., Ltd.{z} ................................................ 32,000 2,549,124 4.1
OTHER FINANCIAL
Jafco Co., Ltd. ..................................................... 45,000 1,218,800 2.0
INVESTMENT MANAGEMENT
Acom Co., Ltd. ...................................................... 14,000 899,628 1.4
CONSUMER FINANCE
Diamond Lease Co., Ltd. ............................................. 119,000 853,160 1.4
OTHER FINANCIAL
Takefuji Corp. ...................................................... 9,300 679,102 1.1
CONSUMER FINANCE
-----------
6,199,814
-----------
Consumer Non-Durables (8.6%)
Wacoal Corp. ........................................................ 118,000 1,517,561 2.4
TEXTILES & APPAREL
Asahi Breweries Ltd.{z} ............................................. 100,000 1,473,712 2.4
BEVERAGES - ALCOHOLIC
Nintendo Corp., Ltd. ................................................ 13,000 1,254,204 2.0
TOYS
Paris Miki, Inc. .................................................... 50,000 1,150,647 1.8
OTHER CONSUMER GOODS
-----------
5,396,124
-----------
Capital Goods (5.3%)
Canon, Inc.{z} ...................................................... 95,000 2,030,669 3.3
OFFICE EQUIPMENT
Toshiba Corp. ....................................................... 215,000 1,280,713 2.0
ELECTRICAL PLANT/EQUIPMENT
-----------
3,311,382
----------- -----
TOTAL EQUITY INVESTMENTS (cost $56,835,148) ........................... 56,833,283 91.1
----------- -----
</TABLE>
The accompanying notes are an integral part of the financial statements.
FS-19
<PAGE> 252
PORTFOLIO OF INVESTMENTS (cont'd)
December 31, 1998
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
VALUE % OF NET
REPURCHASE AGREEMENT (NOTE 1) ASSETS
- ----------------------------------------------------------------------- ----------- -------------
<S> <C> <C> <C>
Dated December 31, 1998, with State Street Bank & Trust Co., due
January 4, 1999, for an effective yield of 4.50%, collateralized by
$5,305,000 U.S. Treasury Bonds, 8.75% due 5/15/17 (market value of
collateral is $7,424,645, including accrued interest).
(cost $7,277,000) .................................................. $ 7,277,000 11.6
----------- -----
TOTAL INVESTMENTS (cost $64,112,148) * ............................... 64,110,283 102.7
Other Assets and Liabilities .......................................... (1,713,929) (2.7)
----------- -----
NET ASSETS ............................................................ $62,396,354 100.0
----------- -----
----------- -----
</TABLE>
- --------------
{z} All or part of the Fund's holdings in this security is segregated
as collateral for written futures. See Note 1 to the Financial
Statements.
{l} This is a U.S. security of which approximately 62.5% of its
outstanding stock is owned by Ito-Yokado Co., Ltd.
{\/} U.S. currency denominated.
-/- Non-income producing security.
* For Federal income tax purposes, cost is $64,933,650 and
appreciation (depreciation) is as follows:
<TABLE>
<S> <C>
Unrealized appreciation: $ 5,944,696
Unrealized depreciation: (6,768,063)
-------------
Net unrealized depreciation: $ (823,367)
-------------
-------------
</TABLE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
FORWARD FOREIGN CURRENCY CONTRACTS OUTSTANDING
DECEMBER 31, 1998
<TABLE>
<CAPTION>
MARKET VALUE UNREALIZED
(U.S. CONTRACT DELIVERY APPRECIATION
CONTRACTS TO SELL: DOLLARS) PRICE DATE (DEPRECIATION)
- ---------------------------------------- ------------- ---------- -------- ---------------
<S> <C> <C> <C> <C>
Japanese Yen............................ 44,514,932 120.81250 2/12/99 $(3,128,486)
Japanese Yen............................ 6,232,090 122.51500 2/12/99 (518,504)
Japanese Yen............................ 2,670,896 118.24000 2/12/99 (133,683)
------------- ---------------
Total Contracts to Sell (Receivable
amount $49,637,245).................. 53,417,918 (3,780,673)
------------- ---------------
THE VALUE OF CONTRACTS TO SELL AS
PERCENTAGE OF NET ASSETS IS 85.61%.
Total Open Forward Foreign Currency
Contracts............................ $(3,780,673)
---------------
---------------
</TABLE>
- ----------------
See Note 1 of Notes to the Financial Statements.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
WRITTEN FUTURE CONTRACT OUTSTANDING
DECEMBER 31, 1998
<TABLE>
<CAPTION>
EXPIRATION NO. OF
DESCRIPTION DATE CONTRACTS CURRENCY MARKET VALUE
- ---------------------------------------- --------------- --------------- ------------- ---------------
<S> <C> <C> <C> <C>
Simex Nikkei 225 Index Future (Face
17,799,224)............................ March 1999 290 JPY $ 18,965,146
</TABLE>
- ----------------
See Note 1 of Notes to the Financial Statements.
The accompanying notes are an integral part of the financial statements.
FS-20
<PAGE> 253
STATEMENT OF ASSETS
AND LIABILITIES
December 31, 1998
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C>
Assets:
Investments in securities, at value (cost $56,835,148) (Note 1).................................. $56,833,283
Repurchase agreement, at value and cost.......................................................... 7,277,000
U.S. currency.................................................................................... 270
Receivable for initial margin (Note 1)........................................................... 1,868,000
Receivable for Fund shares sold.................................................................. 628,411
Receivable from A I M Advisors, Inc.............................................................. 252,032
Dividends receivable............................................................................. 34,664
Interest receivable.............................................................................. 910
-----------
Total assets................................................................................... 66,894,570
-----------
Liabilities:
Payable for open forward foreign currency contracts (Note 1)..................................... 3,780,673
Payable for investment management and administration fees (Note 2)............................... 297,101
Payable for Fund shares repurchased.............................................................. 285,231
Payable for service and distribution expenses (Note 2)........................................... 63,391
Payable for transfer agent fees (Note 2)......................................................... 26,130
Payable for printing and postage expenses........................................................ 15,566
Payable for professional fees.................................................................... 10,167
Payable for registration and filing fees......................................................... 8,021
Payable for Trustees' fees and expenses (Note 2)................................................. 5,654
Payable for custodian fees....................................................................... 5,537
Payable for fund accounting fees................................................................. 641
Other accrued expenses........................................................................... 104
-----------
Total liabilities.............................................................................. 4,498,216
-----------
Net assets......................................................................................... $62,396,354
-----------
-----------
Class A:
Net asset value and redemption price per share ($37,607,822 DIVIDED BY 4,226,699 shares
outstanding)...................................................................................... $ 8.90
-----------
-----------
Maximum offering price per share (100/94.50 of $8.90) *............................................ $ 9.42
-----------
-----------
Class B:+
Net asset value and offering price per share ($22,815,096 DIVIDED BY 2,669,627 shares
outstanding)...................................................................................... $ 8.55
-----------
-----------
Advisor Class:
Net asset value, offering price per share, and redemption price per share ($1,973,436 DIVIDED BY
219,050 shares outstanding)....................................................................... $ 9.01
-----------
-----------
Net assets consist of:
Paid in capital (Note 4)......................................................................... $85,080,433
Accumulated net realized loss on investments and foreign currency transactions................... (20,069,001)
Net unrealized depreciation on translation of assets and liabilities in foreign currencies....... (3,779,135)
Net unrealized appreciation of investments....................................................... 1,164,057
-----------
Total -- representing net assets applicable to capital shares outstanding.......................... $62,396,354
-----------
-----------
<FN>
- --------------
* On sales of $25,000 or more, the offering price is reduced.
+ Redemption price per share is equal to the net asset value per share less
any applicable contingent deferred sales charge.
</TABLE>
The accompanying notes are an integral part of the financial statements.
FS-21
<PAGE> 254
STATEMENT OF OPERATIONS
Year ended December 31, 1998
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C>
Investment income: (Note 1)
Interest income........................................................................... $ 802,460
Dividend income (net of foreign withholding tax of $86,653)............................... 491,033
Securities lending income................................................................. 53,757
-----------
Total investment income................................................................. 1,347,250
-----------
Expenses:
Investment management and administration fees (Note 2).................................... 740,164
Service and distribution expenses: (Note 2)
Class A.................................................................... $ 149,992
Class B.................................................................... 236,324 386,316
-----------
Transfer agent fees (Note 2).............................................................. 294,620
Printing and postage expenses............................................................. 179,750
Registration and filing fees.............................................................. 123,400
Professional fees......................................................................... 62,645
Custodian fees............................................................................ 48,620
Fund accounting fees (Note 2)............................................................. 20,629
Trustees' fees and expenses (Note 2)...................................................... 13,140
Other expenses............................................................................ 24,753
-----------
Total expenses before reductions........................................................ 1,894,037
-----------
Expenses reimbursed by A I M Advisors, Inc. (Note 2).................................. (252,032)
Expense reductions (Note 5)........................................................... (27,338)
-----------
Total net expenses...................................................................... 1,614,667
-----------
Net investment loss......................................................................... (267,417)
-----------
Net realized and unrealized gain (loss) on investments and foreign currencies:
(Note 1)
Net realized loss on investments............................................. (18,161,660)
Net realized gain on foreign currency transactions........................... 3,387,626
-----------
Net realized loss during the year....................................................... (14,774,034)
Net change in unrealized appreciation on translation of assets and
liabilities in foreign currencies........................................... (6,527,794)
Net change in unrealized depreciation of investments......................... 22,781,499
-----------
Net unrealized appreciation during the year............................................. 16,253,705
-----------
Net realized and unrealized gain on investments and foreign currencies...................... 1,479,671
-----------
Net increase in net assets resulting from operations........................................ $ 1,212,254
-----------
-----------
</TABLE>
The accompanying notes are an integral part of the financial statements.
FS-22
<PAGE> 255
STATEMENTS OF CHANGES IN NET ASSETS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
YEAR ENDED YEAR ENDED
DECEMBER 31, DECEMBER 31,
1998 1997
------------- -------------
<S> <C> <C>
Increase (Decrease) in net assets
Operations:
Net investment loss...................................................... $ (267,417) $ (801,848)
Net realized loss on investments and foreign currency transactions....... (14,774,034) (1,309,551)
Net change in unrealized appreciation (depreciation) on translation of
assets and liabilities in foreign currencies............................ (6,527,794) 630,890
Net change in unrealized appreciation (depreciation) of investments...... 22,781,499 (8,170,261)
------------- -------------
Net increase (decrease) in net assets resulting from operations........ 1,212,254 (9,650,770)
------------- -------------
Class A:
Distributions to shareholders: (Note 1)
From net realized gain on investments.................................... (54,192) (110,678)
In excess of net realized gain on investments............................ (607)
Class B:
Distributions to shareholders: (Note 1)
From net realized gain on investments.................................... (30,844) (61,407)
In excess of net realized gain on investments............................ (345)
Advisor Class:
Distributions to shareholders: (Note 1)
From net realized gain on investments.................................... (1,907)
In excess of net realized gain on investments............................ (21) (71,057)
------------- -------------
Total distributions.................................................... (87,916) (243,142)
------------- -------------
Capital share transactions: (Note 4)
Increase from capital shares sold and reinvested......................... 323,386,822 280,419,107
Decrease from capital shares repurchased................................. (361,299,089) (267,455,599)
------------- -------------
Net increase (decrease) from capital share transactions................ (37,912,267) 12,963,508
------------- -------------
Total increase (decrease) in net assets.................................... (36,787,929) 3,069,596
Net assets:
Beginning of year........................................................ 99,184,283 96,114,687
------------- -------------
End of year *........................................................... $62,396,354 $99,184,283
------------- -------------
------------- -------------
* Includes undistributed net investment income............................ $ -- $ --
------------- -------------
------------- -------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
FS-23
<PAGE> 256
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
Contained below is per share operating performance data for a share outstanding
throughout the period, total investment return, ratios and supplemental data.
This information has been derived from information provided in the financial
statements.
<TABLE>
<CAPTION>
CLASS A
-----------------------------------------------------------
YEAR ENDED DECEMBER 31,
-----------------------------------------------------------
1998 (d) 1997 (d) 1996 (d) 1995 (d) 1994
---------- ---------- ----------- ---------- ----------
<S> <C> <C> <C> <C> <C>
Per Share Operating Performance:
Net asset value, beginning of period.... $ 8.96 $ 9.76 $ 11.00 $ 12.15 $ 11.61
---------- ---------- ----------- ---------- ----------
Income from investment operations:
Net investment income (loss).......... (0.02) * (0.08) (0.04) (0.04) (0.04)
Net realized and unrealized gain
(loss) on investments................ (0.03) (0.70) (0.77) 0.26 0.79
---------- ---------- ----------- ---------- ----------
Net increase (decrease) from
investment operations.............. (0.05) (0.78) (0.81) 0.22 0.75
---------- ---------- ----------- ---------- ----------
Distributions to shareholders:
From net realized gain on
investments.......................... (0.01) (0.02) (0.43) (1.37) (0.21)
In excess of net realized gain on
investments.......................... -- -- -- -- --
---------- ---------- ----------- ---------- ----------
Total distributions................. (0.01) (0.02) (0.43) (1.37) (0.21)
---------- ---------- ----------- ---------- ----------
Net asset value, end of period.......... $ 8.90 $ 8.96 $ 9.76 $ 11.00 $ 12.15
---------- ---------- ----------- ---------- ----------
---------- ---------- ----------- ---------- ----------
Total investment return (c)............. (0.54)% (7.99)% (7.43)% 1.94% 6.56%
Ratios and supplemental data:
Net assets, end of period (in 000's).... $ 37,608 $ 44,583 $ 63,585 $ 111,105 $ 98,066
Ratio of net investment income (loss) to
average net assets..................... (0.19)% (0.61)% (0.40)% (0.40)% (0.32)%
Ratio of operating expenses to average
net assets:
With expense reductions and/or
reimbursement (Notes 2 & 5).......... 1.96% 1.99% 1.84% 1.99% 1.91%
Without expense reductions and/or
reimbursement........................ 2.33% 2.06% 1.94% 2.14% 2.03%
Portfolio turnover rate++............... 67% 58% 31% 67% 49%
</TABLE>
- ----------------
(a) Annualized
(b) Not Annualized
(c) Total investment return does not include sales charge.
(d) These selected per share data were calculated based upon average
shares outstanding during the period.
* Includes reimbursement of Fund operating expenses per share of $0.03.
+ Commencing June 1, 1995, the Fund began offering Advisor Class Shares.
++ Portfolio turnover rates are calculated on the basis of the Fund as a
whole without distinguishing between the classes of shares issued.
The accompanying notes are an integral part of the financial statements.
FS-24
<PAGE> 257
FINANCIAL HIGHLIGHTS (cont'd)
- --------------------------------------------------------------------------------
Contained below is per share operating performance data for a share outstanding
throughout the period, total investment return, ratios and supplemental data.
This information has been derived from information provided in the financial
statements.
<TABLE>
<CAPTION>
CLASS B
----------------------------------------------------------
YEAR ENDED DECEMBER 31,
----------------------------------------------------------
1998 (d) 1997 (d) 1996 (d) 1995 (d) 1994
---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C>
Per Share Operating Performance:
Net asset value, beginning of period.... $ 8.67 $ 9.49 $ 10.78 $ 12.02 $ 11.57
---------- ---------- ---------- ---------- ----------
Income from investment operations:
Net investment income (loss).......... (0.07) * (0.14) (0.11) (0.12) (0.13)
Net realized and unrealized gain
(loss) on investments................ (0.04) (0.66) (0.75) 0.25 0.79
---------- ---------- ---------- ---------- ----------
Net increase (decrease) from
investment operations.............. (0.11) (0.80) (0.86) 0.13 0.66
---------- ---------- ---------- ---------- ----------
Distributions to shareholders:
From net realized gain on
investments.......................... (0.01) (0.02) (0.43) (1.37) (0.21)
In excess of net realized gain on
investments.......................... -- -- -- -- --
---------- ---------- ---------- ---------- ----------
Total distributions................. (0.01) (0.02) (0.43) (1.37) (0.21)
---------- ---------- ---------- ---------- ----------
Net asset value, end of period.......... $ 8.55 $ 8.67 $ 9.49 $ 10.78 $ 12.02
---------- ---------- ---------- ---------- ----------
---------- ---------- ---------- ---------- ----------
Total investment return (c)............. (1.25)% (8.42)% (8.05)% 1.20% 5.81%
Ratios and supplemental data:
Net assets, end of period (in 000's).... $ 22,815 $ 24,250 $ 32,116 $ 41,274 $ 27,355
Ratio of net investment income (loss) to
average net assets..................... (0.84)% (1.26)% (1.05)% (1.05)% (0.97)%
Ratio of operating expenses to average
net assets:
With expense reductions and/or
reimbursement (Notes 2 & 5).......... 2.61% 2.64% 2.49% 2.64% 2.56%
Without expense reductions and/or
reimbursement........................ 2.98% 2.71% 2.59% 2.79% 2.68%
Portfolio turnover rate++............... 67% 58% 31% 67% 49%
</TABLE>
- ----------------
(a) Annualized
(b) Not Annualized
(c) Total investment return does not include sales charge.
(d) These selected per share data were calculated based upon average
shares outstanding during the period.
* Includes reimbursement of Fund operating expenses per share of $0.03.
+ Commencing June 1, 1995, the Fund began offering Advisor Class Shares.
++ Portfolio turnover rates are calculated on the basis of the Fund as a
whole without distinguishing between the classes of shares issued.
The accompanying notes are an integral part of the financial statements.
FS-25
<PAGE> 258
FINANCIAL HIGHLIGHTS (cont'd)
- --------------------------------------------------------------------------------
Contained below is per share operating performance data for a share outstanding
throughout the period, total investment return, ratios and supplemental data.
This information has been derived from information provided in the financial
statements.
<TABLE>
<CAPTION>
ADVISOR CLASS+
---------------------------------------------------
JUNE 1, 1995
YEAR ENDED DECEMBER 31, TO
------------------------------------- DECEMBER 31,
1998 (d) 1997 (d) 1996 (d) 1995 (d)
----------- ----------- ----------- ------------
<S> <C> <C> <C> <C>
Per Share Operating Performance:
Net asset value, beginning of period.... $ 9.05 $ 9.81 $ 11.02 $ 10.50
----------- ----------- ----------- ------------
Income from investment operations:
Net investment income (loss).......... 0.01* (0.01) (0.01) (0.00)
Net realized and unrealized gain
(loss) on investments................ (0.04) (0.73) (0.77) 1.89
----------- ----------- ----------- ------------
Net increase (decrease) from
investment operations.............. (0.03) (0.74) (0.78) 1.89
----------- ----------- ----------- ------------
Distributions to shareholders:
From net realized gain on
investments.......................... (0.01) (0.02) (0.43) (1.37)
In excess of net realized gain on
investments.......................... -- -- -- --
----------- ----------- ----------- ------------
Total distributions................. (0.01) (0.02) (0.43) (1.37)
----------- ----------- ----------- ------------
Net asset value, end of period.......... $ 9.01 $ 9.05 $ 9.81 $ 11.02
----------- ----------- ----------- ------------
----------- ----------- ----------- ------------
Total investment return (c)............. (0.31)% (7.54)% (7.14)% 18.14 %(b)
Ratios and supplemental data:
Net assets, end of period (in 000's).... $ 1,973 $ 30,351 $ 413 $ 558
Ratio of net investment income (loss) to
average net assets..................... 0.16% (0.26)% (0.05)% (0.05)%(a)
Ratio of operating expenses to average
net assets:
With expense reductions and/or
reimbursement (Notes 2 & 5).......... 1.61% 1.64% 1.49% 1.64 %(a)
Without expense reductions and/or
reimbursement........................ 1.98% 1.71% 1.59% 1.79 %(a)
Portfolio turnover rate++............... 67% 58% 31% 67 %(a)
</TABLE>
- ----------------
(a) Annualized
(b) Not Annualized
(c) Total investment return does not include sales charge.
(d) These selected per share data were calculated based upon average
shares outstanding during the period.
* Includes reimbursement of Fund operating expenses per share of $0.03.
+ Commencing June 1, 1995, the Fund began offering Advisor Class Shares.
++ Portfolio turnover rates are calculated on the basis of the Fund as a
whole without distinguishing between the classes of shares issued.
The accompanying notes are an integral part of the financial statements.
FS-26
<PAGE> 259
NOTES TO
FINANCIAL STATEMENTS
December 31, 1998
- --------------------------------------------------------------------------------
1. SIGNIFICANT ACCOUNTING POLICIES (SEE ALSO NOTE 2)
AIM Japan Growth Fund (the "Fund") formerly, GT Global Japan Growth Fund, is a
separate series of AIM Growth Series (the "Trust") formerly, GT Global Growth
Series. The Trust is organized as a Delaware business trust and is registered
under the Investment Company Act of 1940, as amended ("1940 Act"), as a
diversified, open-end management investment company. The Trust has eight series
of shares in operation, each series corresponding to a distinct portfolio of
investments.
The Fund offers Class A, Class B, and Advisor Class shares, each of which has
equal rights as to assets and voting privileges. Class A and Class B each has
exclusive voting rights with respect to its distribution plan. Investment
income, realized and unrealized capital gains and losses, and the common
expenses of the Fund are allocated on a pro rata basis to each class based on
the relative net assets of each class to the total net assets of the Fund. Each
class of shares differs in its respective distribution expenses, and may differ
in its transfer agent, registration, and certain other class-specific fees and
expenses.
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statements and
the reported amounts of income and expenses during the reporting period. Actual
results could differ from those estimates. The following is a summary of
significant accounting policies in conformity with generally accepted accounting
principles consistently followed by the Fund in the preparation of the financial
statements.
(A) PORTFOLIO VALUATION
The Fund calculates the net asset value of and completes orders to purchase,
exchange or repurchase Fund shares on each business day, with the exception of
those days on which the New York Stock Exchange is closed.
Equity securities are valued at the last sale price on the exchange on which
such securities are traded or on the principal over-the-counter market in which
such securities are traded, as of the close of business on the day the
securities are being valued or, lacking any sales, at the last available bid
price. In cases where securities are traded on more than one exchange, the
securities are valued on the exchange determined by A I M Advisors, Inc. (the
"Manager") to be the primary market.
Fixed income investments are valued at the mean of representative quoted bid and
ask prices for such investments or, if such prices are not available, at prices
for investments of comparative maturity, quality and type. However, when the
Manager deems it appropriate, prices obtained for the day of valuation from a
bond pricing service will be used. Short-term investments with a maturity of 60
days or less are valued at amortized cost, adjusted for foreign exchange
translation and market fluctuation, if any.
Investments for which market quotations are not readily available (including
restricted securities which are subject to limitations on their sale) are valued
at fair value as determined in good faith by or under the direction of the
Trust's Board of Trustees.
Portfolio securities which are primarily traded on foreign exchanges are
generally valued to the preceding closing values of such securities on their
respective exchanges, and those values are then translated into U.S. dollars at
the current exchange rates, except that when an occurrence subsequent to the
time a value was so established is likely to have materially changed such value,
then the fair value of those securities will be determined by consideration of
other factors by or under the direction of the Trust's Board of Trustees.
(B) FOREIGN CURRENCY TRANSLATION
The accounting records of the Fund are maintained in U.S. dollars. The market
values of foreign securities, currency holdings, other assets and liabilities
are recorded in the books and records of the Fund after translation to U.S.
dollars based on the exchange rates on that day. The cost of each security is
determined using historical exchange rates. Income and withholding taxes are
translated at prevailing exchange rates when earned or incurred.
The Fund does not isolate that portion of the results of operations resulting
from changes in foreign exchange rates on investments from the fluctuations
arising from changes in market prices of securities held. Such fluctuations are
included with the net realized and unrealized gain or loss from investments.
Reported net realized foreign exchange gains and losses arise from sales and
maturities of short-term securities, forward foreign currency contracts, sales
of foreign currencies, currency gains or losses realized between the trade and
settlement dates on securities transactions, and the differences between the
amounts of dividends, interest, and foreign withholding taxes recorded on the
Fund's books and the U.S. dollar equivalent of the amounts actually received or
paid. Net unrealized foreign exchange gains and losses arise from changes in the
value of assets and liabilities other than investments in securities at period
end, resulting from changes in exchange rates.
(C) REPURCHASE AGREEMENTS
With respect to repurchase agreements entered into by the Fund, it is the Fund's
policy to always receive, as collateral, United States government securities or
other high quality debt securities of which the value, including accrued
interest, is at least equal to the amount to be repaid to the Fund under each
agreement at its maturity.
(D) FORWARD FOREIGN CURRENCY CONTRACTS
A forward foreign currency contract ("Forward Contract") is an agreement between
two parties to buy and sell a currency at a set price on a future date. The
market value of the Forward Contract
FS-27
<PAGE> 260
fluctuates with changes in currency exchange rates. The Forward Contract is
marked-to-market daily and the change in market value is recorded by the Fund as
an unrealized gain or loss. When the Forward Contract is closed, the Fund
records a realized gain or loss equal to the difference between the value at the
time it was opened and the value at the time it was closed. The Fund could be
exposed to risk if a counter party is unable to meet the terms of a contract or
if the value of the currency changes unfavorably. The Fund may enter into
Forward Contracts in connection with planned purchases or sales of securities,
or to hedge against adverse fluctuations in exchange rates between currencies.
(E) OPTION ACCOUNTING PRINCIPLES
When the Fund writes a call or put option, an amount equal to the premium
received is included in the Fund's "Statement of Assets and Liabilities" as an
asset and an equivalent liability. The amount of the liability is subsequently
marked-to-market to reflect the current market value of the option. The current
market value of an option listed on a traded exchange is valued at its last bid
price, or, in the case of an over-the-counter option, is valued at the average
of the last bid prices obtained from brokers, unless a quotation from only one
broker is available, in which case only that broker's price will be used. If an
option expires on its stipulated expiration date or if the Fund enters into a
closing purchase transaction, a gain or loss is realized without regard to any
unrealized gain or loss on the underlying security, and the liability related to
such option is extinguished. If a written call option is exercised, a gain or
loss is realized from the sale of the underlying security and the proceeds of
the sale are increased by the premium originally received. If a written put
option is exercised, the cost of the underlying security purchased would be
decreased by the premium originally received. The Fund can write options only on
a covered basis, which, for a call, requires that the Fund hold the underlying
security, and, for a put, requires the Fund to set aside cash, U.S. government
securities or other liquid securities in an amount not less than the exercise
price or otherwise provide adequate cover at all times while the put option is
outstanding. The Fund may use options to manage its exposure to the stock and
bond markets and to fluctuations in currency values or interest rates.
The premium paid by the Fund for the purchase of a call or put option is
included in the Fund's "Statement of Assets and Liabilities" as an investment
and subsequently "marked-to-market" to reflect the current market value of the
option. If an option which the Fund has purchased expires on the stipulated
expiration date, the Fund realizes a loss in the amount of the cost of the
option. If the Fund enters into a closing sale transaction, the Fund realizes a
gain or loss, depending on whether proceeds from the closing sale transaction
are greater or less than the cost of the option. If the Fund exercises a call
option, the cost of the securities acquired by exercising the call is increased
by the premium paid to buy the call. If the Fund exercises a put option, it
realizes a gain or loss from the sale of the underlying security, and the
proceeds from such sale are decreased by the premium originally paid.
The risk associated with purchasing options is limited to the premium originally
paid. The risk in writing a call option is that the Fund may forego the
opportunity of profit if the market value of the underlying security or index
increases and the option is exercised. The risk in writing a put option is that
the Fund may incur a loss if the market value of the underlying security or
index decreases and the option is exercised. In addition, there is the risk the
Fund may not be able to enter into a closing transaction because of an illiquid
secondary market.
(F) FUTURES CONTRACTS
A futures contract is an agreement between two parties to buy and sell a
security at a set price on a future date. Upon entering into such a contract the
Fund is required to pledge to the broker an amount of cash or securities equal
to the minimum "initial margin" requirements of the exchange on which the
contract is traded. Pursuant to the contract, the Fund agrees to receive from or
pay to the broker an amount of cash equal to the daily fluctuation in value of
the contract. Such receipts or payments are known as "variation margin" and are
recorded by the Fund as unrealized gains or losses. When the contract is closed,
the Fund records a realized gain or loss equal to the difference between the
value of the contract at the time it was opened and the value at the time it was
closed. The potential risk to the Fund is that the change in value of the
underlying securities may not correlate to the change in value of the contracts.
The Fund may use futures contracts to manage its exposure to the stock and bond
markets and to fluctuations in currency values or interest rates. At December
31, 1998, the Fund had segregated securities valued at $19,299,212 and cash of
$1,868,000 to cover intial margin requirements on open futures contracts.
(G) SECURITY TRANSACTIONS AND RELATED INVESTMENT INCOME
Security transactions are accounted for on the trade date (date the order to buy
or sell is executed). The cost of securities sold is determined on a first-in,
first-out basis, unless otherwise specified. Dividends are recorded on the
ex-dividend date. Interest income is recorded on the accrual basis. Where a high
level of uncertainty exists as to its collection, income is recorded net of all
withholding tax with any rebate recorded when received. The Fund may trade
securities on other than normal settlement terms. This may increase the risk if
the other party to the transaction fails to deliver and causes the Fund to
subsequently invest at less advantageous prices.
(H) PORTFOLIO SECURITIES LOANED
At December 31, 1998, stocks with an aggregate value of $736,856 were on loan to
brokers. The loans were secured by cash collateral of $762,500 received by the
Fund. For the year ended December 31, 1998, the Fund received securities lending
fees of $53,757.
For international securities, cash collateral is received by the Fund against
loaned securities in an amount at least equal to 105% of the market value of the
loaned securities at the inception of each loan. This collateral must be
maintained at not less than 103% of the market value of the loaned securities
during the period of the loan. For domestic securities, cash collateral is
received by the Fund against loaned securities in an amount at least equal to
102% of the market
FS-28
<PAGE> 261
value of the loaned securities at the inception of each loan. This collateral
must be maintained at not less than 100% of the market value of the loaned
securities during the period of each loan. The cash collateral is invested in a
securities lending trust which consists of a portfolio of high quality short
duration securities whose average effective duration is restricted to 120 days
or less.
(I) TAXES
It is the policy of the Fund to meet the requirements for qualification as a
"regulated investment company" under the Internal Revenue Code of 1986, as
amended ("Code"). It is also the intention of the Fund to make distributions
sufficient to avoid imposition of any excise tax under Section 4982 of the Code.
Therefore, no provision has been made for Federal taxes on income, capital
gains, and unrealized appreciation of securities held, or for excise tax on
income and capital gains. The Fund currently has a capital loss carryforward of
$14,061,105 which expires in 2006.
(J) DISTRIBUTIONS TO SHAREHOLDERS
Distributions to shareholders are recorded by the Fund on the ex-date. Income
and capital gain distributions are determined in accordance with Federal income
tax regulations which may differ from generally accepted accounting principles.
These differences are primarily due to differing treatments of income and gains
on various investment securities held by the Fund and timing differences.
(K) FOREIGN SECURITIES
There are certain additional considerations and risks associated with investing
in foreign securities and currency transactions that are not inherent in
investments of domestic origin. These risks of investing in foreign markets may
include foreign currency exchange rate fluctuations, perceived credit risk,
adverse political and economic developments and possible adverse foreign
government intervention.
(L) RESTRICTED SECURITIES
The Fund is permitted to invest in privately placed restricted securities. These
securities may by resold in transactions exempt from registration or to the
public if the securities are registered. Disposal of these securities may
involve time-consuming negotiations and expense, and prompt sale at an
acceptable price may be difficult. At the end of the year, restricted
securities, if any, (excluding 144A issues), are shown at the end of the Fund's
Portfolio of Investments.
(M) INDEXED SECURITIES
The Fund may invest in indexed securities whose value is linked either directly
or indirectly to changes in foreign currencies, interest rates, equities,
indices, or other reference instruments. Indexed securities may be more volatile
than the reference instrument itself, but any loss is limited to the amount of
the original investment.
(N) LINE OF CREDIT
The Fund, along with certain other funds advised and/or administered by the
Manager, has a line of credit with BankBoston and State Street Bank and Trust
Company. The arrangements with the banks allow the Fund and certain other funds
to borrow, on a first come, first served basis, an aggregate maximum amount of
$250,000,000. The Fund is limited to borrowing up to 33 1/3% of the value of the
Fund's total assets. On December 31, 1998, the Fund had no loans outstanding.
For the year ended December 31, 1998, the weighted average outstanding daily
balance of bank loans (based on the number of days the loans were outstanding)
was $4,412,250 with a weighted average interest rate of 6.33%. Interest expense
for the year ended December 31, 1998, was $3,103 and is included in "Other
expenses" on the Statement of Operations.
2. RELATED PARTIES
A I M Advisors, Inc. (the "Manager"), an indirect wholly-owned subsidiary of
AMVESCAP PLC, is the Fund's investment manager and administrator, and INVESCO
(NY), Inc., (formerly, Chancellor LGT Asset Management, Inc.) is the Fund's
investment sub-adviser and sub-administrator. As of the close of business on May
29, 1998, Liechtenstein Global Trust AG ("LGT"), the former indirect parent
organization of Chancellor LGT Asset Management, Inc. ("Chancellor LGT"),
consummated a purchase agreement with AMVESCAP PLC pursuant to which AMVESCAP
PLC acquired LGT's Asset Management Division, which included Chancellor LGT and
certain other affiliates. As a result of this transaction, Chancellor LGT was
renamed INVESCO (NY), Inc., and is now an indirect wholly-owned subsidiary of
AMVESCAP PLC. Also, as of the close of business May 29, 1998, A I M
Distributors, Inc. ("AIM Distributors"), a wholly-owned subsidiary of the
Manager, became the Fund's distributor, and the Trust was reorganized from a
Massachusetts business trust into a Delaware business trust. Finally, as of the
close of business on September 4, 1998, A I M Fund Services, Inc. ("AFS"), an
affiliate of the Manager and AIM Distributors, replaced GT Global Investor
Services, Inc. ("GT Services") as the transfer agent of the Fund.
The Fund pays investment management and administration fees to the Manager at
the following annualized rates: 0.975% on the first $500 million of average
daily net assets of the Fund; 0.95% on the next $500 million; 0.925% of the next
$500 million and 0.90% on amounts thereafter. These fees are computed daily and
paid monthly.
AIM Distributors, an affiliate of the Manager, serves as the Fund's distributor.
For the period ended May 29, 1998, GT Global, Inc. ("GT Global"), an affiliate
of the investment sub-advisor, served as the Fund's distributor.
Class A shares are subject to initial sales charges imposed at the time of
purchase, in accordance with the schedule included in the Fund's current
prospectus. AIM Distributors collects the sales charges imposed on sales of
Class A shares, and reallows a portion of such charges to dealers through which
the sales are made. For the year ended December 31, 1998, AIM Distributors and
GT Global retained sales charges of $18,903 and $8,184, respectively, Purchases
of Class A shares exceeding $1,000,000 may be subject to a contingent deferred
sales charge ("CDSC") upon redemption, in accordance with the Fund's current
prospectus. AIM Distributors and GT Global collected such CDSCs in the amount of
$394 and $1,128 for the year ended December 31, 1998, respectively. AIM
Distributors also makes ongoing shareholder servicing and trail commission
payments to dealers whose clients hold Class A shares.
FS-29
<PAGE> 262
Class B shares are not subject to initial sales charges. When Class B shares are
sold, AIM Distributors, from its own resources, pays commissions to dealers
through which the sales are made. Certain redemptions of Class B shares made
within six years of purchase are subject to CDSCs, in accordance with the Fund's
current prospectus. For the year ended December 31, 1998, AIM Distributors and
GT Global collected such CDSCs in the amount of $81,408 and $98,773,
respectively. In addition, AIM Distributors makes ongoing shareholder servicing
and trail commission payments to dealers whose clients hold Class B shares.
For the period ended May 29, 1998, pursuant to the then effective separate
distribution plans adopted under the 1940 Act Rule 12b-1 by the Trust's Board of
Trustees with respect to the Fund's Class A shares ("Class A Plan") and Class B
shares ("Class B Plan"), the Fund reimbursed GT Global for a portion of its
shareholder servicing and distribution expenses. Under the Class A Plan, the
Fund was permitted to pay GT Global a service fee at the annualized rate of up
to 0.25% of the average daily net assets of the Fund's Class A shares for GT
Global's expenditures incurred in servicing and maintaining shareholder
accounts, and was permitted to pay GT Global a distribution fee at the
annualized rate of up to 0.35% of the average daily net assets of the Fund's
Class A shares, less any amounts paid by the Fund as the aforementioned service
fee, for GT Global's expenditures incurred in providing services as distributor.
All expenses for which GT Global was reimbursed under the Class A Plan would
have been incurred within one year of such reimbursement.
For the period ended May 29, 1998, pursuant to the Class B Plan, the Fund was
permitted to pay GT Global a service fee at the annualized rate of up to 0.25%
of the average daily net assets of the Fund's Class B shares for GT Global's
expenditures incurred in servicing and maintaining shareholder accounts, and was
permitted to pay GT Global a distribution fee at the annualized rate of up to
0.75% of the average daily net assets of the Fund's Class B shares for GT
Global's expenditures incurred in providing services as distributor. Expenses
incurred under the Class B Plan in excess of 1.00% annually were permitted to be
carried forward for reimbursement in subsequent years as long as that Plan
continues in effect.
Effective as of the close of business May 29, 1998, pursuant to Rule 12b-1 under
the 1940 Act, the Trust's Board of Trustees adopted a Master Distribution Plan
applicable to the Fund's Class A shares ("Class A Plan") and Class B shares
("Class B Plan"), pursuant to which the Fund compensates AIM Distributors for
the purpose of financing any activity that is intended to result in the sale of
Class A or Class B shares of the Funds. Under the Class A Plan, the Fund
compensates AIM Distributors at the annualized rate of 0.35% of the average
daily net assets of the Fund's Class A shares. Under the Class B Plan, the Fund
compensates AIM Distributors at an annualized rate of 1.00% of the average daily
net assets of the Fund's Class B shares. Of these amounts, the Fund may pay a
service fee of 0.25% of the average daily net assets of the Class A or Class B
shares to selected dealers and financial institutions who furnish continuing
personal shareholder services to their customers who purchase and own the
appropriate class of shares of the Fund. Any amounts not paid as a service fee
under the Plans would constitute an asset-based sales charge.
The Manager and AIM Distributors have voluntarily undertaken to limit the Fund's
expenses (exclusive of brokerage commissions, taxes, interest, and extraordinary
items) to the maximum annual level of 2.00%, 2.65%, and 1.65% of the average
daily net assets of the Fund's Class A, Class B, and Advisor Class shares,
respectively. If necessary, this limitation will be effected by waivers by the
Manager of investment management and administration fees, waivers by AIM
Distributors of payments under the Class A Plan and/or Class B Plan and/or
reimbursements by the Manager or AIM Distributors of portions of the Fund's
other operating expenses.
Effective as of the close of business September 4, 1998, the Fund, pursuant to a
transfer agency and service agreement, has agreed to pay AFS an annualized fee
of $24.85 per shareholder accounts that are open during any monthly period (this
fee includes all out-of-pocket expenses), and an annualized fee of $0.70 per
shareholder account that is closed during any monthly period. Both fees shall be
billed by AFS monthly in arrears on a prorated basis of 1/12 of the annualized
fee for all such accounts.
For the period January 1, 1998 to September 4, 1998, GT Services, an affiliate
of the Manager and AIM Distributors, was the transfer agent of the Fund. For
performing shareholder servicing, reporting, and general transfer agent
services, GT Services received an annual maintenance fee of $17.50 per account,
a new account fee of $4.00 per account, a per transaction fee of $1.75 for all
transactions other than exchanges and a per exchange fee of $2.25. GT Services
was also reimbursed by the Fund for its out-of-pocket expenses for such items as
postage, forms, telephone charges, stationery and office supplies.
The Manager is the pricing and accounting agent for the Fund. The monthly fee
for these services to the Manager is a percentage, not to exceed 0.03% annually,
of the Fund's average daily net assets. The annual fee rate is derived based on
the aggregate net assets of the funds which comprise the following investment
companies: AIM Growth Series, AIM Investment Funds, AIM Investment Portfolios,
AIM Series Trust, G.T. Global Variable Investment Series and G. T. Global
Variable Investment Trust. The fee is calculated at the rate of 0.03% to the
first $5 billion of assets and 0.02% to the assets in excess of $5 billion. An
amount is allocated to and paid by each such fund based on its relative average
daily net assets.
The Trust pays each of its Trustees who is not an employee, officer or director
of the Manager, AIM Distributors or GT Services $5,000 per year plus $300 for
each meeting of the board or any committee thereof attended by the Trustee.
3. PURCHASES AND SALES OF SECURITIES
For the year ended December 31, 1998, purchases and sales of investment
securities by the Fund, other than U.S. government obligations and short-term
investments, aggregated $41,076,712 and $60,506,578, respectively. There were no
purchases or sales of U.S. government obligations by the Fund during the year.
FS-30
<PAGE> 263
4. CAPITAL SHARES
At December 31, 1998, there were an unlimited number of shares of beneficial
interest authorized, at no par value. Transactions in capital shares of the Fund
were as follows:
CAPITAL SHARE TRANSACTIONS
<TABLE>
<CAPTION>
YEAR ENDED YEAR ENDED
DECEMBER 31, 1998 DECEMBER 31, 1997
------------------------- -------------------------
SHARES AMOUNT SHARES AMOUNT
----------- ------------ ----------- ------------
<S> <C> <C> <C> <C>
CLASS A
- ---------------------------------------------------------------
Shares sold.................................................... 31,462,291 $276,913,744 18,880,969 $187,727,101
Shares issued in connection with reinvestment of
distributions................................................ 5,162 45,216 9,319 84,712
----------- ------------ ----------- ------------
31,467,453 276,958,960 18,890,288 187,811,813
Shares repurchased............................................. (32,214,010) (285,404,844) (20,434,942) (203,841,370)
----------- ------------ ----------- ------------
Net decrease................................................... (746,557) $ (8,445,884) (1,544,654) $(16,029,557)
----------- ------------ ----------- ------------
----------- ------------ ----------- ------------
<CAPTION>
CLASS B
- ---------------------------------------------------------------
<S> <C> <C> <C> <C>
Shares sold.................................................... 3,640,751 $ 31,434,436 5,059,734 $ 49,439,098
Shares issued in connection with reinvestment of
distributions................................................ 3,285 27,680 4,729 41,630
----------- ------------ ----------- ------------
3,644,036 31,462,116 5,064,463 49,480,728
Shares repurchased............................................. (3,772,881) (32,567,659) (5,648,959) (54,991,415)
----------- ------------ ----------- ------------
Net decrease................................................... (128,845) $ (1,105,543) (584,496) $ (5,510,687)
----------- ------------ ----------- ------------
----------- ------------ ----------- ------------
<CAPTION>
ADVISOR CLASS
- ---------------------------------------------------------------
<S> <C> <C> <C> <C>
Shares sold.................................................... 1,661,544 $ 14,964,767 4,149,684 $ 43,125,403
Shares issued in connection with reinvestment of
distributions................................................ 110 979 126 1,163
----------- ------------ ----------- ------------
1,661,654 14,965,746 4,149,810 43,126,566
Shares repurchased............................................. (4,795,465) (43,326,586) (839,053) (8,622,814)
----------- ------------ ----------- ------------
Net increase (decrease)........................................ (3,133,811) $(28,360,840) 3,310,757 $ 34,503,752
----------- ------------ ----------- ------------
----------- ------------ ----------- ------------
</TABLE>
5. EXPENSE REDUCTIONS
The Manager has directed certain portfolio trades to brokers who then paid a
portion of the Fund's expenses. For the year ended December 31, 1998, the Fund's
expenses were reduced by $27,338 under these arrangements.
- --------------
FEDERAL TAX INFORMATION (UNAUDITED):
For the fiscal year ended December 31, 1998, the amount of income received by
the Fund from sources within foreign countries and possessions of the United
States was $.0767 per share (representing a total of $576,355). The amount of
taxes paid by the Fund to such countries for the fiscal year ended December 31,
1998 was $.0115 per share (representing a total of $86,545). The following table
provides a breakdown by country of ordinary income dividends and foreign taxes
paid by the Fund during the fiscal year ended December 31, 1998:
<TABLE>
<CAPTION>
COUNTRY GROSS INCOME % FOREIGN TAX PAID %
- --------------------------------------------------------------- -------------- ------------------
<S> <C> <C>
Japan.......................................................... 37.87 99.88
Nonqualifying.................................................. 0.09 0.12
United States.................................................. 62.04 --
------- -------
100.00% 100.00%
------- -------
------- -------
</TABLE>
FS-31
<PAGE> 264
REPORT OF INDEPENDENT ACCOUNTANTS
To the Shareholders of AIM Mid Cap Equity Fund (formerly
AIM Mid Cap Growth Fund) and
Board of Trustees of AIM Growth Series:
In our opinion, the accompanying statement of assets and
liabilities, including the portfolio of investments, and
the related statements of operations and of changes in
net assets and the financial highlights present fairly,
in all material respects, the financial position of the
AIM Mid Cap Equity Fund at December 31, 1998, and the
results of its operations, the changes in its net assets
and the financial highlights for the periods indicated,
in conformity with generally accepted accounting
principles. These financial statements and financial
highlights (hereafter referred to as "financial
statements") are the responsibility of the Fund's
management; our responsibility is to express an opinion
on these financial statements based on our audits. We
conducted our audits of these financial statements in
accordance with generally accepted auditing standards
which require that we plan and perform the audit to
obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit
includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements,
assessing the accounting principles used and significant
estimates made by management, and evaluating the overall
financial statement presentation. We believe that our
audits, which included confirmation of securities at
December 31, 1998 by correspondence with the custodian
and brokers, provide a reasonable basis for the opinion
expressed above.
/s/ PRICEWATERHOUSECOOPERS LLP
PricewaterhouseCoopers LLP
Boston, Massachusetts
February 19, 1999
FS-32
<PAGE> 265
SCHEDULE OF INVESTMENTS
December 31, 1998
<TABLE>
<CAPTION>
MARKET
SHARES VALUE
<S> <C> <C>
COMMON STOCKS-90.98%
AUTO PARTS & EQUIPMENT-0.62%
Keystone Automotive Industries,
Inc.(a) 103,000 $ 2,156,563
- --------------------------------------------------------------
BANKS (REGIONAL)-1.04%
Bank United Corp.-Class A 92,000 3,611,000
- --------------------------------------------------------------
BROADCASTING (TELEVISION, RADIO, & CABLE)-6.00%
Cablevision Systems Corp.-Class
A(a)(b) 200,000 10,037,500
- --------------------------------------------------------------
Chancellor Media Corp.(a) 95,500 4,572,063
- --------------------------------------------------------------
Jacor Communications, Inc.(a) 96,300 6,199,313
- --------------------------------------------------------------
20,808,876
- --------------------------------------------------------------
CHEMICALS (SPECIALTY)-1.63%
International Specialty Products,
Inc.(a) 415,700 5,637,931
- --------------------------------------------------------------
COMMUNICATIONS EQUIPMENT-1.94%
Discreet Logic, Inc. (Canada)(a) 272,100 5,135,888
- --------------------------------------------------------------
Tekelec(a) 95,000 1,573,438
- --------------------------------------------------------------
6,709,326
- --------------------------------------------------------------
COMPUTERS (NETWORKING)-2.43%
FORE Systems, Inc.(a) 166,900 3,056,356
- --------------------------------------------------------------
Xylan Corp.(a) 304,800 5,353,050
- --------------------------------------------------------------
8,409,406
- --------------------------------------------------------------
COMPUTERS (SOFTWARE & SERVICES)-9.27%
BMC Software, Inc.(a) 76,300 3,400,119
- --------------------------------------------------------------
Citrix Systems, Inc.(a) 46,900 4,552,231
- --------------------------------------------------------------
Electronic Arts, Inc.(a) 25,000 1,403,125
- --------------------------------------------------------------
Hyperion Solutions Corp.(a) 68,000 1,224,000
- --------------------------------------------------------------
I2 Technologies, Inc.(a) 65,000 1,974,375
- --------------------------------------------------------------
Mastech Corp.(a) 80,000 2,290,000
- --------------------------------------------------------------
Novell, Inc.(a) 240,700 4,362,688
- --------------------------------------------------------------
Oracle Corp.(a) 123,500 5,325,938
- --------------------------------------------------------------
Rational Software Corp.(a) 156,600 4,149,900
- --------------------------------------------------------------
Unisys Corp.(a) 100,000 3,443,750
- --------------------------------------------------------------
32,126,126
- --------------------------------------------------------------
CONSUMER (JEWELRY, NOVELTIES & GIFTS)-0.60%
Blyth Industries, Inc.(a) 67,000 2,093,750
- --------------------------------------------------------------
CONSUMER FINANCE-1.79%
Providian Financial Corp. 82,500 6,187,500
- --------------------------------------------------------------
CONTAINERS (METAL & GLASS)-0.92%
Owens-Illinois, Inc.(a) 104,400 3,197,250
- --------------------------------------------------------------
DISTRIBUTORS (FOOD & HEALTH)-5.00%
U S Foodservice, Inc.(a)(b) 353,400 17,316,600
- --------------------------------------------------------------
ELECTRICAL EQUIPMENT-1.99%
Molex, Inc.-Class A 135,100 4,306,313
- --------------------------------------------------------------
SCI Systems, Inc.(a) 45,000 2,598,750
- --------------------------------------------------------------
6,905,063
- --------------------------------------------------------------
ELECTRONICS (SEMICONDUCTOR)-7.47%
Advanced Micro Devices, Inc.(a) 145,600 4,213,300
- --------------------------------------------------------------
Analog Devices, Inc.(a) 106,200 3,332,025
- --------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
MARKET
SHARES VALUE
<S> <C> <C>
ELECTRONICS (SEMICONDUCTOR)-(CONTINUED)
Burr-Brown Corp.(a) 247,300 $ 5,796,094
- --------------------------------------------------------------
Dallas Semiconductor Corp. 49,000 1,996,750
- --------------------------------------------------------------
Lattice Semiconductor Corp.(a) 64,000 2,938,000
- --------------------------------------------------------------
Level One Communications, Inc.(a) 68,300 2,424,650
- --------------------------------------------------------------
Xilinx, Inc.(a) 79,600 5,183,950
- --------------------------------------------------------------
25,884,769
- --------------------------------------------------------------
EQUIPMENT (SEMICONDUCTOR)-0.85%
KLA-Tencor Corp.(a) 68,200 2,958,175
- --------------------------------------------------------------
FINANCIAL (DIVERSIFIED)-1.33%
Ambac Financial Group, Inc. 35,000 2,106,563
- --------------------------------------------------------------
SEI Investments Co. 25,000 2,484,375
- --------------------------------------------------------------
4,590,938
- --------------------------------------------------------------
HEALTHCARE (DRUGS-GENERIC & OTHER)-4.46%
Barr Laboratories, Inc.(a) 42,000 2,016,000
- --------------------------------------------------------------
Forest Laboratories, Inc.(a) 113,000 6,010,188
- --------------------------------------------------------------
Jones Pharma, Inc. 55,400 2,022,100
- --------------------------------------------------------------
Teva Pharmaceutical Industries
Ltd.-ADR (Israel) 78,900 3,210,244
- --------------------------------------------------------------
Watson Pharmaceuticals, Inc.(a) 35,000 2,200,625
- --------------------------------------------------------------
15,459,157
- --------------------------------------------------------------
HEALTHCARE (MEDICAL EQUIPMENT & SUPPLIES)-5.05%
Allegiance Corp. 40,000 1,865,000
- --------------------------------------------------------------
Arterial Vascular Engineering, Inc.(a) 108,100 5,675,250
- --------------------------------------------------------------
Guidant Corp. 28,000 3,087,000
- --------------------------------------------------------------
Henry Schein, Inc.(a) 50,000 2,237,500
- --------------------------------------------------------------
PSS World Medical, Inc.(a) 95,000 2,185,000
- --------------------------------------------------------------
Sybron International Corp.(a) 90,000 2,446,875
- --------------------------------------------------------------
17,496,625
- --------------------------------------------------------------
HEALTHCARE (SPECIALIZED SERVICES)-1.55%
Alza Corp.(a) 66,000 3,448,500
- --------------------------------------------------------------
Omnicare, Inc. 55,000 1,911,250
- --------------------------------------------------------------
5,359,750
- --------------------------------------------------------------
INSURANCE
(PROPERTY-CASUALTY)-0.93%
EXEL Limited-Class A 43,100 3,232,500
- --------------------------------------------------------------
LODGING-HOTELS-0.94%
Promus Hotel Corp.(a) 100,500 3,253,688
- --------------------------------------------------------------
MACHINERY (DIVERSIFIED)-1.18%
Applied Power, Inc.-Class A 108,100 4,080,775
- --------------------------------------------------------------
MANUFACTURING (SPECIALIZED)-2.53%
Pall Corp. 135,700 3,434,906
- --------------------------------------------------------------
United States Filter Corp. 233,249 5,335,571
- --------------------------------------------------------------
8,770,477
- --------------------------------------------------------------
OIL & GAS (DRILLING & EQUIPMENT)-2.95%
BJ Services Co.(a) 174,900 2,732,812
- --------------------------------------------------------------
Cooper Cameron Corp.(a) 102,800 2,518,600
- --------------------------------------------------------------
Rowan Companies, Inc.(a) 116,000 1,160,000
- --------------------------------------------------------------
</TABLE>
F-33
<PAGE> 266
<TABLE>
<CAPTION>
MARKET
SHARES VALUE
<S> <C> <C>
OIL & GAS (DRILLING & EQUIPMENT)-(CONTINUED)
Transocean Offshore Inc. 45,600 $ 1,222,650
- --------------------------------------------------------------
Weatherford International, Inc.(a) 134,400 2,604,000
- --------------------------------------------------------------
10,238,062
- --------------------------------------------------------------
OIL & GAS (EXPLORATION & PRODUCTION)-3.44%
Anadarko Petroleum Corp. 81,800 2,525,575
- --------------------------------------------------------------
Burlington Resources, Inc. 132,200 4,734,412
- --------------------------------------------------------------
Devon Energy Corp. 50,000 1,534,375
- --------------------------------------------------------------
Noble Affiliates, Inc. 50,000 1,231,250
- --------------------------------------------------------------
Seagull Energy Corp.(a) 301,200 1,901,325
- --------------------------------------------------------------
11,926,937
- --------------------------------------------------------------
PERSONAL CARE-0.49%
Avon Products, Inc. 38,000 1,681,500
- --------------------------------------------------------------
PUBLISHING (NEWSPAPERS)-0.25%
New York Times Co. (The)-Class A 25,000 867,187
- --------------------------------------------------------------
RETAIL (DEPARTMENT STORES)-0.40%
Federated Department Stores,
Inc.(a) 33,000 1,437,562
- --------------------------------------------------------------
RETAIL (FOOD CHAINS)-0.63%
Kroger Co.(a) 36,000 2,178,000
- --------------------------------------------------------------
RETAIL (GENERAL MERCHANDISE)-1.04%
Kmart Corp.(a) 235,000 3,598,437
- --------------------------------------------------------------
RETAIL (SPECIALTY)-1.37%
Pep Boys-Manny, Moe & Jack 301,800 4,734,487
- --------------------------------------------------------------
RETAIL (SPECIALTY-APPAREL)-1.61%
Abercrombie & Fitch Co.-Class A(a) 18,600 1,315,950
- --------------------------------------------------------------
Intimate Brands, Inc. 142,200 4,248,225
- --------------------------------------------------------------
5,564,175
- --------------------------------------------------------------
SAVINGS & LOAN COMPANIES-0.94%
GreenPoint Financial Corp. 92,900 3,263,111
- --------------------------------------------------------------
SERVICES (ADVERTISING/MARKETING)-10.39%
Outdoor Systems, Inc.(a)(b) 831,180 24,935,400
- --------------------------------------------------------------
Snyder Communications, Inc.(a) 152,700 5,153,625
- --------------------------------------------------------------
Young & Rubicam, Inc.(a) 183,200 5,931,100
- --------------------------------------------------------------
36,020,125
- --------------------------------------------------------------
SERVICES (COMMERCIAL & CONSUMER)-1.16%
Metzler Group, Inc.(a) 60,000 2,921,250
- --------------------------------------------------------------
Stewart Enterprises, Inc.- Class A 50,000 1,112,500
- --------------------------------------------------------------
4,033,750
- --------------------------------------------------------------
SERVICES (COMPUTER SYSTEMS)-2.87%
Cambridge Technology Partners,
Inc.(a) 164,400 3,637,350
- --------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
MARKET
SHARES VALUE
<S> <C> <C>
SERVICES (COMPUTER SYSTEMS)-(CONTINUED)
Gerber Scientific, Inc. 82,600 $ 1,966,912
- --------------------------------------------------------------
Policy Management Systems Corp.(a) 86,000 4,343,000
- --------------------------------------------------------------
9,947,262
- --------------------------------------------------------------
SERVICES (DATA PROCESSING)-1.83%
CSG Systems International, Inc.(a) 41,000 3,239,000
- --------------------------------------------------------------
Equifax, Inc. 25,000 854,687
- --------------------------------------------------------------
NOVA Corp.(a) 65,300 2,265,093
- --------------------------------------------------------------
6,358,780
- --------------------------------------------------------------
TELECOMMUNICATIONS (CELLULAR/WIRELESS)-0.68%
Metromedia Fiber Network, Inc.(a) 70,000 2,345,000
- --------------------------------------------------------------
WASTE MANAGEMENT-1.41%
Allied Waste Industries, Inc.(a) 207,000 4,890,375
- --------------------------------------------------------------
Total Common Stocks (Cost
$252,047,680) 315,330,995
- --------------------------------------------------------------
</TABLE>
<TABLE>
<S> <C> <C> <C> <C>
OPTIONS PURCHASED-0.03%
PUT OPTIONS-0.03%
BROADCASTING (TELEVISION, RADIO & CABLE)-0.00%
</TABLE>
<TABLE>
<CAPTION>
NUMBER OF EXERCISE EXPIRATION
CONTRACTS PRICE DATE
<S> <C> <C> <C> <C>
Cablevision Systems Corp.-
Class A 1,230 40 Jan-99 $ 15,375
- -----------------------------------------------------------------------
DISTRIBUTORS (FOOD &
HEALTH)-0.01%
U S Foodservice, Inc. 2,828 45 Jan-99 35,350
- -----------------------------------------------------------------------
SERVICES (ADVERTISING/
MARKETING)-0.02%
Outdoor Systems, Inc. 7,010 22.50 Jan-99 65,718
- -----------------------------------------------------------------------
Total Options Purchased
(Cost $1,172,362) 116,443
- -----------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
SHARES
<S> <C> <C>
WARRANTS-0.50%
BANKS (REGIONAL)-0.50%
Golden State Bancorp, Litigation
Warrants, expiring 01/01/01
(Cost $2,296,743) 381,300 $ 1,739,682
- --------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT
<S> <C> <C>
REPURCHASE AGREEMENT-7.90%
SBC Warburg Dillon Read Inc.,
4.75%, 01/04/99 $27,371,944 $ 27,371,944
- --------------------------------------------------------------
TOTAL INVESTMENTS-99.41% 344,559,064
- --------------------------------------------------------------
OTHER ASSETS & LIABILITIES-0.59% 2,059,395
- --------------------------------------------------------------
NET ASSETS-100.00% $346,618,459
==============================================================
</TABLE>
Notes to Schedule of Investments:
(a) Non-income producing security.
(b) A portion of this security is subject to call options written. See Note 4.
(c) Collateral on repurchase agreements, including the fund's pro-rata interest
in joint repurchase agreement is taken into possession by the Fund upon
entering into the repurchase agreement. The collateral is marked to market
daily to ensure its market value as being 102% of the sales price of the
repurchase agreement. The investments in some repurchase agreements are
through participation in joint accounts. with other mutual funds private
accounts and certain non-registered investment companies managed by the
investment advisor or its affiliates.
(d) Joint repurchase agreement entered into 12/31/98 with a maturing value of
$1,000,527,778. Collateralized by $2,207,068,000 U.S. Government
obligations, 0% to 6.75% due 06/30/99 to 11/15/21 with an aggregate market
value at 12/31/98 of $1,020,001,079.
Abbreviation:
ADR - American Depositary Receipt
See Notes to Financial Statements.
F-34
<PAGE> 267
STATEMENT OF ASSETS AND LIABILITIES
December 31, 1998
<TABLE>
<S> <C>
ASSETS:
Investments, at market value
(cost $282,888,729) $344,559,064
- ---------------------------------------------------------
Cash 718,265
- ---------------------------------------------------------
Receivables for:
Investments sold 3,035,046
- ---------------------------------------------------------
Fund shares sold 5,232,000
- ---------------------------------------------------------
Dividends and interest 57,064
- ---------------------------------------------------------
Other assets 14,660
- ---------------------------------------------------------
Total assets 353,616,099
- ---------------------------------------------------------
LIABILITIES:
Payable for fund shares reacquired 1,853,509
- ---------------------------------------------------------
Options written
(premiums received $2,262,028) 4,346,737
- ---------------------------------------------------------
Accrued investment management &
administration fees 203,493
- ---------------------------------------------------------
Accrued accounting fees 7,983
- ---------------------------------------------------------
Accrued distribution fees 352,058
- ---------------------------------------------------------
Accrued trustees' fees 7,113
- ---------------------------------------------------------
Accrued transfer agent fees 83,800
- ---------------------------------------------------------
Accrued operating expenses 142,947
- ---------------------------------------------------------
Total liabilities 6,997,640
- ---------------------------------------------------------
Net assets applicable to shares outstanding $346,618,459
- ---------------------------------------------------------
NET ASSETS:
Class A $180,258,032
=========================================================
Class B $165,447,122
=========================================================
Advisor Class $ 913,305
=========================================================
SHARES OUTSTANDING, $0.01 PAR VALUE PER
SHARE:
Class A 9,501,665
=========================================================
Class B 9,110,457
=========================================================
Advisor Class 47,866
=========================================================
Class A:
Net asset value and redemption price per
share $ 18.97
- ---------------------------------------------------------
Offering price per share:
(Net asset value of
$18.97 divided by 94.50%) $ 20.07
=========================================================
Class B:
Net asset value and offering price per
share $ 18.16
=========================================================
Advisor Class:
Net asset value and offering price per
share $ 19.08
=========================================================
</TABLE>
STATEMENT OF OPERATIONS
For the year ended December 31, 1998
<TABLE>
<S> <C>
INVESTMENT INCOME:
Dividends (net of $5,749 foreign
withholding tax) $ 1,161,164
- ---------------------------------------------------------
Interest 613,489
- ---------------------------------------------------------
Security lending income 254,918
- ---------------------------------------------------------
Total investment income 2,029,571
- ---------------------------------------------------------
EXPENSES:
Investment management & administration fees 3,140,938
- ---------------------------------------------------------
Accounting fees 118,894
- ---------------------------------------------------------
Trustees fees 17,403
- ---------------------------------------------------------
Distribution fees -- Class A 760,959
- ---------------------------------------------------------
Distribution fees -- Class B 2,148,252
- ---------------------------------------------------------
Transfer agent fees -- Class A 487,406
- ---------------------------------------------------------
Transfer agent fees -- Class B 483,318
- ---------------------------------------------------------
Transfer agent fees -- Advisor Class 2,521
- ---------------------------------------------------------
Other 1,043,368
- ---------------------------------------------------------
Total expenses 8,203,059
- ---------------------------------------------------------
Less: Expense reductions (46,733)
- ---------------------------------------------------------
Net expenses 8,156,326
- ---------------------------------------------------------
Net investment income (loss) (6,126,755)
- ---------------------------------------------------------
REALIZED AND UNREALIZED GAIN (LOSS) FROM
INVESTMENT SECURITIES AND OPTION
CONTRACTS:
Net realized gain (loss) from investment
securities (7,289,125)
- ---------------------------------------------------------
Net unrealized appreciation (depreciation)
of:
Investment securities (3,811,413)
- ---------------------------------------------------------
Option contracts written (2,084,709)
- ---------------------------------------------------------
(5,896,122)
- ---------------------------------------------------------
Net gain (loss) from investment
securities and option contracts (13,185,247)
- ---------------------------------------------------------
Net increase (decrease) in net assets
resulting from operations $(19,312,002)
=========================================================
</TABLE>
See Notes to Financial Statements.
F-35
<PAGE> 268
STATEMENT OF CHANGES IN NET ASSETS
For the years ended December 31, 1998 and 1997
<TABLE>
<CAPTION>
1998 1997
------------- -------------
<S> <C> <C>
OPERATIONS:
Net investment income (loss) $ (6,126,755) $ (6,767,300)
- ----------------------------------------------------------------------------------------------
Net realized gain (loss) from investment securities and
option contracts (7,289,125) 91,288,360
- ----------------------------------------------------------------------------------------------
Net unrealized appreciation (depreciation) of investment
securities and option contracts (5,896,122) (23,043,968)
- ----------------------------------------------------------------------------------------------
Net increase (decrease) in net assets resulting from
operations (19,312,002) 61,477,092
- ----------------------------------------------------------------------------------------------
Distributions to shareholders from net realized gains on
investment securities:
Class A (8,638,559) (27,861,047)
- ----------------------------------------------------------------------------------------------
Class B (8,762,197) (29,550,073)
- ----------------------------------------------------------------------------------------------
Advisor Class (46,305) (120,835)
- ----------------------------------------------------------------------------------------------
Share transactions-net:
Class A (59,340,039) (91,841,233)
- ----------------------------------------------------------------------------------------------
Class B (69,635,070) (78,964,718)
- ----------------------------------------------------------------------------------------------
Advisor Class 70,469 (860,102)
- ----------------------------------------------------------------------------------------------
Net increase (decrease) in net assets (165,663,703) (167,720,916)
- ----------------------------------------------------------------------------------------------
NET ASSETS:
Beginning of period 512,282,162 680,003,078
- ----------------------------------------------------------------------------------------------
End of period $ 346,618,459 $ 512,282,162
==============================================================================================
NET ASSETS CONSIST OF:
Shares of beneficial interest $ 295,648,297 $ 430,679,692
- ----------------------------------------------------------------------------------------------
Undistributed net investment income -- --
- ----------------------------------------------------------------------------------------------
Undistributed net realized gain (loss) from investment
securities, foreign currencies and option contracts (8,615,464) 16,120,722
- ----------------------------------------------------------------------------------------------
Unrealized appreciation of investment securities, foreign
currencies and option contracts 59,585,626 65,481,748
- ----------------------------------------------------------------------------------------------
$ 346,618,459 $ 512,282,162
==============================================================================================
</TABLE>
See Notes to Financial Statements.
F-36
<PAGE> 269
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1998
NOTE 1-SIGNIFICANT ACCOUNTING POLICIES
AIM Mid Cap Equity Fund, formerly AIM Mid Cap Growth Fund, (the "Fund"), is a
separate series of AIM Growth Series (the "Trust"). The Trust is a Delaware
business trust and is registered under the Investment Company Act of 1940, as
amended ("1940 Act"), as an open-end management investment company. The Trust
has six diversified series of shares in operation, each series corresponding to
a distinct portfolio of investments.
The Fund offers Class A, Class B, and Advisor Class shares, each of which has
equal rights as to assets and voting privileges. Class A and Class B each has
exclusive voting rights with respect to its distribution plan. Investment
income, realized and unrealized capital gains and losses, and the common
expenses of the Fund are allocated on a pro rata basis to each class based on
the relative net assets of each class to the total net assets of the Fund. Each
class of shares differs in its respective distribution expenses, and may differ
in its transfer agent, registration, and certain other class-specific fees and
expenses.
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statements and
the reported amounts of income and expenses during the reporting period. Actual
results could differ from those estimates. The following is a summary of
significant accounting policies in conformity with generally accepted accounting
principles consistently followed by the Fund in the preparation of the financial
statements.
A. Portfolio Valuation -- The Fund calculates the net asset value of and
completes orders to purchase, exchange or repurchase Fund shares on each
business day, with the exception of those days on which the New York Stock
Exchange is closed.
Equity securities are valued at the last sale price on the exchange on
which such securities are traded or on the principal over-the-counter market
on which such securities are traded, as of the close of business on the day
the securities are being valued or, lacking any sales, at the mean between
the closing bid and asked prices. In cases where securities are traded on
more than one exchange, the securities are valued on the exchange determined
by A I M Advisors, Inc. (the "Manager") to be the primary market.
Fixed income investments are valued at the mean of representative quoted
bid and ask prices for such investments or, if such prices are not available,
at prices for investments of comparative maturity, quality and type; however,
when the Manager deems it appropriate, prices obtained for the day of
valuation from a bond pricing service will be used. Short-term investments
with a maturity of 60 days or less are valued at amortized cost which
approximates market value.
Investments for which market quotations are not readily available
(including restricted securities which are subject to limitations on their
sale) are valued at fair value as determined in good faith by or under the
direction of the Trust's Board of Trustees.
B. Repurchase Agreements -- With respect to repurchase agreements entered into
by the Fund, it is the Fund's policy to always receive, as collateral, United
States government securities or other high quality debt securities of which
the value, including accrued interest, is at least equal to the amount to be
repaid to the Fund under each agreement at its maturity.
C. Option Accounting Principles -- When the Fund writes a call or put option, an
amount equal to the premium received is included in the Fund's "Statement of
Assets and Liabilities" as an asset and an equivalent liability. The amount
of the liability is subsequently marked-to-market to reflect the current
market value of the option. The current market value of an option is the mean
between the last bid and asked prices on that day. If an option expires on
its stipulated expiration date or if the Fund enters into a closing purchase
transaction, a gain or loss is realized without regard to any unrealized gain
or loss on the underlying security, and the liability related to such option
is extinguished. If a written call option is exercised, a gain or loss is
realized from the sale of the underlying security and the proceeds of the
sale are increased by the premium originally received. If a written put
option is exercised, the cost of the underlying security purchased would be
decreased by the premium originally received. The Fund can write options only
on a covered basis, which, for a call, requires that the Fund hold the
underlying security, and, for a put, requires the Fund to set aside cash,
U.S. government securities or other liquid securities in an amount not less
than the exercise price or otherwise provide adequate cover at all times
while the put option is outstanding. The Fund may use options to manage its
exposure to the stock market and to fluctuations in interest rates.
The premium paid by the Fund for the purchase of a call or put option is
included in the Fund's "Statement of Assets and Liabilities" as an investment
and subsequently "marked-to-market" to reflect the current market value of
the option. If an option which the Fund has purchased expires on the
stipulated expiration date, the Fund realizes a loss in the amount of the
cost of the option. If the Fund enters into a closing sale transaction, the
Fund realizes a gain or loss, depending on whether proceeds from the closing
sale transaction are greater or less than the cost of the option. If the Fund
exercises a call option, the cost of the securities acquired by exercising
the call is increased by the premium paid to buy the call. If the Fund
exercises a put option, it realizes a gain or loss from the sale of the
underlying security, and the proceeds from such sale are decreased by the
premium originally paid.
The risk associated with purchasing options is limited to the premium
originally paid. The risk in writing a call option is that the Fund may
forego the opportunity of profit if the market value of the underlying
security or index increases and the option is exercised. The risk in writing
a put option is that the Fund may incur a loss if the market value of the
underlying security or index decreases and the option is exercised. In
addition, there is the risk the Fund may not be able to enter into a closing
transaction because of an illiquid secondary market.
D. Futures Contracts -- A futures contract is an agreement between two parties
to buy and sell a security at a set price on
F-37
<PAGE> 270
a future date. Upon entering into such a contract the Fund is required to
pledge to the broker an amount of cash or securities equal to the minimum
"initial margin" requirements of the exchange on which the contract is
traded. Pursuant to the contract, the Fund agrees to receive from or pay to
the broker an amount of cash equal to the daily fluctuation in value of the
contract. Such receipts or payments are known as "variation margin" and are
recorded by the Fund as unrealized gains or losses. When the contract is
closed, the Fund records a realized gain or loss equal to the difference
between the value of the contract at the time it was opened and the value at
the time it was closed. The potential risk to the Fund is that the change in
value of the underlying securities may not correlate to the change in value
of the contracts. The Fund may use futures contracts to manage its exposure
to the stock market and to fluctuations in interest rates.
E. Security Transactions and Related Investment Income -- Security transactions
are accounted for on the trade date (date the order to buy or sell is
executed). Realized gains and losses are computed on the basis of specific
identification of the Securities sold. Dividends are recorded on the
ex-dividend date. Interest income is recorded on the accrual basis. Where a
high level of uncertainty exists as to its collection, income is recorded net
of all withholding tax with any rebate recorded when received. The Fund may
trade securities on other than normal settlement terms. This may increase the
risk if the other party to the transaction fails to deliver and causes the
Fund to subsequently invest at less advantageous prices. On December 31, 1998
$6,126,755 was reclassified from paid-in capital to undistributed net
investment income as a result of a net operating tax loss in order to comply
with the requirements of the American Institute of Certified Public
Accountants Statement of Position 93-2. Net assets of the Fund were
unaffected as a result of this reclassification.
F. Portfolio Securities Loaned -- At December 31, 1998, stocks with an aggregate
value listed below were on loan to brokers. The loans were secured by cash
collateral received by the Fund:
<TABLE>
<CAPTION>
DECEMBER 31, 1998 PERIOD ENDED
----------------------------- DECEMBER 31, 1998
AGGREGATE VALUE CASH -----------------
ON LOANS COLLATERAL FEES RECEIVED
--------------- ----------- -----------------
<S> <C> <C> <C>
$49,076,261 $49,978,243 $254,918
</TABLE>
Cash collateral is received by the Fund against loaned securities in the
amount at least equal to 102% of the market value of the loaned securities at
the inception of each loan. This collateral must be maintained at not less
than 100% of the market value of the loaned securities during the period of
the loan. The cash collateral is invested in a securities lending trust which
consists of a portfolio of high quality short duration securities whose
average effective duration is restricted to 120 days or less.
G. Taxes -- It is the policy of the Fund to meet the requirements for
qualification as a "regulated investment company" under the Internal Revenue
Code of 1986, as amended ("Code"). It is also the intention of the Fund to
make distributions sufficient to avoid imposition of any excise tax under
Section 4982 of the Code. Therefore, no provision has been made for Federal
taxes on income, capital gains, or unrealized appreciation of securities
held, and excise tax on income and capital gains. The Fund has a capital loss
carryforward of $8,616,058 (which may be carried forward to offset future
taxable capital gains, if any) which expires, if not previously utilized,
through the year 2006. The Fund cannot distribute capital gains to
shareholders until the tax loss carryforwards have been utilized.
H. Distributions to Shareholders -- Distributions to shareholders are recorded
by the Fund on the ex-date. Income and capital gain distributions are
determined in accordance with Federal income tax regulations which may differ
from generally accepted accounting principles. These differences are
primarily due to differing treatments of income and gains on various
investment securities held by the Fund and timing differences.
I. Restricted Securities -- The Fund is permitted to invest in privately placed
restricted securities. These securities may be resold in transactions exempt
from registration or to the public if the securities are registered.
Disposal of these securities may involve time-consuming negotiations and
expense, and prompt sale at an acceptable price may be difficult.
J. Indexed Securities -- The Fund may invest in indexed securities whose value
is linked either directly or indirectly to changes in foreign currencies,
interest rates, equities, indices, or other reference instruments. Indexed
securities may be more volatile than the reference instrument itself, but
any loss is limited to the amount of the original investment.
K. Line of Credit -- The Fund, along with certain other funds advised and/or
administered by the Manager, has a line of credit with BankBoston and State
Street Bank & Trust Company. The arrangements with the banks allow the Fund
and certain other funds to borrow, on a first come, first serve basis, an
aggregate maximum amount of $250,000,000. The Fund is limited to borrowing up
to 33 1/3% of the value of the Fund's total assets. On December 31, 1998, the
Fund did not have loans outstanding.
For the period ended December 31, 1998, the average outstanding daily
balance of bank loans (based on the number of days the loans were
outstanding) for the Fund was $9,979,175 with a weighted average interest
rate of 6.33%. Interest expense for the Fund for the period ended December
31, 1998 was $253,985, and is included in "Other Expenses" on the Statement
of Operations.
NOTE 2-RELATED PARTIES
A I M Advisors, Inc. ("Manager") is the Fund's investment manager and
administrator. As of the close of business on May 29, 1998, Liechtenstein Global
Trust AG ("LGT"), the former indirect parent organization of Chancellor LGT
Asset Management, Inc. ("Chancellor LGT"), consummated a purchase agreement with
AMVESCAP PLC pursuant to which AMVESCAP PLC acquired LGT's Asset Management
Division, which included Chancellor LGT and certain other affiliates. As a
result of this transaction, Chancellor LGT was renamed INVESCO (NY), Inc., and
is now an indirect wholly-owned subsidiary of AMVESCAP PLC. In connection with
this transaction, A I M Advisors, Inc., an indirect wholly-owned subsidiary of
AMVESCAP PLC, became the investment manager and administrator of the Fund. Also
on May 29, 1998, A I M Distributors, Inc. ("AIM Distributors"), a wholly-owned
subsidiary of the Manager, became the Fund's distributor, and the Trust was
reorganized from a Massachusetts business trust into a Delaware business trust.
Finally, on September 4, 1998, A I M Fund Services, Inc. ("AFS"), a wholly-owned
subsidiary of the Manager, became the transfer agent of the Fund.
F-38
<PAGE> 271
The Fund pays investment management and administration fees to the Manager at
the annualized rate of 0.725% on the first $500 million of average daily net
assets of the Fund; 0.70% on the next $500 million; 0.675% on the next $500
million; and 0.65% on amounts thereafter.
AIM Distributors serves as the Fund's distributor. For the period ended May
29, 1998, GT Global, Inc. ("GT Global"), an affiliate of Chancellor LGT, served
as the Fund's distributor. The Fund offers Class A, Class B, and Advisor Class
shares for purchase.
Class A shares are subject to initial sales charges imposed at the time of
purchase, in accordance with the schedule included in the Fund's current
prospectus. AIM Distributors collects the sales charges imposed on sales of
Class A shares, and reallows a portion of such charges to dealers through which
the sales are made. For the year ended December 31, 1998, AIM Distributors and
GT Global retained the following sales charges: $4,819 and $17,303,
respectively. Purchases of Class A shares exceeding $1,000,000 may be subject to
a contingent deferred sales charge ("CDSC") upon redemption, in accordance with
the Fund's current prospectus. AIM Distributors also makes ongoing shareholder
servicing and trail commission payments to dealers whose clients hold Class A
shares.
Class B shares are not subject to initial sales charges. When Class B shares
are sold, AIM Distributors from its own resources pays commissions to dealers
through which the sales are made. Certain redemptions of Class B shares made
within six years of purchase are subject to CDSCs, in accordance with the Fund's
current prospectus. For the year ended December 31, 1998, AIM Distributors and
GT Global collected such CDSCs in the amount of: $191,592 and $770,735,
respectively. In addition, AIM Distributors makes ongoing shareholder servicing
and trail commission payments to dealers whose clients hold Class B shares.
For the period ended May 29, 1998, pursuant to the then effective separate
distribution plans adopted under the 1940 Act Rule 12b-1 by the Trust's Board of
Trustees with respect to the Fund's Class A shares ("Old Class A Plan") and
Class B shares ("Old Class B Plan"), the Fund reimbursed GT Global for a portion
of its shareholder servicing and distribution expenses. Under the Old Class A
Plan, the Fund was permitted to pay GT Global a service fee at the annualized
rate of up to 0.25% of the average daily net assets of the Fund's Class A shares
for GT Global's expenditures incurred in servicing and maintaining shareholder
accounts, and was permitted to pay GT Global a distribution fee at the
annualized rate of up to 0.35% of the average daily net assets of the Fund's
Class A shares, less any amounts paid by the Fund as the aforementioned service
fee, for GT Global's expenditures incurred in providing services as distributor.
All expenses for which GT Global was reimbursed under the Old Class A Plan would
have been incurred within one year of such reimbursement.
For the period ended May 29, 1998, pursuant to the Old Class B Plan, the Fund
was permitted to pay GT Global a service fee at the annualized rate of up to
0.25% of the average daily net assets of the Fund's Class B shares for GT
Global's expenditures incurred in servicing and maintaining shareholder
accounts, and was permitted to pay GT Global a distribution fee at the
annualized rate of up to 0.75% of the average daily net assets of the Fund's
Class B shares for GT Global's expenditures incurred in providing services as
distributor. Expenses incurred under the Old Class B Plan in excess of 1.00%
annually were permitted to be carried forward for reimbursement in subsequent
years as long as that Plan continued in effect.
Effective as of the close of business May 29, 1998, pursuant to Rule 12b-1
under the 1940 Act, the Trust's Board of Trustees adopted a Master Distribution
Plan applicable to the Fund's Class A shares ("Class A Plan") and Class B shares
("Class B Plan"), pursuant to which the Fund compensates AIM Distributors for
the purpose of financing any activity that is intended to result in the sale of
Class A or Class B shares of the Fund. Under the Class A Plan, the Fund
compensates AIM Distributors at the annualized rate of 0.35% of the average
daily net assets of each of the Fund's Class A shares.
Pursuant to the Class B Plan, the Fund compensates AIM Distributors at an
annualized rate of 1.00% of the average daily net assets of the Fund's Class B
shares.
The Class A Plan and the Class B Plan (together, the "Plans") are designed to
compensate AIM Distributors for certain promotional and other sales-related
costs, and to implement a dealer incentive program that provides for periodic
payments to selected dealers who furnish continuing personal shareholder
services to their customers who purchase and own Class A and Class B shares of
the Fund. Payments also can be directed by AIM Distributors to financial
institutions who have entered into service agreements with respect to Class A
and Class B shares of the Fund and who provide continuing personal services to
their customers who own Class A and Class B shares of the Fund. The service fees
payable to selected financial 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 that were purchased on or after a
prescribed date set forth in the Plans.
The Manager and AIM Distributors have undertaken to limit the Fund's expenses
(exclusive of brokerage commissions, taxes, interest, and extraordinary
expenses) to the annual rate of 1.75%, 2.40%, and 1.40% of the average daily net
assets of the Fund's Class A, Class B, and Advisor Class Shares, respectively.
This undertaking may be changed or eliminated in the future. If necessary, this
limitation will be effected by waivers by the Manager of investment management
and administration fees, waivers by AIM Distributors of payments under the Class
A Plan and/or Class B Plan and/or reimbursements by the Manager or AIM
Distributors of portions of the Fund's other operating expenses.
Effective as of the close of business September 4, 1998, the Fund, pursuant to
a transfer agency and service agreement, has agreed to pay A I M Fund Services,
Inc. ("AFS") an annualized fee of $24.85 for each shareholder accounts that are
open during any calendar month (this fee includes all out-of-pocket expenses),
and an annualized fee of $0.70 per shareholder account that is closed during any
calendar month. Both fees are billed by AFS monthly in arrears on a prorated
basis of 1/12 of the annualized fee for all such accounts.
For the period January 1, 1998 to September 4, 1998, GT Global Investor
Services, Inc., an affiliate of Chancellor LGT, was the transfer agent of the
Fund. For performing shareholder servicing, reporting, and general transfer
agent services, GT Services received an annual maintenance fee of $17.50 per
account, a new account fee of $4.00 per account, a per transaction fee of $1.75
for all transactions other than exchanges and a per exchange fee of $2.25. GT
Services was also reimbursed by the
F-39
<PAGE> 272
Fund for its out-of-pocket expenses for such items as postage, forms, telephone
charges, stationery and office supplies.
The Manager is the pricing and accounting agent for the Fund. The monthly fee
for these services to the Manager is a percentage, not to exceed 0.03% annually,
of the Fund's average daily net assets. The annual fee rate is derived based on
the aggregate net assets of the funds which comprise the following investment
companies: AIM Growth Series, AIM Investment Funds, AIM Series Trust, G.T.
Global Variable Investment Series and G.T. Global Variable Investment Trust. The
fee is calculated at the rate of 0.03% to the first $5 billion of assets and
0.02% to the assets in excess of $5 billion. An amount is allocated to and paid
by each such fund based on its relative average daily net assets.
The Trust pays each of its Trustees who is not an employee, officer or
director of the Manager, AIM Distributors or AFS $5,000 per year plus $300 for
each meeting of the board or any committee thereof attended by the Trustee.
At December 31, 1998, all of the shares of beneficial interest were owned
either by the Fund or Invesco (NY), Inc.
NOTE 3-PURCHASES AND SALES OF SECURITIES
The aggregate amount of investment securities (other than short-term
securities) purchased and sold by the Fund during the year ended December 31,
1998 was $710,371,237 and $898,879,718, respectively.
The amount of unrealized appreciation (depreciation) of investment securities,
on a tax basis, as of December 31, 1998 is as follows:
<TABLE>
<S> <C>
Aggregate unrealized appreciation of investment
securities $70,168,213
- ---------------------------------------------------------------
Aggregate unrealized (depreciation) of investment
securities (8,497,878)
- ---------------------------------------------------------------
Net unrealized appreciation of investment
securities $61,670,335
===============================================================
Cost of investments is the same for tax and
financial statement purposes.
</TABLE>
NOTE 4-CALL OPTIONS CONTRACTS WRITTEN
Transactions in call options written during the year ended December 31, 1998 are
summarized as follows:
<TABLE>
<CAPTION>
CALL OPTION CONTRACTS
----------------------
NUMBER OF PREMIUMS
CONTRACTS RECEIVED
--------- ----------
<S> <C> <C>
Beginning of period -- --
- -----------------------------------------------------------------
Written 11,068 $2,262,028
- -----------------------------------------------------------------
End of period 11,068 $2,262,028
=================================================================
</TABLE>
Open call option contracts written at December 31, 1998 were as follows:
<TABLE>
<CAPTION>
DECEMBER 31,
NUMBER 1998 UNREALIZED
CONTRACT STRIKE OF PREMIUMS MARKET APPRECIATION
ISSUER MONTH PRICE CONTRACTS RECEIVED VALUE (DEPRECIATION)
- ------ -------- ------ --------- -------- ------------ --------------
<S> <C> <C> <C> <C> <C> <C>
Cablevision Systems
Corp. Jan 99 45 1230 $ 371,546 $ 691,875 $ (320,329)
- -------------------------------------------------------------------------------------------------
Outdoor Systems, Inc. Jan 99 25 7010 1,699,675 3,548,812 (1,849,137)
- -------------------------------------------------------------------------------------------------
U S Foodservice, Inc. Jan 99 50 2828 190,807 106,050 84,757
- -------------------------------------------------------------------------------------------------
$2,262,028 $4,346,737 $(2,084,709)
=================================================================================================
</TABLE>
NOTE 5-SHARE INFORMATION
Changes in the Fund's shares outstanding during the years ended December 31,
1998 and 1997 were as follows:
<TABLE>
<CAPTION>
1998 1997
--------------------------- ---------------------------
SHARES AMOUNT SHARES AMOUNT
----------- ------------- ----------- -------------
<S> <C> <C> <C> <C>
Sold:
Class A 23,952,734 $ 505,999,810 24,801,099 $ 522,081,212
- --------------------------------------------------------------------------------
Class B 5,833,056 120,542,669 9,218,434 190,231,954
- --------------------------------------------------------------------------------
Advisor Class 887,277 18,970,978 1,056,271 23,267,932
- --------------------------------------------------------------------------------
Issued as
reinvestment of
dividends:
Class A 448,265 7,998,160 1,170,749 23,490,213
- --------------------------------------------------------------------------------
Class B 471,450 8,052,203 1,240,395 24,063,873
- --------------------------------------------------------------------------------
Advisor Class 2,579 46,305 5,993 120,751
- --------------------------------------------------------------------------------
Reacquired:
Class A (27,068,413) (573,338,009) (30,338,852) (637,412,658)
- --------------------------------------------------------------------------------
Class B (9,774,765) (198,229,942) (14,376,532) (293,260,545)
- --------------------------------------------------------------------------------
Advisor Class (896,015) (18,946,814) (1,103,923) (24,248,785)
- --------------------------------------------------------------------------------
(6,143,832) $(128,904,640) (8,326,366) $(171,666,053)
================================================================================
</TABLE>
NOTE 6-EXPENSE REDUCTIONS
The Manager has directed certain portfolio trades to brokers who then paid a
portion of the Fund's expenses. For the year ended December 31, 1998, the
expenses of the Fund were reduced by $46,733 under these arrangements.
F-40
<PAGE> 273
NOTE 7-FINANCIAL HIGHLIGHTS
Shown below are the financial highlights for a share of Class A and Class B
outstanding during each of the years in the five-year period ended December 31,
1998 and for a share of Advisor Class capital stock outstanding during each of
the years in three-year period ended December 31, 1998 and the period June 1,
1995 (date operations commenced) through December 31, 1995.
<TABLE>
<CAPTION>
Class A
----------------------------------------------------
1998(a) 1997 1996 1995 1994
-------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of period $ 21.01 $ 20.77 $ 19.07 $ 17.69 $ 17.17
- ------------------------------------------------------------ -------- -------- -------- -------- --------
Income from investment operations:
Net investment income (0.24)(b) (0.20) 0.03 0.24 0.04(b)
- ------------------------------------------------------------ -------- -------- -------- -------- --------
Net gains (losses) on securities (both realized and
unrealized) (0.81) 3.00 2.96 3.93 2.55
- ------------------------------------------------------------ -------- -------- -------- -------- --------
Total from investment operations (1.05) 2.80 2.99 4.17 2.59
- ------------------------------------------------------------ -------- -------- -------- -------- --------
Less distributions:
Dividends from net investment income -- -- -- (0.21) (0.02)
- ------------------------------------------------------------ -------- -------- -------- -------- --------
Distributions from net realized gains (0.99) (2.56) (1.29) (2.58) (2.05)
- ------------------------------------------------------------ -------- -------- -------- -------- --------
Total distributions (0.99) (2.56) (1.29) (2.79) (2.07)
- ------------------------------------------------------------ -------- -------- -------- -------- --------
Net asset value, end of period $ 18.97 $ 21.01 $ 20.77 $ 19.07 $ 17.69
============================================================ ======== ======== ======== ======== ========
Total Return(C) (4.71)% 14.05% 15.65% 23.23% 15.69%
============================================================ ======== ======== ======== ======== ========
Ratios/supplemental data:
Net assets, end of period (000s omitted) $180,258 $255,674 $343,427 $396,291 $196,937
============================================================ ======== ======== ======== ======== ========
Ratio of expenses to average net assets:
With expense reductions and/or reimbursement 1.56%(d) 1.37% 1.36% 1.46% 1.58%
============================================================ ======== ======== ======== ======== ========
Without expense reductions and/or reimbursement 1.57%(d) 1.48% 1.41% -- --
============================================================ ======== ======== ======== ======== ========
Ratio of net investment income to average net assets
With expense reductions and/or reimbursement (1.09)%(d) (0.90)% 0.12% 1.24% 0.17%
============================================================ ======== ======== ======== ======== ========
Without expense reductions and/or reimbursement (1.10)%(d) (1.01)% 0.07% -- --
============================================================ ======== ======== ======== ======== ========
Portfolio turnover rate(e) 168% 190% 253% 71% 102%
============================================================ ======== ======== ======== ======== ========
</TABLE>
(a) The Fund changed investment advisors on May 29, 1998.
(b) Calculated using average shares outstanding.
(c) Does not deduct sales charges and is not annualized for periods less than
one year.
(d) Ratios are based on average net assets of $216,642,403.
(e) Portfolio turnover rates are calculated on the basis of the Fund as a whole
without distinguishing between the classes of shares issued.
<TABLE>
<CAPTION>
Class B Advisor Class
--------------------------------------------------- ----------------------------------
1998(a) 1997 1996 1995 1994(a) 1998(a) 1997 1996 1995
-------- -------- -------- -------- ------- ------- ------ ------ ------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of period $ 20.31 $ 20.28 $ 18.77 $ 17.50 $ 17.09 $21.10 $20.76 $19.05 $20.61
- -------------------------------------- -------- -------- -------- -------- ------- ------ ------ ------ ------
Income from investment operations:
Net investment income (0.38)(b) (0.34) (0.11) 0.10 (0.09) (0.17)(b) (0.15) 0.09 0.21
- -------------------------------------- -------- -------- -------- -------- ------- ------ ------ ------ ------
Net gains (losses) on securities
(both realized and unrealized) (0.78) 2.93 2.91 3.87 2.55 (0.86) 3.05 2.91 1.09
- -------------------------------------- -------- -------- -------- -------- ------- ------ ------ ------ ------
Total from investment operations (1.16) 2.59 2.80 3.97 2.46 (1.03) 2.90 3.00 1.30
- -------------------------------------- -------- -------- -------- -------- ------- ------ ------ ------ ------
Less distributions:
Dividends from net investment income -- -- -- (0.12) -- -- -- -- (0.28)
- -------------------------------------- -------- -------- -------- -------- ------- ------ ------ ------ ------
Distributions from net realized
gains (0.99) (2.56) (1.29) (2.58) (2.05) (0.99) (2.56) (1.29) (2.58)
- -------------------------------------- -------- -------- -------- -------- ------- ------ ------ ------ ------
Total distributions (0.99) (2.56) (1.29) (2.70) (2.05) (0.99) (2.56) (1.29) (2.86)
- -------------------------------------- -------- -------- -------- -------- ------- ------ ------ ------ ------
Net asset value, end of period $ 18.16 $ 20.31 $ 20.28 $ 18.77 $ 17.50 $19.08 $21.10 $20.76 $19.05
====================================== ======== ======== ======== ======== ======= ====== ====== ====== ======
Total Return(c) (5.41)% 13.35% 14.82% 22.42% 15.06% (4.59)% 14.54% 15.72% 6.01%
====================================== ======== ======== ======== ======== ======= ====== ====== ====== ======
Ratios/supplemental data:
Net assets, end of period (000s
omitted) $165,447 $255,468 $334,590 $348,435 $80,060 $913 $1,140 $1,986 $1,394
====================================== ======== ======== ======== ======== ======= ====== ====== ====== ======
Ratio of expenses to average net
assets:
With expense reductions and/or
reimbursement 2.21%(d) 2.02% 2.01% 2.11% 2.23% 1.21%(d) 1.02% 1.01% 1.11%(e)
====================================== ======== ======== ======== ======== ======= ====== ====== ====== ======
Without expense reductions and/or
reimbursement 2.22%(d) 2.13% 2.06% -- -- 1.22%(d) 1.13% 1.06% --
====================================== ======== ======== ======== ======== ======= ====== ====== ====== ======
Ratio of net investment income to
average net assets
With expense reductions and/or
reimbursement (1.74)%(d) (1.55)% (0.53)% 0.59% (0.48)% (0.74)%(d) 0.55% 0.47% 1.59%(e)
====================================== ======== ======== ======== ======== ======= ====== ====== ====== ======
Without expense reductions and/or
reimbursement (1.75)%(d) (1.66)% (0.58)% -- -- (0.75)%(d)(0.66)% 0.42% --
====================================== ======== ======== ======== ======== ======= ====== ====== ====== ======
Portfolio turnover rate(f) 168% 190% 253% 71% 102% 168% 190% 253% 71%
====================================== ======== ======== ======== ======== ======= ====== ====== ====== ======
</TABLE>
(a) The Fund changed investment advisors on May 29, 1998.
(b) Calculated using average shares outstanding.
(c) Does not deduct contingent deferred sales charges and is not annualized for
periods less than one year.
(d) Ratios are based on average net assets of $214,825,194 and $1,120,683 for
Class B and Advisor Class, respectively.
(e) Annualized.
(f) Portfolio turnover rates are calculated on the basis of the Fund as a whole
without distinguishing between the classes of shares issued.
FS-41
<PAGE> 274
REPORT OF
INDEPENDENT ACCOUNTANTS
- --------------------------------------------------------------------------------
To the Shareholders of AIM New Pacific Growth Fund (formerly GT Global New
Pacific Growth Fund) and Board of Trustees of AIM Growth Series (formerly GT
Global Growth Series):
In our opinion, the accompanying statement of assets and liabilities, including
the portfolio of investments, and the related statements of operations and of
changes in net assets and the financial highlights present fairly, in all
material respects, the financial position of the AIM New Pacific Growth Fund at
December 31, 1998, and the results of its operations, the changes in its net
assets and the financial highlights for the periods indicated, in conformity
with generally accepted accounting principles. These financial statements and
financial highlights (hereafter referred to as "financial statements") are the
responsibility of the Fund's management; our responsibility is to express an
opinion on these financial statements based on our audits. We conducted our
audits of these financial statements in accordance with generally accepted
auditing standards which require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements, assessing the
accounting principles used and significant estimates made by management, and
evaluating the overall financial statement presentation. We believe that our
audits, which included confirmation of securities at December 31, 1998 by
correspondence with the custodian and brokers, provide a reasonable basis for
the opinion expressed above.
/s/ PRICEWATERHOUSECOOPERS LLP
PRICEWATERHOUSECOOPERS LLP
BOSTON, MASSACHUSETTS
FEBRUARY 19, 1999
FS-42
<PAGE> 275
PORTFOLIO OF INVESTMENTS
December 31, 1998
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
VALUE % OF NET
EQUITY INVESTMENTS COUNTRY SHARES (NOTE 1) ASSETS
- ------------------------------------------------------------- -------- ----------- ------------ -------------
<S> <C> <C> <C> <C>
Finance (30.2%)
National Australia Bank Ltd. .............................. AUSL 371,750 $ 5,599,513 4.9
BANKS-MONEY CENTER
Samsung Fire & Marine Insurance ........................... KOR 10,500 3,937,500 3.4
INSURANCE - MULTI-LINE
Australia & New Zealand Banking Group Ltd. ................ AUSL 574,750 3,758,500 3.3
BANKS-REGIONAL
AMP Ltd.-/- ............................................... AUSL 285,150 3,609,801 3.2
INSURANCE-LIFE
HSBC Holdings PLC ......................................... HK 115,021 2,865,466 2.5
BANKS-MONEY CENTER
Lend Lease Corp., Ltd. .................................... AUSL 210,000 2,828,827 2.5
REAL ESTATE
Overseas-Chinese Banking Corp., Ltd. - Foreign ............ SING 400,000 2,715,975 2.4
BANKS-REGIONAL
Development Bank of Singapore - Foreign ................... SING 300,000 2,709,912 2.4
BANKS-MONEY CENTER
Cathay Life Insurance Co., Ltd. ........................... TWN 700,000 2,262,978 2.0
INSURANCE-LIFE
Hang Seng Bank ............................................ HK 220,000 1,966,542 1.7
BANKS-MONEY CENTER
DBS Land Ltd. ............................................. SING 800,000 1,178,539 1.0
REAL ESTATE
First Commercial Bank ..................................... TWN 700,000 979,173 0.9
BANKS-MONEY CENTER
------------
34,412,726
------------
Services (23.0%)
Telstra Corporation Ltd.-/- ............................... AUSL 1,060,800 4,955,898 4.3
TELEPHONE - REGIONAL/LOCAL
Brambles Industries Ltd. .................................. AUSL 158,050 3,846,768 3.4
BUSINESS & PUBLIC SERVICES
Singapore Press Holdings Ltd. ............................. SING 310,816 3,297,533 2.9
BROADCASTING & PUBLISHING
News Corp., Ltd. Preferred ................................ AUSL 535,350 3,255,003 2.8
BROADCASTING & PUBLISHING
Hong Kong Telecommunications Ltd. ......................... HK 1,300,200 2,274,104 2.0
TELEPHONE NETWORKS
TABCORP Holdings Ltd. ..................................... AUSL 358,600 2,195,708 1.9
LEISURE & TOURISM
Telecom Corporation of New Zealand Ltd. ................... NZ 431,200 1,870,481 1.6
TELEPHONE NETWORKS
Philippine Long Distance Telephone Co. .................... PHIL 60,290 1,555,871 1.4
TELEPHONE - LONG DISTANCE
Telekom Malaysia Bhd.{F} .................................. MAL 367,750 806,469 0.7
TELEPHONE NETWORKS
Woolworths Ltd. ........................................... AUSL 234,550 797,925 0.7
RETAILERS-OTHER
Cable & Wireless Optus Ltd.-/- ............................ AUSL 330,500 694,113 0.6
WIRELESS COMMUNICATIONS
</TABLE>
The accompanying notes are an integral part of the financial statements.
F-43
<PAGE> 276
PORTFOLIO OF INVESTMENTS (cont'd)
December 31, 1998
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
VALUE % OF NET
EQUITY INVESTMENTS COUNTRY SHARES (NOTE 1) ASSETS
- ------------------------------------------------------------- -------- ----------- ------------ -------------
<S> <C> <C> <C> <C>
Services (Continued)
Malaysia International Shipping Bhd. - Foreign{F} ......... MAL 458,000 $ 502,193 0.4
TRANSPORTATION - SHIPPING
Berjaya Sports Toto Bhd.{F} ............................... MAL 300,000 311,842 0.3
LEISURE & TOURISM
------------
26,363,908
------------
Consumer Durables (11.1%)
Cheung Kong (Holdings) Ltd. ............................... HK 950,000 6,836,429 6.0
HOUSING
Samsung Electronics ....................................... KOR 32,000 2,152,000 1.9
CONSUMER ELECTRONICS
City Developments Ltd. .................................... SING 300,000 1,300,394 1.1
HOUSING
New World Development Co., Ltd. ........................... HK 500,000 1,258,535 1.1
HOUSING
Sun Hung Kai Properties Ltd. .............................. HK 150,000 1,093,958 1.0
HOUSING
------------
12,641,316
------------
Multi-Industry/Miscellaneous (9.6%)
Hutchison Whampoa ......................................... HK 1,000,000 7,067,161 6.2
MULTI-INDUSTRY
Shanghai Industrial Holdings Ltd. ......................... HK 800,000 1,616,089 1.4
MULTI-INDUSTRY
China Development Corp. ................................... TWN 744,500 1,365,418 1.2
CONGLOMERATE
PT Telekomunikasi Indonesia ............................... INDO 2,500,000 865,385 0.8
MULTI-INDUSTRY
------------
10,914,053
------------
Energy (8.7%)
CLP Holdings Ltd. ......................................... HK 700,000 3,487,757 3.0
ELECTRICAL & GAS UTILITIES
Manila Electric Co. "B" ................................... PHIL 430,000 1,387,097 1.2
ELECTRICAL & GAS UTILITIES
Hong Kong Electric Holdings Ltd. .......................... HK 400,000 1,213,357 1.1
ELECTRICAL & GAS UTILITIES
Electricity Generating Public Co., Ltd. - Foreign-/- ...... THAI 400,900 1,090,847 0.9
ELECTRICAL & GAS UTILITIES
PTT Exploration and Production Public Co., Ltd. -
Foreign-/- ............................................... THAI 140,600 994,298 0.9
OIL
Santos Ltd. ............................................... AUSL 327,200 877,509 0.8
OIL
Korea Electric Power Corp. ................................ KOR 35,000 869,167 0.8
ELECTRICAL & GAS UTILITIES
------------
9,920,032
------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
FS-44
<PAGE> 277
PORTFOLIO OF INVESTMENTS (cont'd)
December 31, 1998
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
VALUE % OF NET
EQUITY INVESTMENTS COUNTRY SHARES (NOTE 1) ASSETS
- ------------------------------------------------------------- -------- ----------- ------------ -------------
<S> <C> <C> <C> <C>
Technology (5.7%)
LG Information & Communication ............................ KOR 85,562 $ 2,303,044 2.0
TELECOM TECHNOLOGY
Compeq Manufacturing Co., Ltd.-/- ......................... TWN 207,200 1,359,005 1.2
COMPUTERS & PERIPHERALS
Taiwan Semiconductor Manufacturing Co.-/- ................. TWN 550,000 1,213,864 1.1
SEMICONDUCTORS
Asustek Computer, Inc.-/- ................................. TWN 90,000 842,089 0.7
COMPUTERS & PERIPHERALS
Compal Electronics, Inc.-/- ............................... TWN 250,000 815,978 0.7
COMPUTERS & PERIPHERALS
------------
6,533,980
------------
Materials/Basic Industry (5.2%)
Broken Hill Proprietary Co., Ltd. ......................... AUSL 230,000 1,692,624 1.5
MISC. MATERIALS & COMMODITIES
Rio Tinto Ltd. ............................................ AUSL 116,000 1,374,724 1.2
MISC. MATERIALS & COMMODITIES
Western Mining Corporation Holdings Ltd. .................. AUSL 366,300 1,103,485 1.0
METALS - NON-FERROUS
North Ltd. ................................................ AUSL 661,000 1,076,583 0.9
METALS - STEEL
Hansol Paper Co. .......................................... KOR 57,000 650,750 0.6
PAPER/PACKAGING
------------
5,898,166
------------
Capital Goods (4.4%)
Samsung Display Devices Co. ............................... KOR 45,000 2,223,750 1.9
ELECTRICAL PLANT/EQUIPMENT
Singapore Technologies Engineering Ltd. ................... SING 1,800,000 1,680,509 1.5
AEROSPACE/DEFENSE
Cheung Kong Infrastructure Holdings ....................... HK 500,000 1,116,547 1.0
CONSTRUCTION
------------
5,020,806
------------
Consumer Non-Durables (2.9%)
Foster's Brewing Group Ltd. ............................... AUSL 1,209,371 3,273,001 2.9
BEVERAGES - ALCOHOLIC
------------ -----
TOTAL EQUITY INVESTMENTS (cost $112,323,801) ................ 114,977,988 100.8
------------ -----
<CAPTION>
NO. OF VALUE % OF NET
WARRANTS COUNTRY WARRANTS (NOTE 1) ASSETS
- ------------------------------------------------------------- -------- ----------- ------------ -------------
<S> <C> <C> <C> <C>
Merrill Lynch - Kospi 300 Call Warrants, due 3/11/99
Performance linked to equity securities. Redemption amount
100% of the final closing price of the Korean Kospi 300
Index converted to the prevailing foreign exchange rate.
(cost $1,560,001){\/} .................................... KOR 626,456 3,323,850 2.9
------------ -----
INVESTMENT MANAGEMENT
<CAPTION>
NO. OF VALUE % OF NET
RIGHTS COUNTRY RIGHTS (NOTE 1) ASSETS
- ------------------------------------------------------------- -------- ----------- ------------ -------------
<S> <C> <C> <C> <C>
Samsung Fire & Marine Insurance Rights, expire 1/13/99 .... KOR 2,137 $ 411,729 0.4
INSURANCE - MULTI-LINE
</TABLE>
The accompanying notes are an integral part of the financial statements.
FS-45
<PAGE> 278
PORTFOLIO OF INVESTMENTS (cont'd)
December 31, 1998
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
NO. OF VALUE % OF NET
RIGHTS COUNTRY RIGHTS (NOTE 1) ASSETS
- ------------------------------------------------------------- -------- ----------- ------------ -------------
<S> <C> <C> <C> <C>
Compal Electronics, Inc. Rights, expire 1/21/99 ........... TWN 250,000 389 --
COMPUTERS & PERIPHERALS
------------ -----
TOTAL RIGHTS (cost $0) ...................................... 412,118 0.4
------------ -----
<CAPTION>
VALUE % OF NET
REPURCHASE AGREEMENT (NOTE 1) ASSETS
- ------------------------------------------------------------- ------------ -------------
<S> <C> <C> <C> <C>
Dated December 31, 1998, with State Street Bank & Trust
Co., due January 4, 1999, for an effective yield of 4.50%,
collateralized by $2,730,000 U.S. Treasury Notes, 6.25%
due 4/30/01 (market value of collateral is $2,852,850,
including accrued interest). (cost $2,796,000) ........... 2,796,000 2.4
------------ -----
TOTAL INVESTMENTS (cost $116,679,802) * .................... 121,509,956 106.5
Other Assets and Liabilities ................................ (7,446,371) (6.5)
------------ -----
NET ASSETS .................................................. $114,063,585 100.0
------------ -----
------------ -----
</TABLE>
- --------------
-/- Non-income producing security.
{\/} U.S. currency denominated.
{F} Security considered illiquid due to currency and capital controls
mandated by the Malaysian government.
* For Federal income tax purposes, cost is $117,549,663 and
appreciation (depreciation) is as follows:
<TABLE>
<S> <C>
Unrealized appreciation: $ 12,087,878
Unrealized depreciation: (8,127,585)
-------------
Net unrealized appreciation: $ 3,960,293
-------------
-------------
</TABLE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
The Fund's Portfolio of Investments at December 31, 1998, was concentrated in
the following countries:
<TABLE>
<CAPTION>
PERCENTAGE OF NET ASSETS {D}
-------------------------------------------
FIXED INCOME,
RIGHTS & SHORT-TERM
COUNTRY (COUNTRY CODE/CURRENCY CODE) EQUITY WARRANTS & OTHER TOTAL
- -------------------------------------- ------ ------------- ---------- -----
<S> <C> <C> <C> <C>
Australia (AUSL/AUD) ................. 35.9 35.9
Hong Kong (HK/HKD) ................... 27.0 27.0
Indonesia (INDO/IDR) ................. 0.8 0.8
Korea (KOR/KRW) ...................... 10.6 3.3 13.9
Malaysia (MAL/MYR) ................... 1.4 1.4
New Zealand (NZ/NZD) ................. 1.6 1.6
Philippines (PHIL/PHP) ............... 2.6 2.6
Singapore (SING/SGD) ................. 11.3 11.3
Taiwan (TWN/TWD) ..................... 7.8 7.8
Thailand (THAI/THB) .................. 1.8 1.8
United States (US/USD) ............... (4.1) (4.1)
------ --- --- -----
Total ............................... 100.8 3.3 (4.1) 100.0
------ --- --- -----
------ --- --- -----
</TABLE>
- --------------
{d} Percentages indicated are based on net assets of $114,063,585.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
FORWARD FOREIGN CURRENCY CONTRACT OUTSTANDING
DECEMBER 31, 1998
<TABLE>
<CAPTION>
MARKET VALUE
(U.S. CONTRACT DELIVERY UNREALIZED
CONTRACT TO SELL: DOLLARS) PRICE DATE DEPRECIATION
- ---------------------------------------- ------------ -------- -------- -------------
<S> <C> <C> <C> <C>
Singapore Dollars....................... 3,166,553 1.64240 2/12/99 $ (455)
------------ -------------
Total Contract to Sell (Receivable
amount $3,166,098)................... 3,166,553 (455)
------------ -------------
THE VALUE OF CONTRACT TO SELL AS
PERCENTAGE OF NET ASSETS IS 2.78%
Total Open Forward Foreign Currency
Contract............................. $ (455)
-------------
-------------
</TABLE>
- ----------------
See Note 1 of Notes to Financial Statements.
The accompanying notes are an integral part of the financial statements.
FS-46
<PAGE> 279
STATEMENT OF ASSETS
AND LIABILITIES
December 31, 1998
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C>
Assets:
Investments in securities, at value (cost $116,679,802) (Note 1)............................ $121,509,956
U.S. currency.................................................................... $ 556
Foreign currencies (cost $922,547)............................................... 934,105 934,661
---------
Receivable from A I M Advisors, Inc......................................................... 497,914
Receivable for Fund shares sold............................................................. 158,884
Dividends receivable........................................................................ 93,264
Receivable for securities sold.............................................................. 93,230
Miscellaneous and interest receivable....................................................... 6,795
-----------
Total assets.............................................................................. 123,294,704
-----------
Liabilities:
Payable for Fund shares repurchased......................................................... 8,033,717
Payable for investment management and administration fees (Note 2).......................... 902,957
Payable for service and distribution expenses (Note 2)...................................... 124,251
Payable for transfer agent fees (Note 2).................................................... 58,789
Payable for custodian fees.................................................................. 33,539
Payable for professional fees............................................................... 25,912
Payable for printing and postage expenses................................................... 14,419
Payable for registration and filing fees.................................................... 4,970
Payable for Trustees' fees and expenses (Note 2)............................................ 3,618
Payable for fund accounting fees (Note 2)................................................... 3,020
Payable for open forward foreign currency contract (Note 1)................................. 455
Other accrued expenses...................................................................... 25,472
-----------
Total liabilities......................................................................... 9,231,119
-----------
Net assets.................................................................................... $114,063,585
-----------
-----------
Class A:
Net asset value and redemption price per share ($80,824,489 DIVIDED BY 15,576,633 shares
outstanding)................................................................................. $ 5.19
-----------
-----------
Maximum offering price per share (100/94.50 of $5.19) *....................................... $ 5.49
-----------
-----------
Class B:+
Net asset value and offering price per share ($31,836,790 DIVIDED BY 6,318,490 shares
outstanding)................................................................................. $ 5.04
-----------
-----------
Advisor Class:
Net asset value, offering price per share, and redemption price per share ($1,402,306 DIVIDED
BY 270,869 shares outstanding)............................................................... $ 5.18
-----------
-----------
Net assets consist of:
Paid in capital (Note 4).................................................................... $196,845,058
Accumulated net investment loss............................................................. (22,386)
Accumulated net realized loss on investments and foreign currency transactions.............. (87,598,203)
Net unrealized appreciation on translation of assets and liabilities in foreign
currencies................................................................................. 8,962
Net unrealized appreciation of investments.................................................. 4,830,154
-----------
Total -- representing net assets applicable to capital shares outstanding..................... $114,063,585
-----------
-----------
<FN>
- --------------
* On sales of $25,000 or more, the offering price is reduced.
+ Redemption price per share is equal to the net asset value per share less
any applicable contingent deferred sales charge.
</TABLE>
The accompanying notes are an integral part of the financial statements.
FS-47
<PAGE> 280
STATEMENT OF OPERATIONS
Year ended December 31, 1998
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C>
Investment income: (Note 1)
Dividend income (net of foreign withholding tax of $122,214).............................. $ 3,912,604
Interest income........................................................................... 696,245
Securities lending income................................................................. 308,990
-----------
Total investment income................................................................. 4,917,839
-----------
Expenses:
Investment management and administration fees (Note 2).................................... 1,447,661
Transfer agent fees (Note 2).............................................................. 884,800
Service and distribution expenses: (Note 2)
Class A.................................................................... $ 370,817
Class B.................................................................... 410,888 781,705
-----------
Printing and postage expenses............................................................. 218,595
Custodian fees............................................................................ 126,500
Registration and filing fees.............................................................. 121,000
Professional fees......................................................................... 85,489
Fund accounting fees (Note 2)............................................................. 40,387
Trustees' fees and expenses (Note 2)...................................................... 13,140
Other expenses (Note 1)................................................................... 113,073
-----------
Total expenses before reductions........................................................ 3,832,350
-----------
Expenses reimbursed by A I M Advisors, Inc. (Note 2).................................. (497,914)
Expense reductions (Note 5)........................................................... (88,368)
-----------
Total net expenses...................................................................... 3,246,068
-----------
Net investment income....................................................................... 1,671,771
-----------
Net realized and unrealized gain (loss) on investments and foreign currencies:
(Note 1)
Net realized loss on investments............................................. (42,030,213)
Net realized gain on foreign currency transactions........................... 1,956,431
-----------
Net realized loss during the year....................................................... (40,073,782)
Net change in unrealized appreciation on translation of assets and
liabilities in foreign currencies........................................... (1,281,283)
Net change in unrealized appreciation of investments......................... 24,192,659
-----------
Net unrealized appreciation during the year............................................. 22,911,376
-----------
Net realized and unrealized loss on investments and foreign currencies...................... (17,162,406)
-----------
Net decrease in net assets resulting from operations........................................ $(15,490,635)
-----------
-----------
</TABLE>
The accompanying notes are an integral part of the financial statements.
FS-48
<PAGE> 281
STATEMENTS OF CHANGES IN NET ASSETS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
YEAR ENDED YEAR ENDED
DECEMBER 31, DECEMBER 31,
1998 1997
------------- -------------
<S> <C> <C>
Decrease in net assets
Operations:
Net investment income.................................................... $ 1,671,771 $ 864,307
Net realized loss on investments and foreign currency transactions....... (40,073,782) (48,653,550)
Net change in unrealized appreciation (depreciation) on translation of
assets and liabilities in foreign currencies............................ (1,281,283) 1,286,651
Net change in unrealized appreciation (depreciation) of investments...... 24,192,659 (113,591,619)
------------- -------------
Net decrease in net assets resulting from operations................... (15,490,635) (160,094,211)
------------- -------------
Class A:
Distributions to shareholders: (Note 1)
From net investment income............................................... (863,346) (427,042)
From net realized gain on investments.................................... -- (15,152,919)
In excess of net investment income....................................... (13,453) --
Class B:
Distributions to shareholders: (Note 1)
From net investment income............................................... (87,694) --
From net realized gain on investments.................................... -- (6,636,532)
In excess of net investment income....................................... (1,367) --
Advisor Class:
Distributions to shareholders: (Note 1)
From net investment income............................................... (19,467) (13,447)
From net realized gain on investments.................................... -- (179,887)
In excess of net investment income....................................... (303) --
------------- -------------
Total distributions.................................................... (985,630) (22,409,827)
------------- -------------
Capital share transactions: (Note 4)
Increase from capital shares sold and reinvested......................... 1,358,431,721 1,697,761,633
Decrease from capital shares repurchased................................. (1,421,007,158) (1,836,766,167)
------------- -------------
Net decrease from capital share transactions........................... (62,575,437) (139,004,534)
------------- -------------
Total decrease in net assets............................................... (79,051,702) (321,508,572)
Net assets:
Beginning of year........................................................ 193,115,287 514,623,859
------------- -------------
End of year *............................................................ $ 114,063,585 $ 193,115,287
------------- -------------
------------- -------------
* Includes accumulated net investment loss................................ $ (22,386) $ --
------------- -------------
------------- -------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
FS-49
<PAGE> 282
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
Contained below is per share operating performance data for a share outstanding
throughout the period, total investment return, ratios and supplemental data.
This information has been derived from information provided in the financial
statements.
<TABLE>
<CAPTION>
CLASS A
-----------------------------------------------------------
YEAR ENDED DECEMBER 31,
-----------------------------------------------------------
1998 (d) 1997 (d) 1996 (d) 1995 (d) 1994
----------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C>
Per Share Operating Performance:
Net asset value, beginning of period.... $ 6.48 $ 13.12 $ 12.47 $ 12.10 $ 15.86
----------- ---------- ---------- ---------- ----------
Income from investment operations:
Net investment income (loss).......... 0.06* 0.05 0.02 0.11 0.02
Net realized and unrealized gain
(loss) on investments................ (1.30) (5.84) 2.44 0.79 (3.15)
----------- ---------- ---------- ---------- ----------
Net increase (decrease) from
investment operations.............. (1.24) (5.79) 2.46 0.90 (3.13)
----------- ---------- ---------- ---------- ----------
Distributions to shareholders:
From net investment income............ (0.05) (0.03) -- (0.10) (0.01)
From net realized gain on
investments.......................... -- (0.82) (1.81) (0.43) (0.55)
In excess of net investment income.... -- -- -- -- --
In excess of net realized gain on
investments.......................... -- -- -- -- (0.07)
----------- ---------- ---------- ---------- ----------
Total distributions................. (0.05) (0.85) (1.81) (0.53) (0.63)
----------- ---------- ---------- ---------- ----------
Net asset value, end of period.......... $ 5.19 $ 6.48 $ 13.12 $ 12.47 $ 12.10
----------- ---------- ---------- ---------- ----------
----------- ---------- ---------- ---------- ----------
Total investment return (c)............. (19.09)% (44.24)% 20.04% 7.45% (19.73)%
Ratios and supplemental data:
Net assets, end of period (in 000's).... $ 80,824 $ 135,807 $ 361,244 $ 383,722 $ 404,680
Ratio of net investment income (loss) to
average net assets..................... 1.30% 0.41% 0.17% 0.91% 0.11%
Ratio of expenses to average net assets:
With expense reductions and/or
reimbursement (Notes 2 & 5).......... 2.00% 1.66% 1.86% 1.89% 1.81%
Without expense reductions and/or
reimbursement........................ 2.40% 1.93% 1.99% 1.94% N/A
Portfolio turnover rate++............... 96% 80% 93% 63% 87%
</TABLE>
- ----------------
(a) Annualized
(b) Not annualized
(c) Total investment return does not include sales charges.
(d) These selected per share data were calculated based upon average
shares outstanding during the period.
* Includes reimbursement of Fund operating expenses per share of $0.02.
+ Commencing June 1, 1995, the Fund began offering Advisor Class shares.
++ Portfolio turnover is calculated on the basis of the Fund as a whole
without distinguishing between the classes of shares issued.
N/A Not Applicable.
The accompanying notes are an integral part of the financial statements.
FS-50
<PAGE> 283
FINANCIAL HIGHLIGHTS (cont'd)
- --------------------------------------------------------------------------------
Contained below is per share operating performance data for a share outstanding
throughout the period, total investment return, ratios and supplemental data.
This information has been derived from information provided in the financial
statements.
<TABLE>
<CAPTION>
CLASS B
------------------------------------------------------------
YEAR ENDED DECEMBER 31,
------------------------------------------------------------
1998 (d) 1997 (d) 1996 (d) 1995 (d) 1994
----------- ----------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C>
Per Share Operating Performance:
Net asset value, beginning of period.... $ 6.28 $ 12.80 $ 12.29 $ 11.96 $ 15.79
----------- ----------- ---------- ---------- ----------
Income from investment operations:
Net investment income (loss).......... 0.03* (0.03) (0.06) 0.03 (0.06)
Net realized and unrealized gain
(loss) on investments................ (1.26) (5.67) 2.38 0.75 (3.15)
----------- ----------- ---------- ---------- ----------
Net increase (decrease) from
investment operations.............. (1.23) (5.70) 2.32 0.78 (3.21)
----------- ----------- ---------- ---------- ----------
Distributions to shareholders:
From net investment income............ (0.01) -- -- (0.02) --
From net realized gain on
investments.......................... -- (0.82) (1.81) (0.43) (0.55)
In excess of net investment income.... -- -- -- -- --
In excess of net realized gain on
investments.......................... -- -- -- -- (0.07)
----------- ----------- ---------- ---------- ----------
Total distributions................. (0.01) (0.82) (1.81) (0.45) (0.62)
----------- ----------- ---------- ---------- ----------
Net asset value, end of period.......... $ 5.04 $ 6.28 $ 12.80 $ 12.29 $ 11.96
----------- ----------- ---------- ---------- ----------
----------- ----------- ---------- ---------- ----------
Total investment return (c)............. (19.55)% (44.65)% 19.28% 6.54% (20.30)%
Ratios and supplemental data:
Net assets, end of period (in 000's).... $ 31,837 $ 55,820 $ 151,805 $ 130,887 $ 120,171
Ratio of net investment income (loss) to
average net assets..................... 0.65% (0.24)% (0.48)% 0.26% (0.54)%
Ratio of expenses to average net assets:
With expense reductions and/or
reimbursement (Notes 2 & 5).......... 2.65% 2.31% 2.51% 2.54% 2.46%
Without expense reductions and/or
reimbursement........................ 3.05% 2.58% 2.64% 2.59% N/A
Portfolio turnover rate++............... 96% 80% 93% 63% 87%
</TABLE>
- ----------------
(a) Annualized
(b) Not annualized
(c) Total investment return does not include sales charges.
(d) These selected per share data were calculated based upon average
shares outstanding during the period.
* Includes reimbursement of Fund operating expenses per share of $0.02.
+ Commencing June 1, 1995, the Fund began offering Advisor Class shares.
++ Portfolio turnover is calculated on the basis of the Fund as a whole
without distinguishing between the classes of shares issued.
N/A Not Applicable.
The accompanying notes are an integral part of the financial statements.
FS-51
<PAGE> 284
FINANCIAL HIGHLIGHTS (cont'd)
- --------------------------------------------------------------------------------
Contained below is per share operating performance data for a share outstanding
throughout the period, total investment return, ratios and supplemental data.
This information has been derived from information provided in the financial
statements.
<TABLE>
<CAPTION>
ADVISOR CLASS+
----------------------------------------------------
JUNE 1, 1995
YEAR ENDED DECEMBER 31, TO
------------------------------------- DECEMBER 31,
1998 (d) 1997 (d) 1996 (d) 1995 (d)
----------- ----------- ----------- -------------
<S> <C> <C> <C> <C>
Per Share Operating Performance:
Net asset value, beginning of period.... $ 6.45 $ 13.16 $ 12.45 $ 12.89
----------- ----------- ----------- -------------
Income from investment operations:
Net investment income (loss).......... 0.08* 0.08 0.07 0.09
Net realized and unrealized gain
(loss) on investments................ (1.28) (5.89) 2.45 0.05
----------- ----------- ----------- -------------
Net increase (decrease) from
investment operations.............. (1.20) (5.81) 2.52 0.14
----------- ----------- ----------- -------------
Distributions to shareholders:
From net investment income............ (0.07) (0.08) -- (0.15)
From net realized gain on
investments.......................... -- (0.82) (1.81) (0.43)
In excess of net investment income.... -- -- -- --
In excess of net realized gain on
investments.......................... -- -- -- --
----------- ----------- ----------- -------------
Total distributions................. (0.07) (0.90) (1.81) (0.58)
----------- ----------- ----------- -------------
Net asset value, end of period.......... $ 5.18 $ 6.45 $ 13.16 $ 12.45
----------- ----------- ----------- -------------
----------- ----------- ----------- -------------
Total investment return (c)............. (18.51)% (44.26)% 20.56% 1.07%(b)
Ratios and supplemental data:
Net assets, end of period (in 000's).... $ 1,402 $ 1,488 $ 1,575 $ 935
Ratio of net investment income (loss) to
average net assets..................... 1.65% 0.76% 0.52% 1.26%(a)
Ratio of expenses to average net assets:
With expense reductions and/or
reimbursement (Notes 2 & 5).......... 1.65% 1.31% 1.51% 1.54%(a)
Without expense reductions and/or
reimbursement........................ 2.05% 1.58% 1.64% 1.59%(a)
Portfolio turnover rate++............... 96% 80% 93% 63%(a)
</TABLE>
- ----------------
(a) Annualized
(b) Not annualized
(c) Total investment return does not include sales charges.
(d) These selected per share data were calculated based upon average
shares outstanding during the period.
* Includes reimbursement of Fund operating expenses per share of $0.02.
+ Commencing June 1, 1995, the Fund began offering Advisor Class shares.
++ Portfolio turnover is calculated on the basis of the Fund as a whole
without distinguishing between the classes of shares issued.
N/A Not Applicable.
The accompanying notes are an integral part of the financial statements.
FS-52
<PAGE> 285
NOTES TO
FINANCIAL STATEMENTS
December 31, 1997
- --------------------------------------------------------------------------------
1. SIGNIFICANT ACCOUNTING POLICIES (SEE ALSO NOTE 2)
AIM New Pacific Growth Fund (the "Fund") formerly, GT Global New Pacific Growth
Fund, is a separate series of AIM Growth Series (the "Trust") formerly, GT
Global Growth Series. The Trust is organized as a Delaware business trust and is
registered under the Investment Company Act of 1940, as amended ("1940 Act"), as
a diversified, open-end management investment company. The Trust has eight
series of shares in operation, each series corresponding to a distinct portfolio
of investments.
The Fund offers Class A, Class B, and Advisor Class shares, each of which has
equal rights as to assets and voting privileges. Class A and Class B each has
exclusive voting rights with respect to its distribution plan. Investment
income, realized and unrealized capital gains and losses, and the common
expenses of the Fund are allocated on a pro rata basis to each class based on
the relative net assets of each class to the total net assets of the Fund. Each
class of shares differs in its respective distribution expenses, and may differ
in its transfer agent, registration, and certain other class-specific fees and
expenses.
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statements and
the reported amounts of income and expenses during the reporting period. Actual
results could differ from those estimates. The following is a summary of
significant accounting policies in conformity with generally accepted accounting
principles consistently followed by the Fund in the preparation of the financial
statements.
(A) PORTFOLIO VALUATION
The Fund calculates the net asset value of and completes orders to purchase,
exchange or repurchase Fund shares on each business day, with the exception of
those days on which the New York Stock Exchange is closed.
Equity securities are valued at the last sale price on the exchange on which
such securities are traded or on the principal over-the-counter market in which
such securities are traded, as of the close of business on the day the
securities are being valued or, lacking any sales, at the last available bid
price. In cases where securities are traded on more than one exchange, the
securities are valued on the exchange determined by A I M Advisors, Inc. (the
"Manager") to be the primary market.
Fixed income investments are valued at the mean of representative quoted bid and
ask prices for such investments or, if such prices are not available, at prices
for investments of comparative maturity, quality and type. However, when the
Manager deems it appropriate, prices obtained for the day of valuation from a
bond pricing service will be used. Short-term investments with a maturity of 60
days or less are valued at amortized cost, adjusted for foreign exchange
translation and market fluctuation, if any.
Investments for which market quotations are not readily available (including
restricted securities which are subject to limitations on their sale) are valued
at fair value as determined in good faith by or under the direction of the
Trust's Board of Trustees.
Portfolio securities which are primarily traded on foreign exchanges are
generally valued to the preceding closing values of such securities on their
respective exchanges, and those values are then translated into U.S. dollars at
the current exchange rates, except that when an occurrence subsequent to the
time a value was so established is likely to have materially changed such value,
then the fair value of those securities will be determined by consideration of
other factors by or under the direction of the Trust's Board of Trustees.
(B) FOREIGN CURRENCY TRANSLATION
The accounting records of the Fund are maintained in U.S. dollars. The market
values of foreign securities, currency holdings, other assets and liabilities
are recorded in the books and records of the Fund after translation to U.S.
dollars based on the exchange rates on that day. The cost of each security is
determined using historical exchange rates. Income and withholding taxes are
translated at prevailing exchange rates when earned or incurred.
The Fund does not isolate that portion of the results of operations resulting
from changes in foreign exchange rates on investments from the fluctuations
arising from changes in market prices of securities held. Such fluctuations are
included with the net realized and unrealized gain or loss from investments.
Reported net realized foreign exchange gains and losses arise from sales and
maturities of short-term securities, forward foreign currency contracts, sales
of foreign currencies, currency gains or losses realized between the trade and
settlement dates on securities transactions, and the differences between the
amounts of dividends, interest, and foreign withholding taxes recorded on the
Fund's books and the U.S. dollar equivalent of the amounts actually received or
paid. Net unrealized foreign exchange gains and losses arise from changes in the
value of assets and liabilities other than investments in securities at period
end, resulting from changes in exchange rates.
(C) REPURCHASE AGREEMENTS
With respect to repurchase agreements entered into by the Fund, it is the Fund's
policy to always receive, as collateral, United States government securities or
other high quality debt securities of which the value, including accrued
interest, is at least equal to the amount to be repaid to the Fund under each
agreement at its maturity.
(D) FORWARD FOREIGN CURRENCY CONTRACTS
A forward foreign currency contract ("Forward Contract") is an agreement between
two parties to buy and sell a currency at a set price on a future date. The
market value of the Forward Contract
FS-53
<PAGE> 286
fluctuates with changes in currency exchange rates. The Forward Contract is
marked-to-market daily and the change in market value is recorded by the Fund as
an unrealized gain or loss. When the Forward Contract is closed, the Fund
records a realized gain or loss equal to the difference between the value at the
time it was opened and the value at the time it was closed. The Fund could be
exposed to risk if a counter party is unable to meet the terms of a contract or
if the value of the currency changes unfavorably. The Fund may enter into
Forward Contracts in connection with planned purchases or sales of securities,
or to hedge against adverse fluctuations in exchange rates between currencies.
(E) OPTION ACCOUNTING PRINCIPLES
When the Fund writes a call or put option, an amount equal to the premium
received is included in the Fund's "Statement of Assets and Liabilities" as an
asset and an equivalent liability. The amount of the liability is subsequently
marked-to-market to reflect the current market value of the option. The current
market value of an option listed on a traded exchange is valued at its last bid
price, or, in the case of an over-the-counter option, is valued at the average
of the last bid prices obtained from brokers, unless a quotation from only one
broker is available, in which case only that broker's price will be used. If an
option expires on its stipulated expiration date or if the Fund enters into a
closing purchase transaction, a gain or loss is realized without regard to any
unrealized gain or loss on the underlying security, and the liability related to
such option is extinguished. If a written call option is exercised, a gain or
loss is realized from the sale of the underlying security and the proceeds of
the sale are increased by the premium originally received. If a written put
option is exercised, the cost of the underlying security purchased would be
decreased by the premium originally received. The Fund can write options only on
a covered basis, which, for a call, requires that the Fund hold the underlying
security, and, for a put, requires the Fund to set aside cash, U.S. government
securities or other liquid securities in an amount not less than the exercise
price or otherwise provide adequate cover at all times while the put option is
outstanding. The Fund may use options to manage its exposure to the stock and
bond markets and to fluctuations in currency values or interest rates.
The premium paid by the Fund for the purchase of a call or put option is
included in the Fund's "Statement of Assets and Liabilities" as an investment
and subsequently "marked-to-market" to reflect the current market value of the
option. If an option which the Fund has purchased expires on the stipulated
expiration date, the Fund realizes a loss in the amount of the cost of the
option. If the Fund enters into a closing sale transaction, the Fund realizes a
gain or loss, depending on whether proceeds from the closing sale transaction
are greater or less than the cost of the option. If the Fund exercises a call
option, the cost of the securities acquired by exercising the call is increased
by the premium paid to buy the call. If the Fund exercises a put option, it
realizes a gain or loss from the sale of the underlying security, and the
proceeds from such sale are decreased by the premium originally paid.
The risk associated with purchasing options is limited to the premium originally
paid. The risk in writing a call option is that the Fund may forego the
opportunity of profit if the market value of the underlying security or index
increases and the option is exercised. The risk in writing a put option is that
the Fund may incur a loss if the market value of the underlying security or
index decreases and the option is exercised. In addition, there is the risk the
Fund may not be able to enter into a closing transaction because of an illiquid
secondary market.
(F) FUTURES CONTRACTS
A futures contract is an agreement between two parties to buy and sell a
security at a set price on a future date. Upon entering into such a contract the
Fund is required to pledge to the broker an amount of cash or securities equal
to the minimum "initial margin" requirements of the exchange on which the
contract is traded. Pursuant to the contract, the Fund agrees to receive from or
pay to the broker an amount of cash equal to the daily fluctuation in value of
the contract. Such receipts or payments are known as "variation margin" and are
recorded by the Fund as unrealized gains or losses. When the contract is closed,
the Fund records a realized gain or loss equal to the difference between the
value of the contract at the time it was opened and the value at the time it was
closed. The potential risk to the Fund is that the change in value of the
underlying securities may not correlate to the change in value of the contracts.
The Fund may use futures contracts to manage its exposure to the stock and bond
markets and to fluctuations in currency values or interest rates.
(G) SECURITY TRANSACTIONS AND RELATED INVESTMENT INCOME
Security transactions are accounted for on the trade date (date the order to buy
or sell is executed). The cost of securities sold is determined on a first-in,
first-out basis, unless otherwise specified. Dividends are recorded on the
ex-dividend date. Interest income is recorded on the accrual basis. Where a high
level of uncertainty exists as to its collection, income is recorded net of all
withholding tax with any rebate recorded when received. The Fund may trade
securities on other than normal settlement terms. This may increase the risk if
the other party to the transaction fails to deliver and causes the Fund to
subsequently invest at less advantageous prices.
(H) PORTFOLIO SECURITIES LOANED
At December 31, 1998, stocks with an aggregate value of $5,772,440 were on loan
to brokers. The loans were secured by cash collateral of $6,131,138 received by
the Fund. For the year ended December 31, 1998, the Fund received securities
lending fees of $308,990.
For international securities, cash collateral is received by the Fund against
loaned securities in an amount at least equal to 105% of the market value of the
loaned securities at the inception of each loan. This collateral must be
maintained at not less than 103% of the market value of the loaned securities
during the period of the loan. For domestic securities, cash collateral is
received by the Fund against loaned securities in an amount at least equal to
102% of the market value of the loaned securities at the inception of each loan.
This collateral must be maintained at not less than 100% of the market value of
the loaned securities during the period of each loan. The
FS-54
<PAGE> 287
cash collateral is invested in a securities lending trust which consists of a
portfolio of high quality short duration securities whose average effective
duration is restricted to 120 days or less.
(I) TAXES
It is the policy of the Fund to meet the requirements for qualification as a
"regulated investment company" under the Internal Revenue Code of 1986, as
amended ("Code"). It is also the intention of the Fund to make distributions
sufficient to avoid imposition of any excise tax under Section 4982 of the Code.
Therefore, no provision has been made for Federal taxes on income, capital
gains, and unrealized appreciation of securities held, or for excise tax on
income and capital gains. The Fund currently has a capital loss carryforward of
$81,520,585, of which $3,081,427 expires in 2005 and $78,439,158 expires in
2006.
(J) DISTRIBUTIONS TO SHAREHOLDERS
Distributions to shareholders are recorded by the Fund on the ex-date. Income
and capital gain distributions are determined in accordance with Federal income
tax regulations which may differ from generally accepted accounting principles.
These differences are primarily due to differing treatments of income and gains
on various investment securities held by the Fund and timing differences.
(K) FOREIGN SECURITIES
There are certain additional considerations and risks associated with investing
in foreign securities and currency transactions that are not inherent in
investments of domestic origin. These risks of investing in foreign markets may
include foreign currency exchange rate fluctuations, perceived credit risk,
adverse political and economic developments and possible adverse foreign
government intervention.
(L) RESTRICTED SECURITIES
The Fund is permitted to invest in privately placed restricted securities. These
securities may by resold in transactions exempt from registration or to the
public if the securities are registered. Disposal of these securities may
involve time-consuming negotiations and expense, and prompt sale at an
acceptable price may be difficult. At the end of the year, restricted
securities, if any, (excluding 144A issues), are shown at the end of the Fund's
Portfolio of Investments.
(M) INDEXED SECURITIES
The Fund may invest in indexed securities whose value is linked either directly
or indirectly to changes in foreign currencies, interest rates, equities,
indices, or other reference instruments. Indexed securities may be more volatile
than the reference instrument itself, but any loss is limited to the amount of
the original investment.
(N) LINE OF CREDIT
The Fund, along with certain other funds advised and/or administered by the
Manager, has a line of credit with BankBoston and State Street Bank and Trust
Company. The arrangements with the banks allow the Fund and certain other funds
to borrow, on a first come, first served basis, an aggregate maximum amount of
$250,000,000. The Fund is limited to borrowing up to 33 1/3% of the value of the
Fund's total assets. On December 31, 1998, the Fund had no loans outstanding.
For the year ended December 31, 1998, the weighted average outstanding daily
balance of bank loans (based on the number of days the loans were outstanding)
was $6,800,494 with a weighted average interest rate of 6.15%. Interest expense
for the year ended December 31, 1998, was $94,155 and is included in "Other
expenses" on the Statement of Operations.
2. RELATED PARTIES
A I M Advisors, Inc. (the "Manager"), an indirect wholly-owned subsidiary of
AMVESCAP PLC, is the Fund's investment manager and administrator, and INVESCO
(NY), Inc., (formerly, Chancellor LGT Asset Management, Inc.) is the Fund's
investment sub-adviser and sub-administrator. As of the close of business on May
29, 1998, Liechtenstein Global Trust AG ("LGT"), the former indirect parent
organization of Chancellor LGT Asset Management, Inc. ("Chancellor LGT"),
consummated a purchase agreement with AMVESCAP PLC pursuant to which AMVESCAP
PLC acquired LGT's Asset Management Division, which included Chancellor LGT and
certain other affiliates. As a result of this transaction, Chancellor LGT was
renamed INVESCO (NY), Inc., and is now an indirect wholly-owned subsidiary of
AMVESCAP PLC. Also, as of the close of business May 29, 1998, A I M
Distributors, Inc. ("AIM Distributors"), a wholly-owned subsidiary of the
Manager, became the Fund's distributor, and the Trust was reorganized from a
Massachusetts business trust into a Delaware business trust. Finally, as of the
close of business on September 4, 1998, A I M Fund Services, Inc. ("AFS"), an
affiliate of the Manager and AIM Distributors, replaced GT Global Investor
Services, Inc. ("GT Services") as the transfer agent of the Fund.
The Fund pays investment management and administration fees to the Manager at
the following annualized rates: 0.975% on the first $500 million of average
daily net assets of the Fund; 0.95% on the next $500 million; 0.925% of the next
$500 million and 0.90% on amounts thereafter. These fees are computed daily and
paid monthly.
AIM Distributors, an affiliate of the Manager, serves as the Fund's distributor.
For the period ended May 29, 1998, GT Global, Inc. ("GT Global"), an affiliate
of the investment sub-advisor, served as the Fund's distributor.
Class A shares are subject to initial sales charges imposed at the time of
purchase, in accordance with the schedule included in the Fund's current
prospectus. AIM Distributors collects the sales charges imposed on sales of
Class A shares, and reallows a portion of such charges to dealers through which
the sales are made. For the year ended December 31, 1998, AIM Distributors
retained sales charges of $23,466. Purchases of Class A shares exceeding
$1,000,000 may be subject to a contingent deferred sales charge ("CDSC") upon
redemption, in accordance with the Fund's current prospectus. AIM Distributors
and GT Global collected such CDSCs in the amount of $19,510 and $2,399 for the
year ended December 31, 1998, respectively. AIM Distributors also makes ongoing
shareholder servicing and trail commission payments to dealers whose clients
hold Class A shares.
FS-55
<PAGE> 288
Class B shares are not subject to initial sales charges. When Class B shares are
sold, AIM Distributors, from its own resources, pays commissions to dealers
through which the sales are made. Certain redemptions of Class B shares made
within six years of purchase are subject to CDSCs, in accordance with the Fund's
current prospectus. For the year ended December 31, 1998, AIM Distributors and
GT Global collected such CDSCs in the amount of $90,711 and $124,324,
respectively. In addition, AIM Distributors makes ongoing shareholder servicing
and trail commission payments to dealers whose clients hold Class B shares.
For the period ended May 29, 1998, pursuant to the then effective separate
distribution plans adopted under the 1940 Act Rule 12b-1 by the Trust's Board of
Trustees with respect to the Fund's Class A shares ("Class A Plan") and Class B
shares ("Class B Plan"), the Fund reimbursed GT Global for a portion of its
shareholder servicing and distribution expenses. Under the Class A Plan, the
Fund was permitted to pay GT Global a service fee at the annualized rate of up
to 0.25% of the average daily net assets of the Fund's Class A shares for GT
Global's expenditures incurred in servicing and maintaining shareholder
accounts, and was permitted to pay GT Global a distribution fee at the
annualized rate of up to 0.35% of the average daily net assets of the Fund's
Class A shares, less any amounts paid by the Fund as the aforementioned service
fee, for GT Global's expenditures incurred in providing services as distributor.
All expenses for which GT Global was reimbursed under the Class A Plan would
have been incurred within one year of such reimbursement.
For the period ended May 29, 1998, pursuant to the Class B Plan, the Fund was
permitted to pay GT Global a service fee at the annualized rate of up to 0.25%
of the average daily net assets of the Fund's Class B shares for GT Global's
expenditures incurred in servicing and maintaining shareholder accounts, and was
permitted to pay GT Global a distribution fee at the annualized rate of up to
0.75% of the average daily net assets of the Fund's Class B shares for GT
Global's expenditures incurred in providing services as distributor. Expenses
incurred under the Class B Plan in excess of 1.00% annually were permitted to be
carried forward for reimbursement in subsequent years as long as that Plan
continues in effect.
Effective as of the close of business May 29, 1998, pursuant to Rule 12b-1 under
the 1940 Act, the Trust's Board of Trustees adopted a Master Distribution Plan
applicable to the Fund's Class A shares ("Class A Plan") and Class B shares
("Class B Plan"), pursuant to which the Fund compensates AIM Distributors for
the purpose of financing any activity that is intended to result in the sale of
Class A or Class B shares of the Funds. Under the Class A Plan, the Fund
compensates AIM Distributors at the annualized rate of 0.35% of the average
daily net assets of the Fund's Class A shares. Under the Class B Plan, the Fund
compensates AIM Distributors at an annualized rate of 1.00% of the average daily
net assets of the Fund's Class B shares. Of these amounts, the Fund may pay a
service fee of 0.25% of the average daily net assets of the Class A or Class B
shares to selected dealers and financial institutions who furnish continuing
personal shareholder services to their customers who purchase and own the
appropriate class of shares of the Fund. Any amounts not paid as a service fee
under the Plans would constitute an asset-based sales charge.
The Manager and AIM Distributors have voluntarily undertaken to limit the Fund's
expenses (exclusive of brokerage commissions, taxes, interest, and extraordinary
items) to the maximum annual level of 2.00%, 2.65%, and 1.65% of the average
daily net assets of the Fund's Class A, Class B, and Advisor Class shares,
respectively. If necessary, this limitation will be effected by waivers by the
Manager of investment management and administration fees, waivers by AIM
Distributors of payments under the Class A Plan and/or Class B Plan and/or
reimbursements by the Manager or AIM Distributors of portions of the Fund's
other operating expenses.
Effective as of the close of business September 4, 1998, the Fund, pursuant to a
transfer agency and service agreement, has agreed to pay AFS an annualized fee
of $24.85 per shareholder accounts that are open during any monthly period (this
fee includes all out-of-pocket expenses), and an annualized fee of $0.70 per
shareholder account that is closed during any monthly period. Both fees shall be
billed by AFS monthly in arrears on a prorated basis of 1/12 of the annualized
fee for all such accounts.
For the period January 1, 1998 to September 4, 1998, GT Services, an affiliate
of the Manager and AIM Distributors, was the transfer agent of the Fund. For
performing shareholder servicing, reporting, and general transfer agent
services, GT Services received an annual maintenance fee of $17.50 per account,
a new account fee of $4.00 per account, a per transaction fee of $1.75 for all
transactions other than exchanges and a per exchange fee of $2.25. GT Services
was also reimbursed by the Fund for its out-of-pocket expenses for such items as
postage, forms, telephone charges, stationery and office supplies.
The Manager is the pricing and accounting agent for the Fund. The monthly fee
for these services to the Manager is a percentage, not to exceed 0.03% annually,
of the Fund's average daily net assets. The annual fee rate is derived based on
the aggregate net assets of the funds which comprise the following investment
companies: AIM Growth Series, AIM Investment Funds, AIM Investment Portfolios,
AIM Series Trust, G.T. Global Variable Investment Series and G. T. Global
Variable Investment Trust. The fee is calculated at the rate of 0.03% to the
first $5 billion of assets and 0.02% to the assets in excess of $5 billion. An
amount is allocated to and paid by each such fund based on its relative average
daily net assets.
The Trust pays each of its Trustees who is not an employee, officer or director
of the Manager, AIM Distributors or GT Services $5,000 per year plus $300 for
each meeting of the board or any committee thereof attended by the Trustee.
3. PURCHASES AND SALES OF SECURITIES
For the year ended December 31, 1998, purchases and sales of investment
securities by the Fund, other than U.S. government obligations and short-term
investments, aggregated $129,155,679 and $167,008,919, respectively. There were
no purchases or sales of U.S. government obligations by the Fund during the
year.
FS-56
<PAGE> 289
4. CAPITAL SHARES
At December 31, 1998, there were an unlimited number of shares of beneficial
interest authorized, at no par value. Transactions in capital shares of the Fund
were as follows:
CAPITAL SHARE TRANSACTIONS
<TABLE>
<CAPTION>
YEAR ENDED YEAR ENDED
DECEMBER 31, 1998 DECEMBER 31, 1997
----------------------------- -----------------------------
CLASS A SHARES AMOUNT SHARES AMOUNT
- --------------------------------------------- ------------ --------------- ------------ ---------------
<S> <C> <C> <C> <C>
Shares sold.................................. 220,054,764 $ 1,179,166,766 110,903,994 $ 1,213,154,082
Shares issued in connection with reinvestment
of distributions........................... 151,132 760,569 2,058,341 13,577,615
------------ --------------- ------------ ---------------
220,205,896 1,179,927,335 112,962,335 1,226,731,697
Shares repurchased........................... (225,597,779) (1,226,798,121) (119,529,679) (1,324,924,362)
------------ --------------- ------------ ---------------
Net decrease................................. (5,391,883) $ (46,870,786) (6,567,344) $ (98,192,665)
------------ --------------- ------------ ---------------
------------ --------------- ------------ ---------------
<CAPTION>
CLASS B
- ---------------------------------------------
<S> <C> <C> <C> <C>
Shares sold.................................. 29,096,684 $ 151,336,461 37,888,593 $ 423,842,967
Shares issued in connection with reinvestment
of distributions........................... 15,481 77,283 856,732 5,478,474
------------ --------------- ------------ ---------------
29,112,165 151,413,744 38,745,325 429,321,441
Shares repurchased........................... (31,689,112) (166,703,231) (41,705,872) (470,119,000)
------------ --------------- ------------ ---------------
Net decrease................................. (2,576,947) $ (15,289,487) (2,960,547) $ (40,797,559)
------------ --------------- ------------ ---------------
------------ --------------- ------------ ---------------
<CAPTION>
ADVISOR CLASS
- ---------------------------------------------
<S> <C> <C> <C> <C>
Shares sold.................................. 5,119,563 $ 27,073,240 4,493,439 $ 41,526,678
Shares issued in connection with reinvestment
of distributions........................... 3,439 17,402 25,872 181,817
------------ --------------- ------------ ---------------
5,123,002 27,090,642 4,519,311 41,708,495
Shares repurchased........................... (5,082,992) (27,505,806) (4,408,085) (41,722,805)
------------ --------------- ------------ ---------------
Net increase (decrease)...................... 40,010 $ (415,164) 111,226 $ (14,310)
------------ --------------- ------------ ---------------
------------ --------------- ------------ ---------------
</TABLE>
5. EXPENSE REDUCTIONS
The Manager has directed certain portfolio trades to brokers who then paid a
portion of the Fund's expenses. For the year ended December 31, 1998, the Fund's
expenses were reduced by $88,368 under these arrangements.
- --------------
FEDERAL TAX INFORMATION (UNAUDITED):
For the fiscal year ended December 31, 1998, the amount of income received by
the Fund from sources within foreign countries and possessions of the United
States was $.1659 per share (representing a total of $3,975,000). The amount of
taxes paid by the Fund to such countries for the fiscal year ended December 31,
1998 was $.005 per share (representing a total of $120,535). The following table
provides a breakdown by country of ordinary income dividends and foreign taxes
paid by the Fund during the fiscal year ended December 31, 1998:
<TABLE>
<CAPTION>
COUNTRY GROSS INCOME % FOREIGN TAX PAID %
- --------------------------------------------- -------------- ------------------
<S> <C> <C>
Australia.................................... 30.91 --
Hong Kong.................................... 30.30 --
Malaysia..................................... 1.40 5.32
New Zealand.................................. 2.51 13.30
Phillipines.................................. 0.80 7.02
Singapore.................................... 9.86 60.18
Taiwan....................................... 2.59 12.81
Various...................................... 0.50 --
------- -------
78.87 98.63
Nonqualifying................................ 1.14 1.37
United States................................ 19.99 --
------- -------
100.00% 100.00%
------- -------
------- -------
</TABLE>
FS-57
<PAGE> 290
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> 291
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE NO.
--------
<S> <C>
INTRODUCTION................................................ 4
GENERAL INFORMATION ABOUT THE FUNDS......................... 4
The Trust and Its Shares.................................. 4
INVESTMENT POLICIES......................................... 5
Selection of Investments.................................. 6
Investments in Other Investment Companies................. 6
Depositary Receipts....................................... 6
Warrants or Rights........................................ 7
Lending of Portfolio Securities........................... 7
Commercial Bank Obligations............................... 7
Repurchase Agreements..................................... 7
Borrowing, Reverse Repurchase Agreement and "Roll"
Transactions........................................... 8
When-Issued or Forward Commitment Securities.............. 8
Temporary Defensive Strategies............................ 9
OPTIONS AND FUTURES......................................... 9
Special Risks of Options and Futures...................... 9
Writing Call Options...................................... 10
Writing Put Options....................................... 11
Purchasing Put Options.................................... 11
Purchasing Call Options................................... 11
Index Options............................................. 12
Interest Rate and Stock Index Futures Contracts........... 13
Options on Futures Contracts.............................. 15
Limitations on Use of Futures, and Options on Futures..... 15
Cover..................................................... 15
RISK FACTORS................................................ 16
Illiquid Securities....................................... 16
Debt Securities........................................... 16
Equity Securities......................................... 17
Small Cap Companies....................................... 17
INVESTMENT LIMITATIONS...................................... 17
EXECUTION OF PORTFOLIO TRANSACTIONS......................... 19
Portfolio Trading and Turnover............................ 20
MANAGEMENT.................................................. 21
Trustees and Executive Officers........................... 21
Investment Management and Administrative Services Relating
to the Funds and the Portfolios........................ 22
Expenses of the Funds and the Portfolios.................. 24
THE DISTRIBUTION PLANS...................................... 24
The Class A and C Plan.................................... 24
The Class B Plan.......................................... 25
Both Plans................................................ 25
THE DISTRIBUTOR............................................. 28
Sales Charges and Dealer Concessions...................... 29
Reductions in Initial Sales Charges....................... 31
Purchases at Net Asset Value.............................. 33
Contingent Deferred Sales Charge Exceptions............... 34
NET ASSET VALUE DETERMINATION............................... 35
</TABLE>
2
<PAGE> 292
<TABLE>
<CAPTION>
PAGE NO.
--------
<S> <C>
HOW TO PURCHASE AND REDEEM SHARES........................... 36
Backup Withholding........................................ 37
DIVIDEND ORDER.............................................. 38
DIVIDENDS, DISTRIBUTIONS AND TAX MATTERS.................... 38
Reinvestment of Dividends and Distributions............... 38
Tax Matters............................................... 38
Taxation of Funds......................................... 38
Reinstatement Privilege................................... 39
Taxation of the Portfolios................................ 39
Taxation of the Funds' Shareholders....................... 40
SHAREHOLDER INFORMATION..................................... 40
MISCELLANEOUS INFORMATION................................... 42
Charges for Certain Account Information................... 42
Custodian................................................. 42
Transfer Agency and Accounting Agency Services............ 42
Independent Accountants................................... 42
Legal Matters............................................. 43
Shareholder Liability..................................... 43
Names..................................................... 43
Control Persons and Principal Holders of Securities....... 44
INVESTMENT RESULTS.......................................... 45
Total Return Quotations................................... 45
Performance Information................................... 46
APPENDIX.................................................... 49
Description of Bond Ratings............................... 49
Description of Commercial Paper Ratings................... 50
Absence of Rating......................................... 50
FINANCIAL STATEMENTS........................................ FS
</TABLE>
3
<PAGE> 293
INTRODUCTION
This Statement of Additional Information relates to the Class A, Class B and
Class C 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 GT 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 two Funds, AIM
New Pacific Growth Fund, AIM Europe Growth Fund, AIM Japan Growth Fund, and AIM
Mid Cap Equity Fund (formerly known as AIM Mid Cap Growth 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 GT 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 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. Other
than the automatic conversion of Class B shares to Class A shares, there are no
conversion rights.
Shareholders of the Funds and the Trust's other series do not have cumulative
voting rights, and therefore the holders of more than 50% of the outstanding
shares of the Funds and the Trust's other series voting together for election of
4
<PAGE> 294
trustees may elect all of the members of the Trust's Board. In such event, the
remaining holders cannot elect any trustees of the Trust.
On any matter submitted to a vote of shareholders, shares of a Fund will be
voted by the Fund's shareholders individually when the matter affects the
specific interest of the Fund only, such as approval of the Fund's investment
management arrangements. In addition, shares of a particular class of a Fund may
vote on matters affecting only that class. The shares of a Fund and the Trust's
other series will be voted in the aggregate on other matters, such as the
election of Trustees and ratification of the selection of the Trust's
independent accounts
Normally there will be no annual meeting of shareholders for any of the Funds
in any year, except as required under the Investment Company Act of 1940, as
amended (the "1940 Act"). A Trustee may be removed at any meeting of the
shareholders of the Trust by a vote of the shareholders owning at least
two-thirds of the outstanding shares. Any Trustee may call a special meeting of
shareholders for any purpose. Furthermore, Trustees shall promptly call a
meeting of shareholders solely for the purpose of removing one or more Trustees
when requested in writing to do so by shareholders holding 10% of the Trust's
outstanding shares.
Pursuant to the Trust's Agreement and Declaration of Trust, the Trust may
issue an unlimited number of shares of each Fund. Each share of a Fund
represents as interest in the Fund only, has a par value of $0.01 per share,
represents an equal proportionate interest in the Fund with other shares of the
Fund and is entitled to such dividends and distributions out of the income
earned and gain realized on the assets belonging to the Fund as may be declared
by the Board of Trustees. Each share of a Fund is equal in earnings, assets and
voting privileges except that each class normally has exclusive voting rights
with respect to its distribution plan and bears the expenses, if any, related to
the distribution of its shares. Shares of a Fund, when issued, are fully paid
and nonassessable.
INVESTMENT POLICIES
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 a 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 Prospectuses 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.
5
<PAGE> 295
Unless specifically noted, the Fund's investment policies described in this
Statement of Additional Information are not fundamental policies and may be
changed by vote of the Trust's Board of Trustees without shareholder approval.
SELECTION OF INVESTMENTS
For purposes of the Prospectuses 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 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.
Equity securities in which the Funds may invest include common stocks,
preferred stock, convertible debt securities and warrants to acquire such
securities.
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, a 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 foreign securities.
Such investments may include American Depositary Receipts ("ADRs") American
Depositary Shares ("ADSs"), Global Depositary Receipts ("GDRs") and European
Depositary Receipts ("EDRs"). 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 underlying foreign equity securities.
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
6
<PAGE> 296
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. While a
loan is outstanding, the borrower must maintain with the Fund's custodian
collateral consisting of cash, U.S. government securities or certain irrevocable
letters of credit equal to at least the value of the borrowed securities, plus
any accrued interest or such other collateral as permitted by the Fund's
investment program and regulatory agencies, and as approved by the Board. The
risks of lending portfolio securities, as with other extensions of secured
credit, consist of possible delay in receiving additional collateral or in
recovery of the securities and possible loss of rights in the collateral should
the borrower fail financially. 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
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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. Each
Portfolio also may borrow up to 5% of its total assets for temporary or
emergency purposes other than to meet redemptions. A Portfolio may borrow in
connection with meeting requests for redemption. 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. A
Portfolio may borrow through reverse repurchase agreements and "roll"
transactions in connection with meeting requests for redemption.
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
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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.
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
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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 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.
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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.
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.
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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 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.
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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.
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 Futures Contract of September deutschmarks 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 deutschmarks on the same
exchange. In such instance, the difference between the price at which the
Futures
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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.
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.
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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.
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.
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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 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
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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 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 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. 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;
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(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.
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.
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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, 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.
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
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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
$113,203, $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 $61,274, $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. High portfolio turnover (over 100%) 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
190% and 233%, and 148% and 93%, respectively.
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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>
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NAME, ADDRESS AND AGE POSITIONS HELD WITH REGISTRANT PRINCIPAL OCCUPATION WITH REGISTRANT
--------------------- ------------------------------ ------------------------------------
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<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>
21
<PAGE> 311
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------
NAME, ADDRESS AND AGE POSITIONS HELD WITH REGISTRANT PRINCIPAL OCCUPATION WITH REGISTRANT
--------------------- ------------------------------ ------------------------------------
- ----------------------------------------------------------------------------------------------------
<S> <C> <C>
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.
- ----------------------------------------------------------------------------------------------------
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.
- ----------------------------------------------------------------------------------------------------
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.
- ----------------------------------------------------------------------------------------------------
DANA R. SUTTON (39) Vice President and Treasurer Vice President and Fund Controller,
A I M Advisors, Inc.; and Assistant
Vice President and Assistant Treasurer,
Fund Management Company.
- ----------------------------------------------------------------------------------------------------
</TABLE>
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 an annual retainer component plus a per-meeting fee component, 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 $6,650, $5,450, $6,050
and $6,650, 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 $106,850, $90,650, $98,600
and $99,500, 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 1, 1999, the Officers and Trustees and their families as a group owned
in the aggregate beneficially or of record less than (i) 1% of the shares of the
Basic Value Fund and (ii) 3.026% of the shares of the Small Cap Fund.
INVESTMENT MANAGEMENT AND ADMINISTRATION SERVICES RELATING TO FUNDS AND THE
PORTFOLIOS
AIM, 11 Greenway Plaza, Suite 100, Houston, Texas 77046, was organized in 1976
and, together with its subsidiaries, manages or advises approximately 110
investment portfolios encompassing a broad range of investment objectives. AIM
and their world-wide asset management affiliates provide investment management
and/or administrative services to institutional, corporate and individual
clients around the world.
22
<PAGE> 312
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 also the sole shareholder of the Funds' principal
underwriter, AIM Distributors.
AIM Management and AIM are indirect wholly owned subsidiaries of AMVESCAP PLC,
11 Devonshire Square, London, EC2M 4YR, England. AMVESCAP PLC and its
subsidiaries are an independent management group that has 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.
In addition to the investment resources of their Houston and London offices,
AIM draws upon the expertise, personnel, data and systems of other offices in
Atlanta, Boston, Dallas, Denver, Louisville, Miami, New York, Portland (Oregon),
Frankfurt, Hong Kong, London, Singapore, Sydney, Tokyo and Toronto. In managing
the Portfolios, AIM employs a team approach, taking advantage of its investment
resources around the world.
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).
The Funds pay AIM administration fees, computed daily and paid monthly, at the
annualized rate of 0.25% of each Fund's average daily net assets. The Funds bear
their pro rata portion of the investment management and administration fees paid
by the Portfolio to AIM. The Portfolios pay AIM such fees, computed daily and
paid monthly, based on the average daily net assets of each Portfolio, at the
annualized rate of 0.475% on the first $500 million, 0.45% on the next $500
million, 0.425% on the next $500 million and 0.40% on the amounts thereafter.
The investment management and administration fees paid by the Fund and the
Portfolio are higher than those paid by most mutual funds. The Funds and
Portfolios pay all expenses not assumed by AIM, AIM Distributors or other
agents. AIM has undertaken to limit each Fund's and each Portfolio's combined
expenses (exclusive of brokerage commissions, taxes, interest and extraordinary
expenses) to the annual rate of 1.75%, 2.40% and 2.40% of the average daily net
assets of each Fund's Class A, Class B and Class C shares, respectively, until
May 31, 2000.
AIM may from time to time waive or reduce its fee. Voluntary fee waivers or
reductions may be rescinded at any time without further notice to investors.
During periods of voluntary fee waivers or reductions, AIM will retain its
ability to be reimbursed for such fee prior to the end of each fiscal year.
Contractual fee waivers or reductions set forth in the Fee Tables in a
Prospectus may not be terminated or amended to the Funds' detriment during the
period stated in the agreement between AIM and the Fund.
AIM also serves as the Funds' pricing and accounting agent. For these
services, AIM receives a fee based on the aggregate net assets of the funds
which comprise the following investment companies: AIM Growth Series, AIM
Investment Funds, AIM Investment Portfolios, AIM Series Trust, GT Global
Variable Investment Series and GT Global Variable Investment Trust. The fee is
calculated at the rate of 0.03% of the first $5 billion of assets, and 0.02% of
the assets in excess of $5 billion. An amount is allocated to and paid by each
such fund based on its relative average daily net assets.
For the fiscal years ended December 31, 1998, December 31, 1997 and December
31, 1996, the Small Cap Portfolio and the Value Portfolio paid fees of $159,738,
$120,544 and 73,312; and $133,235, $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 $84,258, $63,460 and $39,004; and $70,124, $39,171 and
$14,722, respectively, to INVESCO (NY), Inc. For the fiscal years ended December
31, 1998, December 31, 1997 and December 31, 1996, INVESCO (NY), Inc. reimbursed
the Small
23
<PAGE> 313
Cap Portfolio and Value Portfolio for their respective investment management and
administration fees in the amounts of $93,076, $67,837 and $73,312; and $60,760,
$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 $55,651, $63,460 and $39,004; and $41,599,
$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 $148,727, $131,297 and $112,316;
and $102,359, $113,543 and $42,209, respectively.
For the fiscal years ended December 31, 1998, 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, $0 and $58,269; and $0, $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.
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. ("NASD"). The
Class A and C Plan imposes a cap on the total amount of sales charges, including
asset-based sales charges, that may be paid by the Trust with respect to a Fund.
The Class A and C Plan does not obligate the Fund to reimburse AIM Distributors
for actual expenses AIM Distributors may incur in fulfilling its obligations
under the Class A and C Plan on behalf of a Fund. Thus under the Class A and C
Plan, even if AIM Distributors'
24
<PAGE> 314
actual expenses exceed the fee payable to AIM Distributors thereunder at any
given time, a Fund will not be obligated to pay more than that fee. If AIM
Distributors' expenses are less than the fee it receives, AIM Distributors will
retain the full amount of the fee.
THE 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.
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 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 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
25
<PAGE> 315
institutions, and by imposing a cap on the total sales charges, including asset
based sales charges, that may be paid by the Funds and their respective classes.
AIM Distributors may from time to time waive or reduce any portion of its
12b-1 fee for Class A and Class C shares. Voluntary fee waivers or reductions
may be rescinded at any time without further notice to investors. During periods
of voluntary fee waivers or reductions, AIM Distributors will retain its ability
to be reimbursed for such fee prior to the end of each fiscal year. Contractual
fee waivers or reductions set forth in the Fee Table in a Prospectus may not be
terminated or amended to the Funds' detriment during the period stated in the
agreement between AIM Distributors and the Fund.
Under the Plans, certain financial institutions which have entered into
service agreements and which sell shares of the Funds on an agency basis, may
receive payments from the Funds pursuant to the respective Plans. AIM
Distributors does not act as principal, but rather as agent for the Funds, in
making dealer incentive and shareholder servicing payments under the Plans.
These payments are an obligation of the Funds and not of AIM Distributors.
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 a Fund 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................................ $12,807 $80,306 0.35% 1.00%
Small Cap Fund.................................. $17,364 $83,713 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............................... $16,798 $107,762 0.35% 1.00%
Small Cap Fund................................. $26,902 $109,006 0.35% 1.00%
</TABLE>
Class C shares had not commenced operations as of December 31, 1998.
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............................................... $ 8,002 $ 8,750
Printing and mailing prospectuses, semi-annual reports and
annual reports (other than to current shareholders).... 1,756 709
Seminars.................................................. 0 2,365
Compensation to Underwriters to partially offset other
marketing expenses..................................... 0 0
Compensation to Dealers including finder's fees........... 19,847 32,442
Compensation to Sales Personnel........................... 0 0
Annual Report Total....................................... 29,605 44,266
</TABLE>
26
<PAGE> 316
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............................................... $ 1,554 $ 2,534
Printing and mailing prospectuses, semi-annual reports and
annual reports (other than to current shareholders).... 99 278
Seminars.................................................. 0 511
Compensation to Underwriters to partially offset other
marketing expenses..................................... 141,051 144,538
Compensation to Dealers................................... 45,364 44,858
Compensation to Sales Personnel........................... 0 0
Annual Report Totals...................................... 188,068 192,719
</TABLE>
Class C shares had not commenced operations as of December 31, 1998.
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 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.
27
<PAGE> 317
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 10, 1998. Both such Master Distribution
Agreements are hereinafter collectively referred to as the "Distribution
Agreements."
The Distribution Agreements provide that AIM Distributors will bear the
expenses of printing from the final proof and distributing 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.
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.
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 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.
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<PAGE> 318
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................................ $7,787 $2,335 $11,413 $5,770
Small Cap Fund.................................. $8,892 $6,814 $24,222 $5,417
</TABLE>
Each Fund pays AIM Distributors sales charges on sales of Class A shares of
the Funds, retains certain amounts of such charges and reallows other amounts of
such charges to broker/dealers who sell shares.
The following chart reflects the total sales charges paid in connection with
the sale of Class A shares of each Fund and the amount retained by AIM
Distributors for the period June 1, 1998 to December 31, 1998.
<TABLE>
<CAPTION>
JUNE 1, 1998 TO
DECEMBER 31, 1998
------------------
SALES AMOUNT
CHARGES RETAINED
------- --------
<S> <C> <C>
Basic Value Fund............................................ $ 1,807 $ 1,695
Small Cap Fund.............................................. $12,522 $12,218
</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:
<TABLE>
<CAPTION>
1998 1997 1996
------- ------- -------
<S> <C> <C> <C>
Basic Value Fund......................................... $53,326 $55,700 $ 5,608
Small Cap Fund........................................... $16,400 $60,107 $28,162
</TABLE>
Class C shares had not commenced operations as of December 31, 1998.
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 Mid Cap Opportunities Fund, AIM New Pacific Growth Fund, AIM
Select Growth Fund, AIM Small Cap Growth Fund, AIM Small Cap Opportunities Fund,
AIM Value Fund and AIM Weingarten Fund.
<TABLE>
<CAPTION>
DEALER
INVESTOR'S SALES CHARGE CONCESSION
-------------------------- -------------
AS A AS A AS A
PERCENTAGE PERCENTAGE PERCENTAGE
OF THE 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
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<PAGE> 319
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
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. 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
30
<PAGE> 320
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;
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<PAGE> 321
- 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) and (iii)
AIM Floating Rate Fund within the following 13 consecutive months. By marking
the LOI section on the account application and by signing the account
application, the purchaser indicates that he understands and agrees to the terms
of the LOI and is bound by the provisions described below.
Each purchase of fund shares normally subject to an initial sales charge made
during the 13-month period will be made at the public offering price applicable
to a single transaction of the total dollar amount indicated by the LOI, as
described under "Sales Charges and Dealer Concessions." It is the purchaser's
responsibility at the time of purchase to specify the account numbers that
should be considered in determining the appropriate sales charge. The offering
price may be further reduced as described under "Rights of Accumulation" if the
Transfer Agent is advised of all other accounts at the time of the investment.
Shares acquired through reinvestment of dividends and capital gains
distributions will not be applied to the LOI. At any time during the 13-month
period after meeting the original obligation, a purchaser may revise his
intended investment amount upward by submitting a written and signed request.
Such a revision will not change the original expiration date. By signing an LOI,
a purchaser is not making a binding commitment to purchase additional shares,
but if purchases made within the 13-month period do not total the amount
specified, the investor will pay the increased amount of sales charge as
described below. Purchases made within 90 days before signing an LOI will be
applied toward completion of the LOI. The LOI effective date will be the date of
the first purchase within the 90-day period. The Transfer Agent will process
necessary adjustments upon the expiration or completion date of the LOI.
Purchases made more than 90 days before signing an LOI will be applied toward
completion of the LOI based on the value of the shares purchased calculated at
the public offering price on the effective date of the LOI.
To assure compliance with the provisions of the 1940 Act, out of the initial
purchase (or subsequent purchases if necessary) the Transfer Agent will escrow
in the form of shares an appropriate dollar amount (computed to the nearest full
share). All dividends and any capital gain distributions on the escrowed shares
will be credited to the purchaser. All shares purchased, including those
escrowed, will be registered in the purchaser's name. If the total investment
specified under this LOI is completed within the 13-month period, the escrowed
shares will be promptly released. If the intended investment is not completed,
the purchaser will pay the Transfer Agent the difference between the sales
charge on the specified amount and the amount actually purchased. If the
purchaser does not pay such difference within 20 days of the expiration date, he
irrevocably constitutes and appoints the Transfer Agent as his attorney to
surrender for redemption any or all shares, to make up such difference within 60
days of the expiration date.
If at any time before completing the LOI Program, the purchaser wishes to
cancel the agreement, he must give written notice to AIM Distributors. If at any
time before completing the LOI Program the purchaser requests the Transfer Agent
to liquidate or transfer beneficial ownership of his total shares, a
cancellation of the LOI will automatically be effected. If the total amount
purchased is less than the amount specified in the LOI, the Transfer Agent will
redeem an appropriate number of escrowed shares equal to the difference between
the sales charge actually paid and the sales charge that would have been paid if
the total purchases had been made at a single time.
2. Rights of Accumulation. A "purchaser," as previously defined, may also
qualify for reduced initial sales charges based upon such purchaser's existing
investment in shares of any of the AIM Funds (except for (i) Class A shares of
AIM Tax-Exempt Cash Fund and AIM Cash Reserve Shares of AIM Money Market Fund
and (ii) Class B and Class C shares of the
32
<PAGE> 322
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, (ii) Class B and Class C shares of
the AIM Funds) and (iii) AIM Floating Rate Fund owned by such purchaser,
calculated at their then current public offering price. If a purchaser so
qualifies for a reduced sales charge, the reduced sales charge applies to the
total amount of money then being invested by such purchaser and not just to the
portion that exceeds the breakpoint above which a reduced sales charge applies.
For example, if a purchaser already owns qualifying shares of any AIM Fund with
a value of $20,000 and wishes to invest an additional $20,000 in a fund, with a
maximum initial sales charge of 5.50%, the reduced initial sales charge of 5.25%
will apply to the full $20,000 purchase and not just to the $15,000 in excess of
the $25,000 breakpoint. To qualify for obtaining the discount applicable to a
particular purchase, the purchaser or his dealer must furnish AFS with a list of
the account numbers and the names in which such accounts of the purchaser are
registered at the time the purchase is made.
PURCHASES AT NET ASSET VALUE
Purchases of shares of any of the AIM Funds at net asset value (without
payment of an initial sales charge) may be made in connection with: (a) the
reinvestment of dividends and distributions from a fund; (b) exchanges of shares
of certain 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:
- 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 purchasers as defined above, and
non-qualified plans offered in conjunction therewith, provided the initial
investment in the plan(s) is at least $1 million; the sponsor signs a $1
million LOI; the employer-sponsored plan has at least 100 eligible
employees; or all plan transactions are executed through a single omnibus
account per Fund and the financial institution or service organization has
entered into the appropriate agreement with the distributor. Section 403(b)
plans sponsored by public educational institutions are not eligible for a
sales charge exception based on the aggregate investment made by the plan or
the number of eligible employees. Purchases of AIM Small Cap Opportunities
Fund by such plans are subject to initial sales charges;
- 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;
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<PAGE> 323
- 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
Former GT Global funds Class A shares that are subject to a contingent
deferred sales charge and that were purchased before June 1, 1998 are entitled
to the following waivers from the contingent deferred sales charge otherwise due
upon redemption: (1) minimum required distributions made in connection with an
IRA, Keogh Plan or custodial account under Section 403(b) of the Code or other
retirement plan following attainment of age 70 1/2; (2) total or partial
redemptions resulting from a distribution following retirement in the case of a
tax-qualified employer-sponsored retirement plan; (3) when a redemption results
from a tax-free return of an excess contribution pursuant to Section 408(d)(4)
or (5) of the Code or from the death or disability of the employee; (4)
redemptions pursuant to a Fund's right to liquidate a shareholder's account
involuntarily; (5) redemptions pursuant to distributions from a tax-qualified
employer-sponsored retirement plan, which is invested in the former GT Global
funds, which are permitted to be made without penalty pursuant to the Code,
other than tax-free rollovers or transfers of assets, and the proceeds of which
are reinvested in the former GT Global funds; (6) redemptions made in connection
with participant-directed exchanges between options in an employer-sponsored
benefit plan; (7) redemptions made for the purpose of providing cash to fund a
loan to a participant in a tax-qualified retirement plan; (8) redemptions made
in connection with a distribution from any retirement plan or account that is
permitted in accordance with the provisions of Section 72(t)(2) of the Code, and
the regulations promulgated thereunder; (9) redemptions made in connection with
a distribution from any retirement plan or account that involves the return of
an excess deferral amount pursuant to Section 401(k)(8) or Section 402(g)(2) of
the Code; (10) redemptions made in connection with a distribution from a
qualified profit-sharing or stock bonus plan described in Section 401(k) of the
Code to a participant or beneficiary under Section 401(k)(2)(B)(IV) of the Code
upon hardship of the covered employee (determined pursuant to Treasury
Regulation Section 1.401(k)-1(d)(2)); and (11) redemptions made by or for the
benefit of certain states, counties or cities, or any instrumentalities,
departments or authorities thereof where such entities are prohibited or limited
by applicable law from paying a sales charge or commission.
Former GT Global funds Class B shares purchased before June 1, 1998 are
subject to the following waivers from the contingent deferred sales charge
otherwise due upon redemption in addition to the waivers provided for
redemptions of currently issued Class B shares as described in a Prospectus: (1)
total or partial redemptions resulting from a distribution following retirement
in the case of a tax-qualified employer-sponsored retirement; (2) minimum
required distributions made in connection with an IRA, Keogh Plan or custodial
account under Section 403(b) of the Code or other retirement plan following
attainment of age 70 1/2; (3) a one-time reinvestment in Class B shares of a
Fund within 180 days of a prior redemption; (4) redemptions pursuant to
distributions from a tax-qualified employer-sponsored retirement plan, which is
invested in the former GT Global Funds, which are permitted to be made without
penalty pursuant to the Code, other than tax-free rollovers or transfers of
assets, and the proceeds of which are reinvested in the former GT Global Funds;
(5) redemptions made in connection with participant-directed exchanges between
options in an employer-sponsored benefit plan; (6) redemptions made for the
purpose of providing cash to fund a loan to a participant in a tax-qualified
retirement plan; (7) 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; (8)
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 (9) redemptions made by or for the benefit of
certain states, counties or cities, or any instrumentalities, departments or
authorities thereof where such entities are prohibited or limited by applicable
law from paying a sales charge or commission.
CDSCs will not apply to the following:
- 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;
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- 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.
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
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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 "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 under the caption "Reductions
in Initial Sales Charges -- Purchases At Net Asset Value."
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 "Exchanging Shares."
Information concerning redemption of the Funds' shares is set forth in the
Prospectuses under the heading "Redeeming 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
nonresident aliens) or Form W-9 (certifying exempt status) accompanying the
registration information will generally be subject to backup withholding.
Each AIM Fund, and other payers, must, according to IRS regulations, withhold
31% of redemption payments and reportable dividends (whether paid or accrued) in
the case of any shareholder who fails to provide the Fund with a taxpayer
identification number ("TIN") and a certification that he is not subject to
backup withholding.
An investor is subject to backup withholding if:
(1) the investor fails to furnish a correct TIN to the Fund, or
(2) the IRS notifies the Fund that the investor furnished an incorrect
TIN, or
(3) the investor 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 or their tax advisor 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.
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 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.
DIVIDENDS, DISTRIBUTIONS AND TAX MATTERS
REINVESTMENT OF DIVIDENDS AND DISTRIBUTIONS
Income dividends and capital gains distributions are automatically reinvested
in additional shares of the same class of each Fund unless the shareholder has
requested in writing to receive such dividends and distributions in cash or that
they be invested in shares of another AIM Fund, subject to the terms and
conditions set forth herein under the caption "Shareholder Information." If a
shareholder's account does not have any shares in it on a dividend or capital
gains distribution payment date, the dividend or distribution will be paid in
cash whether or not the shareholder has elected to have such dividends or
distributions reinvested.
TAX MATTERS
The following is only a summary of certain additional tax considerations
generally affecting the Funds and their shareholders that are not described in
the Prospectuses. No attempt is made to present a detailed explanation of the
tax treatment of each Fund or its shareholders, and the discussion here and in
the Prospectuses is not intended as a substitute for careful tax planning.
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.
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See "Taxation of the Portfolios" herein for a discussion of the tax
consequences to each Fund of hedging transactions engaged in by its
corresponding Portfolio.
REINSTATEMENT PRIVILEGE
For federal income tax purposes, exercise of your reinstatement privilege may
increase the amount of gain or reduce the amount of loss recognized in the
original redemption transaction, because the initial sales charge will not be
taken into account in determining such gain or loss to the extent there has been
a reduction in the initial sales charge payable upon reinstatement.
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.
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) -- 20% (10% for
taxpayers in the 15% marginal tax bracket) for gain recognized on capital assets
held for more than 12 months.
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 unless the
completed transaction exception applies. 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.
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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.
Ordinary dividends and return of capital distributions 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 distribution 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 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
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exchanges by mail, which will be effective on the business day received by the
Transfer Agent as long as such request is received prior to NYSE Close. The
Transfer Agent and AIM Distributors may in certain cases be liable for losses
due to unauthorized or fraudulent transactions if they do not follow reasonable
procedures for verification of telephone transactions. Such reasonable
procedures may include recordings of telephone transactions (maintained for six
months), requests for confirmation of the shareholder's Social Security Number
and current address, and mailings of confirmations promptly after the
transaction.
By signing an account application form, an investor appoints the Transfer
Agent as his true and lawful attorney-in-fact to surrender for redemption any
and all unissued shares held by the Transfer Agent in the designated account(s),
or in any other account with any of the AIM Funds, present or future, which has
the identical registration as the designated account(s), with full power of
substitution in the premises. The Transfer Agent and AIM Distributors are
thereby authorized and directed to accept and act upon any telephone redemptions
of shares held in any of the account(s) listed, from any person who requests the
redemption proceeds to be applied to purchase shares in any one or more of the
AIM Funds, provided that such fund is available for sale and provided that the
registration and mailing address of the shares to be purchased are identical to
the registration of the shares being redeemed. An investor acknowledges by
signing the form that he understands and agrees that the Transfer Agent and AIM
Distributors may not be liable for any loss, expense or cost arising out of any
telephone exchange requests effected in accordance with the authorization set
forth in these instructions if they reasonably believe such request to be
genuine, but may in certain cases be liable for losses due to unauthorized or
fraudulent transactions. Procedures for verification of telephone transactions
may include recordings of telephone transactions (maintained for six months),
requests for confirmation of the shareholder's Social Security Number and
current address, and mailings of confirmations promptly after the 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.
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<PAGE> 331
Dividends and Distributions. In determining the amount of capital gains, if
any, available for distribution, net capital gains are offset against available
net capital losses, if any, carried forward from previous fiscal periods.
For funds that do not declare a dividend daily, such dividends and
distributions will be reinvested at the net asset value per share determined on
the ex-dividend date. For funds that declare a dividend daily, such dividends
and distributions will be reinvested at the net asset value per share determined
on the payable date.
Dividends on Class B and Class C shares are expected to be lower than those
for Class A shares or AIM Cash Reserve Shares because of higher distribution
fees paid by Class B and Class C shares. Dividends on all shares may also be
affected by other class-specific expenses.
Changes in the form of dividend and distribution payments may be made by the
shareholder at any time by notice to the Transfer Agent and are effective as to
any subsequent payment if such notice is received by the Transfer Agent prior to
the record date of such payment. Any dividend and distribution election remains
in effect until the Transfer Agent receives a revised written election by the
shareholder.
Any dividend or distribution paid by a fund which does not declare dividends
daily has the effect of reducing the net asset value per share on the
ex-dividend date by the amount of the dividend or distribution. Therefore, a
dividend or distribution declared shortly after a purchase of shares by an
investor would represent, in substance, a return of capital to the shareholder
with respect to such shares even though it would be subject to income taxes.
MISCELLANEOUS INFORMATION
CHARGES FOR CERTAIN ACCOUNT INFORMATION
The Transfer Agent may impose certain copying charges for requests for copies
of shareholder account statements and other historical account information older
than the current year and the immediately preceding year.
CUSTODIAN
State Street Bank and Trust Company (the "Custodian"), 225 Franklin Street,
Boston, Massachusetts 02110, is custodian of all securities and cash of the
Portfolios. The Custodian attends to the collection of principal and income,
pays and collects all monies for securities bought and sold by the Portfolios
and performs certain other ministerial duties.
TRANSFER AGENCY AND ACCOUNTING AGENCY SERVICES
A I M Fund Services, Inc., a wholly owned subsidiary of AIM, acts as transfer
agent and dividend disbursing agent for the Funds. The Transfer Agency and
Service Agreement between the Trust and AFS 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 $6,564,
$6,379 and $3,900; and $6,806, $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.
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<PAGE> 332
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> 333
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 1, 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 LGT Asset Management 401(k) Plan 57.537%
Judy Creel, Arthur Sprague, or
Robert Alley, TTEES
11 Greenway Plaza, Suite 100
Houston, TX 77046-1173
LGT Asset Management SERP Plan 36.980%
Judy Creel, Arthur Sprague, or
Robert Alley, TTEES
Attn: Debbie Nettles
11 Greenway Plaza, Suite 100
Houston, TX 77046-1173
INVESCO (NY) Asset Management Inc. 5.442%
Attn: Julio Garcia
1166 Avenue of the Americas
New York, New York 10036-2708
Basic Value Fund -- Class A AIM Foundation 15.955%
11 Greenway Plaza, Suite 2600
Houston, TX 77046
MLPF&S for the Sole Benefit of Its 5.814%
Customers
Attn: Fund Administration
4800 Deer Lake Drive East, 2nd Floor
Jacksonville, FL 32246-6484
Basic Value Fund -- Class B MLPF&S for the Sole Benefit of its 5.139%
Customers
Attn: Fund Administration
4800 Deer Lake Drive East, 2nd Floor
Jacksonville, FL 32246-6484
Small Cap Fund -- Advisor Class LGT Asset Management 401(k) Plan 61.865%
Judy Creel, Arthur Sprague, or
Robert Alley, TTEES
11 Greenway Plaza, Suite 100
Houston, TX 77046-1173
Donaldson Lufkin Jenrette Securities 12.944%
Corp. Inc.
P.O. Box 2052
Jersey City, New Jersey 07303-2052
MLPF&S for the Sole Benefit of Its 6.742%
Customers
Attn: Fund Administration
4800 Deer Lake Drive East, 2nd Floor
Jacksonville, FL 32246-6484
Small Cap Fund -- Class A Jonathan C. Schoolar 5.384%
3722 Tartan Lane
Houston, TX 77025
Small Cap Fund -- Class B MLPF&S for the Sole Benefit of its 9.781%
Customers
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.
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<PAGE> 334
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.
</TABLE>
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<PAGE> 335
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 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>
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..... 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
All advertisements of a Fund will disclose the maximum sales charge (including
deferred sales charges) imposed on purchases of the Fund's shares. If any
advertised performance data does not reflect the maximum sales charge (if any),
such advertisement will disclose that the sales charge has not been deducted in
computing the performance data, and that, if reflected, the maximum sales charge
would reduce the performance quoted. Further information regarding the Fund's
performance is contained in the Fund's annual report to shareholders, which is
available upon request and without charge.
A Fund's total return is calculated in accordance with a standardized formula
for computation of annualized total return. Standardized total return for Class
A shares reflects the deduction of the Fund's maximum front-end sales charge at
the time of purchase. Standardized total return for Class B and Class C shares
reflects the deduction of the maximum applicable contingent deferred sales
charge on a redemption of shares held for the period.
A Fund's total return shows its overall change in value, including changes in
share price and assuming all the Fund's dividends and capital gain distributions
are reinvested. A cumulative total return reflects the Fund's performance over a
stated period of time. An average annual total return reflects the hypothetical
compounded annual rate of return that would have produced the same cumulative
total return if the Fund's performance had been constant over the entire period.
Because average annual returns tend to even out variations in the Fund's return,
investors should recognize that such returns are not the same as actual
year-by-year results. To illustrate the components of overall performance, the
Fund may separate its cumulative and average annual returns into income results
and capital gains or losses.
From time to time, AIM or its affiliates may waive all or a portion of their
fees and/or assume certain expenses of any Fund. Voluntary fee waivers or
reductions or commitments to assume expenses may be rescinded at any time
without further notice to investors. During periods of voluntary fee waivers or
reductions or commitments to assume expenses, AIM will retain its ability to be
reimbursed for such fee prior to the end of each fiscal year. Contractual fee
waivers or reductions or reimbursement of expenses set forth in the Fee Table in
a Prospectus may not be terminated or amended to the Funds' detriment during the
period stated in the agreement between AIM and the Fund. Fee waivers or
reductions or commitments to reduce expenses will have the effect of increasing
that Fund's yield or total return.
The performance of each Fund will vary from time to time and past results are
not necessarily indicative of future results. A Fund's performance is a function
of its portfolio management in selecting the type and quality of portfolio
securities and is affected by operating expenses of the Fund and market
conditions. A shareholder's investment in a Fund is not insured or guaranteed.
These factors should be carefully considered by the investor before making an
investment in any Fund.
46
<PAGE> 336
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 IBCA (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
47
<PAGE> 337
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.
48
<PAGE> 338
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.
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<PAGE> 339
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.
50
<PAGE> 340
FINANCIAL STATEMENTS
FS
<PAGE> 341
REPORT OF INDEPENDENT ACCOUNTANTS
To the Shareholders of AIM Basic Value Fund
(formerly AIM America Value Fund) and Board of Trustees
of AIM Growth Series:
In our opinion, the accompanying statement of assets and
liabilities, including the portfolio of investments, and
the related statements of operations and of changes in
net assets and the financial highlights present fairly,
in all material respects, the financial position of the
AIM Basic Value Fund at December 31, 1998, and the
results of its operations, the changes in its net assets
and the financial highlights for the periods indicated,
in conformity with generally accepted accounting
principles. These financial statements and financial
highlights (hereafter referred to as "financial
statements") are the responsibility of the Fund's
management; our responsibility is to express an opinion
on these financial statements based on our audits. We
conducted our audits of these financial statements in
accordance with generally accepted auditing standards
which require that we plan and perform the audit to
obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit
includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements,
assessing the accounting principles used and significant
estimates made by management, and evaluating the overall
financial statement presentation. We believe that our
audits, which included confirmation of securities at
December 31, 1998 by correspondence with the custodian
and brokers, provide a reasonable basis for the opinion
expressed above.
/s/ PRICEWATERHOUSECOOPERS LLP
PRICEWATERHOUSECOOPERS LLP
Boston, Massachusetts
February 19, 1999
FS-1
<PAGE> 342
SCHEDULE OF INVESTMENTS
December 31, 1998
<TABLE>
<CAPTION>
MARKET
SHARES VALUE
<S> <C> <C>
COMMON STOCKS-92.23%
BANKS (MAJOR REGIONAL)-2.60%
Fleet Financial Group, Inc. 16,000 $ 715,000
- --------------------------------------------------------------
BANKS (MONEY CENTER)-5.54%
BankAmerica Corp. 12,725 765,091
- --------------------------------------------------------------
Chase Manhattan Corp. (The) 4,550 309,684
- --------------------------------------------------------------
First Union Corp. 7,400 450,012
- --------------------------------------------------------------
1,524,787
- --------------------------------------------------------------
CHEMICALS (SPECIALTY)-1.41%
Sigma-Aldrich Corp. 13,200 387,750
- --------------------------------------------------------------
COMPUTERS (PERIPHERALS)-3.53%
Adaptec, Inc.(a) 23,500 412,718
- --------------------------------------------------------------
Quantum Corp.(a) 26,300 558,875
- --------------------------------------------------------------
971,593
- --------------------------------------------------------------
COMPUTERS (SOFTWARE & SERVICES)-4.71%
Adobe Systems, Inc. 9,200 430,100
- --------------------------------------------------------------
Computer Associates International,
Inc. 20,300 865,287
- --------------------------------------------------------------
1,295,387
- --------------------------------------------------------------
ELECTRIC COMPANIES-12.22%
Carolina Power & Light Co. 5,200 244,725
- --------------------------------------------------------------
DQE, Inc. 7,700 338,318
- --------------------------------------------------------------
Illinova Corp. 13,400 335,000
- --------------------------------------------------------------
Pinnacle West Capital Corp. 7,825 331,584
- --------------------------------------------------------------
GPU, Inc. 8,200 362,337
- --------------------------------------------------------------
Niagara Mohawk Power Corp. 40,500 653,062
- --------------------------------------------------------------
Northeast Utilities 23,400 374,400
- --------------------------------------------------------------
Texas Utilities Co. 15,500 723,656
- --------------------------------------------------------------
3,363,082
- --------------------------------------------------------------
ELECTRICAL EQUIPMENT-4.54%
Philips Electronics N.V.-ADR 10,600 717,487
- --------------------------------------------------------------
Raychem Corp. 16,500 533,156
- --------------------------------------------------------------
1,250,643
- --------------------------------------------------------------
ELECTRONICS (INSTRUMENTATION)-1.85%
Perkin-Elmer Corp. 5,200 507,325
- --------------------------------------------------------------
ELECTRONICS (SEMICONDUCTOR)-3.19%
Analog Devices, Inc.(a) 21,400 671,425
- --------------------------------------------------------------
Micron Technology, Inc. 4,100 207,307
- --------------------------------------------------------------
878,732
- --------------------------------------------------------------
ENGINEERING & CONSTRUCTION-1.31%
McDermott International, Inc. 14,600 360,438
- --------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
MARKET
SHARES VALUE
<S> <C> <C>
EQUIPMENT (SEMICONDUCTOR)-2.55%
Novellus Systems, Inc.(a) 14,200 $ 702,900
- --------------------------------------------------------------
FINANCIAL (DIVERSIFIED)-4.40%
Citigroup Inc. 13,900 688,050
- --------------------------------------------------------------
MGIC Investment Corp. 13,100 521,544
- --------------------------------------------------------------
1,209,594
- --------------------------------------------------------------
HEALTH CARE (LONG TERM CARE)-1.77%
HCR Manor Care, Inc.(a) 16,600 487,625
- --------------------------------------------------------------
HEALTH CARE (MANAGED CARE)-5.08%
PacifiCare Health Systems,
Inc.-Class B(a) 7,500 596,250
- --------------------------------------------------------------
United HealthCare Corp. 18,600 800,963
- --------------------------------------------------------------
1,397,213
- --------------------------------------------------------------
HEALTH CARE (DRUGS-MAJOR PHARMACEUTICALS)-1.89%
Pharmacia & Upjohn, Inc. 9,200 520,950
- --------------------------------------------------------------
HEALTH CARE (MEDICAL SUPPLIES)-2.70%
Beckman Coulter Inc. 13,700 743,225
- --------------------------------------------------------------
INSURANCE (PROPERTY CASUALTY)-3.06%
Amerin Corp.(a) 4,200 99,225
- --------------------------------------------------------------
EXEL Limited-Class A 9,900 742,500
- --------------------------------------------------------------
841,725
- --------------------------------------------------------------
MANUFACTURING (SPECIALIZED)-2.89%
Millipore Corp. 28,000 796,250
- --------------------------------------------------------------
OIL (DOMESTIC INTEGRATED)-1.73%
Atlantic Richfield Co. 7,300 476,325
- --------------------------------------------------------------
OIL (INTERNATIONAL INTEGRATED)-1.04%
Mobil Corp. 3,300 287,513
- --------------------------------------------------------------
OIL & GAS (DRILLING &
EQUIPMENT)-2.48%
ENSCO International, Inc. 26,200 280,012
- --------------------------------------------------------------
Schlumberger Ltd. 8,700 401,288
- --------------------------------------------------------------
681,300
- --------------------------------------------------------------
OIL & GAS (EXPLORATION & PRODUCTION)-0.90%
Conoco Inc.-Class A(a) 11,800 246,325
- --------------------------------------------------------------
REAL ESTATE INVESTMENT TRUST-0.51%
Starwood Hotels & Resorts(a) 6,183 140,278
- --------------------------------------------------------------
RETAIL (DEPARTMENT STORES)-5.52%
Federated Department Stores, Inc.(a) 13,500 588,093
- --------------------------------------------------------------
J.C. Penney Co., Inc. 8,600 403,125
- --------------------------------------------------------------
Saks Inc.(a) 16,700 527,094
- --------------------------------------------------------------
1,518,312
- --------------------------------------------------------------
</TABLE>
FS-2
<PAGE> 343
<TABLE>
<CAPTION>
MARKET
SHARES VALUE
<S> <C> <C>
RETAIL (SPECIALTY)-0.77%
Toys "R" Us, Inc.(a) 12,600 $ 212,625
- --------------------------------------------------------------
SERVICES (DATA PROCESSING)-3.28%
First Data Corp. 28,500 903,095
- --------------------------------------------------------------
SERVICES (FACILITIES & ENVIRONMENTAL)-0.64%
Corrections Corp. of America(a) 10,000 176,250
- --------------------------------------------------------------
TELEPHONE-4.66%
Bell Atlantic Corp. 11,200 636,300
- --------------------------------------------------------------
US West, Inc. 10,000 646,250
- --------------------------------------------------------------
1,282,550
- --------------------------------------------------------------
TOBACCO-3.31%
Philip Morris Companies, Inc. 17,050 912,175
- --------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
MARKET
SHARES VALUE
<S> <C> <C>
WASTE MANAGEMENT-2.15%
Waste Management, Inc. 12,667 $ 590,599
- --------------------------------------------------------------
Total Common Stocks (Cost
$21,863,862) 25,381,566
- --------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT
<S> <C> <C>
REPURCHASE AGREEMENT-3.73%(b)
SBC Warburg Dillon Read Inc., 4.75%,
01/04/99(c) $1,026,552 $ 1,026,552
- --------------------------------------------------------------
Total Repurchase Agreements
(Cost $1,026,552) 1,026,552
- --------------------------------------------------------------
TOTAL INVESTMENTS-95.96% 26,408,118
- --------------------------------------------------------------
OTHER ASSETS LESS LIABILITIES-4.04% 1,110,420
- --------------------------------------------------------------
NET ASSETS-100.00% $27,518,538
==============================================================
</TABLE>
Abbreviation:
ADR - American Depositary Receipt
Notes to Schedule of Investments:
(a) Non-income producing security.
(b) Collateral on repurchase agreements, including the Fund's pro-rata interest
in joint repurchase agreements, is taken into possession by the Fund upon
entering into the repurchase agreement. The collateral is marked to market
daily to ensure its market value is at least 102% of the sale price of the
repurchase agreement. The investments in some repurchase agreements are
through participation in joint accounts with other mutual funds, private
accounts, and certain non-registered investment companies managed by the
investment advisor or its affiliates.
(c) Joint repurchase agreement entered into 12/31/98 with a maturing value
$1,000,527,778. Collateralized by $2,207,068,000 U.S. Government
obligations, 0% to 6.75% due 06/30/99 to 11/15/21 with an aggregate market
value at 12/31/98 of $1,020,001,079.
See Notes to Financial Statements.
FS-3
<PAGE> 344
STATEMENT OF ASSETS AND LIABILITIES
December 31, 1998
<TABLE>
<S> <C>
ASSETS:
Investments, at market value (cost
$22,890,414) $26,408,118
- ---------------------------------------------------------
Receivables for:
Investment Advisor 118,468
- ---------------------------------------------------------
Investments sold 37,475
- ---------------------------------------------------------
Fund shares sold 1,201,931
- ---------------------------------------------------------
Dividends and interest 33,974
- ---------------------------------------------------------
Other assets 37,479
- ---------------------------------------------------------
Total assets 27,837,445
- ---------------------------------------------------------
LIABILITIES:
Payables for:
Investments purchased 37,333
- ---------------------------------------------------------
Fund shares reacquired 156,968
- ---------------------------------------------------------
Accrued investment management &
administration fees 31,765
- ---------------------------------------------------------
Accrued accounting fees 587
- ---------------------------------------------------------
Accrued distribution fees 40,203
- ---------------------------------------------------------
Accrued trustees' fees 9,702
- ---------------------------------------------------------
Accrued transfer agent fees 7,000
- ---------------------------------------------------------
Accrued operating expenses 17,075
- ---------------------------------------------------------
Accrued filing fees 18,274
- ---------------------------------------------------------
Total liabilities 318,907
- ---------------------------------------------------------
Net assets applicable to shares outstanding $27,518,538
=========================================================
NET ASSETS:
Class A $ 9,073,952
=========================================================
Class B $17,406,329
=========================================================
Advisor Class $ 1,038,257
=========================================================
SHARES OUTSTANDING, $0.01 PAR VALUE PER
SHARE:
Class A 500,450
=========================================================
Class B 978,399
=========================================================
Advisor Class 56,634
=========================================================
Class A:
Net asset value and redemption price per
share $ 18.13
- ---------------------------------------------------------
Offering price per share:
(Net asset value of $18.13
divided by 94.50%) $ 19.19
=========================================================
Class B:
Net asset value and offering price per
share $ 17.79
- ---------------------------------------------------------
Advisor Class:
Net asset value and offering price per
share $ 18.33
=========================================================
</TABLE>
STATEMENT OF OPERATIONS
For the year ended December 31, 1998
<TABLE>
<S> <C>
INVESTMENT INCOME:
Dividends (net of $416 foreign withholding
tax) $ 502,395
- ---------------------------------------------------------
Interest 53,825
- ---------------------------------------------------------
Securities lending income 2,035
- ---------------------------------------------------------
Total investment income 558,255
- ---------------------------------------------------------
EXPENSES:
Investment management & administration fees 203,359
- ---------------------------------------------------------
Accounting fees 6,806
- ---------------------------------------------------------
Custodian fees 6,265
- ---------------------------------------------------------
Trustees' fees 16,714
- ---------------------------------------------------------
Distribution fees -- Class A 29,605
- ---------------------------------------------------------
Distribution fees -- Class B 188,068
- ---------------------------------------------------------
Transfer agent fees -- Class A 31,636
- ---------------------------------------------------------
Transfer agent fees -- Class B 70,338
- ---------------------------------------------------------
Transfer agent fees -- Advisor Class 2,932
- ---------------------------------------------------------
Filing fees 43,643
- ---------------------------------------------------------
Printing fees 70,882
- ---------------------------------------------------------
Other 40,141
- ---------------------------------------------------------
Total expenses 710,389
- ---------------------------------------------------------
Less: Fee waivers (102,359)
- ---------------------------------------------------------
Net expenses 608,030
- ---------------------------------------------------------
Net investment income (loss) (49,775)
- ---------------------------------------------------------
REALIZED AND UNREALIZED GAIN (LOSS) FROM
INVESTMENT SECURITIES AND OPTION CONTRACTS:
Net realized gain (loss) from:
Investment securities 52,411
- ---------------------------------------------------------
Option contracts written (7,810)
- ---------------------------------------------------------
44,601
- ---------------------------------------------------------
Net unrealized appreciation of investment
securities 1,516,960
- ---------------------------------------------------------
Net gain from investment securities and
option contracts 1,561,561
- ---------------------------------------------------------
Net increase in net assets resulting from
operations $1,511,786
=========================================================
</TABLE>
See Notes to Financial Statements.
FS-4
<PAGE> 345
STATEMENT OF CHANGES IN NET ASSETS
For the years ended December 31, 1998 and 1997
<TABLE>
<CAPTION>
1998 1997
----------- -----------
<S> <C> <C>
OPERATIONS:
Net investment income (loss) $ (49,775) $ 22,242
- ------------------------------------------------------------------------------------------
Net realized gain from investment securities and option
contracts 44,601 1,352,859
- ------------------------------------------------------------------------------------------
Net unrealized appreciation of investment securities and
option contracts 1,516,960 2,016,032
- ------------------------------------------------------------------------------------------
Net increase in net assets resulting from operations 1,511,786 3,391,133
- ------------------------------------------------------------------------------------------
Distributions to shareholders from net investment income:
Class A -- (12,256)
- ------------------------------------------------------------------------------------------
Advisor Class -- (1,610)
- ------------------------------------------------------------------------------------------
Distributions to shareholders from net realized gains on
investment securities:
Class A (141,471) (482,262)
- ------------------------------------------------------------------------------------------
Class B (313,992) (1,128,861)
- ------------------------------------------------------------------------------------------
Advisor Class (18,735) (30,657)
- ------------------------------------------------------------------------------------------
Share transactions-net:
Class A 1,006,548 4,423,280
- ------------------------------------------------------------------------------------------
Class B 87,004 10,245,557
- ------------------------------------------------------------------------------------------
Advisor Class 562,783 197,292
- ------------------------------------------------------------------------------------------
Net increase in net assets 2,693,923 16,601,616
- ------------------------------------------------------------------------------------------
NET ASSETS:
Beginning of period 24,824,615 8,222,999
- ------------------------------------------------------------------------------------------
End of period $27,518,538 $24,824,615
==========================================================================================
NET ASSETS CONSIST OF:
Shares of beneficial interest $24,031,065 $22,421,981
- ------------------------------------------------------------------------------------------
Undistributed net investment income (loss) (2,524) --
- ------------------------------------------------------------------------------------------
Undistributed net realized gain (loss) from investment
securities and option contracts (27,707) 401,890
- ------------------------------------------------------------------------------------------
Unrealized appreciation of investment securities and
option contracts 3,517,704 2,000,744
- ------------------------------------------------------------------------------------------
$27,518,538 $24,824,615
==========================================================================================
</TABLE>
See Notes to Financial Statements.
FS-5
<PAGE> 346
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1998
NOTE 1-SIGNIFICANT ACCOUNTING POLICIES
AIM Basic Value Fund, formerly AIM America Value Fund, (the "Fund"), is a
separate series of AIM Growth Series (the "Trust"). The Trust is a Delaware
business trust and is registered under the Investment Company Act of 1940, as
amended ("1940 Act"), as an open-end management investment company. The Trust
has six diversified series of shares in operation, each series corresponding to
a distinct portfolio of investments.
The Fund invests substantially all of its investable assets in the Value
Portfolio (the "Portfolio"). The Portfolio is organized as a Delaware business
trust and is registered under the 1940 Act as a diversified, open-end management
investment company.
The Portfolio has investment objectives, policies, and limitations
substantially identical to the Fund. Therefore, the financial statements of the
Fund and the Portfolio have been presented on a consolidated basis, and
represent all activities of both the Fund and the Portfolio. At December 31,
1998, all of the shares of beneficial interest of the Portfolio were owned
either by the Fund or INVESCO (NY), Inc., which has a nominal ($100) investment
in the Portfolio.
The Fund offers Class A, Class B, and Advisor Class shares, each of which has
equal rights as to assets and voting privileges. Class A and Class B each has
exclusive voting rights with respect to its distribution plan. Investment
income, realized and unrealized capital gains and losses, and the common
expenses of the Fund are allocated on a pro rata basis to each class based on
the relative net assets of each class to the total net assets of the Fund. Each
class of shares differs in its respective distribution expenses, and may differ
in its transfer agent, registration, and certain other class-specific fees and
expenses.
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statements and
the reported amounts of income and expenses during the reporting period. Actual
results could differ from those estimates. The following is a summary of
significant accounting policies in conformity with generally accepted accounting
principles consistently followed by the Fund and Portfolio in the preparation of
the financial statements.
A. Portfolio Valuation -- The Fund calculates the net asset value of and
completes orders to purchase, exchange or repurchase Fund shares on each
business day, with the exception of those days on which the New York Stock
Exchange is closed.
Equity securities are valued at the last sale price on the exchange on
which such securities are traded or on the principal over-the-counter market
on which such securities are traded, as of the close of business on the day
the securities are being valued or, lacking any sales, at the mean between
the closing bid and asked prices. In cases where securities are traded on
more than one exchange, the securities are valued on the exchange determined
by A I M Advisors, Inc. (the "Manager") to be the primary market.
Fixed income investments are valued at the mean of representative quoted
bid and ask prices for such investments or, if such prices are not available,
at prices for investments of comparative maturity, quality and type; however,
when the Manager deems it appropriate, prices obtained for the day of
valuation from a bond pricing service will be used. Short-term investments
with a maturity of 60 days or less are valued at amortized cost which
approximates market value.
Investments for which market quotations are not readily available
(including restricted securities which are subject to limitations on their
sale) are valued at fair value as determined in good faith by or under the
direction of the Trust's Board of Trustees.
B. Repurchase Agreements -- With respect to repurchase agreements entered into
by the Portfolio, it is the Portfolio's policy to always receive, as
collateral, United States government securities or other high quality debt
securities of which the value, including accrued interest, is at least equal
to the amount to be repaid to the Portfolio under each agreement at its
maturity.
C. Option Accounting Principles -- When the Portfolio writes a call or put
option, an amount equal to the premium received is included in the Fund's
consolidated "Statement of Assets and Liabilities" as an asset and an
equivalent liability. The amount of the liability is subsequently
marked-to-market to reflect the current market value of the option. The
current market value of an option is the mean between the last bid and asked
prices on that day. If an option expires on its stipulated expiration date or
if the Portfolio enters into a closing purchase transaction, a gain or loss
is realized without regard to any unrealized gain or loss on the underlying
security, and the liability related to such option is extinguished. If a
written call option is exercised, a gain or loss is realized from the sale of
the underlying security and the proceeds of the sale are increased by the
premium originally received. If a written put option is exercised, the cost
of the underlying security purchased would be decreased by the premium
originally received. The Portfolio can write options only on a covered basis,
which, for a call, requires that the Portfolio hold the underlying security,
and, for a put, requires the Portfolio to set aside cash, U.S. government
securities or other liquid securities in an amount not less than the exercise
price or otherwise provide adequate cover at all times while the put option
is outstanding. The Portfolio may use options to manage its exposure to the
stock market and to fluctuations in interest rates.
The premium paid by the Portfolio for the purchase of a call or put option
is included in the Fund's consolidated "Statement of Assets and Liabilities"
as an investment and subsequently "marked-to-market" to reflect the current
market value of the option. If an option which the Portfolio has purchased
expires on the stipulated expiration date, the Portfolio realizes a loss in
the amount of the cost of the option. If the Portfolio enters into a closing
sale transaction, the Portfolio realizes a gain or loss, depending on whether
proceeds from the closing sale transaction are greater or less than the cost
of the option. If the Portfolio exercises a call option, the cost of the
securities acquired by exercising the call is increased by the premium paid
to buy the call. If the Portfolio exercises a put option, it realizes a gain
or loss from the sale of the underlying security,
FS-6
<PAGE> 347
and the proceeds from such sale are decreased by the premium originally paid.
The risk associated with purchasing options is limited to the premium
originally paid. The risk in writing a call option is that the Portfolio may
forego the opportunity of profit if the market value of the underlying
security or index increases and the option is exercised. The risk in writing
a put option is that the Portfolio may incur a loss if the market value of
the underlying security or index decreases and the option is exercised. In
addition, there is the risk the Portfolio may not be able to enter into a
closing transaction because of an illiquid secondary market.
D. Futures Contracts -- A futures contract is an agreement between two parties
to buy and sell a security at a set price on a future date. Upon entering
into such a contract the Portfolio is required to pledge to the broker an
amount of cash or securities equal to the minimum "initial margin"
requirements of the exchange on which the contract is traded. Pursuant to the
contract, the Portfolio agrees to receive from or pay to the broker an amount
of cash equal to the daily fluctuation in value of the contract. Such
receipts or payments are known as "variation margin" and are recorded by the
Portfolio as unrealized gains or losses. When the contract is closed, the
Portfolio records a realized gain or loss equal to the difference between the
value of the contract at the time it was opened and the value at the time it
was closed. The potential risk to the Portfolio is that the change in value
of the underlying securities may not correlate to the change in value of the
contracts. The Portfolio may use futures contracts to manage its exposure to
the stock market and to fluctuations in interest rates.
E. Security Transactions and Related Investment Income -- Security transactions
are accounted for on the trade date (date the order to buy or sell is
executed). Realized gains and losses are calculated on the basis of specific
identification of the securities sold. Dividends are recorded on the
ex-dividend date. Interest income is recorded on the accrual basis. Where a
high level of uncertainty exists as to its collection, income is recorded net
of all withholding tax with any rebate recorded when received. The Portfolio
may trade securities on other than normal settlement terms. This may increase
the risk if the other party to the transaction fails to deliver and causes
the Portfolio to subsequently invest at less advantageous prices. On December
31, 1998 additional paid-in capital was decreased by $47,251 and
undistributed net investment income was increased by $47,251 in order to
comply with the requirements of the American Institute of Certified Public
Accountants Statement of Position 93-2. Net assets of the Fund were
unaffected by the reclassifications discussed above.
F. Portfolio Securities Loaned -- At December 31, 1998, stocks with an aggregate
value listed below were on loan to brokers. The loans were secured by cash
collateral received by the Portfolio:
<TABLE>
<CAPTION>
DECEMBER 31, 1998 YEAR ENDED
---------------------------- DECEMBER 31, 1998
AGGREGATE VALUE CASH -----------------
ON LOANS COLLATERAL FEES RECEIVED
--------------- ---------- -----------------
<S> <C> <C> <C>
$1,431,825 $1,433,821 $2,035
</TABLE>
Cash collateral is received by the Portfolio against loaned securities in
the amount at least equal to 102% of the market value of the loaned
securities at the inception of each loan. This collateral must be maintained
at not less than 100% of the market value of the loaned securities during the
period of the loan. The cash collateral is invested in a securities lending
trust which consists of a portfolio of high quality short duration securities
whose average effective duration is restricted to 120 days or less.
G. Deferred Organizational Expenses -- Expenses incurred by the the Fund and the
Portfolio in connection with their organization, their initial registration
with the Securities and Exchange Commission and with various states and the
initial public offering of their shares aggregated $63,500 for the Fund and
$25,000 for the Portfolio. These expenses are being amortized on a
straight-line basis over a five-year period.
H. Taxes -- It is the policy of the Fund and the Portfolio to meet the
requirements for qualification as a "regulated investment company" under the
Internal Revenue Code of 1986, as amended ("Code"). It is also the intention
of the Fund to make distributions sufficient to avoid imposition of any
excise tax under Section 4982 of the Code. Therefore, no provision has been
made for Federal taxes on income, capital gains, or unrealized appreciation
of securities held, and excise tax on income and capital gains.
I. Distributions to Shareholders -- Distributions to shareholders are recorded
by the Fund on the ex-date. Income and capital gain distributions are
determined in accordance with Federal income tax regulations which may
differ from generally accepted accounting principles. These differences are
primarily due to differing treatments of income and gains on various
investment securities held by the Portfolio and timing differences.
J. Restricted Securities -- The Portfolio is permitted to invest in privately
placed restricted securities. These securities may be resold in transactions
exempt from registration or to the public if the securities are registered.
Disposal of these securities may involve time-consuming negotiations and
expense, and prompt sale at an acceptable price may be difficult.
K. Indexed Securities -- The Portfolio may invest in indexed securities whose
value is linked either directly or indirectly to changes in foreign
currencies, interest rates, equities, indices, or other reference
instruments. Indexed securities may be more volatile than the reference
instrument itself, but any loss is limited to the amount of the original
investment.
L. Line of Credit -- The Fund, along with certain other funds advised and/or
administered by the Manager, has a line of credit with BankBoston and State
Street Bank & Trust Company. The arrangements with the banks allow the Fund
and certain other funds to borrow, on a first come, first served basis, an
aggregate maximum amount of $250,000,000. The Fund is limited to borrowing up
to 33 1/3% of the value of the Fund's total assets.
For the year ended December 31, 1998, the average outstanding daily balance
of bank loans (based on the number of days the loans were outstanding) for
the Fund was $87,889 with a weighted average interest rate of 6.24%. Interest
expense for the Fund for the year ended December 31, 1998 was $137, and is
included in "Other Expenses" on the Statement of Operations.
FS-7
<PAGE> 348
NOTE 2-RELATED PARTIES
A I M Advisors, Inc. ("Manager") is the Fund's and the Portfolio's investment
manager and administrator. As of the close of business on May 29, 1998,
Liechtenstein Global Trust AG ("LGT"), the former indirect parent organization
of Chancellor LGT Asset Management, Inc. ("Chancellor LGT"), consummated a
purchase agreement with AMVESCAP PLC pursuant to which AMVESCAP PLC acquired
LGT's Asset Management Division, which included Chancellor LGT and certain other
affiliates. As a result of this transaction, Chancellor LGT was renamed INVESCO
(NY), Inc., and is now an indirect wholly-owned subsidiary of AMVESCAP PLC. In
connection with this transaction, A I M Advisors, Inc., an indirect wholly-owned
subsidiary of AMVESCAP PLC, became the administrator of the Fund and the
investment manager and administrator of the Portfolio. Also, on May 29, 1998,
A I M Distributors, Inc. ("AIM Distributors"), a wholly-owned subsidiary of the
Manager, became the Fund's distributor, and the Trust was reorganized from a
Massachusetts business trust into a Delaware business trust, and the Portfolio
was reorganized from a New York trust into a Delaware business trust. Finally,
on September 4, 1998, A I M Fund Services, Inc. ("AFS"), a wholly-owned
subsidiary of the Manager, became the transfer agent of the Fund.
The Fund pays the Manager administration fees at the annualized rate of 0.25%
of the Fund's average daily net assets. The Portfolio pays investment management
and administration fees to the Manager at the annualized rate of 0.475% on the
first $500 million of average daily net assets of the Portfolio; 0.45% on the
next $500 million; 0.425% on the next $500 million; and 0.40% on amounts
thereafter.
AIM Distributors serves as the Fund's distributor. For the period ended May
29, 1998, GT Global, Inc. ("GT Global"), an affiliate of Chancellor LGT, served
as the Fund's distributor. The Fund offers Class A, Class B, and Advisor Class
shares for purchase.
Class A shares are subject to initial sales charges imposed at the time of
purchase, in accordance with the schedule included in the Fund's current
prospectus. AIM Distributors collects the sales charges imposed on sales of
Class A shares, and reallows a portion of such charges to dealers through which
the sales are made. For the year ended December 31, 1998, AIM Distributors and
GT Global retained the following sales charges: $1,695 and $2,335, respectively.
Purchases of Class A shares exceeding $1,000,000 may be subject to a contingent
deferred sales charge ("CDSC") upon redemption, in accordance with the Fund's
current prospectus. No CDSC's for Class A were collected for the period ended
December 31, 1998. AIM Distributors also makes ongoing shareholder servicing and
trail commission payments to dealers whose clients hold Class A shares.
Class B shares are not subject to initial sales charges. When Class B shares
are sold, AIM Distributors from its own resources pays commissions to dealers
through which the sales are made. Certain redemptions of Class B shares made
within six years of purchase are subject to CDSCs, in accordance with the Fund's
current prospectus. For the year ended December 31, 1998, AIM Distributors and
GT Global collected such CDSCs in the amount of: $15,167 and $38,159,
respectively. In addition, AIM Distributors makes ongoing shareholder servicing
and trail commission payments to dealers whose clients hold Class B shares.
For the period ended May 29, 1998, pursuant to the then effective separate
distribution plans adopted under the 1940 Act Rule 12b-1 by the Trust's Board of
Trustees with respect to the Fund's Class A shares ("Old Class A Plan") and
Class B shares ("Old Class B Plan"), the Fund reimbursed GT Global for a portion
of its shareholder servicing and distribution expenses. Under the Old Class A
Plan, the Fund was permitted to pay GT Global a service fee at the annualized
rate of up to 0.25% of the average daily net assets of the Fund's Class A shares
for GT Global's expenditures incurred in servicing and maintaining shareholder
accounts, and was permitted to pay GT Global a distribution fee at the
annualized rate of up to 0.35% of the average daily net assets of the Fund's
Class A shares, less any amounts paid by the Fund as the aforementioned service
fee, for GT Global's expenditures incurred in providing services as distributor.
All expenses for which GT Global was reimbursed under the Old Class A Plan would
have been incurred within one year of such reimbursement.
For the period ended May 29, 1998, pursuant to the Old Class B Plan, the Fund
was permitted to pay GT Global a service fee at the annualized rate of up to
0.25% of the average daily net assets of the Fund's Class B shares for GT
Global's expenditures incurred in servicing and maintaining shareholder
accounts, and was permitted to pay GT Global a distribution fee at the
annualized rate of up to 0.75% of the average daily net assets of the Fund's
Class B shares for GT Global's expenditures incurred in providing services as
distributor. Expenses incurred under the Old Class B Plan in excess of 1.00%
annually were permitted to be carried forward for reimbursement in subsequent
years as long as that Plan continued in effect.
Effective as of the close of business May 29, 1998, pursuant to Rule 12b-1
under the 1940 Act, the Trust's Board of Trustees adopted a Master Distribution
Plan applicable to the Fund's Class A shares ("Class A Plan") and Class B shares
("Class B Plan"), pursuant to which the Fund compensates AIM Distributors for
the purpose of financing any activity that is intended to result in the sale of
Class A or Class B shares of the Fund. Under the Class A Plan, the Fund
compensates AIM Distributors at the annualized rate of 0.35% of the average
daily net assets of each of the Fund's Class A shares.
Pursuant to the Class B Plan, the Fund compensates AIM Distributors at an
annualized rate of 1.00% of the average daily net assets of the Fund's Class B
shares.
The Class A Plan and the Class B Plan (together, the "Plans") are designed to
compensate AIM Distributors for certain promotional and other sales-related
costs, and to implement a dealer incentive program that provides for periodic
payments to selected dealers who furnish continuing personal shareholder
services to their customers who purchase and own Class A and Class B shares of
the Fund. Payments also can be directed by AIM Distributors to financial
institutions who have entered into service agreements with respect to Class A
and Class B shares of the Fund and who provide continuing personal services to
their customers who own Class A and Class B shares of the Fund. The service fees
payable to selected financial 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 that were purchased on or after a
prescribed date set forth in the Plans.
The Manager and AIM Distributors have undertaken to limit the Fund's expenses
(exclusive of brokerage commissions, taxes, interest, and extraordinary
expenses) to the annual rate of 1.75%, 2.40%, and 1.40% of the average daily net
assets of the Fund's Class A, Class B, and Advisor Class shares, respectively.
This
FS-8
<PAGE> 349
undertaking may be changed or eliminated in the future. If necessary, this
limitation will be effected by waivers by the Manager of investment management
and administration fees, waivers by AIM Distributors of payments under the Class
A Plan and/or Class B Plan and/or reimbursements by the Manager or AIM
Distributors of portions of the Fund's other operating expenses.
Effective as of the close of business September 4, 1998, the Fund, pursuant to
a transfer agency and service agreement, has agreed to pay A I M Fund Services,
Inc. ("AFS") an annualized fee of $24.85 for each shareholder account that is
open during any calendar month (this fee includes all out-of-pocket expenses),
and an annualized fee of $0.70 per shareholder account that is closed during any
calendar month. Both fees are billed by AFS monthly in arrears on a prorated
basis of 1/12 of the annualized fee for all such accounts.
For the period January 1, 1998 to September 4, 1998, GT Global Investor
Services, Inc., an affiliate of Chancellor LGT, was the transfer agent of the
Fund. For performing shareholder servicing, reporting, and general transfer
agent services, GT Services received an annual maintenance fee of $17.50 per
account, a new account fee of $4.00 per account, a per transaction fee of $1.75
for all transactions other than exchanges and a per exchange fee of $2.25. GT
Services was also reimbursed by the Fund for its out-of-pocket expenses for such
items as postage, forms, telephone charges, stationery and office supplies.
The Manager is the pricing and accounting agent for the Fund. The monthly fee
for these services to the Manager is a percentage, not to exceed 0.03% annually,
of the Fund's average daily net assets. The annual fee rate is derived based on
the aggregate net assets of the funds which comprise the following investment
companies: AIM Growth Series, AIM Investment Funds, AIM Series Trust, G.T.
Global Variable Investment Series and G.T. Global Variable Investment Trust. The
fee is calculated at the rate of 0.03% to the first $5 billion of assets and
0.02% to the assets in excess of $5 billion. An amount is allocated to and paid
by each such fund based on its relative average daily net assets.
The Portfolio pays each of its Trustees who is not an employee, officer or
director of the Manager, AIM Distributors or AFS $500 per year plus $150 for
each meeting of the board or any committee thereof attended by the Trustee.
At December 31, 1998, all of the shares of beneficial interest of the
Portfolio were owned either by the Fund or Invesco (NY), Inc.
NOTE 3-PURCHASES AND SALES OF SECURITIES
The aggregate amount of investment securities (other than short-term securities)
purchased and sold by the Portfolio during the year ended December 31, 1998 was
$39,540,620 and $39,657,090, respectively.
The amount of unrealized appreciation (depreciation) of investment securities,
on a tax basis, as of December 31, 1998 is as follows:
<TABLE>
<S> <C>
Aggregate unrealized appreciation of investment
securities $4,110,581
- ---------------------------------------------------------------
Aggregate unrealized (depreciation) of investment
securities (688,180)
- ---------------------------------------------------------------
Net unrealized appreciation of investment
securities $3,422,401
===============================================================
</TABLE>
Cost of investments for tax purposes is $22,985,717.
NOTE 4-SHARE INFORMATION
Changes in the Fund's shares outstanding during the years ended December 31,
1998 and 1997 were as follows:
<TABLE>
<CAPTION>
1998 1997
----------------------- -----------------------
SHARES AMOUNT SHARES AMOUNT
-------- ------------ --------- -----------
<S> <C> <C> <C> <C>
Sold:
Class A 472,964 $ 8,362,868 781,797 $13,117,280
- ------------------------------------------------------------------------
Class B 587,988 10,276,429 1,148,582 19,043,834
- ------------------------------------------------------------------------
Advisor Class 41,555 747,776 14,203 230,962
- ------------------------------------------------------------------------
Issued as
reinvestment of
dividends:
Class A 7,580 134,463 26,859 454,725
- ------------------------------------------------------------------------
Class B 16,572 288,515 60,093 1,004,744
- ------------------------------------------------------------------------
Advisor Class 1,044 18,735 1,920 32,714
- ------------------------------------------------------------------------
Reacquired:
Class A (424,737) (7,490,783) (536,657) (9,148,725)
- ------------------------------------------------------------------------
Class B (607,196) (10,477,940) (606,167) (9,803,021)
- ------------------------------------------------------------------------
Advisor Class (11,248) (203,728) (3,834) (66,384)
- ------------------------------------------------------------------------
84,522 $ 1,656,335 886,796 $14,866,129
========================================================================
</TABLE>
NOTE 5-EXPENSE REDUCTIONS
The Manager has directed certain portfolio trades to brokers who then paid a
portion of the Portfolio's expenses. For the year ended December 31, 1998, the
expenses of the Portfolio were reduced by $1,546 under these arrangements.
FS-9
<PAGE> 350
NOTE 6-FINANCIAL HIGHLIGHTS
Shown below are the financial highlights for a share of Class A, Class B, and
Advisor Class outstanding during each of the years in the three-year period
ended December 31, 1998 and the period October 18, 1995 (date operations
commenced) through December 31, 1995:
<TABLE>
<CAPTION>
CLASS A
--------------------------------------------------
1998(a) 1997 1996 1995
------- ------- ------- -------
<S> <C> <C> <C> <C>
Net asset value, beginning of period $17.25 $ 14.65 $ 12.76 $ 11.43
- ------------------------------------------------------------ ------ ------- ------- -------
Income from investment operations:
Net investment income(b) 0.04 0.09(c) (0.01)(c) 0.03(c)
- ------------------------------------------------------------ ------ ------- ------- -------
Net gains on securities (both realized and unrealized) 1.16 3.87 1.94 1.30
- ------------------------------------------------------------ ------ ------- ------- -------
Total from investment operations 1.20 3.96 1.93 1.33
- ------------------------------------------------------------ ------ ------- ------- -------
Less distributions:
Dividends from net investment income -- (0.03) -- --
- ------------------------------------------------------------ ------ ------- ------- -------
Distributions from net realized gains (0.32) (1.33) (0.04) --
- ------------------------------------------------------------ ------ ------- ------- -------
Total distributions (0.32) (1.36) (0.04) --
- ------------------------------------------------------------ ------ ------- ------- -------
Net asset value, end of period $18.13 $ 17.25 $ 14.65 $ 12.76
============================================================ ====== ======= ======= =======
Total Return(d) 7.02% 27.23% 15.12% 11.64%
============================================================ ====== ======= ======= =======
Ratios/supplemental data:
Net assets, end of period (000s omitted) $9,074 $ 7,688 $ 2,529 $ 870
============================================================ ====== ======= ======= =======
Ratio of expenses to average net assets:
With expense reductions and/or reimbursement 1.74%(e) 1.99% 2.00% 2.00%(f)
- ------------------------------------------------------------ ------ ------- ------- -------
Without expense reductions and/or reimbursement 2.11%(e) 2.97% 5.51% 50.54%(f)
============================================================ ====== ======= ======= =======
Ratio of net investment income to average net assets:
With expense reductions and/or reimbursement 0.25%(e) 0.56% (0.10)% 1.10%(f)
- ------------------------------------------------------------ ------ ------- ------- -------
Without expense reductions and/or reimbursement (0.08)%(e) (0.42)% (3.61)% (47.44)%(f)
============================================================ ====== ======= ======= =======
Ratio of interest expense to average net assets(g) -- 0.03% -- --
============================================================ ====== ======= ======= =======
Portfolio turnover rate(g) 148% 93% 256% --
============================================================ ====== ======= ======= =======
</TABLE>
(a) The Fund changed Investment Advisors on May 29, 1998.
(b) Before reimbursement the net investment loss per share would have been
$(0.02), $(0.07), $(0.50), and $(1.11) for 1998-1995, respectively.
(c) Calculated using average shares outstanding.
(d) Does not deduct sales charges and is not annualized for periods less than
one year.
(e) Ratios are based on average net assets of $8,458,715.
(f) Annualized.
(g) Portfolio turnover rates and ratio of interest expense to average net assets
are calculated on the basis of the Value Portfolio as a whole without
distinguishing between the classes of shares issued.
FS-10
<PAGE> 351
NOTE 6-FINANCIAL HIGHLIGHTS (continued)
<TABLE>
<CAPTION>
CLASS B ADVISOR CLASS
---------------------------------------------------- -----------
1998(a) 1997 1996 1995 1998(a)
------- -------- ------- -------- -------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of period $ 17.04 $ 14.54 $ 12.75 $ 11.43 $17.37
- ------------------------------------------------------ ------- -------- ------- -------- ------
Income from investment operations:
Net investment income(b) (0.08) (0.01)(c) (0.10)(c) 0.01(c) 0.07
- ------------------------------------------------------ ------- -------- ------- -------- ------
Net gains on securities (both realized and
unrealized) 1.15 3.83 1.93 1.31 1.21
- ------------------------------------------------------ ------- -------- ------- -------- ------
Total from investment operations 1.07 3.82 1.83 1.32 1.28
- ------------------------------------------------------ ------- -------- ------- -------- ------
Less distributions:
Dividends from net investment income -- -- -- -- --
- ------------------------------------------------------ ------- -------- ------- -------- ------
Distributions from net realized gains (0.32) (1.32) (0.04) -- (0.32)
- ------------------------------------------------------ ------- -------- ------- -------- ------
Total distributions (0.32) (1.32) (0.04) -- (0.32)
- ------------------------------------------------------ ------- -------- ------- -------- ------
Net asset value, end of period $ 17.79 $ 17.04 $ 14.54 $ 12.75 $18.33
====================================================== ======= ======== ======= ======== ======
Total Return(d) 6.34% 26.44% 14.35% 11.55% 7.43%
====================================================== ======= ======== ======= ======== ======
Ratios/supplemental data:
Net assets, end of period (000s omitted) $17,406 $ 16,717 $ 5,503 $ 1,254 $1,038
====================================================== ======= ======== ======= ======== ======
Ratio of expenses to average net assets:
With expense reductions and/or reimbursement 2.39%(e) 2.64% 2.65% 2.65%(f) 1.39%(e)
- ------------------------------------------------------ ------- -------- ------- -------- ------
Without expense reductions and/or reimbursement 2.76%(e) 3.62% 6.16% 51.19%(f) 1.76%(e)
====================================================== ======= ======== ======= ======== ======
Ratio of net investment income to average net assets:
With expense reductions and/or reimbursement (0.40)%(e) (0.09)% (0.75)% 0.45%(f) 0.60%(e)
- ------------------------------------------------------ ------- -------- ------- -------- ------
Without expense reductions and/or reimbursement (0.72)%(e) (1.07)% (4.26)% (48.09)%(f) 0.23%(e)
====================================================== ======= ======== ======= ======== ======
Ratio of interest expense to average net assets(f) -- 0.03% -- -- --
====================================================== ======= ======== ======= ======== ======
Portfolio turnover rate(g) 148% 93% 256% -- 148%
====================================================== ======= ======== ======= ======== ======
<CAPTION>
ADVISOR CLASS
------------------------------------
1997 1996 1995
------- ------- --------
<S> <C> <C> <C>
Net asset value, beginning of period $ 14.72 $ 12.77 $ 11.43
- ------------------------------------------------------ ------- ------- --------
Income from investment operations:
Net investment income(b) 0.15(c) 0.03(c) 0.04(c)
- ------------------------------------------------------ ------- ------- --------
Net gains on securities (both realized and
unrealized) 3.91 1.96 1.30
- ------------------------------------------------------ ------- ------- --------
Total from investment operations 4.06 1.99 1.34
- ------------------------------------------------------ ------- ------- --------
Less distributions:
Dividends from net investment income (0.07) -- --
- ------------------------------------------------------ ------- ------- --------
Distributions from net realized gains (1.34) (0.04) --
- ------------------------------------------------------ ------- ------- --------
Total distributions (1.41) (0.04) --
- ------------------------------------------------------ ------- ------- --------
Net asset value, end of period $ 17.37 $ 14.72 $ 12.77
====================================================== ======= ======= ========
Total Return(d) 27.78% 15.58% 11.72%
====================================================== ======= ======= ========
Ratios/supplemental data:
Net assets, end of period (000s omitted) $ 439 $ 191 $ 81
====================================================== ======= ======= ========
Ratio of expenses to average net assets:
With expense reductions and/or reimbursement 1.64% 1.65% 1.65%(f)
- ------------------------------------------------------ ------- ------- --------
Without expense reductions and/or reimbursement 2.62% 5.16% 50.19%(f)
====================================================== ======= ======= ========
Ratio of net investment income to average net assets:
With expense reductions and/or reimbursement 0.91% 0.25% 1.45%(f)
====================================================== ======= ======= ========
Without expense reductions and/or reimbursement (0.07)% (3.26)% (47.09)%(f)
====================================================== ======= ======= ========
Ratio of interest expense to average net assets(f) 0.03% -- --
====================================================== ======= ======= ========
Portfolio turnover rate(g) 93% 256% --
====================================================== ======= ======= ========
</TABLE>
(a) The Fund changed Investment Advisors on May 29, 1998.
(b) Before reimbursement the net investment loss per share would have been
$(0.15), $(0.17), $(0.59), and $(1.13) for 1998-1995, respectively for Class
B, $0.02, $(0.01), $(0.46) and $(1.10) for 1998-1995, respectively for
Advisor Class.
(c) Calculated based upon average shares outstanding during the period.
(d) Does not deduct contingent deferred sales charges and is not annualized for
periods less than one year.
(e) Ratios are based on average net assets of $18,806,810 and $783,941 for Class
B and Advisor Class, respectively.
(f) Annualized.
(g) Portfolio turnover rates and ratio of interest expense to average net assets
are calculated on the basis of the Portfolio as a whole without
distinguishing between the classes of shares issued.
FS-11
<PAGE> 352
REPORT OF INDEPENDENT ACCOUNTANTS
To the Shareholders of AIM Small Cap Growth Fund
(formerly AIM Small Cap Equity Fund) and Board of
Trustees of AIM Growth Series (formerly GT Global Growth
Series):
In our opinion, the accompanying statement of assets and
liabilities, including the portfolio of investments, and
the related statements of operations and of changes in
net assets and the financial highlights present fairly,
in all material respects, the financial position of the
AIM Small Cap Growth Fund at December 31, 1998, and the
results of its operations, the changes in its net assets
and the financial highlights for the periods indicated,
in conformity with generally accepted accounting
principles. These financial statements and financial
highlights (hereafter referred to as "financial
statements") are the responsibility of the Fund's
management; our responsibility is to express an opinion
on these financial statements based on our audits. We
conducted our audits of these financial statements in
accordance with generally accepted auditing standards
which require that we plan and perform the audit to
obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit
includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements,
assessing the accounting principles used and significant
estimates made by management, and evaluating the overall
financial statement presentation. We believe that our
audits, which included confirmation of securities at
December 31, 1998 by correspondence with the custodian
and brokers, provide a reasonable basis for the opinion
expressed above.
/s/ PRICEWATERHOUSECOOPERS LLP
PRICEWATERHOUSECOOPERS LLP
Boston, Massachusetts
February 19, 1999
FS-12
<PAGE> 353
SCHEDULE OF INVESTMENTS
DECEMBER 31, 1998
<TABLE>
<CAPTION>
MARKET
SHARES VALUE
<S> <C> <C>
DOMESTIC COMMON STOCKS-78.64%
AEROSPACE/DEFENSE-0.17%
Hawk Corp.(a) 10,300 $ 86,263
- --------------------------------------------------------------
AIRLINES-0.14%
Mesaba Holdings, Inc.(a) 3,500 72,188
- --------------------------------------------------------------
AUTO PARTS & EQUIPMENT-0.74%
Tower Automotive, Inc.(a) 15,600 389,025
- --------------------------------------------------------------
BANKING (REGIONAL)-0.91%
Centennial Bancorp(a) 6,500 121,875
- --------------------------------------------------------------
Columbia Bancorp 20,000 180,000
- --------------------------------------------------------------
Fort Bend Holdings Corp. 5,000 122,500
- --------------------------------------------------------------
Silicon Valley Bancshares(a) 3,000 51,094
- --------------------------------------------------------------
475,469
- --------------------------------------------------------------
BIOTECHNOLOGY-0.86%
Curative Health Services, Inc.(a) 1,400 46,900
- --------------------------------------------------------------
Scios, Inc.(a) 38,900 403,582
- --------------------------------------------------------------
450,482
- --------------------------------------------------------------
BROADCASTING (TELEVISION, RADIO & CABLE)-0.55%
Cox Radio, Inc.-Class A(a) 6,800 287,300
- --------------------------------------------------------------
CHEMICALS (SPECIALTY)-0.81%
Cambrex Corp. 8,400 201,600
- --------------------------------------------------------------
ChiRex, Inc.(a) 6,000 128,250
- --------------------------------------------------------------
OM Group, Inc. 2,500 91,250
- --------------------------------------------------------------
421,100
- --------------------------------------------------------------
COMMUNICATIONS EQUIPMENT-2.97%
Brightpoint, Inc.(a) 20,000 275,000
- --------------------------------------------------------------
Excel Switching Corp.(a) 7,100 269,800
- --------------------------------------------------------------
Periphonics Corp.(a) 35,000 461,560
- --------------------------------------------------------------
REMEC, Inc.(a) 20,000 360,000
- --------------------------------------------------------------
VideoServer, Inc.(a) 10,000 183,750
- --------------------------------------------------------------
1,550,110
- --------------------------------------------------------------
COMPUTERS (HARDWARE)-0.39%
Visual Networks, Inc.(a) 5,500 206,250
- --------------------------------------------------------------
COMPUTERS (NETWORKING)-0.28%
ACT Networks, Inc.(a) 12,000 147,000
- --------------------------------------------------------------
COMPUTERS (PERIPHERALS)-1.44%
Actel Corp.(a) 15,000 300,000
- --------------------------------------------------------------
Cybex Computer Products Corp.(a) 3,600 105,750
- --------------------------------------------------------------
QLogic Corp.(a) 1,100 143,963
- --------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
MARKET
SHARES VALUE
<S> <C> <C>
COMPUTERS (PERIPHERALS)-(CONTINUED)
Xircom, Inc.(a) 6,000 $ 204,000
- --------------------------------------------------------------
753,713
- --------------------------------------------------------------
COMPUTERS (SOFTWARE &
SERVICES)-10.46%
AnswerThink Consulting Group,
Inc.(a) 12,600 338,625
- --------------------------------------------------------------
Best Software, Inc.(a) 4,000 95,000
- --------------------------------------------------------------
Computer Management Sciences,
Inc.(a) 19,100 331,863
- --------------------------------------------------------------
Concord Communications, Inc.(a) 8,200 465,350
- --------------------------------------------------------------
Documentum, Inc.(a) 2,900 154,969
- --------------------------------------------------------------
Engineering Animation, Inc.(a) 3,700 199,800
- --------------------------------------------------------------
Entrust Technologies, Inc. 12,900 307,988
- --------------------------------------------------------------
InfoSpace.com, Inc.(a) 10,000 381,250
- --------------------------------------------------------------
Internet America, Inc.(a) 6,000 174,000
- --------------------------------------------------------------
ISS Group, Inc.(a) 3,000 165,000
- --------------------------------------------------------------
Macromedia, Inc.(a) 10,000 336,875
- --------------------------------------------------------------
MAPICS, Inc.(a) 19,300 318,450
- --------------------------------------------------------------
Metro Information Services, Inc.(a) 12,400 372,000
- --------------------------------------------------------------
MindSpring Enterprises, Inc.(a) 2,000 122,125
- --------------------------------------------------------------
Pervasive Software, Inc.(a) 10,000 192,500
- --------------------------------------------------------------
QuadraMed Corp.(a) 5,000 102,500
- --------------------------------------------------------------
ScanSource, Inc.(a) 11,000 236,500
- --------------------------------------------------------------
Software AG Systems, Inc.(a) 20,000 362,500
- --------------------------------------------------------------
Spyglass, Inc.(a) 12,000 264,000
- --------------------------------------------------------------
Stac Software, Inc.(a) 20,000 27,500
- --------------------------------------------------------------
USWeb Corp.(a) 14,000 369,250
- --------------------------------------------------------------
Wiztec Solutions Ltd.(a) 10,000 144,375
- --------------------------------------------------------------
5,462,420
- --------------------------------------------------------------
CONSUMER (JEWELRY, NOVELTIES AND GIFTS)-0.80%
Department 56, Inc.(a) 3,200 120,200
- --------------------------------------------------------------
Fossil, Inc.(a) 7,000 201,250
- --------------------------------------------------------------
Media Arts Group, Inc.(a) 7,000 98,438
- --------------------------------------------------------------
419,888
- --------------------------------------------------------------
CONSUMER FINANCE-0.42%
AmeriCredit Corp.(a) 15,800 218,238
- --------------------------------------------------------------
ELECTRICAL EQUIPMENT-1.89%
AFC Cable Systems, Inc.(a) 5,000 168,125
- --------------------------------------------------------------
General Cable Corp. 15,200 311,600
- --------------------------------------------------------------
Hadco Corp.(a) 1,700 59,500
- --------------------------------------------------------------
Hypercom Corp.(a) 12,500 123,438
- --------------------------------------------------------------
Optimal Robotics Corp.(a) 10,000 140,000
- --------------------------------------------------------------
Sawtek Inc.(a) 4,900 85,750
- --------------------------------------------------------------
</TABLE>
FS-13
<PAGE> 354
<TABLE>
<CAPTION>
MARKET
SHARES VALUE
<S> <C> <C>
ELECTRICAL EQUIPMENT-(CONTINUED)
SLI, Inc.(a) 3,500 $ 97,125
- --------------------------------------------------------------
985,538
- --------------------------------------------------------------
ELECTRONICS (SEMICONDUCTORS)-2.36%
Apex PC Solutions, Inc.(a) 5,000 144,375
- --------------------------------------------------------------
Applied Micro Circuits Corp.(a) 3,100 105,303
- --------------------------------------------------------------
Hi/Fn, Inc.(a) 5,069 119,757
- --------------------------------------------------------------
RF Micro Devices, Inc.(a) 7,000 324,625
- --------------------------------------------------------------
Sipex Corp.(a) 8,000 281,000
- --------------------------------------------------------------
TranSwitch Corp.(a) 6,700 260,881
- --------------------------------------------------------------
1,235,941
- --------------------------------------------------------------
ENTERTAINMENT-0.26%
SFX Entertainment, Inc.-Class A(a) 2,500 137,188
- --------------------------------------------------------------
EQUIPMENT (SEMICONDUCTOR)-0.51%
Asyst Technologies, Inc.(a) 7,500 152,813
- --------------------------------------------------------------
Etec Systems, Inc.(a) 2,900 116,000
- --------------------------------------------------------------
268,813
- --------------------------------------------------------------
FOODS-1.47%
Ben & Jerry's Homemade, Inc.-Class
A(a) 13,000 290,875
- --------------------------------------------------------------
Fresh Del Monte Produce Inc.(a) 3,000 65,063
- --------------------------------------------------------------
Hain Food Group, Inc. (The)(a) 6,200 155,000
- --------------------------------------------------------------
Horizon Organic Holding Corp.(a) 4,000 62,000
- --------------------------------------------------------------
United Natural Foods, Inc.(a) 8,000 193,000
- --------------------------------------------------------------
765,938
- --------------------------------------------------------------
HEALTH CARE (DRUGS-GENERIC AND OTHER)-3.47%
Anesta Corp.(a) 5,000 133,125
- --------------------------------------------------------------
Barr Laboratories, Inc.(a) 11,800 566,400
- --------------------------------------------------------------
Jones Pharma, Inc. 18,800 686,200
- --------------------------------------------------------------
Medicis Pharmaceutical-Class A(a) 3,000 178,875
- --------------------------------------------------------------
Parexel International Corp.(a) 10,000 250,000
- --------------------------------------------------------------
1,814,600
- --------------------------------------------------------------
HEALTH CARE (HOSPITAL
MANAGEMENT)-0.13%
New American Healthcare Corp.(a) 6,300 70,481
- --------------------------------------------------------------
HEALTH CARE (MEDICAL PRODUCTS & SUPPLIES)-1.92%
Colorado MEDtech, Inc.(a) 25,000 331,250
- --------------------------------------------------------------
Hologic, Inc.(a) 8,000 97,000
- --------------------------------------------------------------
Osteotech, Inc.(a) 5,000 232,500
- --------------------------------------------------------------
PSS World Medical, Inc.(a) 11,700 269,100
- --------------------------------------------------------------
Xomed Surgical Products, Inc.(a) 2,250 72,000
- --------------------------------------------------------------
1,001,850
- --------------------------------------------------------------
HEALTH CARE (SPECIALIZED
SERVICES)-3.23%
Hooper Holmes, Inc. 12,200 353,800
- --------------------------------------------------------------
Orthodontic Centers of America,
Inc.(a) 16,000 311,000
- --------------------------------------------------------------
Physician Reliance Network, Inc.(a) 38,300 502,688
- --------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
MARKET
SHARES VALUE
<S> <C> <C>
HEALTH CARE (SPECIALIZED SERVICES)-(CONTINUED)
Superior Consultant Holdings
Corp.(a) 5,000 $ 217,500
- --------------------------------------------------------------
Total Renal Care Holdings, Inc.(a) 10,300 304,493
- --------------------------------------------------------------
1,689,481
- --------------------------------------------------------------
INSURANCE (LIFE & HEALTH)-1.36%
Healthcare Recoveries, Inc.(a) 14,000 238,000
- --------------------------------------------------------------
Reinsurance Group of America, Inc. 7,800 473,850
- --------------------------------------------------------------
711,850
- --------------------------------------------------------------
INSURANCE (PROPERTY &
CASUALTY)-0.52%
FPIC Insurance Group, Inc. 3,000 142,500
- --------------------------------------------------------------
Medical Assurance, Inc. 3,850 127,291
- --------------------------------------------------------------
269,791
- --------------------------------------------------------------
INSURANCE BROKERS-0.39%
Clark/Bardes Holdings, Inc.(a) 12,200 205,875
- --------------------------------------------------------------
INVESTMENT MANAGEMENT-0.85%
Knight/Trimark Group, Inc.-Class
A(a) 18,600 445,238
- --------------------------------------------------------------
IRON & STEEL-0.44%
Gibraltar Steel Corp.(a) 10,000 227,500
- --------------------------------------------------------------
LEISURE TIME (PRODUCTS)-1.94%
Acclaim Entertainment, Inc.(a) 20,000 245,000
- --------------------------------------------------------------
JAKKS Pacific, Inc.(a) 7,500 80,625
- --------------------------------------------------------------
Noodle Kidoodle, Inc.(a) 20,000 190,000
- --------------------------------------------------------------
THQ, Inc.(a) 9,000 252,000
- --------------------------------------------------------------
Zomax Optical Media, Inc.(a) 15,000 243,750
- --------------------------------------------------------------
1,011,375
- --------------------------------------------------------------
LODGING (HOTELS)-0.63%
ExecuStay Corp.(a) 25,400 330,200
- --------------------------------------------------------------
MACHINERY (DIVERSIFIED)-0.12%
Gradall Industries, Inc.(a) 4,400 63,250
- --------------------------------------------------------------
MANUFACTURING (DIVERSIFIED)-0.39%
Matthews International Corp.-Class A 2,300 72,450
- --------------------------------------------------------------
Spartech Corp. 6,000 132,000
- --------------------------------------------------------------
204,450
- --------------------------------------------------------------
OFFICE EQUIPMENT & SUPPLIES-1.01%
CompX International, Inc.(a) 6,800 179,350
- --------------------------------------------------------------
Knoll, Inc.(a) 11,700 346,613
- --------------------------------------------------------------
525,963
- --------------------------------------------------------------
OIL & GAS (DRILLING &
EQUIPMENT)-0.32%
Cal Dive International, Inc.(a) 3,500 72,625
- --------------------------------------------------------------
Gulfmark Offshore Inc.(a) 6,000 94,500
- --------------------------------------------------------------
167,125
- --------------------------------------------------------------
OIL & GAS (EXPLORATION AND PRODUCTION)-0.66%
Cabot Oil & Gas Corp.-Class A 4,000 60,000
- --------------------------------------------------------------
</TABLE>
FS-14
<PAGE> 355
<TABLE>
<CAPTION>
MARKET
SHARES VALUE
<S> <C> <C>
OIL & GAS (EXPLORATION AND
PRODUCTION)-(CONTINUED)
Evergreen Resources, Inc.(a) 5,900 $ 104,725
- --------------------------------------------------------------
Louis Dreyfus Natural Gas Corp.(a) 2,000 28,500
- --------------------------------------------------------------
Newfield Exploration Co.(a) 5,700 118,988
- --------------------------------------------------------------
Seagull Energy Corp.(a) 5,000 31,563
- --------------------------------------------------------------
343,776
- --------------------------------------------------------------
PERSONAL CARE-0.70%
D & K Healthcare Resources, Inc.(a) 5,000 136,250
- --------------------------------------------------------------
Steiner Leisure Ltd.(a) 4,300 137,600
- --------------------------------------------------------------
Twinlab Corp.(a) 7,000 91,875
- --------------------------------------------------------------
365,725
- --------------------------------------------------------------
PUBLISHING-0.62%
Information Holdings, Inc.(a) 20,500 322,875
- --------------------------------------------------------------
REAL ESTATE INVESTMENT TRUST-0.35%
Correctional Properties Trust 10,000 180,621
- --------------------------------------------------------------
RESTAURANTS-1.15%
P.F. Chang's China Bistro, Inc.(a) 10,000 227,500
- --------------------------------------------------------------
PJ America, Inc.(a) 12,000 217,500
- --------------------------------------------------------------
Taco Cabana-Class A(a) 20,000 155,000
- --------------------------------------------------------------
600,000
- --------------------------------------------------------------
RETAIL (COMPUTERS &
ELECTRONICS)-0.55%
Tweeter Home Entertainment Group,
Inc.(a) 10,000 287,500
- --------------------------------------------------------------
RETAIL (DISCOUNTERS)-1.46%
99 Cents Only Stores(a) 15,500 761,438
- --------------------------------------------------------------
RETAIL (DRUG STORES)-0.49%
Duane Reade, Inc.(a) 6,700 257,950
- --------------------------------------------------------------
RETAIL (FOOD CHAINS)-0.30%
Wild Oats Markets Inc.(a) 5,000 157,500
- --------------------------------------------------------------
RETAIL (HOME SHOPPING)-1.74%
DM Management Co.(a) 38,950 740,050
- --------------------------------------------------------------
Micro Warehouse, Inc.(a) 5,000 169,063
- --------------------------------------------------------------
909,113
- --------------------------------------------------------------
RETAIL (SPECIALTY)-2.55%
Blue Rhino Corp.(a) 13,000 289,250
- --------------------------------------------------------------
CSK Auto Corp.(a) 3,300 88,069
- --------------------------------------------------------------
Hollywood Entertainment Corp.(a) 10,000 272,500
- --------------------------------------------------------------
Renters Choice, Inc.(a) 8,000 254,000
- --------------------------------------------------------------
Rent-Way, Inc.(a) 8,000 194,500
- --------------------------------------------------------------
School Specialty, Inc. 6,000 126,000
- --------------------------------------------------------------
UBid, Inc.(a) 1,000 106,626
- --------------------------------------------------------------
1,330,945
- --------------------------------------------------------------
RETAIL (SPECIALTY APPAREL)-1.59%
Buckle, Inc. (The)(a) 5,200 124,800
- --------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
MARKET
SHARES VALUE
<S> <C> <C>
RETAIL (SPECIALTY APPAREL)-(CONTINUED)
Chico's Fas, Inc.(a) 10,000 $ 233,750
- --------------------------------------------------------------
Children's Place Retail Stores, Inc.
(The)(a) 14,000 351,750
- --------------------------------------------------------------
Goody's Family Clothing, Inc.(a) 11,900 119,372
- --------------------------------------------------------------
829,672
- --------------------------------------------------------------
SAVINGS & LOAN COMPANY-0.66%
TeleBanc Financial Corp.(a) 10,100 343,400
- --------------------------------------------------------------
SERVICES
(ADVERTISING/MARKETING)-2.08%
Abacus Direct Corp.(a) 2,000 91,000
- --------------------------------------------------------------
Hagler Bailly, Inc.(a) 5,000 100,000
- --------------------------------------------------------------
HA-LO Industries, Inc.(a) 3,000 112,875
- --------------------------------------------------------------
Healthworld Corp.(a) 10,000 103,750
- --------------------------------------------------------------
Lamar Advertising Co.(a) 8,600 320,350
- --------------------------------------------------------------
Metris Companies Inc. 4,000 201,250
- --------------------------------------------------------------
Professional Detailing, Inc.(a) 5,500 155,375
- --------------------------------------------------------------
1,084,600
- --------------------------------------------------------------
SERVICES (COMMERCIAL &
CONSUMER)-7.04%
American Dental Partners, Inc.(a) 20,900 241,656
- --------------------------------------------------------------
Bright Horizons Family Solutions,
Inc.(a) 10,000 270,000
- --------------------------------------------------------------
Championship Auto Racing Teams,
Inc.(a) 14,300 423,638
- --------------------------------------------------------------
Comfort Systems USA, Inc.(a) 22,600 403,975
- --------------------------------------------------------------
Iron Mountain, Inc.(a) 24,150 870,909
- --------------------------------------------------------------
ITT Educational Services, Inc.(a) 10,200 346,800
- --------------------------------------------------------------
LaSalle Partners, Inc.(a) 5,000 147,188
- --------------------------------------------------------------
Metzler Group, Inc.(a) 6,600 321,338
- --------------------------------------------------------------
Strayer Education, Inc. 6,000 211,500
- --------------------------------------------------------------
United Road Services, Inc.(a) 23,900 439,163
- --------------------------------------------------------------
3,676,167
- --------------------------------------------------------------
SERVICES (COMPUTER SYSTEMS)-2.74%
Analysts International Corp. 7,300 140,525
- --------------------------------------------------------------
Cotelligent Group, Inc.(a) 5,000 106,563
- --------------------------------------------------------------
Insight Enterprises, Inc.(a) 23,250 1,182,844
- --------------------------------------------------------------
1,429,932
- --------------------------------------------------------------
SERVICES (DATA PROCESSING)-2.02%
Lason Holdings, Inc.(a) 13,600 791,350
- --------------------------------------------------------------
Mecon, Inc.(a) 25,000 262,500
- --------------------------------------------------------------
1,053,850
- --------------------------------------------------------------
SERVICES (EMPLOYMENT)-1.40%
Data Processing Resources Corp.(a) 12,200 356,850
- --------------------------------------------------------------
Personnel Group of America, Inc.(a) 21,400 374,500
- --------------------------------------------------------------
731,350
- --------------------------------------------------------------
SERVICES (FACILITIES & ENVIRONMENTAL)-2.27%
Casella Waste Systems, Inc.(a) 10,000 371,250
- --------------------------------------------------------------
Cornell Corrections, Inc.(a) 11,100 210,900
- --------------------------------------------------------------
</TABLE>
FS-15
<PAGE> 356
<TABLE>
<CAPTION>
MARKET
SHARES VALUE
<S> <C> <C>
SERVICES (FACILITIES &
ENVIRONMENTAL)-(CONTINUED)
GP Strategies Corp.(a) 10,000 $ 150,000
- --------------------------------------------------------------
Tetra Tech, Inc.(a) 10,000 270,625
- --------------------------------------------------------------
Waste Connections, Inc.(a) 10,000 183,750
- --------------------------------------------------------------
1,186,525
- --------------------------------------------------------------
TELECOMMUNICATIONS (CELLULAR/WIRELESS)-0.76%
Boston Communications Group, Inc.(a) 10,000 130,000
- --------------------------------------------------------------
Metro One Telecommunications,
Inc.(a) 20,000 265,000
- --------------------------------------------------------------
395,000
- --------------------------------------------------------------
TEXTILES (APPAREL)-0.29%
Quicksilver, Inc.(a) 5,000 150,000
- --------------------------------------------------------------
TEXTILES (SPECIALTY)-0.49%
Happy Kids, Inc.(a) 20,000 255,000
- --------------------------------------------------------------
TRUCKERS-0.15%
Hub Group, Inc.(a) 4,000 77,500
- --------------------------------------------------------------
WASTE MANAGEMENT-2.43%
Allied Waste Industries, Inc.(a) 26,565 627,598
- --------------------------------------------------------------
Eastern Environmental Services,
Inc.(a) 14,400 426,600
- --------------------------------------------------------------
KTI, Inc.(a) 10,000 216,250
- --------------------------------------------------------------
1,270,448
- --------------------------------------------------------------
Total Domestic Common Stocks
(Cost $31,794,190) 41,072,780
- --------------------------------------------------------------
FOREIGN STOCKS & OTHER EQUITY INTERESTS-2.49%
BERMUDA-0.67%
Annuity and Life Re, Ltd.
(Insurance-Life) 13,000 351,000
- --------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
MARKET
SHARES VALUE
<S> <C> <C>
CANADA-0.36%
Architel Systems Corp. (Electrical
Equipment)(a) 15,000 $ 189,375
- --------------------------------------------------------------
FRANCE-0.72%
Business Objects S.A.-ADR(a) 11,500 373,750
- --------------------------------------------------------------
ISRAEL-0.34%
Fundtech Ltd.
(Computers-Software)(a) 8,525 175,828
- --------------------------------------------------------------
NETHERLANDS-0.24%
Core Laboratories N.V. (Oil &
Gas-Drilling & Equipment)(a) 6,700 128,137
- --------------------------------------------------------------
UNITED KINGDOM-0.16%
ICON, PLC-ADR (Biotechnology)(a) 2,500 83,750
- --------------------------------------------------------------
Total Foreign Stocks and Other
Equity Interests (Cost
$946,565) 1,301,840
- --------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT
<S> <C> <C>
U.S. TREASURY SECURITIES-3.80%
U.S. TREASURY BILLS-3.80%(b)(c)
4.44%, 03/25/99 (Cost $1,984,429) $2,005,000 $ 1,984,429
- --------------------------------------------------------------
REPURCHASE AGREEMENT-10.74%(d)
SBC Warburg Dillon Read Inc., 4.75%,
01/04/99(e) (Cost $5,607,969) 5,607,969 5,607,969
- --------------------------------------------------------------
TOTAL INVESTMENTS-95.67% 49,967,018
- --------------------------------------------------------------
OTHER ASSETS LESS LIABILITIES-4.33% 2,263,845
- --------------------------------------------------------------
NET ASSETS-100.00% $52,230,863
==============================================================
</TABLE>
Notes to Schedule of Investments
(a) Non-income producing security.
(b) U.S. Treasury bills are traded on a discount basis. In such cases the
interest rate shown represents the rate of discount paid or received at the
time of purchase by the Fund.
(c) A portion of the principal balance was pledged as collateral to cover margin
requirements for open futures contracts. See Note 5.
(d) Collateral on repurchase agreements, including the Fund's pro-rata interest
in joint repurchase agreements, is taken into possession by the Fund upon
entering into the repurchase agreement. The collateral is marked to market
daily to ensure its market value is at least 102% of the sales price of the
repurchase agreement. The investments in some repurchase agreements are
through participation in joint accounts with other mutual funds, private
accounts, and certain non-registered investment companies managed by the
investment advisor or its affiliates.
(e) Joint repurchase agreement entered into 12/31/98 with a maturing value of
$1,000,527,778. Collateralized by $2,207,068,000 U.S. Government
obligations, 0% to 6.75% with a market value at 12/31/98 of $1,020,001,079.
Abbreviation:
ADR - American Depositary Receipt
See Notes to Financial Statements
FS-16
<PAGE> 357
STATEMENT OF ASSETS AND LIABILITIES
DECEMBER 31, 1998
<TABLE>
<S> <C>
ASSETS:
Investments, at market value (cost
$34,735,184) $44,359,049
- ---------------------------------------------------------
Repurchase agreement (cost $5,607,969) 5,607,969
- ---------------------------------------------------------
Receivables for:
Investments sold 445,267
- ---------------------------------------------------------
Fund shares sold 2,665,706
- ---------------------------------------------------------
Dividends and interest 1,724
- ---------------------------------------------------------
Variation margin 38,750
- ---------------------------------------------------------
Other assets 50,560
- ---------------------------------------------------------
Total assets 53,169,025
- ---------------------------------------------------------
LIABILITIES:
Payables for:
Investments purchased 327,944
- ---------------------------------------------------------
Fund shares reacquired 501,597
- ---------------------------------------------------------
Accrued investment management &
administration fees 17,798
- ---------------------------------------------------------
Accrued accounting fees 790
- ---------------------------------------------------------
Accrued distribution fees 30,568
- ---------------------------------------------------------
Accrued trustees' fees 10,919
- ---------------------------------------------------------
Accrued transfer agent fees 8,700
- ---------------------------------------------------------
Accrued operating expenses 39,846
- ---------------------------------------------------------
Total liabilities 938,162
- ---------------------------------------------------------
Net assets applicable to shares outstanding $52,230,863
- ---------------------------------------------------------
NET ASSETS:
Class A $24,737,557
=========================================================
Class B $26,447,897
=========================================================
Advisor Class $ 1,045,409
=========================================================
SHARES OUTSTANDING, $0.01 PAR VALUE PER
SHARE:
Class A 1,452,229
=========================================================
Class B 1,589,687
=========================================================
Advisor Class 60,748
=========================================================
Class A:
Net asset value and redemption price per
share $ 17.03
- ---------------------------------------------------------
Offering price per share:
(Net asset value of $17.03
divided by 94.50%) $ 18.02
=========================================================
Class B:
Net asset value and offering price per
share $ 16.64
=========================================================
Advisor Class:
Net asset value and offering price per
share $ 17.21
=========================================================
</TABLE>
STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1998
<TABLE>
<S> <C>
INVESTMENT INCOME:
Dividends $ 42,607
- ---------------------------------------------------------
Interest 94,407
- ---------------------------------------------------------
Security lending income 17,459
- ---------------------------------------------------------
Total investment income 154,473
- ---------------------------------------------------------
EXPENSES:
Investment management & administration fees 243,996
- ---------------------------------------------------------
Accounting fees 6,564
- ---------------------------------------------------------
Custodian fees 31,093
- ---------------------------------------------------------
Trustees' fees 20,474
- ---------------------------------------------------------
Distribution fees -- Class A 44,266
- ---------------------------------------------------------
Distribution fees -- Class B 192,719
- ---------------------------------------------------------
Transfer agent fees -- Class A 41,468
- ---------------------------------------------------------
Transfer agent fees -- Class B 63,188
- ---------------------------------------------------------
Transfer agent fees -- Advisor Class 5,847
- ---------------------------------------------------------
Printing 95,135
- ---------------------------------------------------------
Professional fees 54,802
- ---------------------------------------------------------
Other 59,001
- ---------------------------------------------------------
Total expenses 858,553
- ---------------------------------------------------------
Less: expense reimbursements/reductions (148,727)
- ---------------------------------------------------------
Net expenses 709,826
- ---------------------------------------------------------
Net investment income (loss) (555,353)
- ---------------------------------------------------------
REALIZED AND UNREALIZED GAIN (LOSS) FROM
INVESTMENT SECURITIES AND FUTURES
CONTRACTS:
Net realized gain (loss) from:
Investment securities 1,040,498
- ---------------------------------------------------------
Futures contracts (52,075)
- ---------------------------------------------------------
988,423
- ---------------------------------------------------------
Net unrealized appreciation of:
Investment securities 8,737,666
- ---------------------------------------------------------
Futures contracts 153,000
- ---------------------------------------------------------
8,890,666
- ---------------------------------------------------------
Net gain from investment securities,
foreign currencies and futures
contracts 9,879,089
- ---------------------------------------------------------
Net increase in net assets resulting from
operations $ 9,323,736
=========================================================
</TABLE>
See Notes to Financial Statements.
FS-17
<PAGE> 358
STATEMENT OF CHANGES IN NET ASSETS
FOR THE YEARS ENDED DECEMBER 31, 1998 AND 1997
<TABLE>
<CAPTION>
1998 1997
----------- -----------
<S> <C> <C>
OPERATIONS:
Net investment income (loss) $ (555,353) $ (449,560)
- ------------------------------------------------------------------------------------------
Net realized gain from investment securities and futures
contracts 988,423 2,524,251
- ------------------------------------------------------------------------------------------
Net unrealized appreciation of investment securities and
futures contracts 8,890,666 1,674,235
- ------------------------------------------------------------------------------------------
Net increase in net assets resulting from operations 9,323,736 3,748,926
- ------------------------------------------------------------------------------------------
Distributions to shareholders from net realized gains on
investment securities:
Class A (576,954) (213,287)
- ------------------------------------------------------------------------------------------
Class B (733,412) (410,555)
- ------------------------------------------------------------------------------------------
Advisor Class (30,675) (32,021)
- ------------------------------------------------------------------------------------------
Share transactions-net:
Class A 9,846,073 990,794
- ------------------------------------------------------------------------------------------
Class B 1,291,586 8,950,465
- ------------------------------------------------------------------------------------------
Advisor Class (600,234) 1,099,105
- ------------------------------------------------------------------------------------------
Net increase in net assets 18,520,120 14,133,427
- ------------------------------------------------------------------------------------------
NET ASSETS:
Beginning of period 33,710,743 19,577,316
- ------------------------------------------------------------------------------------------
End of period $52,230,863 $33,710,743
==========================================================================================
NET ASSETS CONSIST OF:
Shares of beneficial interest $42,095,396 $31,557,971
- ------------------------------------------------------------------------------------------
Undistributed net investment income (loss) -- --
- ------------------------------------------------------------------------------------------
Undistributed net realized gain from investment securities
and futures contracts 348,602 1,256,573
- ------------------------------------------------------------------------------------------
Unrealized appreciation of investment securities and
futures contracts 9,786,865 896,199
- ------------------------------------------------------------------------------------------
$52,230,863 $33,710,743
==========================================================================================
</TABLE>
See Notes to Financial Statements.
FS-18
<PAGE> 359
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1998
NOTE 1-SIGNIFICANT ACCOUNTING POLICIES
AIM Small Cap Growth Fund, formerly AIM Small Cap Equity Fund, (the "Fund"), is
a separate series of AIM Growth Series (the "Trust"). The Trust is a Delaware
business trust and is registered under the Investment Company Act of 1940, as
amended ("1940 Act"), as an open-end management investment company. The Trust
has six diversified series of shares in operation, each series corresponding to
a distinct portfolio of investments.
The Fund invests substantially all of its investable assets in the Small Cap
Portfolio ("the Portfolio"). The Portfolio is organized as a Delaware business
trust and is registered under the 1940 Act as a diversified, open-end management
investment company.
The Portfolio has investment objectives, policies, and limitations
substantially identical to the Fund. Therefore, the financial statements of the
Fund and the Portfolio have been presented on a consolidated basis, and
represent all activities of both the Fund and the Portfolio. At December 31,
1998, all of the shares of beneficial interest of the Portfolio were owned
either by the Fund or INVESCO (NY), Inc., which has a nominal ($100) investment
in the Portfolio.
The Fund offers Class A, Class B, and Advisor Class shares, each of which has
equal rights as to assets and voting privileges. Class A and Class B each has
exclusive voting rights with respect to its distribution plan. Investment
income, realized and unrealized capital gains and losses, and the common
expenses of the Fund are allocated on a pro rata basis to each class based on
the relative net assets of each class to the total net assets of the Fund. Each
class of shares differs in its respective distribution expenses, and may differ
in its transfer agent, registration, and certain other class-specific fees and
expenses.
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statements and
the reported amounts of income and expenses during the reporting period. Actual
results could differ from those estimates. The following is a summary of
significant accounting policies in conformity with generally accepted accounting
principles consistently followed by the Fund and Portfolio in the preparation of
the financial statements.
A. Portfolio Valuation -- The Fund calculates the net asset value of and
completes orders to purchase, exchange or repurchase Fund shares on each
business day, with the exception of those days on which the New York Stock
Exchange is closed.
Equity securities are valued at the last sale price on the exchange on
which such securities are traded or on the principal over-the-counter market
on which such securities are traded, as of the close of business on the day
the securities are being valued or, lacking any sales, at the mean between
the closing bid and asked prices. In cases where securities are traded on
more than one exchange, the securities are valued on the exchange determined
by A I M Advisors, Inc. (the "Manager") to be the primary market.
Fixed income investments are valued at the mean of representative quoted
bid and ask prices for such investments or, if such prices are not available,
at prices for investments of comparative maturity, quality and type; however,
when the Manager deems it appropriate, prices obtained for the day of
valuation from a bond pricing service will be used. Short-term investments
with a maturity of 60 days or less are valued at amortized cost, which
approximates market value.
Investments for which market quotations are not readily available
(including restricted securities which are subject to limitations on their
sale) are valued at fair value as determined in good faith by or under the
direction of the Trust's Board of Trustees.
B. Repurchase Agreements -- With respect to repurchase agreements entered into
by the Portfolio, it is the Portfolio's policy to always receive, as
collateral, United States government securities or other high quality debt
securities of which the value, including accrued interest, is at least equal
to the amount to be repaid to the Portfolio under each agreement at its
maturity.
C. Option Accounting Principles -- When the Portfolio writes a call or put
option, an amount equal to the premium received is included in Fund's
consolidated "Statement of Assets and Liabilities" as an asset and an
equivalent liability. The amount of the liability is subsequently
marked-to-market to reflect the current market value of the option. The
current market value of an option is the mean between the last bid and asked
prices. If an option expires on its stipulated expiration date or if the
Portfolio enters into a closing purchase transaction, a gain or loss is
realized without regard to any unrealized gain or loss on the underlying
security, and the liability related to such option is extinguished. If a
written call option is exercised, a gain or loss is realized from the sale of
the underlying security and the proceeds of the sale are increased by the
premium originally received. If a written put option is exercised, the cost
of the underlying security purchased would be decreased by the premium
originally received. The Portfolio can write options only on a covered basis,
which, for a call, requires that the Portfolio hold the underlying security,
and, for a put, requires the Portfolio to set aside cash, U.S. government
securities or other liquid securities in an amount not less than the exercise
price or otherwise provide adequate cover at all times while the put option
is outstanding. The Portfolio may use options to manage its exposure to the
stock market and to fluctuations in interest rates.
The premium paid by the Portfolio for the purchase of a call or put option
is included in Fund's consolidated "Statement of Assets and Liabilities" as
an investment and subsequently "marked-to-market" to reflect the current
market value of the option. If an option which the Portfolio has purchased
expires on the stipulated expiration date, the Portfolio realizes a loss in
the amount of the cost of the option. If the Portfolio enters into a closing
sale transaction, the Portfolio realizes a gain or loss, depending on whether
proceeds from the closing sale transaction are greater or less than the cost
of the option. If the Portfolio exercises a call option, the cost of the
securities acquired by exercising the call is increased by the premium paid
to buy the call. If the Portfolio exercises a put option, it realizes a gain
or loss from the sale of the underlying security,
FS-19
<PAGE> 360
and the proceeds from such sale are decreased by the premium originally paid.
The risk associated with purchasing options is limited to the premium
originally paid. The risk in writing a call option is that the Portfolio may
forego the opportunity of profit if the market value of the underlying
security or index increases and the option is exercised. The risk in writing
a put option is that the Portfolio may incur a loss if the market value of
the underlying security or index decreases and the option is exercised. In
addition, there is the risk the Portfolio may not be able to enter into a
closing transaction because of an illiquid secondary market.
D. Futures Contracts -- A futures contract is an agreement between two parties
to buy and sell a security at a set price on a future date. Upon entering
into such a contract the Portfolio is required to pledge to the broker an
amount of cash or securities equal to the minimum "initial margin"
requirements of the exchange on which the contract is traded. Pursuant to the
contract, the Portfolio agrees to receive from or pay to the broker an amount
of cash equal to the daily fluctuation in value of the contract. Such
receipts or payments are known as "variation margin" and are recorded by the
Portfolio as unrealized gains or losses. When the contract is closed, the
Portfolio records a realized gain or loss equal to the difference between the
value of the contract at the time it was opened and the value at the time it
was closed. The potential risk to the Portfolio is that the change in value
of the underlying securities may not correlate to the change in value of the
contracts. The Portfolio may use futures contracts to manage its exposure to
the stock market and to fluctuations in interest rates.
E. Security Transactions and Related Investment Income -- Security transactions
are accounted for on the trade date (date the order to buy or sell is
executed). Realized gains and losses are calculated on the basis of specific
identification of the Securities sold. Dividends are recorded on the
ex-dividend date. Interest income is recorded on the accrual basis. Where a
high level of uncertainty exists as to its collection, income is recorded net
of all withholding tax with any rebate recorded when received. The Portfolio
may trade securities on other than normal settlement terms. This may increase
the risk if the other party to the transaction fails to deliver and causes
the Portfolio to subsequently invest at less advantageous prices.
On December 31, 1998, undistributed net investment income was increased and
undistributed net realized gains was decreased by $555,353 in order to comply
with the requirements of the American Institute of Certified Public
Accountants Statement of Position 93-2. Net assets of the Fund were
unaffected by the reclassifications discussed above.
F. Portfolio Securities Loaned -- At December 31, 1998, stocks with an aggregate
value listed below were on loan to brokers. The loans were secured by cash
collateral received by the Portfolio:
<TABLE>
<CAPTION>
DECEMBER 31, 1998 PERIOD ENDED
---------------------------- DECEMBER 31, 1998
AGGREGATE VALUE CASH -----------------
ON LOANS COLLATERAL FEES RECEIVED
--------------- ---------- -----------------
<S> <C> <C>
$5,453,825 $5,571,152 $17,459
</TABLE>
Cash collateral is received by the Portfolio against loaned securities in
the amount at least equal to 102% of the market value of the loaned
securities at the inception of each loan. This collateral must be maintained
at not less than 100% of the market value of the loaned securities during the
period of the loan. The cash collateral is invested in a securities lending
trust which consists of a portfolio of high quality short duration securities
whose average effective duration is restricted to 120 days or less.
G. Deferred Organizational Expenses -- Expenses incurred by the AIM Small Cap
Growth Fund and the Portfolio in connection with their organization, their
initial registration with the Securities and Exchange Commission and with
various states and the initial public offering of their shares aggregated
$63,500 for the Fund and $25,000 for the Portfolio. These expenses are being
amortized on a straight-line basis over a five-year period.
H. Taxes -- It is the policy of the Fund and the Portfolio to meet the
requirements for qualification as a "regulated investment company" under the
Internal Revenue Code of 1986, as amended ("Code"). It is also the intention
of the Fund to make distributions sufficient to avoid imposition of any
excise tax under Section 4982 of the Code. Therefore, no provision has been
made for Federal taxes on income, capital gains, or unrealized appreciation
of securities held, and excise tax on income and capital gains.
I. Distributions to Shareholders -- Distributions to shareholders are recorded
by the Fund on the ex-date. Income and capital gain distributions are
determined in accordance with Federal income tax regulations which may
differ from generally accepted accounting principles. These differences are
primarily due to differing treatments of income and gains on various
investment securities held by the Portfolio and timing differences.
J. Restricted Securities -- The Portfolio is permitted to invest in privately
placed restricted securities. These securities may be resold in transactions
exempt from registration or to the public if the securities are registered.
Disposal of these securities may involve time-consuming negotiations and
expense, and prompt sale at an acceptable price may be difficult.
K. Indexed Securities -- The Portfolio may invest in indexed securities whose
value is linked either directly or indirectly to changes in foreign
currencies, interest rates, equities, indices, or other reference
instruments. Indexed securities may be more volatile than the reference
instrument itself, but any loss is limited to the amount of the original
investment.
L. Line of Credit -- The Fund, along with certain other funds advised and/or
administered by the Manager, has a line of credit with BankBoston and State
Street Bank & Trust Company. The arrangements with the banks allow the Fund
and certain other funds to borrow, on a first come, first served basis, an
aggregate maximum amount of $250,000,000. The Fund is limited to borrowing up
to 33 1/3% of the value of the Fund's total assets.
For the year ended December 31, 1998, the average outstanding daily balance
of bank loans (based on the number of days the loans were outstanding) for
the Fund was $591,476 with a weighted average interest rate of 5.87%.
Interest expense for the Fund for the year ended December 31, 1998 was
$3,706, and is included in "Other Expenses" on the Statement of Operations.
FS-20
<PAGE> 361
NOTE 2-RELATED PARTIES
A I M Advisors, Inc. (the "Manager") is the Fund's and the Portfolio's
investment manager and administrator. As of the close of business on May 29,
1998, Liechtenstein Global Trust AG ("LGT"), the former indirect parent
organization of Chancellor LGT Asset Management, Inc. ("Chancellor LGT"),
consummated a purchase agreement with AMVESCAP PLC pursuant to which AMVESCAP
PLC acquired LGT's Asset Management Division, which included Chancellor LGT and
certain other affiliates. As a result of this transaction, Chancellor LGT was
renamed INVESCO (NY), Inc., and is now an indirect wholly-owned subsidiary of
AMVESCAP PLC. In connection with this transaction, A I M Advisors, Inc., an
indirect wholly-owned subsidiary of AMVESCAP PLC, became the administrator of
the Fund and the investment manager and administrator of the Portfolio. Also, on
May 29, 1998, A I M Distributors, Inc. ("AIM Distributors"), a wholly-owned
subsidiary of the Manager, became the Fund's distributor, and the Trust was
reorganized from a Massachusetts business trust into a Delaware business trust,
and the Portfolio was reorganized from a New York trust into a Delaware business
trust. Finally, on September 4, 1998, A I M Fund Services, Inc. ("AFS"), a
wholly-owned subsidiary of the Manager, became the transfer agent of the Fund.
The Fund pays the Manager administration fees at the annualized rate of 0.25%
of the Fund's average daily net assets. The Portfolio pays investment management
and administration fees to the Manager at the annualized rate of 0.475% on the
first $500 million of average daily net assets of the Portfolio; 0.45% on the
next $500 million; 0.425% on the next $500 million; and 0.40% on amounts
thereafter. These fees are computed daily and paid monthly.
AIM Distributors, serves as the Fund's distributor. For the period ended May
29, 1998, GT Global, Inc. ("GT Global"), an affiliate of Chancellor LGT, served
as the Funds' distributor. The Fund offers Class A, Class B, and Advisor Class
shares for purchase.
Class A shares are subject to initial sales charges imposed at the time of
purchase, in accordance with the schedule included in the Fund's current
prospectus. AIM Distributors collects the sales charges imposed on sales of
Class A shares, and reallows a portion of such charges to dealers through which
the sales are made. For the year ended December 31, 1998, AIM Distributors and
GT Global retained the following sales charges: $12,218 and $6,814,
respectively. Purchases of Class A shares exceeding $1,000,000 may be subject to
a contingent deferred sales charge ("CDSC") upon redemption, in accordance with
the Fund's current prospectus. AIM Distributors also makes ongoing shareholder
servicing and trail commission payments to dealers whose clients hold Class A
shares.
Class B shares are not subject to initial sales charges. When Class B shares
are sold, AIM Distributors from its own resources pays commissions to dealers
through which the sales are made. Certain redemptions of Class B shares made
within six years of purchase are subject to CDSCs, in accordance with the Fund's
current prospectus. For the year ended December 31, 1998, AIM Distributors and
GT Global collected such CDSCs in the amount of: $244 and $16,156, respectively.
In addition, AIM Distributors makes ongoing shareholder servicing and trail
commission payments to dealers whose clients hold Class B shares.
For the period ended May 29, 1998, pursuant to the then effective separate
distribution plans adopted under the 1940 Act Rule 12b-1 by the Trust's Board of
Trustees with respect to the Fund's Class A shares ("Old Class A Plan") and
Class B shares ("Old Class B Plan"), the Fund reimbursed GT Global for a portion
of its shareholder servicing and distribution expenses. Under the Old Class A
Plan, the Fund was permitted to pay GT Global a service fee at the annualized
rate of up to 0.25% of the average daily net assets of the Fund's Class A shares
for GT Global's expenditures incurred in servicing and maintaining shareholder
accounts, and was permitted to pay GT Global a distribution fee at the
annualized rate of up to 0.35% of the average daily net assets of the Fund's
Class A shares, less any amounts paid by the Fund as the aforementioned service
fee, for GT Global's expenditures incurred in providing services as distributor.
All expenses for which GT Global was reimbursed under the Old Class A Plan would
have been incurred within one year of such reimbursement.
For the period ended May 29, 1998, pursuant to the Old Class B Plan, the Fund
was permitted to pay GT Global a service fee at the annualized rate of up to
0.25% of the average daily net assets of the Fund's Class B shares for GT
Global's expenditures incurred in servicing and maintaining shareholder
accounts, and was permitted to pay GT Global a distribution fee at the
annualized rate of up to 0.75% of the average daily net assets of the Fund's
Class B shares for GT Global's expenditures incurred in providing services as
distributor. Expenses incurred under the Old Class B Plan in excess of 1.00%
annually were permitted to be carried forward for reimbursement in subsequent
years as long as that Plan continued in effect.
Effective as of the close of business May 29, 1998, pursuant to Rule 12b-1
under the 1940 Act, the Trust's Board of Trustees adopted a Master Distribution
Plan applicable to the Fund's Class A shares ("Class A Plan") and Class B shares
("Class B Plan"), pursuant to which the Fund compensates AIM Distributors for
the purpose of financing any activity that is intended to result in the sale of
Class A or Class B shares of the Fund. Under the Class A Plan, the Fund
compensates AIM Distributors at the annualized rate of 0.35% of the average
daily net assets of the Fund's Class A shares.
Pursuant to the Class B Plan, the Fund compensates AIM Distributors at an
annualized rate of 1.00% of the average daily net assets of the Fund's Class B
shares.
The Class A Plan and the Class B Plan (together, the "Plans") are designed to
compensate AIM Distributors for certain promotional and other sales-related
costs, and to implement a dealer incentive program that provides for periodic
payments to selected dealers who furnish continuing personal shareholder
services to their customers who purchase and own Class A and Class B shares of
the Fund. Payments also can be directed by AIM Distributors to financial
institutions who have entered into service agreements with respect to Class A
and Class B shares of the Fund and who provide continuing personal services to
their customers who own Class A and Class B shares of the Fund. The service fees
payable to selected financial 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 that were purchased on or after a
prescribed date set forth in the Plans.
The Manager and AIM Distributors have undertaken to limit the Fund's expenses
(exclusive of brokerage commissions, taxes, interest, and extraordinary
expenses) to the annual rate of 1.75%, 2.40%, and 1.40% of the average daily net
assets of the Fund's Class A, Class B, and Advisor Class shares, respectively.
This
FS-21
<PAGE> 362
undertaking may be changed or eliminated in the future. If necessary, this
limitation will be effected by waivers by the Manager of investment management
and administration fees, waivers by AIM Distributors of payments under the Class
A Plan and/or Class B Plan and/or reimbursements by the Manager or AIM
Distributors of portions of the Fund's other operating expenses.
Effective as of the close of business September 4, 1998, the Fund, pursuant to
a transfer agency and service agreement, has agreed to pay A I M Fund Services,
Inc. ("AFS") an annualized fee of $24.85 for each shareholder account that is
open during any calendar month (this fee includes all out-of-pocket expenses),
and an annualized fee of $0.70 per shareholder account that is closed during any
calendar month fees are billed by AFS monthly in arrears on a prorated basis of
1/12 of the annualized fee for all such accounts.
For the period January 1, 1998 to September 4, 1998, GT Global Investor
Services, Inc., an affiliate of Chancellor LGT, was the transfer agent of the
Fund. For performing shareholder servicing, reporting, and general transfer
agent services, GT Services received an annual maintenance fee of $17.50 per
account, a new account fee of $4.00 per account, a per transaction fee of $1.75
for all transactions other than exchanges and a per exchange fee of $2.25. GT
Services was also reimbursed by the Fund for its out-of-pocket expenses for such
items as postage, forms, telephone charges, stationery and office supplies.
The Manager is the pricing and accounting agent for the Fund. The monthly fee
for these services to the Manager is a percentage, not to exceed 0.03% annually,
of the Fund's average daily net assets. The annual fee rate is derived based on
the aggregate net assets of the funds which comprise the following investment
companies: AIM Growth Series, AIM Investment Funds, AIM Series Trust, G.T.
Global Variable Investment Series and G.T. Global Variable Investment Trust. The
fee is calculated at the rate of 0.03% of the first $5 billion of assets of such
investment companies, and 0.02% of the assets in excess of $5 billion. An amount
is allocated to and paid by each such fund based on its relative average daily
net assets.
The Trust pays each of its Trustees who is not an employee, officer or
director of the Manager, AIM Distributors or GT Services $5,000 per year plus
$300 for each meeting of the board or any committee thereof attended by the
Trustee. The Portfolio pays each of its Trustees who is not an employee, officer
or director of the Manager, AIM Distributors or AFS $500 per year plus $150 for
each meeting of the board or any committee thereof attended by the Trustee.
At December 31, 1998, all of the shares of beneficial interest of the
Portfolio were owned either by the Fund or INVESCO (NY), Inc.
NOTE 3-PURCHASES AND SALES OF SECURITIES
The aggregate amount of investment securities (other than short-term
securities) purchased and sold by the Portfolio during the year ended December
31, 1998 was $61,020,877 and $61,119,926, respectively.
The amount of unrealized appreciation (depreciation) of investment securities,
on a tax basis, as of December 31, 1998 is as follows:
<TABLE>
<S> <C>
Aggregate unrealized appreciation of investment
securities $10,571,589
- ---------------------------------------------------------------
Aggregate unrealized (depreciation) of investment
securities (967,318)
- ---------------------------------------------------------------
Net unrealized appreciation of investment
securities $ 9,604,271
===============================================================
</TABLE>
Cost of investments for tax purposes is $34,754,778.
NOTE 4-SHARE INFORMATION
Changes in the Fund's shares outstanding during the years ended December 31,
1998 and 1997 were as follows:
<TABLE>
<CAPTION>
1998 1997
------------------------- -------------------------
SHARES AMOUNT SHARES AMOUNT
---------- ------------ ---------- ------------
<S> <C> <C> <C> <C>
Sold:
Class A 2,808,949 $ 42,444,424 2,067,494 $ 28,341,345
- ----------------------------------------------------------------------------
Class B 1,807,272 26,359,785 2,192,656 29,216,057
- ----------------------------------------------------------------------------
Advisor Class 63,569 992,118 156,123 2,292,127
- ----------------------------------------------------------------------------
Issued as
reinvestment of
dividends:
Class A 35,278 549,813 14,194 195,720
- ----------------------------------------------------------------------------
Class B 45,364 690,497 26,438 359,234
- ----------------------------------------------------------------------------
Advisor Class 1,482 23,320 507 7,039
- ----------------------------------------------------------------------------
Reacquired:
Class A (2,155,365) (33,148,164) (1,992,960) (27,546,271)
- ----------------------------------------------------------------------------
Class B (1,772,161) (25,758,696) (1,570,899) (20,624,826)
- ----------------------------------------------------------------------------
Advisor Class (114,990) (1,615,672) (80,540) (1,200,061)
- ----------------------------------------------------------------------------
719,398 $ 10,537,425 813,013 $ 11,040,364
============================================================================
</TABLE>
NOTE 5-FUTURES CONTRACTS
On December 31, 1998, $100,000 principal amount of U.S. Treasury obligations
were pledged as collateral to cover margin requirements for futures contracts.
Open contracts were as follows:
<TABLE>
<CAPTION>
NO. OF MONTH/
CONTRACT CONTRACTS COMMITMENT APPRECIATION
-------- --------- ---------- --------------
<S> <C> <C> <C>
Russell 2000 Index 10 March 99 $153,000
</TABLE>
NOTE 6-EXPENSE REDUCTIONS
The Manager has directed certain portfolio trades to brokers who then paid a
portion of the Portfolio's expenses. For the year ended December 31, 1998, the
expenses of the Portfolio were reduced by $1,695 under these arrangements.
FS-22
<PAGE> 363
NOTE 7-FINANCIAL HIGHLIGHTS
Shown below are the financial highlights for a share of Class A, Class B, and
Advisor Class outstanding during each of the years in the three-year period
ended December 31, 1998 and the period October 18, 1995 (date operations
commenced) through December 31, 1995;
<TABLE>
<CAPTION>
CLASS A
-------------------------------------------
1998(a) 1997 1996 1995
------- ------- ------ ------
<S> <C> <C> <C> <C>
Net asset value, beginning of period $ 14.27 $ 12.52 $11.80 $11.43
- ------------------------------------------------------------ ------- ------- ------ ------
Income from investment operations:
Net investment income(b) (0.19)(c) (0.18)(c) (0.05)(c) 0.04(c)
- ------------------------------------------------------------ ------- ------- ------ ------
Net gains on securities (both realized and unrealized) 3.45 2.20 1.69 0.33
- ------------------------------------------------------------ ------- ------- ------ ------
Total from investment operations 3.26(b) 2.02 1.64 0.37
- ------------------------------------------------------------ ------- ------- ------ ------
Less distributions:
- ------------------------------------------------------------ ------- ------- ------ ------
Distributions from net realized gains (0.50) (0.27) (0.92) --
- ------------------------------------------------------------ ------- ------- ------ ------
Total distributions (0.50) (0.27) (0.92) --
- ------------------------------------------------------------ ------- ------- ------ ------
Net asset value, end of period $ 17.03 $ 14.27 $12.52 $11.80
============================================================ ======= ======= ====== ======
Total Return(d) 23.15% 16.23% 13.81% 3.24%
============================================================ ======= ======= ====== ======
Ratios/supplemental data:
Net assets, end of period (000s omitted) $24,737 $10,896 $8,448 $1,931
============================================================ ======= ======= ====== ======
Ratio of expenses to average net assets:
With expense reductions and/or reimbursement 1.75%(e) 1.92% 2.00% 2.00%(f)
============================================================ ======= ======= ====== ======
Without expense reductions and/or reimbursement 2.19%(e) 2.52% 3.09% 24.20%(f)
============================================================ ======= ======= ====== ======
Ratio of net investment income to average net assets:
With expense reductions and/or reimbursement (1.29)%(e) (1.40)% (0.38)% 1.68%(f)
============================================================ ======= ======= ====== ======
Without expense reductions and/or reimbursement (1.73)%(e) (2.00)% (1.47)% (20.52)%(f)
============================================================ ======= ======= ====== ======
Ratio of interest expense to average net assets(g) 0.01% -- -- --
============================================================ ======= ======= ====== ======
Portfolio turnover rate(g) 190% 233% 150% --
============================================================ ======= ======= ====== ======
</TABLE>
(a) The Fund charged Investment Advisors on May 29, 1998.
(b) Before reimbursement the net investment loss per share would have been
$(0.24), $(0.25), $(0.19), and $(0.47) for 1998-1995, respectively.
(c) Calculated using average shares outstanding.
(d) Does not deduct sales charges and is not annualized for periods less than
one year.
(e) Ratios are based on average net assets of $12,647,418.
(f) Annualized
(g) Portfolio turnover rates and ratio of interest expense to average net assets
are calculated on the basis of the Portfolio as a whole without
distinguishing between the classes of shares issued.
<TABLE>
<CAPTION>
CLASS B ADVISOR CLASS
--------------------------------------- -------------------------------------
1998(a) 1997 1996 1995 1998(a) 1997 1996 1995
------- ------- ------- ------ ------ ------ ------ -------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of period $ 14.06 $ 12.42 $ 11.78 $11.43 $14.39 $12.58 $11.81 $ 11.43
- ------------------------------------------- ------- ------- ------- ------ ------ ------ ------ -------
Income from investment operations:
Net investment income(b) (0.29)(c) (0.26)(c) (0.14)(c) 0.02(c) (0.14)(c) (0.14)(c) -- 0.05(c)
- ------------------------------------------- ------- ------- ------- ------ ------ ------ ------ -------
Net gains on securities (both
realized and unrealized) 3.37 2.17 1.70 0.33 3.46 2.22 1.69 0.33
- ------------------------------------------- ------- ------- ------- ------ ------ ------ ------ -------
Total from investment
operations 3.08 1.91 1.56 0.35 3.32 2.08 1.69 0.38
- ------------------------------------------- ------- ------- ------- ------ ------ ------ ------ -------
Less distributions:
- ------------------------------------------- ------- ------- ------- ------ ------ ------ ------ -------
Distributions from net
realized gains (0.50) (0.27) (0.92) -- (0.50) (0.27) (0.92) --
- ------------------------------------------- ------- ------- ------- ------ ------ ------ ------ -------
Total distributions (0.50) (0.27) (0.92) -- (0.50) (0.27) (0.92) --
- ------------------------------------------- ------- ------- ------- ------ ------ ------ ------ -------
Net asset value, end of period $ 16.64 $ 14.06 $ 12.42 $11.78 $17.21 $14.39 $12.58 $ 11.81
=========================================== ======= ======= ======= ====== ====== ====== ====== =======
Total Return(d) 22.22% 15.47% 13.14% 3.06% 23.38% 16.63% 14.22% 3.32%
=========================================== ======= ======= ======= ====== ====== ====== ====== =======
Ratios/supplemental data:
Net assets, end of period (000s omitted) $26,448 $21,222 $10,694 $2,024 $1,045 $1,592 $ 435 $ 52
=========================================== ======= ======= ======= ====== ====== ====== ====== =======
Ratio of expenses to average net assets:
With expense reductions
and/or reimbursement 2.40%(e) 2.57% 2.65% 2.65%(f) 1.40%(e) 1.57% 1.65% 1.65%(f)
=========================================== ======= ======= ======= ====== ====== ====== ====== =======
Without expense reductions
and/or reimbursement 2.85%(e) 3.17% 3.74% 24.85%(f) 1.84%(e) 2.17% 2.74% 23.85%(f)
=========================================== ======= ======= ======= ====== ====== ====== ====== =======
Ratio of net investment income to
average net assets:
With expense reductions
and/or reimbursement (1.95)%(e) (2.05)% (1.03)% 1.03%(f) (0.94)%(e) (1.05)% (0.03)% 2.03%(f)
=========================================== ======= ======= ======= ====== ====== ====== ====== =======
Without expense reductions
and/or reimbursement (2.39)%(e) (2.65)% (2.12)% --(f) (1.38)%(e) (1.65)% (1.12)% (20.17)%(f)
=========================================== ======= ======= ======= ====== ====== ====== ====== =======
Ratio of interest expense
to average net assets(g) 0.01% -- -- -- 0.01% -- -- --
=========================================== ======= ======= ======= ====== ====== ====== ====== =======
Portfolio turnover rate(g) 190% 233% 150% -- 190% 233% 150% --%
=========================================== ======= ======= ======= ====== ====== ====== ====== =======
</TABLE>
(a) The Fund changed Investment Advisors on May 29, 1998.
(b) Before reimbursement the net investment loss per share would have been
$(0.35), $(0.33), $(0.28), and $(0.49) for 1998-1995, respectively for Class
B, $(0.20), $(0.21), $(0.14), and $(0.46) for 1998-1995, respectively for
Advisor Class.
(c) Calculated using average shares outstanding.
(d) Does not deduct contingent deferred sales charges and is not annualized for
periods less than one year.
(e) Ratios are based on average net assets of $19,271,876 for Class B and
$1,783,361 for Advisor Class.
(f) Annualized
(g) Portfolio turnover rates and ratio of interest expense to average net assets
are calculated on the basis of the Small Cap Growth Portfolio as a whole
without distinguishing between the classes of shares issued.
FS-23
<PAGE> 364
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 EUROPE GROWTH FUND PROSPECTUS, THE AIM JAPAN GROWTH FUND
PROSPECTUS, THE AIM MID CAP EQUITY FUND PROSPECTUS AND THE AIM NEW PACIFIC
GROWTH FUND PROSPECTUS
EACH DATED MAY 3, 1999
<PAGE> 365
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE NO.
--------
<S> <C>
INTRODUCTION................................................ 4
GENERAL INFORMATION ABOUT THE FUNDS......................... 4
The Trust and its Shares.................................. 4
INVESTMENT POLICIES......................................... 5
Selection of Investments.................................. 6
Investments in Other Investment Companies................. 7
Samurai and Yankee Bonds.................................. 7
Depositary Receipts....................................... 7
Warrants or Rights........................................ 8
Lending of Portfolio Securities........................... 8
Commercial Bank Obligations............................... 8
Privatizations............................................ 8
Repurchase Agreements..................................... 9
Borrowing, Reverse Repurchase Agreements and "Roll"
Transactions........................................... 9
When-Issued or Forward Commitment Securities.............. 9
Temporary Defensive Strategies............................ 10
OPTIONS, FUTURES AND CURRENCY STRATEGIES.................... 10
Special Risks of Options, Futures and Currency
Strategies............................................. 10
Writing Call Options...................................... 11
Writing Put Options....................................... 11
Purchasing Put Options.................................... 12
Purchasing Call Options................................... 12
Index Options............................................. 13
Interest Rate, Currency and Stock Index Futures
Contracts.............................................. 14
Options on Futures Contracts.............................. 16
Limitations on Use of Futures, Options on Futures and
Certain Options on Currencies.......................... 16
Forward Contracts......................................... 16
Foreign Currency Strategies -- Special Considerations..... 17
Cover..................................................... 18
RISK FACTORS................................................ 18
Illiquid Securities....................................... 18
Foreign Securities........................................ 19
Debt Securities........................................... 24
Equity Securities......................................... 24
INVESTMENT LIMITATIONS...................................... 24
EXECUTION OF PORTFOLIO TRANSACTIONS......................... 26
Portfolio Trading and Turnover............................ 27
MANAGEMENT.................................................. 28
Trustees and Executive Officers........................... 28
Investment Management and Administration Services......... 30
Distribution Services..................................... 31
Expenses of the Funds..................................... 31
</TABLE>
2
<PAGE> 366
<TABLE>
<CAPTION>
PAGE NO.
--------
<S> <C>
NET ASSET VALUE DETERMINATION............................... 31
HOW TO PURCHASE AND REDEEM SHARES........................... 32
Backup Withholding........................................ 32
Programs and Services for Shareholders.................... 34
Dividend Order............................................ 34
DIVIDENDS, DISTRIBUTIONS AND TAX MATTERS.................... 34
Reinvestment of Dividends and Distributions............... 34
Tax Matters............................................... 34
General................................................... 34
Reinstatement Privilege................................... 35
Foreign Taxes............................................. 35
Passive Foreign Investment Companies...................... 35
Non-U.S. Shareholders..................................... 36
Options, Futures and Foreign Currency Transactions........ 36
SHAREHOLDER INFORMATION..................................... 37
MISCELLANEOUS INFORMATION................................... 38
Charges for Certain Account Information................... 38
Custodian................................................. 39
Transfer Agency and Accounting Agency Services............ 39
Independent Accountants................................... 39
Legal Matters............................................. 39
Shareholder Liability..................................... 39
Names..................................................... 39
Control Persons and Principal Holders of Securities....... 40
INVESTMENT RESULTS.......................................... 42
Total Return Quotations................................... 42
Performance Information................................... 43
APPENDIX.................................................... 46
Description of Bond Ratings............................... 46
Description of Commercial Paper Ratings................... 47
Absence of Rating......................................... 47
FINANCIAL STATEMENTS........................................ FS
</TABLE>
3
<PAGE> 367
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 Asset Management (Japan) Limited ("INVESCO Japan") serves as the
investment sub-advisor of Japan Fund. INVESCO Asia Limited ("INVESCO Asia")
serves as the investment sub-advisor of Pacific Fund. INVESCO Asset Management
Ltd. ("INVESCO AML") serves as the investment sub-advisor of Europe Fund.
INVESCO Japan, INVESCO Asia 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 GT 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 four 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
GT 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 (the "Board") 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 Trust's
Board. In such event, the remaining holders cannot elect any trustees of the
Trust.
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On any matter submitted to a vote of shareholders, shares of a Fund will be
voted by the Fund's shareholders individually when the matter affects the
specific interest of the Fund only, such as approval of the Fund's investment
management arrangements. In addition, shares of a particular class of a Fund may
vote on matters affecting only that class. The shares of a Fund and of the
Trust's other series will be voted in the aggregate on other matters, such as
the election of Trustees and ratification of the selection of the Trust's
independent accountants.
Normally there will be no annual meeting of shareholders for any of the Funds
in any year, except as required under the Investment Company Act of 1940, as
amended (the "1940 Act"). A Trustee may be removed at any meeting of the
shareholders of the Trust by a vote of the shareholders owning at least
two-thirds of the outstanding shares. Any Trustee may call a special meeting of
shareholders for any purpose. Furthermore, Trustees shall promptly call a
meeting of shareholders solely for the purpose of removing one or more Trustees
when requested in writing to do so by shareholders holding 10% of the Trust's
outstanding shares.
Pursuant to the Trust's Agreement and Declaration of Trust, the Trust may
issue an unlimited number of shares of each Fund. Each share of a Fund
represents an interest in the Fund only, has a par value of $0.01 per share,
represents an equal proportionate interest in the Fund with other shares of the
Fund and is entitled to such dividends and distributions out of the income
earned and gain realized on the assets belonging to the Fund as may be declared
by the Board of Trustees. Each share of a Fund is equal in earnings, assets and
voting privileges except that each class normally has exclusive voting rights
with respect to its distribution plan and bears the expenses, if any, related to
the distribution of its shares. Shares of a Fund, when issued, are fully paid
and nonassessable.
Advisor Class shares are offered through the Prospectuses and this Statement
of Additional Information to (a) trustees or other fiduciaries purchasing shares
for employee benefit plans which are sponsored by organizations which have at
least 1,000 employees; (b) any account with assets of at least $10,000 if (i) a
financial planner, trust company, bank trust department or registered investment
advisor has investment discretion over such account, and (ii) the account holder
pays such person as compensation for its advice and other services an annual fee
of at least 0.50% on the assets in the account; (c) any account with assets of
at least $10,000 if (i) such account is established under a "wrap fee" program,
and (ii) the account holder pays the sponsor of such program an annual fee of at
least 0.50% on the assets in the account; (d) accounts advised by the
Sub-advisors or one of the companies formerly affiliated with the Asset
Management Division of Liechtenstein Global Trust AG, provided such accounts
were invested in Advisor Class shares of any of the funds in The AIM Family of
Funds on May 29, 1998; and (e) any of the companies affiliated with AMVESCAP
PLC. Pursuant to a separate prospectus, the Fund also offers Class A, Class B
and Class C shares, which represent interests in the Fund. The Class A, Class B
and Class C shares have different distribution arrangements.
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. Unless
specifically noted, the Fund's investment policies described in this Statement
of Additional Information are not fundamental policies and may be changed by
vote of the Trust's Board of Trustees, without shareholder approval.
Pacific Growth Fund's primary investment area includes: Australia, Hong Kong,
India, Indonesia, Malaysia, New Zealand, Pakistan, the Philippines, Singapore,
South Korea, Taiwan and Thailand. Europe Growth Fund's primary investment area
includes: Austria, Belgium, Denmark, Finland, France, Germany, Greece, Ireland,
Italy, Luxembourg, the Netherlands, Norway, Portugal, Spain, Sweden,
Switzerland, Turkey and the United Kingdom.
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. 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. Accordingly, the Funds are regional funds for investors
interested in more geographically concentrated investment but still desiring to
diversify across multiple markets.
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
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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.
There is no assurance that the Funds will achieve their investment objectives.
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.
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.
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.
Equity securities in which the Funds may invest include common stocks,
preferred stocks, convertible debt securities and warrants to acquire such
securities.
Mid Cap Fund. The Fund may 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.
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 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.
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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
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, a 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, such 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 foreign securities. Such investments may include American
Depositary Receipts ("ADRs"), American Depositary Shares ("ADSs"), Global
Depositary Receipts ("GDRs") and European Depositary Receipts ("EDRs"). 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 Fund's investment policies, its investments in ADRs,
ADSs, GDRs and EDRs will be deemed to be investments in the underlying foreign
equity securities.
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
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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. While a loan is
outstanding, the borrower must maintain with the Fund's custodian collateral
consisting of cash, U.S. government securities or certain irrevocable letters of
credit equal to at least the value of the borrowed securities, plus any accrued
interest or such other collateral as permitted by the Fund's investment program
and regulatory agencies, and as approved by the Board. The risks of lending
portfolio securities, as with other extensions of secured credit, consist of
possible delay in receiving additional collateral or in recovery of the
securities and possible loss of rights in the collateral should the borrower
fail financially. 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 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
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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. 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. A Fund may borrow in connection with meeting requests for the
redemption of a Fund's shares. 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, 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. A Fund may
borrow through reverse repurchase agreements and "roll" transactions in
connection with meeting requests for the redemption of a Fund's shares.
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
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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.
(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.
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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.
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
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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 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
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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 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
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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 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
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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 deutschmarks 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 deutschmarks 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 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
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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%.
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.
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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 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
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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, 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 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. Moreover, individual foreign
economies may differ favorably or unfavorably from the U.S. economy in such
respects as growth of gross national product, rate of inflation, rate of savings
and capital reinvestment, resource self-sufficiency and balance of payments
positions.
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 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.
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Additionally, certain costs attributable to foreign investing, such as custody
charges, are higher than those attributable to domestic investing.
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. Currencies generally are evaluated on
the basis of fundamental economic criteria (e.g., relative inflation and
interest rate levels and trends, growth rate forecasts, balance of payments
status and economic policies) as well as technical and political data. The
exchange rates between the U.S. dollar and other currencies are determined by
supply and demand in the currency exchange markets, the international balance of
payments, governmental intervention, speculation and other economic and
political conditions.
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.
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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.
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 a 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 a
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 a 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,
the 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
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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 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
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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 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 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. There also may be a lower level of monitoring and regulation of emerging
securities markets and the activities of investors in such markets, and
enforcement of existing regulations has been extremely limited.
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.
23
<PAGE> 387
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 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;
(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
24
<PAGE> 388
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.
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.
25
<PAGE> 389
EXECUTION OF PORTFOLIO TRANSACTIONS
Subject to policies established by the Trust's Board, 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, 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.
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 any of the Sub-advisors. The Trust's Board has
adopted procedures in conformity with Rule 17e-1 under the 1940 Act to ensure
that all brokerage commissions paid to
26
<PAGE> 390
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 years ended December 31, 1998 and 1997, 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................................ $1,989,166 $2,217,385 $2,711,139
Japan Fund................................. $ 235,325 $ 218,841 $ 253,623
Mid Cap Fund............................... $1,528,607 $2,193,539 $2,760,768
Pacific Fund............................... $ 930,036 $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. High portfolio turnover (over
100%) 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................................................. 97% 107%
Japan Fund.................................................. 67% 58%
Mid Cap Fund................................................ 168% 190%
Pacific Fund................................................ 96% 80%
</TABLE>
27
<PAGE> 391
MANAGEMENT
The Trust's Board of Trustees has overall responsibility for the operation of
the Funds. The Board 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, (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-
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>
28
<PAGE> 392
<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.
- ----------------------------------------------------------------------------------------------------------
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.
- ----------------------------------------------------------------------------------------------------------
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.
- ----------------------------------------------------------------------------------------------------------
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.
- ----------------------------------------------------------------------------------------------------------
DANA R. SUTTON, (39) Vice President and Vice President and Fund Controller, A I M Advisors,
Treasurer Inc.; and Assistant Vice President and Assistant
Treasurer, Fund Management Company.
- ----------------------------------------------------------------------------------------------------------
</TABLE>
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 an annual retainer component plus a per-meeting fee
component, 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 $13,300, $10,900, $12,100 and $13,300, 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 $106,850, $90,650, $98,600 and $99,500,
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 1, 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.
29
<PAGE> 393
INVESTMENT MANAGEMENT AND ADMINISTRATION SERVICES
AIM, 11 Greenway Plaza, Suite 100, Houston, Texas 77046, was organized in 1976
and, together with its subsidiaries, manages or advises approximately 110
investment portfolios encompassing a broad range of investment objectives.
INVESCO Asset Management Limited, 11 Devonshire Square, London, EC2M 4YR,
England, has provided investment management and/or administrative services to
pension funds, insurance funds, index funds, unit trusts, offshore funds and a
variety of institutional accounts since 1967. INVESCO Asset Management (Japan)
Limited, Imperial Tower, 1-1-1 Uchisaiwai-cho, Chiyoda-Ku, Tokyo, 100-0011, has
provided investment management services since 1990. INVESCO Asia Limited, 12/F,
Three Exchange Square, 8 Connaught Place, Hong Kong, has provided investment
management services since 1972. AIM, the Sub-advisors and their world-wide asset
management affiliates provide investment management and/or administrative
services to institutional, corporate and individual clients around the world.
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 also the sole shareholder of the Funds' principal
underwriter, AIM Distributors.
AIM Management, AIM and the Sub-Advisors are indirect wholly owned
subsidiaries of AMVESCAP PLC, 11 Devonshire Square, London, EC2M 4YR, England.
AMVESCAP PLC and its subsidiaries are an independent management group that has 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.
In addition to the investment resources of their Houston and London offices,
AIM and the Sub-advisors draw upon the expertise, personnel, data and systems of
other offices in Atlanta, Boston, Dallas, Denver, Louisville, Miami, New York,
Portland (Oregon), Frankfurt, Hong Kong, London, Singapore, Sydney, Tokyo and
Toronto. In managing the Funds and the Portfolio, the Sub-advisors employ a team
approach, taking advantage of its investment resources around the world.
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 Japan serves as the sub-advisor to Japan Fund
under a sub-advisory contract between AIM and INVESCO Japan ("Sub-Management
Contract"). INVESCO Asia serves as the sub-advisor to Pacific Fund under a
sub-advisory contract between AIM and INVESCO Asia ("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"). The 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).
For these services, each Fund (other than Mid Cap Fund) pays AIM investment
management and administrative fees, computed daily and paid monthly, based on
its average daily net assets, at the annualized rate of 0.975% on the first $500
million, 0.95% on the next $500 million, 0.925% on the next $500 million and
0.90% on the amounts thereafter. Mid Cap Fund pays AIM investment management and
administration fees, computed daily and paid monthly, based on its average daily
net assets, at the annualized rate of 0.725% on the first $500 million, 0.70% on
the next $500 million, 0.675% on the next $500 million and 0.65% on amounts
thereafter. AIM pays each Sub-advisor sub-advisory fees, computed weekly and
paid monthly based on each Fund's average daily net assets, at the annualized
rate of 0.39% of the first $500 million, 0.38% on the next $500 million, 0.37%
on the next $500 million, and 0.36% on the amounts thereafter. The investment
management and administration fees paid by the Funds are higher than those paid
by most mutual funds. The Funds pay all expenses not assumed by AIM, the
Sub-advisors, AIM Distributors or other agents. AIM has undertaken to limit
expenses of each of Europe Fund, Japan Fund and Pacific Fund (exclusive of
brokerage commissions, taxes, interest and extraordinary expenses) to the annual
rate of 1.65% of the average daily net assets of each Fund's Advisor Class
shares, and has undertaken to limit expenses of Mid Cap Fund to the annual rate
of 1.40% of the average daily net assets of each Fund's Advisor Class until May
31, 2000.
30
<PAGE> 394
AIM may from time to time waive or reduce its fee. Voluntary fee waivers or
reductions may be rescinded at any time without further notice to investors.
During periods of voluntary fee waivers or reductions, AIM will retain its
ability to be reimbursed for such fee prior to the end of each fiscal year.
Contractual fee waivers or reductions set forth in the Fee Tables in a
Prospectus may not be terminated or amended to the Funds' detriment during the
period stated in the agreement between AIM and the Fund.
AIM also serves as the Funds' pricing and accounting agent. For these
services, AIM receives a fee based on the aggregate net assets of the funds
which comprise the following investment companies: AIM Growth Series, AIM
Investment Funds, AIM Investment Portfolios, AIM Series Trust, G.T. Global
Variable Investment Series and G.T. Global Variable Investment Trust. The fee is
calculated at the rate of 0.03% of the first $5 billion of assets, and 0.02% of
the assets in excess of $5 billion. An amount is allocated to and paid by each
such fund based on its relative average daily net assets.
In placing securities for a Fund's portfolio transactions, the Sub-advisors
seek to obtain the best net results. Consistent with its obligation to obtain
the best net results, the Sub-advisor may consider a broker/dealer's sale of
shares of the AIM Funds as a factor in considering through whom portfolio
transactions will be effected. Brokerage transactions may be executed through
affiliates of AIM or the Sub-advisors.
For the fiscal years ended December 31, 1998, 1997 and 1996, each Fund paid
the current and former Advisors the following investment management and
administration fees:
<TABLE>
<CAPTION>
FUND 1998 1997 1996
---- ---------- ---------- ----------
<S> <C> <C> <C>
Europe Fund.............................. $5,643,072 $5,228,246 $5,416,280
Japan Fund............................... $ 740,164 $1,017,788 $1,367,702
Mid Cap Fund............................. $3,140,938 $3,999,732 $4,982,969
Pacific Fund............................. $1,447,661 $3,736,264 $5,260,774
</TABLE>
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 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
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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 "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 "Exchanging Shares."
Information concerning redemption of the Funds' shares is set forth in the
Prospectuses under the heading "Redeeming 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"),
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 generally be subject to backup withholding.
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<PAGE> 396
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 or their tax advisor 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
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<PAGE> 397
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 "Exchanging Shares" and "Redeeming 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 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.
DIVIDENDS, DISTRIBUTIONS AND TAX MATTERS
REINVESTMENT OF DIVIDENDS AND DISTRIBUTIONS
Income dividends and capital gains distributions are automatically reinvested
in additional shares of the same class of each Fund unless the shareholder has
requested in writing to receive such dividends and distributions in cash or that
they be invested in shares of another AIM Fund, subject to the terms and
conditions set forth herein under the caption "Shareholder Information." If a
shareholder's account does not have any shares in it on a dividend or capital
gains distribution payment date, the dividend or distribution will be paid in
cash whether or not the shareholder has elected to have such dividends or
distributions reinvested.
TAX MATTERS
The following is only a summary of certain additional tax considerations
generally affecting the Funds and their shareholders that are described in the
Prospectus. No attempt is made to present a detailed explanation of the tax
treatment of each Fund or its shareholders, and the discussion here and in the
Prospectus is not intended as a substitute for careful tax planning.
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.
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<PAGE> 398
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.
REINSTATEMENT PRIVILEGE
For federal income tax purposes, exercise of your reinstatement privilege may
increase the amount of gain or reduce the amount of loss recognized in the
original redemption transaction, because the initial sales charge will not be
taken into account in determining such gain or loss to the extent there has been
a reduction in the initial sales charge payable upon reinstatement.
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 foreign tax credit limitation and will be able to
claim a foreign tax credit without having to file the 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.
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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
Ordinary dividends and return of capital distributions 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 distribution 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 -- 20% (10% for taxpayers in the 15% marginal tax bracket) for gain
recognized on capital assets held for more than 12 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 unless the
completed transaction exception applies. 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. 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 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.
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<PAGE> 401
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.
MISCELLANEOUS INFORMATION
CHARGES FOR CERTAIN ACCOUNT INFORMATION
The Transfer Agent may impose certain copying charges for requests for copies
of shareholder account statements and other historical account information older
than the current year and the immediately preceding year.
38
<PAGE> 402
CUSTODIAN
State Street Bank and Trust Company (the "Custodian"), 225 Franklin Street,
Boston, Massachusetts 02110, is custodian of all securities and cash of the
Funds. The Custodian attends to the collection of principal and income, pays and
collects all monies for securities bought and sold by the Funds and performs
certain other ministerial duties. The Custodian 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
A I M Fund Services, Inc., a wholly owned subsidiary of AIM, acts as transfer
agent and dividend disbursing agent for the Funds. The Transfer Agency and
Service Agreement between the Trust and AFS 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*.......................................... $158,561 $138,072 $139,442
Japan Fund............................................ $ 20,629 $ 26,210 $ 35,119
Mid Cap Fund.......................................... $118,894 $142,274 $173,767
Pacific Fund.......................................... $ 40,387 $ 99,321 $135,182
</TABLE>
- ---------------
* INVESCO AML became the Fund's Sub-Advisor on December 14, 1998. The fees
reflected represent fees received by both Sub-Advisors.
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
39
<PAGE> 403
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 1, 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 LGT Asset Management 401(k) Plan 83.311%
Judy Creel, Arthur Sprague, or
Robert Alley, TTEES
11 Greenway Plaza, Suite 100
Houston, TX 77046-1173
LGT Asset Management SERP Plan 7.919%
Judy Creel, Arthur Sprague, or
Robert Alley, TTEES
Attn: Debbie Nettles
11 Greenway Plaza, Suite 100
Houston, TX 77046-1173
Europe Growth Fund -- Class A MLPF&S for the Sole Benefit of Its 13.536%
Customers
Attn: Fund Administration
4800 Deer Lake Drive East, 2nd Floor
Jacksonville, FL 32246-6484
Europe Growth Fund -- Class B MLPF&S for the Sole Benefit of Its 8.231%
Customers
Attn: Fund Administration
4800 Deer Lake Drive East, 2nd Floor
Jacksonville, FL 32246-6484
Japan Fund -- Advisor Class Prudential Securities, Inc. 33.065%
Special Custody Acct. For the
Exclusive Benefit of Customers-PC
Attn: Mutual Funds
1 New York Plaza
New York, NY 10004-1901
FTC & Co. 23.407%
Attn: Datalynx #147
P.O. Box 173736
Denver, CO 80217
Charles Schwab & Co. Inc. 20.429%
Reinvestment Account
101 Montgomery St.
San Francisco, CA 94104
LGT Asset Management 401(k) Plan 9.002%
Judy Creel, Arthur Sprague, or
Robert Alley, TTEES
11 Greenway Plaza, Suite 100
Houston, TX 77046-1173
Japan Growth Fund -- Class A MLPF&S for the Sole Benefit of Its 10.159%
Customers
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>
40
<PAGE> 404
<TABLE>
<CAPTION>
PERCENT
PERCENT OWNED OF
OWNED OF RECORD AND
FUND NAME AND ADDRESS OF OWNER RECORD* BENEFICIALLY
- ---- ------------------------- -------- ------------
<S> <C> <C> <C>
Japan Growth Fund -- Class B MLPF&S for the Sole Benefit of Its 16.337%
Customers
Attn: Fund Administration
4800 Deer Lake Drive East, 2nd Floor
Jacksonville, FL 32246-6484
Mid Cap Equity Fund -- Advisor Class LGT Asset Management 401(k) Plan 55.877%
Judy Creel, Arthur Sprague, or
Robert Alley, TTEES
11 Greenway Plaza, Suite 100
Houston, TX 77046-1173
LGT Asset Management SERP Plan 44.066%
Judy Creel, Arthur Sprague, or
Robert Alley, TTEES
Attn: Debbie Nettles
11 Greenway Plaza, Suite 100
Houston, TX 77046-1173
Mid Cap Growth -- Class A MLPF&S for the Sole Benefit of Its 10.472%
Customers
Attn: Fund Administration
4800 Deer Lake Drive East, 2nd Floor
Jacksonville, FL 32246-6484
Mid Cap Equity -- Class B MLPF&S for the Sole Benefit of Its 11.147%
Customers
Attn: Fund Administration
4800 Deer Lake Drive East, 2nd Floor
Jacksonville, FL 32246-6484
Pacific Fund -- Advisor Class LGT Asset Management 401(k) Plan 73.875%
Judy Creel, Arthur Sprague, or
Robert Alley, TTEES
11 Greenway Plaza, Suite 100
Houston, TX 77046-1173
LGT Asset Management SERP Plan 21.159%
Judy Creel, Arthur Sprague, or
Robert Alley, TTEES
Attn: Debbie Nettles
11 Greenway Plaza, Suite 100
Houston, TX 77046-1173
Pacific Fund -- Class A MLPF&S for the Sole Benefit of Its 7.157%
Customers
Attn: Fund Administration
4800 Deer Lake Drive East, 2nd Floor
Jacksonville, FL 32246-6484
Pacific Fund -- Class B MLPF&S for the Sole Benefit of Its 6.151%
Customers
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> 405
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>
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>
42
<PAGE> 406
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>
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
A Fund's total return shows its overall change in value, including changes in
share price and assuming all the Fund's dividends and capital gain distributions
are reinvested. A cumulative total return reflects the Fund's performance over a
stated period of time. An average annual total return reflects the hypothetical
compounded annual rate of return that would have produced the same cumulative
total return if the Fund's performance had been constant over the entire period.
BECAUSE AVERAGE ANNUAL RETURNS TEND TO EVEN OUT VARIATIONS IN THE FUND'S RETURN,
INVESTORS SHOULD RECOGNIZE THAT SUCH RETURNS ARE NOT THE SAME AS ACTUAL
YEAR-BY-YEAR RESULTS. To illustrate the components of overall performance, the
Fund may separate its cumulative and average annual returns into income results
and capital gains or losses.
From time to time, AIM or its affiliates may waive all or a portion of their
fees and/or assume certain expenses of any Fund. Voluntary fee waivers or
reductions or commitments to assume expenses may be rescinded at any time
without further notice to investors. During periods of voluntary fee waivers or
reductions or commitments to assume expenses,
43
<PAGE> 407
AIM will retain its ability to be reimbursed for such fee prior to the end of
each fiscal year. Contractual fee waivers or reductions or reimbursement of
expenses set forth in the Fee Table in a Prospectus may not be terminated or
amended to the Funds' detriment during the period stated in the agreement
between AIM and the Fund. Fee waivers or reductions or commitments to reduce
expenses will have the effect of increasing that Fund's yield and total return.
The performance of each Fund will vary from time to time and past results are
not necessarily indicative of future results. A Fund's performance is a function
of its portfolio management in selecting the type and quality of portfolio
securities and is affected by operating expenses of the Fund and market
conditions. A shareholder's investment in a Fund is not insured or guaranteed.
These factors should be carefully considered by the investor before making an
investment in any Fund. Further information regarding the Fund's performance is
contained in the Fund's annual report to shareholders, which is available upon
request and without charge.
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
44
<PAGE> 408
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 IBCA (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.
45
<PAGE> 409
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.
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<PAGE> 410
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.
47
<PAGE> 411
FINANCIAL STATEMENTS
FS
<PAGE> 412
REPORT OF
INDEPENDENT ACCOUNTANTS
- --------------------------------------------------------------------------------
To the Shareholders of AIM Europe Growth Fund (formerly GT Global Europe Growth
Fund) and Board of Trustees of AIM Growth Series (formerly GT Global Growth
Series):
In our opinion, the accompanying statement of assets and liabilities, including
the portfolio of investments, and the related statements of operations and of
changes in net assets and the financial highlights present fairly, in all
material respects, the financial position of the AIM Europe Growth Fund at
December 31, 1998, and the results of its operations, the changes in its net
assets and the financial highlights for the periods indicated, in conformity
with generally accepted accounting principles. These financial statements and
financial highlights (hereafter referred to as "financial statements") are the
responsibility of the Fund's management; our responsibility is to express an
opinion on these financial statements based on our audits. We conducted our
audits of these financial statements in accordance with generally accepted
auditing standards which require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements, assessing the
accounting principles used and significant estimates made by management, and
evaluating the overall financial statement presentation. We believe that our
audits, which included confirmation of securities at December 31, 1998 by
correspondence with the custodian and brokers, provide a reasonable basis for
the opinion expressed above.
/s/ PRICEWATERHOUSECOOPERS LLP
PRICEWATERHOUSECOOPERS LLP
BOSTON, MASSACHUSETTS
FEBRUARY 19, 1999
FS-1
<PAGE> 413
PORTFOLIO OF INVESTMENTS
December 31, 1998
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
VALUE % OF NET
EQUITY INVESTMENTS COUNTRY SHARES (NOTE 1) ASSETS
- ------------------------------------------------------------- -------- ----------- ------------ -------------
<S> <C> <C> <C> <C>
Services (29.2%)
Orange PLC-/- ............................................. UK 1,543,401 $ 17,800,947 3.4
WIRELESS COMMUNICATIONS
TNT Post Group N.V. ....................................... NETH 488,041 15,720,626 3.0
TRANSPORTATION - SHIPPING
Vodafone Group PLC ........................................ UK 898,220 14,539,401 2.8
WIRELESS COMMUNICATIONS
MobilCom AG ............................................... GER 39,499 12,562,692 2.4
TELECOM - OTHER
Mannesmann AG ............................................. GER 99,250 11,375,870 2.2
WIRELESS COMMUNICATIONS
Telecel - Comunicacaoes Pessoais S.A. ..................... PORT 51,227 10,480,844 2.0
WIRELESS COMMUNICATIONS
Swisscom AG-/- ............................................ SWTZ 24,728 10,354,355 2.0
TELEPHONE NETWORKS
Telecom Italia SpA ........................................ ITLY 1,189,452 10,125,492 2.0
TELEPHONE NETWORKS
Telecom Italia Mobile SpA ................................. ITLY 1,359,699 10,039,576 1.9
TELEPHONE NETWORKS
Helsingin Puhelin Oyj (Helsinki Telephone Corp.) .......... FIN 152,600 9,072,461 1.8
TELEPHONE NETWORKS
Corporate Services Group PLC .............................. UK 3,380,455 8,511,236 1.6
BUSINESS & PUBLIC SERVICES
STET Hellas Telecommunications S.A. - ADR-/- {\/} ......... GREC 196,532 6,362,724 1.2
WIRELESS COMMUNICATIONS
EM.TV & Merchandising AG .................................. GER 11,063 6,306,919 1.2
BROADCASTING & PUBLISHING
ASSA Abloy AB "B" ......................................... SWDN 122,267 4,667,829 0.9
BUSINESS & PUBLIC SERVICES
Esat Telecom Group PLC - ADR-/- {\/} ...................... IRE 77,500 2,983,750 0.6
TELEPHONE NETWORKS
Panafon Hellenic Telecom S.A.-/- .......................... GREC 31,411 842,178 0.2
WIRELESS COMMUNICATIONS
------------
151,746,900
------------
Finance (22.3%)
Axa - UAP ................................................. FR 82,862 12,007,911 2.3
INSURANCE - MULTI-LINE
Zurich Allied AG .......................................... SWTZ 13,853 10,259,613 2.0
INSURANCE - MULTI-LINE
ING Groep N.V. ............................................ NETH 166,578 10,155,032 2.0
OTHER FINANCIAL
UBS AG - Registered ....................................... SWTZ 32,455 9,973,791 1.9
BANKS-MONEY CENTER
Unicredito Italiano SpA ................................... ITLY 1,680,892 9,927,505 1.9
OTHER FINANCIAL
Abbey National PLC ........................................ UK 456,001 9,753,246 1.9
BANKS-SUPER REGIONAL
Safra Republic Holdings S.A.{\/} .......................... LUX 156,000 8,502,000 1.6
OTHER FINANCIAL
</TABLE>
The accompanying notes are an integral part of the financial statements.
FS-2
<PAGE> 414
PORTFOLIO OF INVESTMENTS (cont'd)
December 31, 1998
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
VALUE % OF NET
EQUITY INVESTMENTS COUNTRY SHARES (NOTE 1) ASSETS
- ------------------------------------------------------------- -------- ----------- ------------ -------------
<S> <C> <C> <C> <C>
Finance (Continued)
Lloyds TSB Group PLC ...................................... UK 575,860 $ 8,163,394 1.6
BANKS-MONEY CENTER
Nordbanken Holding AB ..................................... SWDN 1,135,143 7,269,389 1.4
BANKS-REGIONAL
ForeningsSparbanken AB .................................... SWDN 255,682 6,612,466 1.3
BANKS-REGIONAL
Mediolanum SpA ............................................ ITLY 875,230 6,493,129 1.3
INSURANCE-LIFE
Skandia Forsakrings AB Free ............................... SWDN 414,494 6,329,711 1.2
INSURANCE - MULTI-LINE
CGU PLC ................................................... UK 327,013 5,105,833 1.0
INSURANCE - MULTI-LINE
BPI-SGPS S.A. ............................................. PORT 141,607 4,809,890 0.9
BANKS-MONEY CENTER
------------
115,362,910
------------
Technology (15.9%)
Dassault Systemes S.A. .................................... FR 247,694 11,641,330 2.3
COMPUTERS & PERIPHERALS
Equant N.V.-/- {V} ........................................ NETH 163,518 11,377,073 2.2
NETWORKING
TT Tieto Oy "B" ........................................... FIN 228,328 10,169,814 2.0
COMPUTERS & PERIPHERALS
Saville Systems PLC - ADR{\/} ............................. IRE 467,000 8,873,000 1.7
TELECOM TECHNOLOGY
SAP AG Non-Voting ......................................... GER 18,153 8,662,545 1.7
COMPUTERS & PERIPHERALS
Misys PLC ................................................. UK 1,120,686 8,176,234 1.6
SOFTWARE
Mobistar S.A.-/- .......................................... BEL 151,688 7,617,328 1.5
TELECOM TECHNOLOGY
Computacenter PLC-/- ...................................... UK 869,978 6,361,592 1.2
COMPUTERS & PERIPHERALS
Sonera Group Oyj-/- ....................................... FIN 194,800 3,440,008 0.7
TELECOM TECHNOLOGY
Energis PLC-/- ............................................ UK 151,300 3,381,941 0.7
TELECOM TECHNOLOGY
JBA Holdings PLC .......................................... UK 515,660 1,585,404 0.3
SOFTWARE
------------
81,286,269
------------
Health Care (11.1%)
Novartis AG ............................................... SWTZ 7,389 14,528,328 2.8
PHARMACEUTICALS
Roche Holding AG .......................................... SWTZ 864 10,545,179 2.0
PHARMACEUTICALS
SmithKline Beecham PLC .................................... UK 732,592 10,269,566 2.0
PHARMACEUTICALS
Glaxo Wellcome PLC ........................................ UK 292,286 10,040,453 1.9
PHARMACEUTICALS
</TABLE>
The accompanying notes are an integral part of the financial statements.
FS-3
<PAGE> 415
PORTFOLIO OF INVESTMENTS (cont'd)
December 31, 1998
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
VALUE % OF NET
EQUITY INVESTMENTS COUNTRY SHARES (NOTE 1) ASSETS
- ------------------------------------------------------------- -------- ----------- ------------ -------------
<S> <C> <C> <C> <C>
Health Care (Continued)
Nycomed Amersham PLC ...................................... UK 1,034,910 $ 7,137,654 1.4
PHARMACEUTICALS
Genset - ADR-/- {\/} ...................................... FR 159,794 4,414,309 0.9
BIOTECHNOLOGY
Primamedic Ltd.-/- ........................................ ASTRI 618,200 685,541 0.1
PHARMACEUTICALS
------------
57,621,030
------------
Capital Goods (7.4%)
Nokia Oyj "A" ............................................. FIN 205,148 24,956,688 4.8
TELECOM EQUIPMENT
Telefonaktiebolaget LM Ericsson "B" ....................... SWDN 495,180 11,769,672 2.3
TELECOM EQUIPMENT
Altran Technologies S.A. .................................. FR 6,074 1,464,845 0.3
MACHINERY & ENGINEERING
------------
38,191,205
------------
Consumer Non-Durables (7.3%)
Nestle S.A. - Registered .................................. SWTZ 4,534 9,872,313 1.9
FOOD
Cadbury Schweppes PLC ..................................... UK 572,834 9,748,405 1.9
FOOD
Tabacalera S.A. "A" ....................................... SPN 265,300 6,685,254 1.3
TOBACCO
Diageo PLC ................................................ UK 499,547 5,607,981 1.1
BEVERAGES - ALCOHOLIC
Raisio Group PLC-/- ....................................... FIN 500,807 5,502,834 1.1
FOOD
------------
37,416,787
------------
Energy (3.3%)
BP Amoco PLC .............................................. UK 471,997 7,036,173 1.4
OIL
Petroleum Geo-Services ASA-/- ............................. NOR 422,448 5,393,758 1.0
ENERGY EQUIPMENT & SERVICES
Coflexip - ADR{\/} ........................................ FR 150,769 4,843,454 0.9
ENERGY EQUIPMENT & SERVICES
------------
17,273,385
------------
Consumer Durables (1.7%)
Porsche AG Preferred-/- ................................... GER 3,741 8,530,845 1.7
AUTOMOBILES
------------ -----
TOTAL EQUITY INVESTMENTS (cost $441,896,026) ................ 507,429,331 98.2
------------ -----
</TABLE>
The accompanying notes are an integral part of the financial statements.
FS-4
<PAGE> 416
PORTFOLIO OF INVESTMENTS (cont'd)
December 31, 1998
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
VALUE % OF NET
REPURCHASE AGREEMENT (NOTE 1) ASSETS
- ------------------------------------------------------------- ------------ -------------
<S> <C> <C> <C> <C>
Dated December 31, 1998, with State Street Bank & Trust
Co., due January 4, 1999, for an effective yield of 4.50%,
collateralized by $10,370,000 U.S. Treasury Bonds, 8.75%
due 5/15/17 (market value of collateral is $14,513,396,
including accrued interest) (cost $14,223,000) ........... $ 14,223,000 2.8
------------ -----
TOTAL INVESTMENTS (cost $456,119,026) * .................... 521,652,331 101.0
Other Assets and Liabilities ................................ (5,000,159) (1.0)
------------ -----
NET ASSETS .................................................. $516,652,172 100.0
------------ -----
------------ -----
</TABLE>
- --------------
-/- Non-income producing security.
{\/} U.S. currency denominated.
{V} Security is denominated in French Francs.
* For Federal income tax purposes, cost is $461,177,839 and
appreciation (depreciation) is as follows:
<TABLE>
<S> <C>
Unrealized appreciation: $ 96,242,133
Unrealized depreciation: (35,767,641)
-------------
Net unrealized appreciation: $ 60,474,492
-------------
-------------
</TABLE>
Abbreviation:
ADR--American Depositary Receipt
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
The Fund's Portfolio of Investments at December 31, 1998, was concentrated in
the following countries:
<TABLE>
<CAPTION>
PERCENTAGE OF NET ASSETS {D}
------------------------------
SHORT-TERM
COUNTRY (COUNTRY CODE/CURRENCY CODE) EQUITY & OTHER TOTAL
- -------------------------------------- ------ ------------- -----
<S> <C> <C> <C>
Austria (ASTRI/ATS) .................. 0.1 0.1
Belgium (BEL/BEF) .................... 1.5 1.5
Finland (FIN/FIM) .................... 10.4 10.4
France (FR/FRF) ...................... 6.7 6.7
Germany (GER/DEM) .................... 9.2 9.2
Greece (GREC/GRD) .................... 1.4 1.4
Ireland (IRE/IEP) .................... 2.3 2.3
Italy (ITLY/ITL) ..................... 7.1 7.1
Luxembourg (LUX/LUF) ................. 1.6 1.6
Netherlands (NETH/NLG) ............... 7.2 7.2
Norway (NOR/NOK) ..................... 1.0 1.0
Portugal (PORT/PTE) .................. 2.9 2.9
Spain (SPN/ESP) ...................... 1.3 1.3
Sweden (SWDN/SEK) .................... 7.1 7.1
Switzerland (SWTZ/CHF) ............... 12.6 12.6
United Kingdom (UK/GBP) .............. 25.8 25.8
United States (US/USD) ............... 1.8 1.8
------ ----- -----
Total ............................... 98.2 1.8 100.0
------ ----- -----
------ ----- -----
</TABLE>
- --------------
{d} Percentages indicated are based on net assets of $516,652,172.
The accompanying notes are an integral part of the financial statements.
FS-5
<PAGE> 417
STATEMENT OF ASSETS
AND LIABILITIES
December 31, 1998
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C>
Assets:
Investments in securities, at value (cost $456,119,026) (Note 1)............................ $521,652,331
U.S. currency.................................................................... $ 891
Foreign currencies (cost $566,885)............................................... 572,681 573,572
---------
Receivable for Fund shares sold............................................................. 6,979,690
Dividends and dividend withholding tax reclaims receivable.................................. 438,913
Miscellaneous and interest receivable....................................................... 5,208
-----------
Total assets.............................................................................. 529,649,714
-----------
Liabilities:
Payable for Fund shares repurchased......................................................... 11,326,788
Payable for securities purchased............................................................ 572,681
Payable for service and distribution expenses (Note 2)...................................... 488,767
Payable for investment management and administration fees (Note 2).......................... 431,502
Payable for transfer agent fees (Note 2).................................................... 104,812
Payable for custodian fees.................................................................. 19,043
Payable for professional fees............................................................... 15,518
Payable for fund accounting fees (Note 2)................................................... 11,935
Payable for printing and postage expenses................................................... 10,316
Payable for registration and filing fees.................................................... 5,169
Payable for Trustees' fees and expenses (Note 2)............................................ 5,106
Other accrued expenses...................................................................... 5,905
-----------
Total liabilities......................................................................... 12,997,542
-----------
Net assets.................................................................................... $516,652,172
-----------
-----------
Class A:
Net asset value and redemption price per share ($415,066,115 DIVIDED BY 26,485,045 shares
outstanding)................................................................................. $ 15.67
-----------
-----------
Maximum offering price per share (100 DIVIDED BY 94.5 of $15.67) *............................ $ 16.58
-----------
-----------
Class B:+
Net asset value and offering price per share ($99,943,136 DIVIDED BY 6,551,353 shares
outstanding)................................................................................. $ 15.26
-----------
-----------
Advisor Class:
Net asset value, offering price per share, and redemption price per share ($1,642,921 DIVIDED
BY 103,868 shares outstanding)............................................................... $ 15.82
-----------
-----------
Net assets consist of:
Paid in capital (Note 4).................................................................... $364,202,132
Accumulated net realized gain on investments and foreign currency transactions.............. 86,905,207
Net unrealized appreciation on translation of assets and liabilities in foreign
currencies................................................................................. 11,528
Net unrealized appreciation of investments.................................................. 65,533,305
-----------
Total -- representing net assets applicable to capital shares outstanding..................... $516,652,172
-----------
-----------
<FN>
- --------------
* On sales of $25,000 or more, the offering price is reduced.
+ Redemption price per share is equal to the net asset value per share less
any applicable contingent deferred sales charge.
</TABLE>
The accompanying notes are an integral part of the financial statements.
FS-6
<PAGE> 418
STATEMENT OF OPERATIONS
Year ended December 31, 1998
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C>
Investment income: (Note 1)
Dividend income (net of foreign withholding tax of $1,801,354)............................ $ 9,216,947
Interest income........................................................................... 782,335
Securities lending income................................................................. 563,149
-----------
Total investment income................................................................. 10,562,431
-----------
Expenses:
Investment management and administration fees (Note 2).................................... 5,643,072
Service and distribution expenses: (Note 2)
Class A.................................................................... $ 1,649,617
Class B.................................................................... 1,052,508 2,702,125
-----------
Interest expense (Note 1)................................................................. 1,549,511
Transfer agent fees....................................................................... 1,215,665
Custodian fees............................................................................ 414,640
Printing and postage expenses............................................................. 390,815
Registration and filing fees.............................................................. 163,150
Fund accounting fees (Note 2)............................................................. 158,561
Professional fees......................................................................... 157,950
Trustees' fees and expenses (Note 2)...................................................... 16,060
Other expenses............................................................................ 32,313
-----------
Total expenses before reductions........................................................ 12,443,862
-----------
Expense reductions (Note 5)........................................................... (30,709)
-----------
Total net expenses...................................................................... 12,413,153
-----------
Net investment loss......................................................................... (1,850,722)
-----------
Net realized and unrealized gain on investments and foreign currencies: (Note
1)
Net realized gain on investments............................................. 118,937,449
Net realized gain on foreign currency transactions........................... 119,748
-----------
Net realized gain during the year....................................................... 119,057,197
Net change in unrealized appreciation on translation of assets and
liabilities in foreign currencies........................................... 217,346
Net change in unrealized appreciation of investments......................... 6,189,915
-----------
Net unrealized appreciation during the year............................................. 6,407,261
-----------
Net realized and unrealized gain on investments and foreign currencies...................... 125,464,458
-----------
Net increase in net assets resulting from operations........................................ $123,613,736
-----------
-----------
</TABLE>
The accompanying notes are an integral part of the financial statements.
FS-7
<PAGE> 419
STATEMENTS OF CHANGES IN NET ASSETS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
YEAR ENDED YEAR ENDED
DECEMBER 31, DECEMBER 31,
1998 1997
-------------- --------------
<S> <C> <C>
Increase (Decrease) in net assets
Operations:
Net investment loss...................................................... $ (1,850,722) $ (2,163,876)
Net realized gain on investments and foreign currency transactions....... 119,057,197 107,144,938
Net change in unrealized appreciation (depreciation) on translation of
assets and liabilities in foreign currencies............................ 217,346 (237,701)
Net change in unrealized appreciation (depreciation) of investments...... 6,189,915 (31,970,694)
-------------- --------------
Net increase in net assets resulting from operations................... 123,613,736 72,772,667
-------------- --------------
Class A:
Distributions to shareholders: (Note 1)
From net realized gain on investments.................................... (28,578,354) (368,261)
Class B:
Distributions to shareholders: (Note 1)
From net realized gain on investments.................................... (6,161,419) (76,445)
Advisor Class:
Distributions to shareholders: (Note 1)
From net realized gain on investments.................................... (89,449) (1,099)
-------------- --------------
Total distributions.................................................... (34,829,222) (445,805)
-------------- --------------
Capital share transactions: (Note 4)
Increase from capital shares sold and reinvested......................... 5,304,793,872 2,415,165,409
Decrease from capital shares repurchased................................. (5,368,180,025) (2,538,538,626)
-------------- --------------
Net decrease from capital share transactions........................... (63,386,153) (123,373,217)
-------------- --------------
Total increase (decrease) in net assets.................................... 25,398,361 (51,046,355)
Net assets:
Beginning of year........................................................ 491,253,811 542,300,166
-------------- --------------
End of year *............................................................ $ 516,652,172 $ 491,253,811
-------------- --------------
-------------- --------------
* Includes undistributed net investment income............................ $ -- $ --
-------------- --------------
-------------- --------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
FS-8
<PAGE> 420
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
Contained below is per share operating performance data for a share outstanding
throughout the period, total investment return, ratios and supplemental data.
This information has been derived from information provided in the financial
statements.
<TABLE>
<CAPTION>
CLASS A
----------------------------------------------------------
YEAR ENDED DECEMBER 31,
----------------------------------------------------------
1998 (d) 1997 (d) 1996 (d) 1995 (d) 1994 (d)
---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C>
Per Share Operating Performance:
Net asset value, beginning of period.... $ 14.32 $ 12.89 $ 10.88 $ 10.03 $ 10.84
---------- ---------- ---------- ---------- ----------
Income from investment operations:
Net investment income (loss).......... (0.03) (0.04) (0.03) 0.04 0.06
Net realized and unrealized gain
(loss) on investments................ 2.35 1.48 2.16 0.95 (0.69)
---------- ---------- ---------- ---------- ----------
Net increase (decrease) from
investment operations.............. 2.32 1.44 2.13 0.99 (0.63)
---------- ---------- ---------- ---------- ----------
Distributions to shareholders:
From net investment income............ -- -- -- (0.10) (0.05)
From net realized gain on
investments.......................... (0.97) (0.01) (0.12) (0.04) --
In excess of net realized gain on
investments.......................... -- -- -- -- (0.13)
---------- ---------- ---------- ---------- ----------
Total distributions................. (0.97) (0.01) (0.12) (0.14) (0.18)
---------- ---------- ---------- ---------- ----------
Net asset value, end of period.......... $ 15.67 $ 14.32 $ 12.89 $ 10.88 $ 10.03
---------- ---------- ---------- ---------- ----------
---------- ---------- ---------- ---------- ----------
Total investment return (c)............. 16.63% 11.20% 19.61% 9.86% (5.8)%
Ratios and supplemental data:
Net assets, end of period (in 000's).... $ 415,066 $ 407,004 $ 453,792 $ 483,375 $ 646,313
Ratio of net investment income (loss) to
average net assets..................... (0.20)% (0.29)% (0.26)% 0.38% 0.61%
Ratio of expenses to average net assets
excluding interest expense:
With expense reductions (Note 5)...... 1.75% 1.75% 1.82% 1.83% 1.73%
Without expense reductions............ 1.75% 1.89% 1.88% 1.89% 1.81%
Ratio of interest expense to average net
assets++............................... 0.27% N/A N/A N/A N/A
Portfolio turnover rate++............... 97% 107% 123% 108% 91%
</TABLE>
- ----------------
(a) Annualized
(b) Not annualized
(c) Total investment return does not include sales charges.
(d) These selected per share data were calculated based upon average
shares outstanding during the period.
+ Commencing June 1, 1995, the Fund began offering Advisor Class shares.
++ Portfolio turnover rates and ratio of interest expense to average net
assets are calculated on the basis of the Fund as a whole without
distinguishing between the classes of shares issued.
N/A Not Applicable.
The accompanying notes are an integral part of the financial statements.
FS-9
<PAGE> 421
FINANCIAL HIGHLIGHTS (cont'd)
- --------------------------------------------------------------------------------
Contained below is per share operating performance data for a share outstanding
throughout the period, total investment return, ratios and supplemental data.
This information has been derived from information provided in the financial
statements.
<TABLE>
<CAPTION>
CLASS B
----------------------------------------------------------
YEAR ENDED DECEMBER 31,
----------------------------------------------------------
1998 (d) 1997 (d) 1996 (d) 1995 (d) 1994 (d)
---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C>
Per Share Operating Performance:
Net asset value, beginning of period.... $ 14.06 $ 12.73 $ 10.81 $ 9.97 $ 10.79
---------- ---------- ---------- ---------- ----------
Income from investment operations:
Net investment income (loss).......... (0.14) (0.13) (0.11) (0.03) --
Net realized and unrealized gain
(loss) on investments................ 2.31 1.47 2.15 0.94 (0.69)
---------- ---------- ---------- ---------- ----------
Net increase (decrease) from
investment operations.............. 2.17 1.34 2.04 0.91 (0.69)
---------- ---------- ---------- ---------- ----------
Distributions to shareholders:
From net investment income............ -- -- -- (0.03) --
From net realized gain on
investments.......................... (0.97) (0.01) (0.12) (0.04) --
In excess of net realized gain on
investments.......................... -- -- -- -- (0.13)
---------- ---------- ---------- ---------- ----------
Total distributions................. (0.97) (0.01) (0.12) (0.07) (0.13)
---------- ---------- ---------- ---------- ----------
Net asset value, end of period.......... $ 15.26 $ 14.06 $ 12.73 $ 10.81 $ 9.97
---------- ---------- ---------- ---------- ----------
---------- ---------- ---------- ---------- ----------
Total investment return (c)............. 15.80% 10.55% 18.79% 9.20% (6.38)%
Ratios and supplemental data:
Net assets, end of period (in 000's).... $ 99,943 $ 81,011 $ 87,092 $ 73,025 $ 81,602
Ratio of net investment income (loss) to
average net assets..................... (0.85)% (0.94)% (0.91)% (0.27)% (0.04)%
Ratio of expenses to average net assets
excluding interest expense:
With expense reductions (Note 5)...... 2.40% 2.40% 2.47% 2.48% 2.38%
Without expense reductions............ 2.40% 2.54% 2.53% 2.54% 2.46%
Ratio of interest expense to average net
assets++............................... 0.27% N/A N/A N/A N/A
Portfolio turnover rate++............... 97% 107% 123% 108% 91%
</TABLE>
- ----------------
(a) Annualized
(b) Not annualized
(c) Total investment return does not include sales charges.
(d) These selected per share data were calculated based upon average
shares outstanding during the period.
+ Commencing June 1, 1995, the Fund began offering Advisor Class shares.
++ Portfolio turnover rates and ratio of interest expense to average net
assets are calculated on the basis of the Fund as a whole without
distinguishing between the classes of shares issued.
N/A Not Applicable.
The accompanying notes are an integral part of the financial statements.
FS-10
<PAGE> 422
FINANCIAL HIGHLIGHTS (cont'd)
- --------------------------------------------------------------------------------
Contained below is per share operating performance data for a share outstanding
throughout the period, total investment return, ratios and supplemental data.
This information has been derived from information provided in the financial
statements.
<TABLE>
<CAPTION>
ADVISOR CLASS+
------------------------------------------------------
YEAR ENDED JUNE 1, 1995
DECEMBER 31, TO
--------------------------------------- DECEMBER 31,
1998 (d) 1997 (d) 1996 (d) 1995 (d)
------------- ----------- ----------- -------------
<S> <C> <C> <C> <C>
Per Share Operating Performance:
Net asset value, beginning of period.... $ 14.41 $ 12.92 $ 10.85 $ 10.24
------------- ----------- ----------- -------------
Income from investment operations:
Net investment income (loss).......... 0.02 0.01 0.01 0.08
Net realized and unrealized gain
(loss) on investments................ 2.36 1.49 2.18 0.71
------------- ----------- ----------- -------------
Net increase (decrease) from
investment operations.............. 2.38 1.50 2.19 0.79
------------- ----------- ----------- -------------
Distributions to shareholders:
From net investment income............ -- -- -- (0.14)
From net realized gain on
investments.......................... (0.97) (0.01) (0.12) (0.04)
In excess of net realized gain on
investments.......................... -- -- -- --
------------- ----------- ----------- -------------
Total distributions................. (0.97) (0.01) (0.12) (0.18)
------------- ----------- ----------- -------------
Net asset value, end of period.......... $ 15.82 $ 14.41 $ 12.92 $ 10.85
------------- ----------- ----------- -------------
------------- ----------- ----------- -------------
Total investment return (c)............. 16.88% 11.64% 20.21% 7.75%(b)
Ratios and supplemental data:
Net assets, end of period (in 000's).... $ 1,643 $ 3,239 $ 1,416 $ 718
Ratio of net investment income (loss) to
average net assets..................... 0.15% 0.06% 0.09% 0.73%(a)
Ratio of expenses to average net assets
excluding interest expense:
With expense reductions (Note 5)...... 1.40% 1.40% 1.47% 1.48%(a)
Without expense reductions............ 1.40% 1.54% 1.53% 1.54%(a)
Ratio of interest expense to average net
assets++............................... 0.27% N/A N/A N/A
Portfolio turnover rate++............... 97% 107% 123% 108%(a)
</TABLE>
- ----------------
(a) Annualized
(b) Not annualized
(c) Total investment return does not include sales charges.
(d) These selected per share data were calculated based upon average
shares outstanding during the period.
+ Commencing June 1, 1995, the Fund began offering Advisor Class shares.
++ Portfolio turnover rates and ratio of interest expense to average net
assets are calculated on the basis of the Fund as a whole without
distinguishing between the classes of shares issued.
N/A Not Applicable.
The accompanying notes are an integral part of the financial statements.
FS-11
<PAGE> 423
NOTES TO
FINANCIAL STATEMENTS
December 31, 1998
- --------------------------------------------------------------------------------
1. SIGNIFICANT ACCOUNTING POLICIES (SEE ALSO NOTE 2)
AIM Europe Growth Fund (the "Fund") formerly GT Global Europe Growth Fund, is a
separate series of AIM Growth Series (the "Trust") formerly GT Global Growth
Series. The Trust is organized as a Delaware business trust and is registered
under the Investment Company Act of 1940, as amended ("1940 Act"), as a
diversified, open-end management investment company. The Trust has eight series
of shares in operation, each series corresponding to a distinct portfolio of
investments.
The Fund offers Class A, Class B, and Advisor Class shares, each of which has
equal rights as to assets and voting privileges. Class A and Class B each has
exclusive voting rights with respect to its distribution plan. Investment
income, realized and unrealized capital gains and losses, and the common
expenses of the Fund are allocated on a pro rata basis to each class based on
the relative net assets of each class to the total net assets of the Fund. Each
class of shares differs in its respective distribution expenses, and may differ
in its transfer agent, registration, and certain other class-specific fees and
expenses.
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statements and
the reported amounts of income and expenses during the reporting period. Actual
results could differ from those estimates. The following is a summary of
significant accounting policies in conformity with generally accepted accounting
principles consistently followed by the Fund in the preparation of the financial
statements.
(A) PORTFOLIO VALUATION
The Fund calculates the net asset value of Fund shares and completes orders to
purchase, exchange or repurchase Fund shares on each business day, with the
exception of those days on which the New York Stock Exchange is closed.
Equity securities are valued at the last sale price on the exchange on which
such securities are traded or on the principal over-the-counter market in which
such securities are traded, as of the close of business on the day the
securities are being valued, or, lacking any sales, at the last available bid
price. In cases where securities are traded on more than one exchange, the
securities are valued on the exchange determined by A I M Advisors, Inc. (the
"Manager") to be the primary market.
Fixed income investments are valued at the mean of representative quoted bid and
asked prices for such investments or, if such prices are not available, at
prices for investments of comparative maturity, quality and type; however, when
the Manager deems it appropriate, prices obtained for the day of valuation from
a bond pricing service will be used. Short-term investments with a maturity of
60 days or less are valued to amortized cost, adjusted for foreign exchange
translation and market fluctuation, if any.
Investments for which market quotations are not readily available (including
restricted securities which are subject to limitations on their sale) are valued
at fair value as determined in good faith by or under the direction of the
Trust's Board of Trustees.
Portfolio securities which are primarily traded on foreign exchanges are
generally valued at the preceding closing values of such securities on their
respective exchanges, and those values are then translated into U.S. dollars at
the current exchange rates, except that when an occurrence subsequent to the
time a value was so established is likely to have materially changed such value,
then the fair value of those securities will be determined by consideration of
other factors by or under the direction of the Trust's Board of Trustees.
(B) FOREIGN CURRENCY TRANSLATION
The accounting records of the Fund are maintained in U.S. dollars. The market
values of foreign securities, currency holdings, other assets and liabilities
are recorded in the books and records of the Fund after translation to U.S.
dollars based on the exchange rates on that day. The cost of each security is
determined using historical exchange rates. Income and withholding taxes are
translated at prevailing exchange rates when earned or incurred.
The Fund does not isolate that portion of the results of operations resulting
from changes in foreign exchange rates on investments from the fluctuation
arising from changes in market prices of securities held. Such fluctuations are
included with the net realized and unrealized gain or loss from investments.
Reported net realized foreign exchange gains and losses arise from sales and
maturities of short-term securities, forward foreign currency contracts, sales
of foreign currencies, currency gains or losses realized between the trade and
settlement dates on securities transactions, and the differences between the
amounts of dividends, interest, and foreign withholding taxes recorded on the
Fund's books and the U.S. dollar equivalent of the amounts actually received or
paid. Net unrealized foreign exchange gains or losses arise from changes in the
value of assets and liabilities other than investments in securities at period
end, resulting from changes in exchange rates.
(C) REPURCHASE AGREEMENTS
With respect to repurchase agreements entered into by the Fund, it is the Fund's
policy to always receive, as collateral, U.S. government securities or other
high quality debt securities of which the value, including accrued interest, is
at least equal to the amount to be repaid to the Fund under each agreement at
its maturity.
(D) FORWARD FOREIGN CURRENCY CONTRACTS
A forward foreign currency contract ("Forward Contract") is an agreement between
two parties to buy and sell a currency at a set price on a future date. The
market value of the Forward Contract fluctuates with changes in currency
exchange rates. The Forward Contract is marked-to-market daily and the change in
market value is recorded by the Fund as an unrealized gain or loss. When the
Forward Contract is closed, the Fund records a realized gain or loss
FS-12
<PAGE> 424
equal to the difference between the value at the time it was opened and the
value at the time it was closed. The Fund could be exposed to risk if a counter
party is unable to meet the terms of a contract or if the value of the currency
changes unfavorably. The Fund may enter into Forward Contracts in connection
with planned purchases or sales of securities, or to hedge against adverse
fluctuations in exchange rates between currencies.
(E) OPTION ACCOUNTING PRINCIPLES
When the Fund writes a call or put option, an amount equal to the premium
received is included in the Fund's "Statement of Assets and Liabilities" as an
asset and an equivalent liability. The amount of the liability is subsequently
market-to-market to reflect the current market value of the option. The current
market value of an option listed on a traded exchange is valued at its last bid
price, or, in the case of on over-the-counter option, is valued at the average
of the last bid prices obtained from brokers, unless a quotation from only one
broker is available, in which case only that broker's price will be used. If an
option expires on its stipulated expiration date or if the Fund enters into a
closing purchase transaction, a gain or loss is realized without regard to any
unrealized gain or loss on the underlying security, and the liability related to
such option is extinguished. If a written call option is exercised, a gain or
loss is realized from the sale of the underlying security and the proceeds of
the sale are increased by the premium originally received. If a written put
option is exercised, the cost of the underlying security purchased would be
decreased by the premium originally received. The Fund can write options only on
a covered basis, which, for a call, requires that the Fund hold the underlying
security, and, for a put, requires the Fund to set aside cash, U.S. government
securities or other liquid securities in an amount not less than the exercise
price or otherwise provide adequate cover at all times while the put option is
outstanding. The Fund may use options to manage its exposure to the stock market
and to fluctuations in currency values or interest rates.
The premium paid by the Fund for the purchase of a call or put option is
included in the Fund's "Statement of Assets and Liabilities" as an investment
and subsequently "marked-to-market" to reflect the current market value of the
option. If an option which the Fund has purchased expires on the stipulated
expiration date, the Fund realizes a loss in the amount of the cost of the
option. If the Fund enters into a closing sale transaction, the Fund realizes a
gain or loss, depending on whether proceeds from the closing sale transaction
are greater or less than the cost of the option. If the Fund exercises a call
option, the cost of the securities acquired by exercising the call is increased
by the premium paid to buy the call. If the Fund exercises a put option, it
realizes a gain or loss from the sale of the underlying security, and the
proceeds from such sale are decreased by the premium originally paid.
The risk associated with purchasing options is limited to the premium originally
paid. The risk in writing a call option is that the Fund may forego the
opportunity of profit if the market value of the underlying security or index
increases and the option is exercised. The risk in writing a put option is that
the Fund may incur a loss if the market value of the underlying security or
index decreases and the option is exercised. In addition, there is the risk the
Fund may not be able to enter into a closing transaction because of an illiquid
secondary market.
(F) FUTURES CONTRACTS
A futures contract is an agreement between two parties to buy and sell a
security at a set price on a future date. Upon entering into such a contract the
Fund is required to pledge to the broker an amount of cash or securities equal
to the minimum "initial margin" requirements of the exchange on which the
contract is traded. Pursuant to the contract, the Fund agrees to receive from or
pay to the broker an amount of cash equal to the daily fluctuation in value of
the contract. Such receipts or payments are known as "variation margin" and are
recorded by the Fund as unrealized gains or losses. When the contract is closed,
the Fund records a realized gain or loss equal to the difference between the
value of the contract at the time it was opened and the value at the time it was
closed. The potential risk to the Fund is that the change in value of the
underlying securities may not correlate to the change in value of the contracts.
The Fund may use futures contracts to manage its exposure to the stock market
and to fluctuations in currency values or interest rates.
(G) SECURITY TRANSACTIONS AND RELATED INVESTMENT INCOME
Security transactions are accounted for on the trade date (date the order to buy
or sell is executed). The cost of securities sold is determined on a first-in,
first-out basis, unless otherwise specified. Dividends are recorded on the
ex-dividend date. Interest income is recorded on the accrual basis. Where a high
level of uncertainty exists as to its collection, income is recorded net of all
withholding tax with any rebate recorded when received. The Fund may trade
securities on other then normal settlement terms. This may increase the risk if
the other party to the transaction fails to deliver and causes the Fund to
subsequently invest at less advantageous prices.
(H) PORTFOLIO SECURITIES LOANED
At December 31, 1998, stocks with an aggregate value of approximately
$16,294,685 were on loan to brokers. The loans were secured by cash collateral
of $17,024,659, received by the Fund. For the year ended December 31, 1998, the
Fund received securities lending fees of $563,149.
For international securities, cash collateral is received by the Fund against
loaned securities in an amount at least equal to 105% of the market value of the
loaned securities at the inception of each loan. This collateral must be
maintained at not less than 103% of the market value of the loaned securities
during the period of the loan. For domestic securities, cash collateral is
received by the Fund against loaned securities in an amount at least equal to
102% of the market value of the loaned securities at the inception of each loan.
This collateral must be maintained at not less than 100% of the market value of
the loaned securities during the period of the loan. The cash collateral is
invested in a securities lending trust which consists of a portfolio of high
quality short duration securities whose average effective duration is restricted
to 120 days or less.
(I) TAXES
It is the policy of the Fund to meet the requirements for qualification as a
"regulated investment company" under the Internal Revenue Code of 1986, as
amended ("Code"). It is also the intention of the
FS-13
<PAGE> 425
Fund to make distributions sufficient to avoid imposition of any excise tax
under Section 4982 of the Code. Therefore, no provision has been made for
Federal taxes on income, capital gains, or unrealized appreciation of securities
held, or excise tax on income and capital gains.
(J) DISTRIBUTION TO SHAREHOLDERS
Distribution to shareholders are recorded by the Fund on the ex-date. Income and
capital gain distributions are determined in accordance with Federal income tax
regulations which may differ from generally accepted accounting principles.
These differences are primarily due to differing treatments of income and gains
on various investment securities held by the Fund and timing differences.
(K) FOREIGN SECURITIES
There are certain additional considerations and risks associated with investing
in foreign securities and currency transactions that are not inherent in
investments of domestic origin. The Fund's investments in emerging market
countries may involve greater risks than investments in more developed markets,
and the prices of such investments may be volatile. These risks of investing in
foreign and emerging markets may include foreign currency exchange rate
fluctuations, perceived credit risk, adverse political and economic developments
and possible adverse foreign government intervention.
(L) RESTRICTED SECURITIES
The Fund is permitted to invest in privately placed restricted securities. These
securities may be resold in transactions exempt from registration or to the
public if the securities are registered. Disposal of these securities may
involve time-consuming negotiations and expense, and prompt sale at an
acceptable price may be difficult.
(M) INDEXED SECURITIES
The Fund may invest in indexed securities whose value is linked either directly
or indirectly to changes in foreign currencies, interest rates, equities,
indices, or other reference instruments. Indexed securities may be more volatile
than the reference instrument itself, but any loss is limited to the amount of
the original investment.
(N) LINE OF CREDIT
The Fund, along with certain other funds advised and/or administered by the
Manager, has a line of credit with BankBoston and State Street Bank and Trust
Company. The arrangements with the banks allow the Fund and certain other funds
to borrow, on a first come, first served basis, an aggregate maximum amount of
$250,000,000. The Fund is limited to borrowing up to 33 1/3% of the value of the
Fund's total assets. On December 31, 1998, the Fund had no outstanding loans.
For the year ended December 31, 1998, the weighted average outstanding daily
balance of bank loans (based on the number of days the loans were outstanding)
was $40,237,214 with a weighted average interest rate of 6.26%. Interest expense
for the year ended December 31, 1998 was $1,539,318. Other interest expense
amounted to $10,193.
2. RELATED PARTIES
A I M Advisors, Inc. (the "Manager"), an indirect wholly-owned subsidiary of
AMVESCAP PLC, is the Fund's investment manager and administrator, and as of
December 14, 1998, sub-advisory and sub-administration responsibility for the
Fund was transferred from INVESCO (NY), Inc.,(formerly, Chancellor LGT Asset
Management, Inc.) to INVESCO Asset Management Ltd., both indirect wholly-owned
subsidiaries of AMVESCAP PLC. As of the close of business on May 29, 1998,
Liechtenstein Global Trust AG ("LGT"), the former indirect parent organization
of Chancellor LGT Asset Management, Inc. ("Chancellor LGT"), consummated a
purchase agreement with AMVESCAP PLC pursuant to which AMVESCAP PLC acquired
LGT's Asset Management Division, which included Chancellor LGT and certain other
affiliates. As a result of this transaction, Chancellor LGT was renamed INVESCO
(NY), Inc., and is now an indirect wholly-owned subsidiary of AMVESCAP PLC.
Also, as of the close of business on May 29, 1998, A I M Distributors, Inc.
("AIM Distributors"), a wholly-owned subsidiary of the Manager, became the
Fund's distributor, and the Trust was reorganized from a Massachusetts business
trust into a Delaware business trust. Finally, A I M Fund Services, Inc.
("AFS"), an affiliate of the Manager and AIM Distributors, replaced GT Global
Investor Services, Inc. ("GT Services") as transfer agent of the Fund as of the
close of business on September 4, 1998.
The Fund pays investment management and administration fees to the Manager at
the following annualized rates: 0.975% on the first $500 million of the average
daily net assets of the Fund; 0.95% on the next $500 million; 0.925% on the next
$500 million and 0.90% on amounts thereafter. These fees are computed daily and
paid monthly.
AIM Distributors serves as the Fund's distributor. For the period ended May 29,
1998, GT Global, Inc. ("GT Global"), an affiliate of the investment sub-advisor,
served as the Fund's distributor.
Class A shares are subject to initial sales charges imposed at the time of
purchase, in accordance with the schedule included in the Fund's current
prospectus. AIM Distributors collects the sales charges imposed on sales of
Class A shares, and reallows a portion of such charges to dealers through which
the sales are made. For the year ended December 31, 1998, AIM Distributors and
GT Global retained $55,381 and $789, respectively, of such sales charges.
Purchases of Class A shares exceeding $1,000,000 may be subject to a contingent
deferred sales charge ("CDSC") upon redemption, in accordance with the Fund's
current prospectus. AIM Distributors and GT Global collected such CDSCs in the
amount of $29,478 and $0, respectively, for the year ended December 31, 1998.
AIM Distributors also makes ongoing shareholder servicing and trail commission
payments to dealers whose clients hold Class A shares.
Class B shares are not subject to initial sales charges. When Class B shares are
sold, AIM Distributors from its own resources pays commissions to dealers
through which the sales are made. Certain redemptions of Class B shares made
within six years of purchase are subject to CDSCs, in accordance with the Fund's
current prospectus. During the year ended December 31, 1998, AIM Distributors
and GT Global collected such CDSCs in the amount of $199,555 and $178,096,
respectively. In addition, AIM Distributors makes ongoing shareholder servicing
and trail commission payments to dealers whose clients hold Class B shares.
FS-14
<PAGE> 426
For the period ended May 29, 1998, pursuant to the then effective separate
distribution plans adopted under the 1940 Act Rule 12b-1 by the Trust's Board of
Trustees with respect to the Fund's Class A shares ("Class A Plan") and Class B
shares ("Class B Plan"), the Fund reimbursed GT Global for a portion of its
shareholder servicing and distribution expenses. Under the Class A Plan, the
Fund was permitted to pay GT Global a service fee at the annualized rate of up
to 0.25% of the average daily net assets of the Fund's Class A shares for GT
Global's expenditures incurred in servicing and maintaining shareholder
accounts, and was permitted to pay GT Global a distribution fee at the
annualized rate of up to 0.35% of the average daily net assets of the Fund's
Class A shares, less any amounts paid by the Fund as the aforementioned service
fee, for its expenditures incurred in providing services as distributor. All
expenses for which GT Global was reimbursed under the Class A Plan would have
been incurred within one year of such reimbursement.
For the period ended May 29, 1998, pursuant to the Class B Plan, the Fund was
permitted to pay GT Global a service fee at the annualized rate of up to 0.25%
of the average daily net assets of the Fund's Class B shares for its
expenditures incurred in servicing and maintaining shareholder accounts, and was
permitted to pay GT Global a distribution fee at the annualized rate of up to
0.75% of the average daily net assets of the Fund's Class B shares for GT
Global's expenditures incurred in providing services as distributor. Expenses
incurred under the Class B Plan in excess of 1.00% annually were permitted to be
carried forward for reimbursement in subsequent years as long as that Plan
continued in effect.
Effective as of the close of business May 29, 1998, pursuant to Rule 12b-1 under
the 1940 Act, the Trust's Board of Trustees adopted a Master Distribution Plan
applicable to the Fund's Class A shares ("Class A Plan") and Class B shares
("Class B Plan"), pursuant to which a Fund compensates AIM Distributors for the
purpose of financing any activity that is intended to result in the sale of
Class A or Class B shares of the Fund. Under the Class A Plan, the Fund
compensates AIM Distributors at the annualized rate of 0.35% of the average
daily net assets of the Fund's Class A shares. Under the Class B Plan, the Fund
compensates AIM Distributors at an annualized rate of 1.00% of the average daily
net assets of the Fund's Class B shares. Of these amounts, the Fund may pay a
service fee of 0.25% of the average daily net assets of the Class A or Class B
shares to selected dealers and financial institutions who furnish continuing
personal shareholder services to their customers who purchase and own the
appropriate class of shares of the Fund. Any amounts not paid as a service fee
under the Plans would constitute an asset-based sales charge.
The Manager and AIM Distributors have voluntarily undertaken to limit the Fund's
expenses (exclusive of brokerage commissions, taxes,interest, and extraordinary
items) to the maximum annual level of 2.00%, 2.65%, and 1.65% of the average
daily net assets of the Fund's Class A, Class B, and Advisor Class shares,
respectively. If necessary, this limitation will be effected by waivers by the
Manager of investment management and administration fees, waivers by AIM
Distributors of payments under the Class A Plan and/or Class B Plan and/or
reimbursements by the Manager or AIM Distributors of portions of the Fund's
other operating expenses.
Effective as of the close of business September 4, 1998, the Fund, pursuant to a
transfer agency and service agreement, has agreed to pay AFS an annualized fee
of $24.85 per shareholder accounts that are open during any monthly period (this
fee includes all out-of-pocket expenses), and an annualized fee of $0.70 per
shareholder account that is closed during any monthly period. Both fees shall be
billed by AFS monthly in arrears on a prorated basis of 1/12 of the annualized
fee for all such accounts.
For the period January 1, 1998 to September 4, 1998, GT Services, an affiliate
of the Manager and AIM Distributors, was the transfer agent of the Fund. For
performing shareholder servicing, reporting, and general transfer agent
services, GT Services received an annual maintenance fee of $17.50 per account,
a new account fee of $4.00 per account, a per transaction fee of $1.75 for all
transactions other than exchanges and a per exchange fee of $2.25. GT Services
also was reimbursed by the Fund for its out-of-pocket expenses for such items as
postage, forms, telephone charges, stationery and office supplies.
The Manager is the pricing and accounting agent for the Fund. The monthly fee
for these services to the Manager is a percentage, not to exceed 0.03% annually,
of the Fund's average daily net assets. The annual fee rate is derived based on
the aggregate net assets of the funds which comprise the following investment
companies: AIM Growth Series, AIM Investment Funds, AIM Investment Portfolios,
AIM Series Trust, G.T. Global Variable Investment Series and G.T. Global
Variable Investment Trust. The fee is calculated at the rate of 0.03% to the
first $5 billion of assets and 0.02% to the assets in excess of $5 billion. An
amount is allocated to and paid by each such fund based on its relative average
daily net assets.
The Trust pays each of its Trustees who is not an employee, officer or director
of the Manager, AIM Distributors or GT Services $5,000 per year plus $300 for
each meeting of the board or any committee thereof attended by the Trustee.
3. PURCHASES AND SALES OF SECURITIES
For the year ended December 31, 1998, purchases and sales of investment
securities by the Fund, other than U.S. government obligations and short-term
investments, aggregated $551,235,800 and $637,985,802, respectively. There were
no purchases or sales of U.S. government obligations by the Fund during the
period.
FS-15
<PAGE> 427
4. CAPITAL SHARES
At December 31, 1998, there were an unlimited number of shares of beneficial
interest authorized, at no par value. Transactions in capital shares of the Fund
were as follows:
CAPITAL SHARE TRANSACTIONS
<TABLE>
<CAPTION>
YEAR ENDED YEAR ENDED
DECEMBER 31, 1998 DECEMBER 31, 1997
--------------------------------- ---------------------------------
CLASS A SHARES AMOUNT SHARES AMOUNT
- ------------------------------ --------------- --------------- --------------- ---------------
<S> <C> <C> <C> <C>
Shares sold................... 284,179,353 $ 4,678,178,730 146,863,882 $ 2,008,141,712
Shares issued in connection
with reinvestment of
distributions............... 1,565,424 23,371,501 20,229 286,488
--------------- --------------- --------------- ---------------
285,744,777 4,701,550,231 146,884,111 2,008,428,200
Shares repurchased............ (287,680,343) (4,771,589,437) (153,681,853) (2,115,903,158)
--------------- --------------- --------------- ---------------
Net decrease.................. (1,935,566) $ (70,039,206) (6,797,742) $ (107,474,958)
--------------- --------------- --------------- ---------------
--------------- --------------- --------------- ---------------
<CAPTION>
CLASS B
- ------------------------------
<S> <C> <C> <C> <C>
Shares sold................... 29,683,015 $ 488,430,227 25,162,463 $ 340,605,118
Shares issued in connection
with reinvestment of
distributions............... 370,423 5,382,231 4,768 66,175
--------------- --------------- --------------- ---------------
30,053,438 493,812,458 25,167,231 340,671,293
Shares repurchased............ (29,265,734) (483,839,015) (26,243,592) (357,657,223)
--------------- --------------- --------------- ---------------
Net increase (decrease)....... 787,704 $ 9,973,443 (1,076,361) $ (16,985,930)
--------------- --------------- --------------- ---------------
--------------- --------------- --------------- ---------------
<CAPTION>
ADVISOR CLASS
- ------------------------------
<S> <C> <C> <C> <C>
Shares sold................... 6,484,352 $ 109,346,851 4,798,844 $ 66,064,822
Shares issued in connection
with reinvestment of
distributions............... 5,605 84,332 77 1,094
--------------- --------------- --------------- ---------------
6,489,957 109,431,183 4,798,921 66,065,916
Shares repurchased............ (6,610,936) (112,751,573) (4,683,709) (64,978,245)
--------------- --------------- --------------- ---------------
Net increase (decrease)....... (120,979) $ (3,320,390) 115,212 $ 1,087,671
--------------- --------------- --------------- ---------------
--------------- --------------- --------------- ---------------
</TABLE>
5. EXPENSE REDUCTIONS
The Manager has directed certain portfolio trades to brokers who then paid a
portion of the Fund's expenses. For the year ended December 31, 1998, the Fund's
expenses were reduced by $30,709 under these arrangements.
- --------------
FEDERAL TAX INFORMATION (UNAUDITED):
For the fiscal year ended December 31, 1998, the amount of income received by
the Fund from sources within foreign countries and possessions of the United
States was $.3013 per share (representing a total of $10,719,966). The amount of
taxes paid by the Fund to such countries for the fiscal year ended December 31,
1998 was $.0505 per share (representing a total of $1,795,341). The following
table provides a breakdown by country of ordinary income dividends and foreign
taxes paid by the Fund during the fiscal year ended December 31, 1998:
<TABLE>
<CAPTION>
COUNTRY GROSS INCOME % FOREIGN TAX PAID %
- ------------------------------ -------------- ------------------
<S> <C> <C>
Finland....................... 0.76 2.65
France........................ 2.94 22.91
Germany....................... 0.49 1.15
Italy......................... 1.31 4.56
Netherlands................... 2.86 8.44
Portugal...................... 0.47 1.90
Sweden........................ 3.40 11.85
Switzerland................... 3.03 20.14
United Kingdom................ 10.33 25.92
------- -------
25.59 99.52
Nonqualifying................. 0.02 0.48
United States................. 74.39 --
------- -------
100.00% 100.00%
------- -------
------- -------
</TABLE>
Pursuant to Section 852 of the Internal Revenue Code, the Fund designates
$59,633,841 as a capital gain dividend for the fiscal year ended December 31,
1998.
FS-16
<PAGE> 428
REPORT OF
INDEPENDENT ACCOUNTANTS
- --------------------------------------------------------------------------------
To the Shareholders of AIM Japan Growth Fund (formerly GT Global Japan Growth
Fund) and Board of Trustees of AIM Growth Series (formerly GT Global Growth
Series):
In our opinion, the accompanying statement of assets and liabilities, including
the portfolio of investments, and the related statements of operations and of
changes in net assets and the financial highlights present fairly, in all
material respects, the financial position of the AIM Japan Growth Fund at
December 31, 1998, and the results of its operations, the changes in its net
assets and the financial highlights for the periods indicated, in conformity
with generally accepted accounting principles. These financial statements and
financial highlights (hereafter referred to as 'financial statements') are the
responsibility of the Fund's management; our responsibility is to express an
opinion on these financial statements based on our audits. We conducted our
audits of these financial statements in accordance with generally accepted
auditing standards which require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements, assessing the
accounting principles used and significant estimates made by management, and
evaluating the overall financial statement presentation. We believe that our
audits, which included confirmation of securities at December 31, 1998 by
correspondence with the custodian and brokers, provide a reasonable basis for
the opinion expressed above.
/s/ PRICEWATERHOUSECOOPERS LLP
PRICEWATERHOUSECOOPERS LLP
BOSTON, MASSACHUSETTS
FEBRUARY 19, 1999
FS-17
<PAGE> 429
PORTFOLIO OF INVESTMENTS
December 31, 1998
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
VALUE % OF NET
EQUITY INVESTMENTS SHARES (NOTE 1) ASSETS
- ----------------------------------------------------------------------- ----------- ----------- -------------
<S> <C> <C> <C>
Services (24.9%)
Ito-Yokado Co., Ltd.{z} ............................................. 55,000 $ 3,845,813 6.2
RETAILERS-OTHER
NTT Mobile Communications{z} ........................................ 75 3,086,830 4.9
WIRELESS COMMUNICATIONS
Yoshinoya D&C Co., Ltd. ............................................. 160 1,741,901 2.8
RESTAURANTS
Secom Co., Ltd. ..................................................... 18,000 1,491,237 2.4
CONSUMER SERVICES
Fast Retailing Co., Ltd. ............................................ 80,000 1,414,764 2.3
RETAILERS-APPAREL
Fuji Photo Film Co., Ltd. ........................................... 35,000 1,301,115 2.1
CONSUMER SERVICES
Ryohin Keikaku Co., Ltd. ............................................ 6,300 839,219 1.3
RETAILERS-APPAREL
Nippon Telegraph & Telephone Corp. .................................. 101 779,536 1.2
TELEPHONE NETWORKS
Tsutsumi Jewelry Co., Ltd. .......................................... 41,800 665,959 1.1
RETAILERS-OTHER
Southland Corp.{l} -/- {\/} ......................................... 185,600 353,800 0.6
RETAILERS-OTHER
-----------
15,520,174
-----------
Technology (16.0%)
Murata Manufacturing Co., Ltd. ...................................... 52,000 2,158,612 3.5
INSTRUMENTATION & TEST
Matsushita-Kotobuki Electronics Ltd. ................................ 95,000 2,051,691 3.3
COMPUTERS & PERIPHERALS
Fujitsu Ltd. ........................................................ 134,000 1,785,006 2.9
COMPUTERS & PERIPHERALS
Rohm Co., Ltd. ...................................................... 16,000 1,457,249 2.3
SEMICONDUCTORS
TDK Corp. ........................................................... 15,000 1,371,482 2.2
COMPUTERS & PERIPHERALS
Nihon Unisys Ltd. ................................................... 80,000 1,125,863 1.8
COMPUTERS & PERIPHERALS
-----------
9,949,903
-----------
Consumer Durables (14.4%)
Sony Corp. .......................................................... 35,200 2,564,135 4.1
CONSUMER ELECTRONICS
Bridgestone Corp.{z} ................................................ 100,000 2,270,313 3.6
AUTO PARTS
Citizen Watch Co., Ltd. ............................................. 300,000 1,805,629 2.9
CONSUMER ELECTRONICS
Sekisui Chemical Co., Ltd. .......................................... 250,000 1,681,714 2.7
HOUSING
Toyota Motor Corp. .................................................. 25,000 679,324 1.1
AUTOMOBILES
-----------
9,001,115
-----------
</TABLE>
The accompanying notes are an integral part of the financial statements.
FS-18
<PAGE> 430
PORTFOLIO OF INVESTMENTS (cont'd)
December 31, 1998
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
VALUE % OF NET
EQUITY INVESTMENTS SHARES (NOTE 1) ASSETS
- ----------------------------------------------------------------------- ----------- ----------- -------------
<S> <C> <C> <C>
Health Care (11.9%)
Takeda Chemical Industries{z} ....................................... 105,000 $ 4,042,751 6.5
PHARMACEUTICALS
Yamanouchi Pharmaceutical Co., Ltd. ................................. 76,000 2,448,575 3.9
PHARMACEUTICALS
Taisho Pharmaceutical Co., Ltd. ..................................... 35,000 963,445 1.5
PHARMACEUTICALS
-----------
7,454,771
-----------
Finance (10.0%)
Nichiei Co., Ltd.{z} ................................................ 32,000 2,549,124 4.1
OTHER FINANCIAL
Jafco Co., Ltd. ..................................................... 45,000 1,218,800 2.0
INVESTMENT MANAGEMENT
Acom Co., Ltd. ...................................................... 14,000 899,628 1.4
CONSUMER FINANCE
Diamond Lease Co., Ltd. ............................................. 119,000 853,160 1.4
OTHER FINANCIAL
Takefuji Corp. ...................................................... 9,300 679,102 1.1
CONSUMER FINANCE
-----------
6,199,814
-----------
Consumer Non-Durables (8.6%)
Wacoal Corp. ........................................................ 118,000 1,517,561 2.4
TEXTILES & APPAREL
Asahi Breweries Ltd.{z} ............................................. 100,000 1,473,712 2.4
BEVERAGES - ALCOHOLIC
Nintendo Corp., Ltd. ................................................ 13,000 1,254,204 2.0
TOYS
Paris Miki, Inc. .................................................... 50,000 1,150,647 1.8
OTHER CONSUMER GOODS
-----------
5,396,124
-----------
Capital Goods (5.3%)
Canon, Inc.{z} ...................................................... 95,000 2,030,669 3.3
OFFICE EQUIPMENT
Toshiba Corp. ....................................................... 215,000 1,280,713 2.0
ELECTRICAL PLANT/EQUIPMENT
-----------
3,311,382
----------- -----
TOTAL EQUITY INVESTMENTS (cost $56,835,148) ........................... 56,833,283 91.1
----------- -----
</TABLE>
The accompanying notes are an integral part of the financial statements.
FS-19
<PAGE> 431
PORTFOLIO OF INVESTMENTS (cont'd)
December 31, 1998
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
VALUE % OF NET
REPURCHASE AGREEMENT (NOTE 1) ASSETS
- ----------------------------------------------------------------------- ----------- -------------
<S> <C> <C> <C>
Dated December 31, 1998, with State Street Bank & Trust Co., due
January 4, 1999, for an effective yield of 4.50%, collateralized by
$5,305,000 U.S. Treasury Bonds, 8.75% due 5/15/17 (market value of
collateral is $7,424,645, including accrued interest).
(cost $7,277,000) .................................................. $ 7,277,000 11.6
----------- -----
TOTAL INVESTMENTS (cost $64,112,148) * ............................... 64,110,283 102.7
Other Assets and Liabilities .......................................... (1,713,929) (2.7)
----------- -----
NET ASSETS ............................................................ $62,396,354 100.0
----------- -----
----------- -----
</TABLE>
- --------------
{z} All or part of the Fund's holdings in this security is segregated
as collateral for written futures. See Note 1 to the Financial
Statements.
{l} This is a U.S. security of which approximately 62.5% of its
outstanding stock is owned by Ito-Yokado Co., Ltd.
{\/} U.S. currency denominated.
-/- Non-income producing security.
* For Federal income tax purposes, cost is $64,933,650 and
appreciation (depreciation) is as follows:
<TABLE>
<S> <C>
Unrealized appreciation: $ 5,944,696
Unrealized depreciation: (6,768,063)
-------------
Net unrealized depreciation: $ (823,367)
-------------
-------------
</TABLE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
FORWARD FOREIGN CURRENCY CONTRACTS OUTSTANDING
DECEMBER 31, 1998
<TABLE>
<CAPTION>
MARKET VALUE UNREALIZED
(U.S. CONTRACT DELIVERY APPRECIATION
CONTRACTS TO SELL: DOLLARS) PRICE DATE (DEPRECIATION)
- ---------------------------------------- ------------- ---------- -------- ---------------
<S> <C> <C> <C> <C>
Japanese Yen............................ 44,514,932 120.81250 2/12/99 $(3,128,486)
Japanese Yen............................ 6,232,090 122.51500 2/12/99 (518,504)
Japanese Yen............................ 2,670,896 118.24000 2/12/99 (133,683)
------------- ---------------
Total Contracts to Sell (Receivable
amount $49,637,245).................. 53,417,918 (3,780,673)
------------- ---------------
THE VALUE OF CONTRACTS TO SELL AS
PERCENTAGE OF NET ASSETS IS 85.61%.
Total Open Forward Foreign Currency
Contracts............................ $(3,780,673)
---------------
---------------
</TABLE>
- ----------------
See Note 1 of Notes to the Financial Statements.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
WRITTEN FUTURE CONTRACT OUTSTANDING
DECEMBER 31, 1998
<TABLE>
<CAPTION>
EXPIRATION NO. OF
DESCRIPTION DATE CONTRACTS CURRENCY MARKET VALUE
- ---------------------------------------- --------------- --------------- ------------- ---------------
<S> <C> <C> <C> <C>
Simex Nikkei 225 Index Future (Face
17,799,224)............................ March 1999 290 JPY $ 18,965,146
</TABLE>
- ----------------
See Note 1 of Notes to the Financial Statements.
The accompanying notes are an integral part of the financial statements.
FS-20
<PAGE> 432
STATEMENT OF ASSETS
AND LIABILITIES
December 31, 1998
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C>
Assets:
Investments in securities, at value (cost $56,835,148) (Note 1).................................. $56,833,283
Repurchase agreement, at value and cost.......................................................... 7,277,000
U.S. currency.................................................................................... 270
Receivable for initial margin (Note 1)........................................................... 1,868,000
Receivable for Fund shares sold.................................................................. 628,411
Receivable from A I M Advisors, Inc.............................................................. 252,032
Dividends receivable............................................................................. 34,664
Interest receivable.............................................................................. 910
-----------
Total assets................................................................................... 66,894,570
-----------
Liabilities:
Payable for open forward foreign currency contracts (Note 1)..................................... 3,780,673
Payable for investment management and administration fees (Note 2)............................... 297,101
Payable for Fund shares repurchased.............................................................. 285,231
Payable for service and distribution expenses (Note 2)........................................... 63,391
Payable for transfer agent fees (Note 2)......................................................... 26,130
Payable for printing and postage expenses........................................................ 15,566
Payable for professional fees.................................................................... 10,167
Payable for registration and filing fees......................................................... 8,021
Payable for Trustees' fees and expenses (Note 2)................................................. 5,654
Payable for custodian fees....................................................................... 5,537
Payable for fund accounting fees................................................................. 641
Other accrued expenses........................................................................... 104
-----------
Total liabilities.............................................................................. 4,498,216
-----------
Net assets......................................................................................... $62,396,354
-----------
-----------
Class A:
Net asset value and redemption price per share ($37,607,822 DIVIDED BY 4,226,699 shares
outstanding)...................................................................................... $ 8.90
-----------
-----------
Maximum offering price per share (100/94.50 of $8.90) *............................................ $ 9.42
-----------
-----------
Class B:+
Net asset value and offering price per share ($22,815,096 DIVIDED BY 2,669,627 shares
outstanding)...................................................................................... $ 8.55
-----------
-----------
Advisor Class:
Net asset value, offering price per share, and redemption price per share ($1,973,436 DIVIDED BY
219,050 shares outstanding)....................................................................... $ 9.01
-----------
-----------
Net assets consist of:
Paid in capital (Note 4)......................................................................... $85,080,433
Accumulated net realized loss on investments and foreign currency transactions................... (20,069,001)
Net unrealized depreciation on translation of assets and liabilities in foreign currencies....... (3,779,135)
Net unrealized appreciation of investments....................................................... 1,164,057
-----------
Total -- representing net assets applicable to capital shares outstanding.......................... $62,396,354
-----------
-----------
<FN>
- --------------
* On sales of $25,000 or more, the offering price is reduced.
+ Redemption price per share is equal to the net asset value per share less
any applicable contingent deferred sales charge.
</TABLE>
The accompanying notes are an integral part of the financial statements.
FS-21
<PAGE> 433
STATEMENT OF OPERATIONS
Year ended December 31, 1998
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C>
Investment income: (Note 1)
Interest income........................................................................... $ 802,460
Dividend income (net of foreign withholding tax of $86,653)............................... 491,033
Securities lending income................................................................. 53,757
-----------
Total investment income................................................................. 1,347,250
-----------
Expenses:
Investment management and administration fees (Note 2).................................... 740,164
Service and distribution expenses: (Note 2)
Class A.................................................................... $ 149,992
Class B.................................................................... 236,324 386,316
-----------
Transfer agent fees (Note 2).............................................................. 294,620
Printing and postage expenses............................................................. 179,750
Registration and filing fees.............................................................. 123,400
Professional fees......................................................................... 62,645
Custodian fees............................................................................ 48,620
Fund accounting fees (Note 2)............................................................. 20,629
Trustees' fees and expenses (Note 2)...................................................... 13,140
Other expenses............................................................................ 24,753
-----------
Total expenses before reductions........................................................ 1,894,037
-----------
Expenses reimbursed by A I M Advisors, Inc. (Note 2).................................. (252,032)
Expense reductions (Note 5)........................................................... (27,338)
-----------
Total net expenses...................................................................... 1,614,667
-----------
Net investment loss......................................................................... (267,417)
-----------
Net realized and unrealized gain (loss) on investments and foreign currencies:
(Note 1)
Net realized loss on investments............................................. (18,161,660)
Net realized gain on foreign currency transactions........................... 3,387,626
-----------
Net realized loss during the year....................................................... (14,774,034)
Net change in unrealized appreciation on translation of assets and
liabilities in foreign currencies........................................... (6,527,794)
Net change in unrealized depreciation of investments......................... 22,781,499
-----------
Net unrealized appreciation during the year............................................. 16,253,705
-----------
Net realized and unrealized gain on investments and foreign currencies...................... 1,479,671
-----------
Net increase in net assets resulting from operations........................................ $ 1,212,254
-----------
-----------
</TABLE>
The accompanying notes are an integral part of the financial statements.
FS-22
<PAGE> 434
STATEMENTS OF CHANGES IN NET ASSETS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
YEAR ENDED YEAR ENDED
DECEMBER 31, DECEMBER 31,
1998 1997
------------- -------------
<S> <C> <C>
Increase (Decrease) in net assets
Operations:
Net investment loss...................................................... $ (267,417) $ (801,848)
Net realized loss on investments and foreign currency transactions....... (14,774,034) (1,309,551)
Net change in unrealized appreciation (depreciation) on translation of
assets and liabilities in foreign currencies............................ (6,527,794) 630,890
Net change in unrealized appreciation (depreciation) of investments...... 22,781,499 (8,170,261)
------------- -------------
Net increase (decrease) in net assets resulting from operations........ 1,212,254 (9,650,770)
------------- -------------
Class A:
Distributions to shareholders: (Note 1)
From net realized gain on investments.................................... (54,192) (110,678)
In excess of net realized gain on investments............................ (607)
Class B:
Distributions to shareholders: (Note 1)
From net realized gain on investments.................................... (30,844) (61,407)
In excess of net realized gain on investments............................ (345)
Advisor Class:
Distributions to shareholders: (Note 1)
From net realized gain on investments.................................... (1,907)
In excess of net realized gain on investments............................ (21) (71,057)
------------- -------------
Total distributions.................................................... (87,916) (243,142)
------------- -------------
Capital share transactions: (Note 4)
Increase from capital shares sold and reinvested......................... 323,386,822 280,419,107
Decrease from capital shares repurchased................................. (361,299,089) (267,455,599)
------------- -------------
Net increase (decrease) from capital share transactions................ (37,912,267) 12,963,508
------------- -------------
Total increase (decrease) in net assets.................................... (36,787,929) 3,069,596
Net assets:
Beginning of year........................................................ 99,184,283 96,114,687
------------- -------------
End of year *........................................................... $62,396,354 $99,184,283
------------- -------------
------------- -------------
* Includes undistributed net investment income............................ $ -- $ --
------------- -------------
------------- -------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
FS-23
<PAGE> 435
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
Contained below is per share operating performance data for a share outstanding
throughout the period, total investment return, ratios and supplemental data.
This information has been derived from information provided in the financial
statements.
<TABLE>
<CAPTION>
CLASS A
-----------------------------------------------------------
YEAR ENDED DECEMBER 31,
-----------------------------------------------------------
1998 (d) 1997 (d) 1996 (d) 1995 (d) 1994
---------- ---------- ----------- ---------- ----------
<S> <C> <C> <C> <C> <C>
Per Share Operating Performance:
Net asset value, beginning of period.... $ 8.96 $ 9.76 $ 11.00 $ 12.15 $ 11.61
---------- ---------- ----------- ---------- ----------
Income from investment operations:
Net investment income (loss).......... (0.02) * (0.08) (0.04) (0.04) (0.04)
Net realized and unrealized gain
(loss) on investments................ (0.03) (0.70) (0.77) 0.26 0.79
---------- ---------- ----------- ---------- ----------
Net increase (decrease) from
investment operations.............. (0.05) (0.78) (0.81) 0.22 0.75
---------- ---------- ----------- ---------- ----------
Distributions to shareholders:
From net realized gain on
investments.......................... (0.01) (0.02) (0.43) (1.37) (0.21)
In excess of net realized gain on
investments.......................... -- -- -- -- --
---------- ---------- ----------- ---------- ----------
Total distributions................. (0.01) (0.02) (0.43) (1.37) (0.21)
---------- ---------- ----------- ---------- ----------
Net asset value, end of period.......... $ 8.90 $ 8.96 $ 9.76 $ 11.00 $ 12.15
---------- ---------- ----------- ---------- ----------
---------- ---------- ----------- ---------- ----------
Total investment return (c)............. (0.54)% (7.99)% (7.43)% 1.94% 6.56%
Ratios and supplemental data:
Net assets, end of period (in 000's).... $ 37,608 $ 44,583 $ 63,585 $ 111,105 $ 98,066
Ratio of net investment income (loss) to
average net assets..................... (0.19)% (0.61)% (0.40)% (0.40)% (0.32)%
Ratio of operating expenses to average
net assets:
With expense reductions and/or
reimbursement (Notes 2 & 5).......... 1.96% 1.99% 1.84% 1.99% 1.91%
Without expense reductions and/or
reimbursement........................ 2.33% 2.06% 1.94% 2.14% 2.03%
Portfolio turnover rate++............... 67% 58% 31% 67% 49%
</TABLE>
- ----------------
(a) Annualized
(b) Not Annualized
(c) Total investment return does not include sales charge.
(d) These selected per share data were calculated based upon average
shares outstanding during the period.
* Includes reimbursement of Fund operating expenses per share of $0.03.
+ Commencing June 1, 1995, the Fund began offering Advisor Class Shares.
++ Portfolio turnover rates are calculated on the basis of the Fund as a
whole without distinguishing between the classes of shares issued.
The accompanying notes are an integral part of the financial statements.
FS-24
<PAGE> 436
FINANCIAL HIGHLIGHTS (cont'd)
- --------------------------------------------------------------------------------
Contained below is per share operating performance data for a share outstanding
throughout the period, total investment return, ratios and supplemental data.
This information has been derived from information provided in the financial
statements.
<TABLE>
<CAPTION>
CLASS B
----------------------------------------------------------
YEAR ENDED DECEMBER 31,
----------------------------------------------------------
1998 (d) 1997 (d) 1996 (d) 1995 (d) 1994
---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C>
Per Share Operating Performance:
Net asset value, beginning of period.... $ 8.67 $ 9.49 $ 10.78 $ 12.02 $ 11.57
---------- ---------- ---------- ---------- ----------
Income from investment operations:
Net investment income (loss).......... (0.07) * (0.14) (0.11) (0.12) (0.13)
Net realized and unrealized gain
(loss) on investments................ (0.04) (0.66) (0.75) 0.25 0.79
---------- ---------- ---------- ---------- ----------
Net increase (decrease) from
investment operations.............. (0.11) (0.80) (0.86) 0.13 0.66
---------- ---------- ---------- ---------- ----------
Distributions to shareholders:
From net realized gain on
investments.......................... (0.01) (0.02) (0.43) (1.37) (0.21)
In excess of net realized gain on
investments.......................... -- -- -- -- --
---------- ---------- ---------- ---------- ----------
Total distributions................. (0.01) (0.02) (0.43) (1.37) (0.21)
---------- ---------- ---------- ---------- ----------
Net asset value, end of period.......... $ 8.55 $ 8.67 $ 9.49 $ 10.78 $ 12.02
---------- ---------- ---------- ---------- ----------
---------- ---------- ---------- ---------- ----------
Total investment return (c)............. (1.25)% (8.42)% (8.05)% 1.20% 5.81%
Ratios and supplemental data:
Net assets, end of period (in 000's).... $ 22,815 $ 24,250 $ 32,116 $ 41,274 $ 27,355
Ratio of net investment income (loss) to
average net assets..................... (0.84)% (1.26)% (1.05)% (1.05)% (0.97)%
Ratio of operating expenses to average
net assets:
With expense reductions and/or
reimbursement (Notes 2 & 5).......... 2.61% 2.64% 2.49% 2.64% 2.56%
Without expense reductions and/or
reimbursement........................ 2.98% 2.71% 2.59% 2.79% 2.68%
Portfolio turnover rate++............... 67% 58% 31% 67% 49%
</TABLE>
- ----------------
(a) Annualized
(b) Not Annualized
(c) Total investment return does not include sales charge.
(d) These selected per share data were calculated based upon average
shares outstanding during the period.
* Includes reimbursement of Fund operating expenses per share of $0.03.
+ Commencing June 1, 1995, the Fund began offering Advisor Class Shares.
++ Portfolio turnover rates are calculated on the basis of the Fund as a
whole without distinguishing between the classes of shares issued.
The accompanying notes are an integral part of the financial statements.
FS-25
<PAGE> 437
FINANCIAL HIGHLIGHTS (cont'd)
- --------------------------------------------------------------------------------
Contained below is per share operating performance data for a share outstanding
throughout the period, total investment return, ratios and supplemental data.
This information has been derived from information provided in the financial
statements.
<TABLE>
<CAPTION>
ADVISOR CLASS+
---------------------------------------------------
JUNE 1, 1995
YEAR ENDED DECEMBER 31, TO
------------------------------------- DECEMBER 31,
1998 (d) 1997 (d) 1996 (d) 1995 (d)
----------- ----------- ----------- ------------
<S> <C> <C> <C> <C>
Per Share Operating Performance:
Net asset value, beginning of period.... $ 9.05 $ 9.81 $ 11.02 $ 10.50
----------- ----------- ----------- ------------
Income from investment operations:
Net investment income (loss).......... 0.01* (0.01) (0.01) (0.00)
Net realized and unrealized gain
(loss) on investments................ (0.04) (0.73) (0.77) 1.89
----------- ----------- ----------- ------------
Net increase (decrease) from
investment operations.............. (0.03) (0.74) (0.78) 1.89
----------- ----------- ----------- ------------
Distributions to shareholders:
From net realized gain on
investments.......................... (0.01) (0.02) (0.43) (1.37)
In excess of net realized gain on
investments.......................... -- -- -- --
----------- ----------- ----------- ------------
Total distributions................. (0.01) (0.02) (0.43) (1.37)
----------- ----------- ----------- ------------
Net asset value, end of period.......... $ 9.01 $ 9.05 $ 9.81 $ 11.02
----------- ----------- ----------- ------------
----------- ----------- ----------- ------------
Total investment return (c)............. (0.31)% (7.54)% (7.14)% 18.14 %(b)
Ratios and supplemental data:
Net assets, end of period (in 000's).... $ 1,973 $ 30,351 $ 413 $ 558
Ratio of net investment income (loss) to
average net assets..................... 0.16% (0.26)% (0.05)% (0.05)%(a)
Ratio of operating expenses to average
net assets:
With expense reductions and/or
reimbursement (Notes 2 & 5).......... 1.61% 1.64% 1.49% 1.64 %(a)
Without expense reductions and/or
reimbursement........................ 1.98% 1.71% 1.59% 1.79 %(a)
Portfolio turnover rate++............... 67% 58% 31% 67 %(a)
</TABLE>
- ----------------
(a) Annualized
(b) Not Annualized
(c) Total investment return does not include sales charge.
(d) These selected per share data were calculated based upon average
shares outstanding during the period.
* Includes reimbursement of Fund operating expenses per share of $0.03.
+ Commencing June 1, 1995, the Fund began offering Advisor Class Shares.
++ Portfolio turnover rates are calculated on the basis of the Fund as a
whole without distinguishing between the classes of shares issued.
The accompanying notes are an integral part of the financial statements.
FS-26
<PAGE> 438
NOTES TO
FINANCIAL STATEMENTS
December 31, 1998
- --------------------------------------------------------------------------------
1. SIGNIFICANT ACCOUNTING POLICIES (SEE ALSO NOTE 2)
AIM Japan Growth Fund (the "Fund") formerly, GT Global Japan Growth Fund, is a
separate series of AIM Growth Series (the "Trust") formerly, GT Global Growth
Series. The Trust is organized as a Delaware business trust and is registered
under the Investment Company Act of 1940, as amended ("1940 Act"), as a
diversified, open-end management investment company. The Trust has eight series
of shares in operation, each series corresponding to a distinct portfolio of
investments.
The Fund offers Class A, Class B, and Advisor Class shares, each of which has
equal rights as to assets and voting privileges. Class A and Class B each has
exclusive voting rights with respect to its distribution plan. Investment
income, realized and unrealized capital gains and losses, and the common
expenses of the Fund are allocated on a pro rata basis to each class based on
the relative net assets of each class to the total net assets of the Fund. Each
class of shares differs in its respective distribution expenses, and may differ
in its transfer agent, registration, and certain other class-specific fees and
expenses.
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statements and
the reported amounts of income and expenses during the reporting period. Actual
results could differ from those estimates. The following is a summary of
significant accounting policies in conformity with generally accepted accounting
principles consistently followed by the Fund in the preparation of the financial
statements.
(A) PORTFOLIO VALUATION
The Fund calculates the net asset value of and completes orders to purchase,
exchange or repurchase Fund shares on each business day, with the exception of
those days on which the New York Stock Exchange is closed.
Equity securities are valued at the last sale price on the exchange on which
such securities are traded or on the principal over-the-counter market in which
such securities are traded, as of the close of business on the day the
securities are being valued or, lacking any sales, at the last available bid
price. In cases where securities are traded on more than one exchange, the
securities are valued on the exchange determined by A I M Advisors, Inc. (the
"Manager") to be the primary market.
Fixed income investments are valued at the mean of representative quoted bid and
ask prices for such investments or, if such prices are not available, at prices
for investments of comparative maturity, quality and type. However, when the
Manager deems it appropriate, prices obtained for the day of valuation from a
bond pricing service will be used. Short-term investments with a maturity of 60
days or less are valued at amortized cost, adjusted for foreign exchange
translation and market fluctuation, if any.
Investments for which market quotations are not readily available (including
restricted securities which are subject to limitations on their sale) are valued
at fair value as determined in good faith by or under the direction of the
Trust's Board of Trustees.
Portfolio securities which are primarily traded on foreign exchanges are
generally valued to the preceding closing values of such securities on their
respective exchanges, and those values are then translated into U.S. dollars at
the current exchange rates, except that when an occurrence subsequent to the
time a value was so established is likely to have materially changed such value,
then the fair value of those securities will be determined by consideration of
other factors by or under the direction of the Trust's Board of Trustees.
(B) FOREIGN CURRENCY TRANSLATION
The accounting records of the Fund are maintained in U.S. dollars. The market
values of foreign securities, currency holdings, other assets and liabilities
are recorded in the books and records of the Fund after translation to U.S.
dollars based on the exchange rates on that day. The cost of each security is
determined using historical exchange rates. Income and withholding taxes are
translated at prevailing exchange rates when earned or incurred.
The Fund does not isolate that portion of the results of operations resulting
from changes in foreign exchange rates on investments from the fluctuations
arising from changes in market prices of securities held. Such fluctuations are
included with the net realized and unrealized gain or loss from investments.
Reported net realized foreign exchange gains and losses arise from sales and
maturities of short-term securities, forward foreign currency contracts, sales
of foreign currencies, currency gains or losses realized between the trade and
settlement dates on securities transactions, and the differences between the
amounts of dividends, interest, and foreign withholding taxes recorded on the
Fund's books and the U.S. dollar equivalent of the amounts actually received or
paid. Net unrealized foreign exchange gains and losses arise from changes in the
value of assets and liabilities other than investments in securities at period
end, resulting from changes in exchange rates.
(C) REPURCHASE AGREEMENTS
With respect to repurchase agreements entered into by the Fund, it is the Fund's
policy to always receive, as collateral, United States government securities or
other high quality debt securities of which the value, including accrued
interest, is at least equal to the amount to be repaid to the Fund under each
agreement at its maturity.
(D) FORWARD FOREIGN CURRENCY CONTRACTS
A forward foreign currency contract ("Forward Contract") is an agreement between
two parties to buy and sell a currency at a set price on a future date. The
market value of the Forward Contract
FS-27
<PAGE> 439
fluctuates with changes in currency exchange rates. The Forward Contract is
marked-to-market daily and the change in market value is recorded by the Fund as
an unrealized gain or loss. When the Forward Contract is closed, the Fund
records a realized gain or loss equal to the difference between the value at the
time it was opened and the value at the time it was closed. The Fund could be
exposed to risk if a counter party is unable to meet the terms of a contract or
if the value of the currency changes unfavorably. The Fund may enter into
Forward Contracts in connection with planned purchases or sales of securities,
or to hedge against adverse fluctuations in exchange rates between currencies.
(E) OPTION ACCOUNTING PRINCIPLES
When the Fund writes a call or put option, an amount equal to the premium
received is included in the Fund's "Statement of Assets and Liabilities" as an
asset and an equivalent liability. The amount of the liability is subsequently
marked-to-market to reflect the current market value of the option. The current
market value of an option listed on a traded exchange is valued at its last bid
price, or, in the case of an over-the-counter option, is valued at the average
of the last bid prices obtained from brokers, unless a quotation from only one
broker is available, in which case only that broker's price will be used. If an
option expires on its stipulated expiration date or if the Fund enters into a
closing purchase transaction, a gain or loss is realized without regard to any
unrealized gain or loss on the underlying security, and the liability related to
such option is extinguished. If a written call option is exercised, a gain or
loss is realized from the sale of the underlying security and the proceeds of
the sale are increased by the premium originally received. If a written put
option is exercised, the cost of the underlying security purchased would be
decreased by the premium originally received. The Fund can write options only on
a covered basis, which, for a call, requires that the Fund hold the underlying
security, and, for a put, requires the Fund to set aside cash, U.S. government
securities or other liquid securities in an amount not less than the exercise
price or otherwise provide adequate cover at all times while the put option is
outstanding. The Fund may use options to manage its exposure to the stock and
bond markets and to fluctuations in currency values or interest rates.
The premium paid by the Fund for the purchase of a call or put option is
included in the Fund's "Statement of Assets and Liabilities" as an investment
and subsequently "marked-to-market" to reflect the current market value of the
option. If an option which the Fund has purchased expires on the stipulated
expiration date, the Fund realizes a loss in the amount of the cost of the
option. If the Fund enters into a closing sale transaction, the Fund realizes a
gain or loss, depending on whether proceeds from the closing sale transaction
are greater or less than the cost of the option. If the Fund exercises a call
option, the cost of the securities acquired by exercising the call is increased
by the premium paid to buy the call. If the Fund exercises a put option, it
realizes a gain or loss from the sale of the underlying security, and the
proceeds from such sale are decreased by the premium originally paid.
The risk associated with purchasing options is limited to the premium originally
paid. The risk in writing a call option is that the Fund may forego the
opportunity of profit if the market value of the underlying security or index
increases and the option is exercised. The risk in writing a put option is that
the Fund may incur a loss if the market value of the underlying security or
index decreases and the option is exercised. In addition, there is the risk the
Fund may not be able to enter into a closing transaction because of an illiquid
secondary market.
(F) FUTURES CONTRACTS
A futures contract is an agreement between two parties to buy and sell a
security at a set price on a future date. Upon entering into such a contract the
Fund is required to pledge to the broker an amount of cash or securities equal
to the minimum "initial margin" requirements of the exchange on which the
contract is traded. Pursuant to the contract, the Fund agrees to receive from or
pay to the broker an amount of cash equal to the daily fluctuation in value of
the contract. Such receipts or payments are known as "variation margin" and are
recorded by the Fund as unrealized gains or losses. When the contract is closed,
the Fund records a realized gain or loss equal to the difference between the
value of the contract at the time it was opened and the value at the time it was
closed. The potential risk to the Fund is that the change in value of the
underlying securities may not correlate to the change in value of the contracts.
The Fund may use futures contracts to manage its exposure to the stock and bond
markets and to fluctuations in currency values or interest rates. At December
31, 1998, the Fund had segregated securities valued at $19,299,212 and cash of
$1,868,000 to cover intial margin requirements on open futures contracts.
(G) SECURITY TRANSACTIONS AND RELATED INVESTMENT INCOME
Security transactions are accounted for on the trade date (date the order to buy
or sell is executed). The cost of securities sold is determined on a first-in,
first-out basis, unless otherwise specified. Dividends are recorded on the
ex-dividend date. Interest income is recorded on the accrual basis. Where a high
level of uncertainty exists as to its collection, income is recorded net of all
withholding tax with any rebate recorded when received. The Fund may trade
securities on other than normal settlement terms. This may increase the risk if
the other party to the transaction fails to deliver and causes the Fund to
subsequently invest at less advantageous prices.
(H) PORTFOLIO SECURITIES LOANED
At December 31, 1998, stocks with an aggregate value of $736,856 were on loan to
brokers. The loans were secured by cash collateral of $762,500 received by the
Fund. For the year ended December 31, 1998, the Fund received securities lending
fees of $53,757.
For international securities, cash collateral is received by the Fund against
loaned securities in an amount at least equal to 105% of the market value of the
loaned securities at the inception of each loan. This collateral must be
maintained at not less than 103% of the market value of the loaned securities
during the period of the loan. For domestic securities, cash collateral is
received by the Fund against loaned securities in an amount at least equal to
102% of the market
FS-28
<PAGE> 440
value of the loaned securities at the inception of each loan. This collateral
must be maintained at not less than 100% of the market value of the loaned
securities during the period of each loan. The cash collateral is invested in a
securities lending trust which consists of a portfolio of high quality short
duration securities whose average effective duration is restricted to 120 days
or less.
(I) TAXES
It is the policy of the Fund to meet the requirements for qualification as a
"regulated investment company" under the Internal Revenue Code of 1986, as
amended ("Code"). It is also the intention of the Fund to make distributions
sufficient to avoid imposition of any excise tax under Section 4982 of the Code.
Therefore, no provision has been made for Federal taxes on income, capital
gains, and unrealized appreciation of securities held, or for excise tax on
income and capital gains. The Fund currently has a capital loss carryforward of
$14,061,105 which expires in 2006.
(J) DISTRIBUTIONS TO SHAREHOLDERS
Distributions to shareholders are recorded by the Fund on the ex-date. Income
and capital gain distributions are determined in accordance with Federal income
tax regulations which may differ from generally accepted accounting principles.
These differences are primarily due to differing treatments of income and gains
on various investment securities held by the Fund and timing differences.
(K) FOREIGN SECURITIES
There are certain additional considerations and risks associated with investing
in foreign securities and currency transactions that are not inherent in
investments of domestic origin. These risks of investing in foreign markets may
include foreign currency exchange rate fluctuations, perceived credit risk,
adverse political and economic developments and possible adverse foreign
government intervention.
(L) RESTRICTED SECURITIES
The Fund is permitted to invest in privately placed restricted securities. These
securities may by resold in transactions exempt from registration or to the
public if the securities are registered. Disposal of these securities may
involve time-consuming negotiations and expense, and prompt sale at an
acceptable price may be difficult. At the end of the year, restricted
securities, if any, (excluding 144A issues), are shown at the end of the Fund's
Portfolio of Investments.
(M) INDEXED SECURITIES
The Fund may invest in indexed securities whose value is linked either directly
or indirectly to changes in foreign currencies, interest rates, equities,
indices, or other reference instruments. Indexed securities may be more volatile
than the reference instrument itself, but any loss is limited to the amount of
the original investment.
(N) LINE OF CREDIT
The Fund, along with certain other funds advised and/or administered by the
Manager, has a line of credit with BankBoston and State Street Bank and Trust
Company. The arrangements with the banks allow the Fund and certain other funds
to borrow, on a first come, first served basis, an aggregate maximum amount of
$250,000,000. The Fund is limited to borrowing up to 33 1/3% of the value of the
Fund's total assets. On December 31, 1998, the Fund had no loans outstanding.
For the year ended December 31, 1998, the weighted average outstanding daily
balance of bank loans (based on the number of days the loans were outstanding)
was $4,412,250 with a weighted average interest rate of 6.33%. Interest expense
for the year ended December 31, 1998, was $3,103 and is included in "Other
expenses" on the Statement of Operations.
2. RELATED PARTIES
A I M Advisors, Inc. (the "Manager"), an indirect wholly-owned subsidiary of
AMVESCAP PLC, is the Fund's investment manager and administrator, and INVESCO
(NY), Inc., (formerly, Chancellor LGT Asset Management, Inc.) is the Fund's
investment sub-adviser and sub-administrator. As of the close of business on May
29, 1998, Liechtenstein Global Trust AG ("LGT"), the former indirect parent
organization of Chancellor LGT Asset Management, Inc. ("Chancellor LGT"),
consummated a purchase agreement with AMVESCAP PLC pursuant to which AMVESCAP
PLC acquired LGT's Asset Management Division, which included Chancellor LGT and
certain other affiliates. As a result of this transaction, Chancellor LGT was
renamed INVESCO (NY), Inc., and is now an indirect wholly-owned subsidiary of
AMVESCAP PLC. Also, as of the close of business May 29, 1998, A I M
Distributors, Inc. ("AIM Distributors"), a wholly-owned subsidiary of the
Manager, became the Fund's distributor, and the Trust was reorganized from a
Massachusetts business trust into a Delaware business trust. Finally, as of the
close of business on September 4, 1998, A I M Fund Services, Inc. ("AFS"), an
affiliate of the Manager and AIM Distributors, replaced GT Global Investor
Services, Inc. ("GT Services") as the transfer agent of the Fund.
The Fund pays investment management and administration fees to the Manager at
the following annualized rates: 0.975% on the first $500 million of average
daily net assets of the Fund; 0.95% on the next $500 million; 0.925% of the next
$500 million and 0.90% on amounts thereafter. These fees are computed daily and
paid monthly.
AIM Distributors, an affiliate of the Manager, serves as the Fund's distributor.
For the period ended May 29, 1998, GT Global, Inc. ("GT Global"), an affiliate
of the investment sub-advisor, served as the Fund's distributor.
Class A shares are subject to initial sales charges imposed at the time of
purchase, in accordance with the schedule included in the Fund's current
prospectus. AIM Distributors collects the sales charges imposed on sales of
Class A shares, and reallows a portion of such charges to dealers through which
the sales are made. For the year ended December 31, 1998, AIM Distributors and
GT Global retained sales charges of $18,903 and $8,184, respectively, Purchases
of Class A shares exceeding $1,000,000 may be subject to a contingent deferred
sales charge ("CDSC") upon redemption, in accordance with the Fund's current
prospectus. AIM Distributors and GT Global collected such CDSCs in the amount of
$394 and $1,128 for the year ended December 31, 1998, respectively. AIM
Distributors also makes ongoing shareholder servicing and trail commission
payments to dealers whose clients hold Class A shares.
FS-29
<PAGE> 441
Class B shares are not subject to initial sales charges. When Class B shares are
sold, AIM Distributors, from its own resources, pays commissions to dealers
through which the sales are made. Certain redemptions of Class B shares made
within six years of purchase are subject to CDSCs, in accordance with the Fund's
current prospectus. For the year ended December 31, 1998, AIM Distributors and
GT Global collected such CDSCs in the amount of $81,408 and $98,773,
respectively. In addition, AIM Distributors makes ongoing shareholder servicing
and trail commission payments to dealers whose clients hold Class B shares.
For the period ended May 29, 1998, pursuant to the then effective separate
distribution plans adopted under the 1940 Act Rule 12b-1 by the Trust's Board of
Trustees with respect to the Fund's Class A shares ("Class A Plan") and Class B
shares ("Class B Plan"), the Fund reimbursed GT Global for a portion of its
shareholder servicing and distribution expenses. Under the Class A Plan, the
Fund was permitted to pay GT Global a service fee at the annualized rate of up
to 0.25% of the average daily net assets of the Fund's Class A shares for GT
Global's expenditures incurred in servicing and maintaining shareholder
accounts, and was permitted to pay GT Global a distribution fee at the
annualized rate of up to 0.35% of the average daily net assets of the Fund's
Class A shares, less any amounts paid by the Fund as the aforementioned service
fee, for GT Global's expenditures incurred in providing services as distributor.
All expenses for which GT Global was reimbursed under the Class A Plan would
have been incurred within one year of such reimbursement.
For the period ended May 29, 1998, pursuant to the Class B Plan, the Fund was
permitted to pay GT Global a service fee at the annualized rate of up to 0.25%
of the average daily net assets of the Fund's Class B shares for GT Global's
expenditures incurred in servicing and maintaining shareholder accounts, and was
permitted to pay GT Global a distribution fee at the annualized rate of up to
0.75% of the average daily net assets of the Fund's Class B shares for GT
Global's expenditures incurred in providing services as distributor. Expenses
incurred under the Class B Plan in excess of 1.00% annually were permitted to be
carried forward for reimbursement in subsequent years as long as that Plan
continues in effect.
Effective as of the close of business May 29, 1998, pursuant to Rule 12b-1 under
the 1940 Act, the Trust's Board of Trustees adopted a Master Distribution Plan
applicable to the Fund's Class A shares ("Class A Plan") and Class B shares
("Class B Plan"), pursuant to which the Fund compensates AIM Distributors for
the purpose of financing any activity that is intended to result in the sale of
Class A or Class B shares of the Funds. Under the Class A Plan, the Fund
compensates AIM Distributors at the annualized rate of 0.35% of the average
daily net assets of the Fund's Class A shares. Under the Class B Plan, the Fund
compensates AIM Distributors at an annualized rate of 1.00% of the average daily
net assets of the Fund's Class B shares. Of these amounts, the Fund may pay a
service fee of 0.25% of the average daily net assets of the Class A or Class B
shares to selected dealers and financial institutions who furnish continuing
personal shareholder services to their customers who purchase and own the
appropriate class of shares of the Fund. Any amounts not paid as a service fee
under the Plans would constitute an asset-based sales charge.
The Manager and AIM Distributors have voluntarily undertaken to limit the Fund's
expenses (exclusive of brokerage commissions, taxes, interest, and extraordinary
items) to the maximum annual level of 2.00%, 2.65%, and 1.65% of the average
daily net assets of the Fund's Class A, Class B, and Advisor Class shares,
respectively. If necessary, this limitation will be effected by waivers by the
Manager of investment management and administration fees, waivers by AIM
Distributors of payments under the Class A Plan and/or Class B Plan and/or
reimbursements by the Manager or AIM Distributors of portions of the Fund's
other operating expenses.
Effective as of the close of business September 4, 1998, the Fund, pursuant to a
transfer agency and service agreement, has agreed to pay AFS an annualized fee
of $24.85 per shareholder accounts that are open during any monthly period (this
fee includes all out-of-pocket expenses), and an annualized fee of $0.70 per
shareholder account that is closed during any monthly period. Both fees shall be
billed by AFS monthly in arrears on a prorated basis of 1/12 of the annualized
fee for all such accounts.
For the period January 1, 1998 to September 4, 1998, GT Services, an affiliate
of the Manager and AIM Distributors, was the transfer agent of the Fund. For
performing shareholder servicing, reporting, and general transfer agent
services, GT Services received an annual maintenance fee of $17.50 per account,
a new account fee of $4.00 per account, a per transaction fee of $1.75 for all
transactions other than exchanges and a per exchange fee of $2.25. GT Services
was also reimbursed by the Fund for its out-of-pocket expenses for such items as
postage, forms, telephone charges, stationery and office supplies.
The Manager is the pricing and accounting agent for the Fund. The monthly fee
for these services to the Manager is a percentage, not to exceed 0.03% annually,
of the Fund's average daily net assets. The annual fee rate is derived based on
the aggregate net assets of the funds which comprise the following investment
companies: AIM Growth Series, AIM Investment Funds, AIM Investment Portfolios,
AIM Series Trust, G.T. Global Variable Investment Series and G. T. Global
Variable Investment Trust. The fee is calculated at the rate of 0.03% to the
first $5 billion of assets and 0.02% to the assets in excess of $5 billion. An
amount is allocated to and paid by each such fund based on its relative average
daily net assets.
The Trust pays each of its Trustees who is not an employee, officer or director
of the Manager, AIM Distributors or GT Services $5,000 per year plus $300 for
each meeting of the board or any committee thereof attended by the Trustee.
3. PURCHASES AND SALES OF SECURITIES
For the year ended December 31, 1998, purchases and sales of investment
securities by the Fund, other than U.S. government obligations and short-term
investments, aggregated $41,076,712 and $60,506,578, respectively. There were no
purchases or sales of U.S. government obligations by the Fund during the year.
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<PAGE> 442
4. CAPITAL SHARES
At December 31, 1998, there were an unlimited number of shares of beneficial
interest authorized, at no par value. Transactions in capital shares of the Fund
were as follows:
CAPITAL SHARE TRANSACTIONS
<TABLE>
<CAPTION>
YEAR ENDED YEAR ENDED
DECEMBER 31, 1998 DECEMBER 31, 1997
------------------------- -------------------------
SHARES AMOUNT SHARES AMOUNT
----------- ------------ ----------- ------------
<S> <C> <C> <C> <C>
CLASS A
- ---------------------------------------------------------------
Shares sold.................................................... 31,462,291 $276,913,744 18,880,969 $187,727,101
Shares issued in connection with reinvestment of
distributions................................................ 5,162 45,216 9,319 84,712
----------- ------------ ----------- ------------
31,467,453 276,958,960 18,890,288 187,811,813
Shares repurchased............................................. (32,214,010) (285,404,844) (20,434,942) (203,841,370)
----------- ------------ ----------- ------------
Net decrease................................................... (746,557) $ (8,445,884) (1,544,654) $(16,029,557)
----------- ------------ ----------- ------------
----------- ------------ ----------- ------------
<CAPTION>
CLASS B
- ---------------------------------------------------------------
<S> <C> <C> <C> <C>
Shares sold.................................................... 3,640,751 $ 31,434,436 5,059,734 $ 49,439,098
Shares issued in connection with reinvestment of
distributions................................................ 3,285 27,680 4,729 41,630
----------- ------------ ----------- ------------
3,644,036 31,462,116 5,064,463 49,480,728
Shares repurchased............................................. (3,772,881) (32,567,659) (5,648,959) (54,991,415)
----------- ------------ ----------- ------------
Net decrease................................................... (128,845) $ (1,105,543) (584,496) $ (5,510,687)
----------- ------------ ----------- ------------
----------- ------------ ----------- ------------
<CAPTION>
ADVISOR CLASS
- ---------------------------------------------------------------
<S> <C> <C> <C> <C>
Shares sold.................................................... 1,661,544 $ 14,964,767 4,149,684 $ 43,125,403
Shares issued in connection with reinvestment of
distributions................................................ 110 979 126 1,163
----------- ------------ ----------- ------------
1,661,654 14,965,746 4,149,810 43,126,566
Shares repurchased............................................. (4,795,465) (43,326,586) (839,053) (8,622,814)
----------- ------------ ----------- ------------
Net increase (decrease)........................................ (3,133,811) $(28,360,840) 3,310,757 $ 34,503,752
----------- ------------ ----------- ------------
----------- ------------ ----------- ------------
</TABLE>
5. EXPENSE REDUCTIONS
The Manager has directed certain portfolio trades to brokers who then paid a
portion of the Fund's expenses. For the year ended December 31, 1998, the Fund's
expenses were reduced by $27,338 under these arrangements.
- --------------
FEDERAL TAX INFORMATION (UNAUDITED):
For the fiscal year ended December 31, 1998, the amount of income received by
the Fund from sources within foreign countries and possessions of the United
States was $.0767 per share (representing a total of $576,355). The amount of
taxes paid by the Fund to such countries for the fiscal year ended December 31,
1998 was $.0115 per share (representing a total of $86,545). The following table
provides a breakdown by country of ordinary income dividends and foreign taxes
paid by the Fund during the fiscal year ended December 31, 1998:
<TABLE>
<CAPTION>
COUNTRY GROSS INCOME % FOREIGN TAX PAID %
- --------------------------------------------------------------- -------------- ------------------
<S> <C> <C>
Japan.......................................................... 37.87 99.88
Nonqualifying.................................................. 0.09 0.12
United States.................................................. 62.04 --
------- -------
100.00% 100.00%
------- -------
------- -------
</TABLE>
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<PAGE> 443
REPORT OF INDEPENDENT ACCOUNTANTS
To the Shareholders of AIM Mid Cap Equity Fund (formerly
AIM Mid Cap Growth Fund) and
Board of Trustees of AIM Growth Series:
In our opinion, the accompanying statement of assets and
liabilities, including the portfolio of investments, and
the related statements of operations and of changes in
net assets and the financial highlights present fairly,
in all material respects, the financial position of the
AIM Mid Cap Equity Fund at December 31, 1998, and the
results of its operations, the changes in its net assets
and the financial highlights for the periods indicated,
in conformity with generally accepted accounting
principles. These financial statements and financial
highlights (hereafter referred to as "financial
statements") are the responsibility of the Fund's
management; our responsibility is to express an opinion
on these financial statements based on our audits. We
conducted our audits of these financial statements in
accordance with generally accepted auditing standards
which require that we plan and perform the audit to
obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit
includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements,
assessing the accounting principles used and significant
estimates made by management, and evaluating the overall
financial statement presentation. We believe that our
audits, which included confirmation of securities at
December 31, 1998 by correspondence with the custodian
and brokers, provide a reasonable basis for the opinion
expressed above.
/s/ PRICEWATERHOUSECOOPERS LLP
PricewaterhouseCoopers LLP
Boston, Massachusetts
February 19, 1999
FS-32
<PAGE> 444
SCHEDULE OF INVESTMENTS
December 31, 1998
<TABLE>
<CAPTION>
MARKET
SHARES VALUE
<S> <C> <C>
COMMON STOCKS-90.98%
AUTO PARTS & EQUIPMENT-0.62%
Keystone Automotive Industries,
Inc.(a) 103,000 $ 2,156,563
- --------------------------------------------------------------
BANKS (REGIONAL)-1.04%
Bank United Corp.-Class A 92,000 3,611,000
- --------------------------------------------------------------
BROADCASTING (TELEVISION, RADIO, & CABLE)-6.00%
Cablevision Systems Corp.-Class
A(a)(b) 200,000 10,037,500
- --------------------------------------------------------------
Chancellor Media Corp.(a) 95,500 4,572,063
- --------------------------------------------------------------
Jacor Communications, Inc.(a) 96,300 6,199,313
- --------------------------------------------------------------
20,808,876
- --------------------------------------------------------------
CHEMICALS (SPECIALTY)-1.63%
International Specialty Products,
Inc.(a) 415,700 5,637,931
- --------------------------------------------------------------
COMMUNICATIONS EQUIPMENT-1.94%
Discreet Logic, Inc. (Canada)(a) 272,100 5,135,888
- --------------------------------------------------------------
Tekelec(a) 95,000 1,573,438
- --------------------------------------------------------------
6,709,326
- --------------------------------------------------------------
COMPUTERS (NETWORKING)-2.43%
FORE Systems, Inc.(a) 166,900 3,056,356
- --------------------------------------------------------------
Xylan Corp.(a) 304,800 5,353,050
- --------------------------------------------------------------
8,409,406
- --------------------------------------------------------------
COMPUTERS (SOFTWARE & SERVICES)-9.27%
BMC Software, Inc.(a) 76,300 3,400,119
- --------------------------------------------------------------
Citrix Systems, Inc.(a) 46,900 4,552,231
- --------------------------------------------------------------
Electronic Arts, Inc.(a) 25,000 1,403,125
- --------------------------------------------------------------
Hyperion Solutions Corp.(a) 68,000 1,224,000
- --------------------------------------------------------------
I2 Technologies, Inc.(a) 65,000 1,974,375
- --------------------------------------------------------------
Mastech Corp.(a) 80,000 2,290,000
- --------------------------------------------------------------
Novell, Inc.(a) 240,700 4,362,688
- --------------------------------------------------------------
Oracle Corp.(a) 123,500 5,325,938
- --------------------------------------------------------------
Rational Software Corp.(a) 156,600 4,149,900
- --------------------------------------------------------------
Unisys Corp.(a) 100,000 3,443,750
- --------------------------------------------------------------
32,126,126
- --------------------------------------------------------------
CONSUMER (JEWELRY, NOVELTIES & GIFTS)-0.60%
Blyth Industries, Inc.(a) 67,000 2,093,750
- --------------------------------------------------------------
CONSUMER FINANCE-1.79%
Providian Financial Corp. 82,500 6,187,500
- --------------------------------------------------------------
CONTAINERS (METAL & GLASS)-0.92%
Owens-Illinois, Inc.(a) 104,400 3,197,250
- --------------------------------------------------------------
DISTRIBUTORS (FOOD & HEALTH)-5.00%
U S Foodservice, Inc.(a)(b) 353,400 17,316,600
- --------------------------------------------------------------
ELECTRICAL EQUIPMENT-1.99%
Molex, Inc.-Class A 135,100 4,306,313
- --------------------------------------------------------------
SCI Systems, Inc.(a) 45,000 2,598,750
- --------------------------------------------------------------
6,905,063
- --------------------------------------------------------------
ELECTRONICS (SEMICONDUCTOR)-7.47%
Advanced Micro Devices, Inc.(a) 145,600 4,213,300
- --------------------------------------------------------------
Analog Devices, Inc.(a) 106,200 3,332,025
- --------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
MARKET
SHARES VALUE
<S> <C> <C>
ELECTRONICS (SEMICONDUCTOR)-(CONTINUED)
Burr-Brown Corp.(a) 247,300 $ 5,796,094
- --------------------------------------------------------------
Dallas Semiconductor Corp. 49,000 1,996,750
- --------------------------------------------------------------
Lattice Semiconductor Corp.(a) 64,000 2,938,000
- --------------------------------------------------------------
Level One Communications, Inc.(a) 68,300 2,424,650
- --------------------------------------------------------------
Xilinx, Inc.(a) 79,600 5,183,950
- --------------------------------------------------------------
25,884,769
- --------------------------------------------------------------
EQUIPMENT (SEMICONDUCTOR)-0.85%
KLA-Tencor Corp.(a) 68,200 2,958,175
- --------------------------------------------------------------
FINANCIAL (DIVERSIFIED)-1.33%
Ambac Financial Group, Inc. 35,000 2,106,563
- --------------------------------------------------------------
SEI Investments Co. 25,000 2,484,375
- --------------------------------------------------------------
4,590,938
- --------------------------------------------------------------
HEALTHCARE (DRUGS-GENERIC & OTHER)-4.46%
Barr Laboratories, Inc.(a) 42,000 2,016,000
- --------------------------------------------------------------
Forest Laboratories, Inc.(a) 113,000 6,010,188
- --------------------------------------------------------------
Jones Pharma, Inc. 55,400 2,022,100
- --------------------------------------------------------------
Teva Pharmaceutical Industries
Ltd.-ADR (Israel) 78,900 3,210,244
- --------------------------------------------------------------
Watson Pharmaceuticals, Inc.(a) 35,000 2,200,625
- --------------------------------------------------------------
15,459,157
- --------------------------------------------------------------
HEALTHCARE (MEDICAL EQUIPMENT & SUPPLIES)-5.05%
Allegiance Corp. 40,000 1,865,000
- --------------------------------------------------------------
Arterial Vascular Engineering, Inc.(a) 108,100 5,675,250
- --------------------------------------------------------------
Guidant Corp. 28,000 3,087,000
- --------------------------------------------------------------
Henry Schein, Inc.(a) 50,000 2,237,500
- --------------------------------------------------------------
PSS World Medical, Inc.(a) 95,000 2,185,000
- --------------------------------------------------------------
Sybron International Corp.(a) 90,000 2,446,875
- --------------------------------------------------------------
17,496,625
- --------------------------------------------------------------
HEALTHCARE (SPECIALIZED SERVICES)-1.55%
Alza Corp.(a) 66,000 3,448,500
- --------------------------------------------------------------
Omnicare, Inc. 55,000 1,911,250
- --------------------------------------------------------------
5,359,750
- --------------------------------------------------------------
INSURANCE
(PROPERTY-CASUALTY)-0.93%
EXEL Limited-Class A 43,100 3,232,500
- --------------------------------------------------------------
LODGING-HOTELS-0.94%
Promus Hotel Corp.(a) 100,500 3,253,688
- --------------------------------------------------------------
MACHINERY (DIVERSIFIED)-1.18%
Applied Power, Inc.-Class A 108,100 4,080,775
- --------------------------------------------------------------
MANUFACTURING (SPECIALIZED)-2.53%
Pall Corp. 135,700 3,434,906
- --------------------------------------------------------------
United States Filter Corp. 233,249 5,335,571
- --------------------------------------------------------------
8,770,477
- --------------------------------------------------------------
OIL & GAS (DRILLING & EQUIPMENT)-2.95%
BJ Services Co.(a) 174,900 2,732,812
- --------------------------------------------------------------
Cooper Cameron Corp.(a) 102,800 2,518,600
- --------------------------------------------------------------
Rowan Companies, Inc.(a) 116,000 1,160,000
- --------------------------------------------------------------
</TABLE>
F-33
<PAGE> 445
<TABLE>
<CAPTION>
MARKET
SHARES VALUE
<S> <C> <C>
OIL & GAS (DRILLING & EQUIPMENT)-(CONTINUED)
Transocean Offshore Inc. 45,600 $ 1,222,650
- --------------------------------------------------------------
Weatherford International, Inc.(a) 134,400 2,604,000
- --------------------------------------------------------------
10,238,062
- --------------------------------------------------------------
OIL & GAS (EXPLORATION & PRODUCTION)-3.44%
Anadarko Petroleum Corp. 81,800 2,525,575
- --------------------------------------------------------------
Burlington Resources, Inc. 132,200 4,734,412
- --------------------------------------------------------------
Devon Energy Corp. 50,000 1,534,375
- --------------------------------------------------------------
Noble Affiliates, Inc. 50,000 1,231,250
- --------------------------------------------------------------
Seagull Energy Corp.(a) 301,200 1,901,325
- --------------------------------------------------------------
11,926,937
- --------------------------------------------------------------
PERSONAL CARE-0.49%
Avon Products, Inc. 38,000 1,681,500
- --------------------------------------------------------------
PUBLISHING (NEWSPAPERS)-0.25%
New York Times Co. (The)-Class A 25,000 867,187
- --------------------------------------------------------------
RETAIL (DEPARTMENT STORES)-0.40%
Federated Department Stores,
Inc.(a) 33,000 1,437,562
- --------------------------------------------------------------
RETAIL (FOOD CHAINS)-0.63%
Kroger Co.(a) 36,000 2,178,000
- --------------------------------------------------------------
RETAIL (GENERAL MERCHANDISE)-1.04%
Kmart Corp.(a) 235,000 3,598,437
- --------------------------------------------------------------
RETAIL (SPECIALTY)-1.37%
Pep Boys-Manny, Moe & Jack 301,800 4,734,487
- --------------------------------------------------------------
RETAIL (SPECIALTY-APPAREL)-1.61%
Abercrombie & Fitch Co.-Class A(a) 18,600 1,315,950
- --------------------------------------------------------------
Intimate Brands, Inc. 142,200 4,248,225
- --------------------------------------------------------------
5,564,175
- --------------------------------------------------------------
SAVINGS & LOAN COMPANIES-0.94%
GreenPoint Financial Corp. 92,900 3,263,111
- --------------------------------------------------------------
SERVICES (ADVERTISING/MARKETING)-10.39%
Outdoor Systems, Inc.(a)(b) 831,180 24,935,400
- --------------------------------------------------------------
Snyder Communications, Inc.(a) 152,700 5,153,625
- --------------------------------------------------------------
Young & Rubicam, Inc.(a) 183,200 5,931,100
- --------------------------------------------------------------
36,020,125
- --------------------------------------------------------------
SERVICES (COMMERCIAL & CONSUMER)-1.16%
Metzler Group, Inc.(a) 60,000 2,921,250
- --------------------------------------------------------------
Stewart Enterprises, Inc.- Class A 50,000 1,112,500
- --------------------------------------------------------------
4,033,750
- --------------------------------------------------------------
SERVICES (COMPUTER SYSTEMS)-2.87%
Cambridge Technology Partners,
Inc.(a) 164,400 3,637,350
- --------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
MARKET
SHARES VALUE
<S> <C> <C>
SERVICES (COMPUTER SYSTEMS)-(CONTINUED)
Gerber Scientific, Inc. 82,600 $ 1,966,912
- --------------------------------------------------------------
Policy Management Systems Corp.(a) 86,000 4,343,000
- --------------------------------------------------------------
9,947,262
- --------------------------------------------------------------
SERVICES (DATA PROCESSING)-1.83%
CSG Systems International, Inc.(a) 41,000 3,239,000
- --------------------------------------------------------------
Equifax, Inc. 25,000 854,687
- --------------------------------------------------------------
NOVA Corp.(a) 65,300 2,265,093
- --------------------------------------------------------------
6,358,780
- --------------------------------------------------------------
TELECOMMUNICATIONS (CELLULAR/WIRELESS)-0.68%
Metromedia Fiber Network, Inc.(a) 70,000 2,345,000
- --------------------------------------------------------------
WASTE MANAGEMENT-1.41%
Allied Waste Industries, Inc.(a) 207,000 4,890,375
- --------------------------------------------------------------
Total Common Stocks (Cost
$252,047,680) 315,330,995
- --------------------------------------------------------------
</TABLE>
<TABLE>
<S> <C> <C> <C> <C>
OPTIONS PURCHASED-0.03%
PUT OPTIONS-0.03%
BROADCASTING (TELEVISION, RADIO & CABLE)-0.00%
</TABLE>
<TABLE>
<CAPTION>
NUMBER OF EXERCISE EXPIRATION
CONTRACTS PRICE DATE
<S> <C> <C> <C> <C>
Cablevision Systems Corp.-
Class A 1,230 40 Jan-99 $ 15,375
- -----------------------------------------------------------------------
DISTRIBUTORS (FOOD &
HEALTH)-0.01%
U S Foodservice, Inc. 2,828 45 Jan-99 35,350
- -----------------------------------------------------------------------
SERVICES (ADVERTISING/
MARKETING)-0.02%
Outdoor Systems, Inc. 7,010 22.50 Jan-99 65,718
- -----------------------------------------------------------------------
Total Options Purchased
(Cost $1,172,362) 116,443
- -----------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
SHARES
<S> <C> <C>
WARRANTS-0.50%
BANKS (REGIONAL)-0.50%
Golden State Bancorp, Litigation
Warrants, expiring 01/01/01
(Cost $2,296,743) 381,300 $ 1,739,682
- --------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT
<S> <C> <C>
REPURCHASE AGREEMENT-7.90%
SBC Warburg Dillon Read Inc.,
4.75%, 01/04/99 $27,371,944 $ 27,371,944
- --------------------------------------------------------------
TOTAL INVESTMENTS-99.41% 344,559,064
- --------------------------------------------------------------
OTHER ASSETS & LIABILITIES-0.59% 2,059,395
- --------------------------------------------------------------
NET ASSETS-100.00% $346,618,459
==============================================================
</TABLE>
Notes to Schedule of Investments:
(a) Non-income producing security.
(b) A portion of this security is subject to call options written. See Note 4.
(c) Collateral on repurchase agreements, including the fund's pro-rata interest
in joint repurchase agreement is taken into possession by the Fund upon
entering into the repurchase agreement. The collateral is marked to market
daily to ensure its market value as being 102% of the sales price of the
repurchase agreement. The investments in some repurchase agreements are
through participation in joint accounts. with other mutual funds private
accounts and certain non-registered investment companies managed by the
investment advisor or its affiliates.
(d) Joint repurchase agreement entered into 12/31/98 with a maturing value of
$1,000,527,778. Collateralized by $2,207,068,000 U.S. Government
obligations, 0% to 6.75% due 06/30/99 to 11/15/21 with an aggregate market
value at 12/31/98 of $1,020,001,079.
Abbreviation:
ADR - American Depositary Receipt
See Notes to Financial Statements.
F-34
<PAGE> 446
STATEMENT OF ASSETS AND LIABILITIES
December 31, 1998
<TABLE>
<S> <C>
ASSETS:
Investments, at market value
(cost $282,888,729) $344,559,064
- ---------------------------------------------------------
Cash 718,265
- ---------------------------------------------------------
Receivables for:
Investments sold 3,035,046
- ---------------------------------------------------------
Fund shares sold 5,232,000
- ---------------------------------------------------------
Dividends and interest 57,064
- ---------------------------------------------------------
Other assets 14,660
- ---------------------------------------------------------
Total assets 353,616,099
- ---------------------------------------------------------
LIABILITIES:
Payable for fund shares reacquired 1,853,509
- ---------------------------------------------------------
Options written
(premiums received $2,262,028) 4,346,737
- ---------------------------------------------------------
Accrued investment management &
administration fees 203,493
- ---------------------------------------------------------
Accrued accounting fees 7,983
- ---------------------------------------------------------
Accrued distribution fees 352,058
- ---------------------------------------------------------
Accrued trustees' fees 7,113
- ---------------------------------------------------------
Accrued transfer agent fees 83,800
- ---------------------------------------------------------
Accrued operating expenses 142,947
- ---------------------------------------------------------
Total liabilities 6,997,640
- ---------------------------------------------------------
Net assets applicable to shares outstanding $346,618,459
- ---------------------------------------------------------
NET ASSETS:
Class A $180,258,032
=========================================================
Class B $165,447,122
=========================================================
Advisor Class $ 913,305
=========================================================
SHARES OUTSTANDING, $0.01 PAR VALUE PER
SHARE:
Class A 9,501,665
=========================================================
Class B 9,110,457
=========================================================
Advisor Class 47,866
=========================================================
Class A:
Net asset value and redemption price per
share $ 18.97
- ---------------------------------------------------------
Offering price per share:
(Net asset value of
$18.97 divided by 94.50%) $ 20.07
=========================================================
Class B:
Net asset value and offering price per
share $ 18.16
=========================================================
Advisor Class:
Net asset value and offering price per
share $ 19.08
=========================================================
</TABLE>
STATEMENT OF OPERATIONS
For the year ended December 31, 1998
<TABLE>
<S> <C>
INVESTMENT INCOME:
Dividends (net of $5,749 foreign
withholding tax) $ 1,161,164
- ---------------------------------------------------------
Interest 613,489
- ---------------------------------------------------------
Security lending income 254,918
- ---------------------------------------------------------
Total investment income 2,029,571
- ---------------------------------------------------------
EXPENSES:
Investment management & administration fees 3,140,938
- ---------------------------------------------------------
Accounting fees 118,894
- ---------------------------------------------------------
Trustees fees 17,403
- ---------------------------------------------------------
Distribution fees -- Class A 760,959
- ---------------------------------------------------------
Distribution fees -- Class B 2,148,252
- ---------------------------------------------------------
Transfer agent fees -- Class A 487,406
- ---------------------------------------------------------
Transfer agent fees -- Class B 483,318
- ---------------------------------------------------------
Transfer agent fees -- Advisor Class 2,521
- ---------------------------------------------------------
Other 1,043,368
- ---------------------------------------------------------
Total expenses 8,203,059
- ---------------------------------------------------------
Less: Expense reductions (46,733)
- ---------------------------------------------------------
Net expenses 8,156,326
- ---------------------------------------------------------
Net investment income (loss) (6,126,755)
- ---------------------------------------------------------
REALIZED AND UNREALIZED GAIN (LOSS) FROM
INVESTMENT SECURITIES AND OPTION
CONTRACTS:
Net realized gain (loss) from investment
securities (7,289,125)
- ---------------------------------------------------------
Net unrealized appreciation (depreciation)
of:
Investment securities (3,811,413)
- ---------------------------------------------------------
Option contracts written (2,084,709)
- ---------------------------------------------------------
(5,896,122)
- ---------------------------------------------------------
Net gain (loss) from investment
securities and option contracts (13,185,247)
- ---------------------------------------------------------
Net increase (decrease) in net assets
resulting from operations $(19,312,002)
=========================================================
</TABLE>
See Notes to Financial Statements.
F-35
<PAGE> 447
STATEMENT OF CHANGES IN NET ASSETS
For the years ended December 31, 1998 and 1997
<TABLE>
<CAPTION>
1998 1997
------------- -------------
<S> <C> <C>
OPERATIONS:
Net investment income (loss) $ (6,126,755) $ (6,767,300)
- ----------------------------------------------------------------------------------------------
Net realized gain (loss) from investment securities and
option contracts (7,289,125) 91,288,360
- ----------------------------------------------------------------------------------------------
Net unrealized appreciation (depreciation) of investment
securities and option contracts (5,896,122) (23,043,968)
- ----------------------------------------------------------------------------------------------
Net increase (decrease) in net assets resulting from
operations (19,312,002) 61,477,092
- ----------------------------------------------------------------------------------------------
Distributions to shareholders from net realized gains on
investment securities:
Class A (8,638,559) (27,861,047)
- ----------------------------------------------------------------------------------------------
Class B (8,762,197) (29,550,073)
- ----------------------------------------------------------------------------------------------
Advisor Class (46,305) (120,835)
- ----------------------------------------------------------------------------------------------
Share transactions-net:
Class A (59,340,039) (91,841,233)
- ----------------------------------------------------------------------------------------------
Class B (69,635,070) (78,964,718)
- ----------------------------------------------------------------------------------------------
Advisor Class 70,469 (860,102)
- ----------------------------------------------------------------------------------------------
Net increase (decrease) in net assets (165,663,703) (167,720,916)
- ----------------------------------------------------------------------------------------------
NET ASSETS:
Beginning of period 512,282,162 680,003,078
- ----------------------------------------------------------------------------------------------
End of period $ 346,618,459 $ 512,282,162
==============================================================================================
NET ASSETS CONSIST OF:
Shares of beneficial interest $ 295,648,297 $ 430,679,692
- ----------------------------------------------------------------------------------------------
Undistributed net investment income -- --
- ----------------------------------------------------------------------------------------------
Undistributed net realized gain (loss) from investment
securities, foreign currencies and option contracts (8,615,464) 16,120,722
- ----------------------------------------------------------------------------------------------
Unrealized appreciation of investment securities, foreign
currencies and option contracts 59,585,626 65,481,748
- ----------------------------------------------------------------------------------------------
$ 346,618,459 $ 512,282,162
==============================================================================================
</TABLE>
See Notes to Financial Statements.
F-36
<PAGE> 448
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1998
NOTE 1-SIGNIFICANT ACCOUNTING POLICIES
AIM Mid Cap Equity Fund, formerly AIM Mid Cap Growth Fund, (the "Fund"), is a
separate series of AIM Growth Series (the "Trust"). The Trust is a Delaware
business trust and is registered under the Investment Company Act of 1940, as
amended ("1940 Act"), as an open-end management investment company. The Trust
has six diversified series of shares in operation, each series corresponding to
a distinct portfolio of investments.
The Fund offers Class A, Class B, and Advisor Class shares, each of which has
equal rights as to assets and voting privileges. Class A and Class B each has
exclusive voting rights with respect to its distribution plan. Investment
income, realized and unrealized capital gains and losses, and the common
expenses of the Fund are allocated on a pro rata basis to each class based on
the relative net assets of each class to the total net assets of the Fund. Each
class of shares differs in its respective distribution expenses, and may differ
in its transfer agent, registration, and certain other class-specific fees and
expenses.
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statements and
the reported amounts of income and expenses during the reporting period. Actual
results could differ from those estimates. The following is a summary of
significant accounting policies in conformity with generally accepted accounting
principles consistently followed by the Fund in the preparation of the financial
statements.
A. Portfolio Valuation -- The Fund calculates the net asset value of and
completes orders to purchase, exchange or repurchase Fund shares on each
business day, with the exception of those days on which the New York Stock
Exchange is closed.
Equity securities are valued at the last sale price on the exchange on
which such securities are traded or on the principal over-the-counter market
on which such securities are traded, as of the close of business on the day
the securities are being valued or, lacking any sales, at the mean between
the closing bid and asked prices. In cases where securities are traded on
more than one exchange, the securities are valued on the exchange determined
by A I M Advisors, Inc. (the "Manager") to be the primary market.
Fixed income investments are valued at the mean of representative quoted
bid and ask prices for such investments or, if such prices are not available,
at prices for investments of comparative maturity, quality and type; however,
when the Manager deems it appropriate, prices obtained for the day of
valuation from a bond pricing service will be used. Short-term investments
with a maturity of 60 days or less are valued at amortized cost which
approximates market value.
Investments for which market quotations are not readily available
(including restricted securities which are subject to limitations on their
sale) are valued at fair value as determined in good faith by or under the
direction of the Trust's Board of Trustees.
B. Repurchase Agreements -- With respect to repurchase agreements entered into
by the Fund, it is the Fund's policy to always receive, as collateral, United
States government securities or other high quality debt securities of which
the value, including accrued interest, is at least equal to the amount to be
repaid to the Fund under each agreement at its maturity.
C. Option Accounting Principles -- When the Fund writes a call or put option, an
amount equal to the premium received is included in the Fund's "Statement of
Assets and Liabilities" as an asset and an equivalent liability. The amount
of the liability is subsequently marked-to-market to reflect the current
market value of the option. The current market value of an option is the mean
between the last bid and asked prices on that day. If an option expires on
its stipulated expiration date or if the Fund enters into a closing purchase
transaction, a gain or loss is realized without regard to any unrealized gain
or loss on the underlying security, and the liability related to such option
is extinguished. If a written call option is exercised, a gain or loss is
realized from the sale of the underlying security and the proceeds of the
sale are increased by the premium originally received. If a written put
option is exercised, the cost of the underlying security purchased would be
decreased by the premium originally received. The Fund can write options only
on a covered basis, which, for a call, requires that the Fund hold the
underlying security, and, for a put, requires the Fund to set aside cash,
U.S. government securities or other liquid securities in an amount not less
than the exercise price or otherwise provide adequate cover at all times
while the put option is outstanding. The Fund may use options to manage its
exposure to the stock market and to fluctuations in interest rates.
The premium paid by the Fund for the purchase of a call or put option is
included in the Fund's "Statement of Assets and Liabilities" as an investment
and subsequently "marked-to-market" to reflect the current market value of
the option. If an option which the Fund has purchased expires on the
stipulated expiration date, the Fund realizes a loss in the amount of the
cost of the option. If the Fund enters into a closing sale transaction, the
Fund realizes a gain or loss, depending on whether proceeds from the closing
sale transaction are greater or less than the cost of the option. If the Fund
exercises a call option, the cost of the securities acquired by exercising
the call is increased by the premium paid to buy the call. If the Fund
exercises a put option, it realizes a gain or loss from the sale of the
underlying security, and the proceeds from such sale are decreased by the
premium originally paid.
The risk associated with purchasing options is limited to the premium
originally paid. The risk in writing a call option is that the Fund may
forego the opportunity of profit if the market value of the underlying
security or index increases and the option is exercised. The risk in writing
a put option is that the Fund may incur a loss if the market value of the
underlying security or index decreases and the option is exercised. In
addition, there is the risk the Fund may not be able to enter into a closing
transaction because of an illiquid secondary market.
D. Futures Contracts -- A futures contract is an agreement between two parties
to buy and sell a security at a set price on
F-37
<PAGE> 449
a future date. Upon entering into such a contract the Fund is required to
pledge to the broker an amount of cash or securities equal to the minimum
"initial margin" requirements of the exchange on which the contract is
traded. Pursuant to the contract, the Fund agrees to receive from or pay to
the broker an amount of cash equal to the daily fluctuation in value of the
contract. Such receipts or payments are known as "variation margin" and are
recorded by the Fund as unrealized gains or losses. When the contract is
closed, the Fund records a realized gain or loss equal to the difference
between the value of the contract at the time it was opened and the value at
the time it was closed. The potential risk to the Fund is that the change in
value of the underlying securities may not correlate to the change in value
of the contracts. The Fund may use futures contracts to manage its exposure
to the stock market and to fluctuations in interest rates.
E. Security Transactions and Related Investment Income -- Security transactions
are accounted for on the trade date (date the order to buy or sell is
executed). Realized gains and losses are computed on the basis of specific
identification of the Securities sold. Dividends are recorded on the
ex-dividend date. Interest income is recorded on the accrual basis. Where a
high level of uncertainty exists as to its collection, income is recorded net
of all withholding tax with any rebate recorded when received. The Fund may
trade securities on other than normal settlement terms. This may increase the
risk if the other party to the transaction fails to deliver and causes the
Fund to subsequently invest at less advantageous prices. On December 31, 1998
$6,126,755 was reclassified from paid-in capital to undistributed net
investment income as a result of a net operating tax loss in order to comply
with the requirements of the American Institute of Certified Public
Accountants Statement of Position 93-2. Net assets of the Fund were
unaffected as a result of this reclassification.
F. Portfolio Securities Loaned -- At December 31, 1998, stocks with an aggregate
value listed below were on loan to brokers. The loans were secured by cash
collateral received by the Fund:
<TABLE>
<CAPTION>
DECEMBER 31, 1998 PERIOD ENDED
----------------------------- DECEMBER 31, 1998
AGGREGATE VALUE CASH -----------------
ON LOANS COLLATERAL FEES RECEIVED
--------------- ----------- -----------------
<S> <C> <C> <C>
$49,076,261 $49,978,243 $254,918
</TABLE>
Cash collateral is received by the Fund against loaned securities in the
amount at least equal to 102% of the market value of the loaned securities at
the inception of each loan. This collateral must be maintained at not less
than 100% of the market value of the loaned securities during the period of
the loan. The cash collateral is invested in a securities lending trust which
consists of a portfolio of high quality short duration securities whose
average effective duration is restricted to 120 days or less.
G. Taxes -- It is the policy of the Fund to meet the requirements for
qualification as a "regulated investment company" under the Internal Revenue
Code of 1986, as amended ("Code"). It is also the intention of the Fund to
make distributions sufficient to avoid imposition of any excise tax under
Section 4982 of the Code. Therefore, no provision has been made for Federal
taxes on income, capital gains, or unrealized appreciation of securities
held, and excise tax on income and capital gains. The Fund has a capital loss
carryforward of $8,616,058 (which may be carried forward to offset future
taxable capital gains, if any) which expires, if not previously utilized,
through the year 2006. The Fund cannot distribute capital gains to
shareholders until the tax loss carryforwards have been utilized.
H. Distributions to Shareholders -- Distributions to shareholders are recorded
by the Fund on the ex-date. Income and capital gain distributions are
determined in accordance with Federal income tax regulations which may differ
from generally accepted accounting principles. These differences are
primarily due to differing treatments of income and gains on various
investment securities held by the Fund and timing differences.
I. Restricted Securities -- The Fund is permitted to invest in privately placed
restricted securities. These securities may be resold in transactions exempt
from registration or to the public if the securities are registered.
Disposal of these securities may involve time-consuming negotiations and
expense, and prompt sale at an acceptable price may be difficult.
J. Indexed Securities -- The Fund may invest in indexed securities whose value
is linked either directly or indirectly to changes in foreign currencies,
interest rates, equities, indices, or other reference instruments. Indexed
securities may be more volatile than the reference instrument itself, but
any loss is limited to the amount of the original investment.
K. Line of Credit -- The Fund, along with certain other funds advised and/or
administered by the Manager, has a line of credit with BankBoston and State
Street Bank & Trust Company. The arrangements with the banks allow the Fund
and certain other funds to borrow, on a first come, first serve basis, an
aggregate maximum amount of $250,000,000. The Fund is limited to borrowing up
to 33 1/3% of the value of the Fund's total assets. On December 31, 1998, the
Fund did not have loans outstanding.
For the period ended December 31, 1998, the average outstanding daily
balance of bank loans (based on the number of days the loans were
outstanding) for the Fund was $9,979,175 with a weighted average interest
rate of 6.33%. Interest expense for the Fund for the period ended December
31, 1998 was $253,985, and is included in "Other Expenses" on the Statement
of Operations.
NOTE 2-RELATED PARTIES
A I M Advisors, Inc. ("Manager") is the Fund's investment manager and
administrator. As of the close of business on May 29, 1998, Liechtenstein Global
Trust AG ("LGT"), the former indirect parent organization of Chancellor LGT
Asset Management, Inc. ("Chancellor LGT"), consummated a purchase agreement with
AMVESCAP PLC pursuant to which AMVESCAP PLC acquired LGT's Asset Management
Division, which included Chancellor LGT and certain other affiliates. As a
result of this transaction, Chancellor LGT was renamed INVESCO (NY), Inc., and
is now an indirect wholly-owned subsidiary of AMVESCAP PLC. In connection with
this transaction, A I M Advisors, Inc., an indirect wholly-owned subsidiary of
AMVESCAP PLC, became the investment manager and administrator of the Fund. Also
on May 29, 1998, A I M Distributors, Inc. ("AIM Distributors"), a wholly-owned
subsidiary of the Manager, became the Fund's distributor, and the Trust was
reorganized from a Massachusetts business trust into a Delaware business trust.
Finally, on September 4, 1998, A I M Fund Services, Inc. ("AFS"), a wholly-owned
subsidiary of the Manager, became the transfer agent of the Fund.
F-38
<PAGE> 450
The Fund pays investment management and administration fees to the Manager at
the annualized rate of 0.725% on the first $500 million of average daily net
assets of the Fund; 0.70% on the next $500 million; 0.675% on the next $500
million; and 0.65% on amounts thereafter.
AIM Distributors serves as the Fund's distributor. For the period ended May
29, 1998, GT Global, Inc. ("GT Global"), an affiliate of Chancellor LGT, served
as the Fund's distributor. The Fund offers Class A, Class B, and Advisor Class
shares for purchase.
Class A shares are subject to initial sales charges imposed at the time of
purchase, in accordance with the schedule included in the Fund's current
prospectus. AIM Distributors collects the sales charges imposed on sales of
Class A shares, and reallows a portion of such charges to dealers through which
the sales are made. For the year ended December 31, 1998, AIM Distributors and
GT Global retained the following sales charges: $4,819 and $17,303,
respectively. Purchases of Class A shares exceeding $1,000,000 may be subject to
a contingent deferred sales charge ("CDSC") upon redemption, in accordance with
the Fund's current prospectus. AIM Distributors also makes ongoing shareholder
servicing and trail commission payments to dealers whose clients hold Class A
shares.
Class B shares are not subject to initial sales charges. When Class B shares
are sold, AIM Distributors from its own resources pays commissions to dealers
through which the sales are made. Certain redemptions of Class B shares made
within six years of purchase are subject to CDSCs, in accordance with the Fund's
current prospectus. For the year ended December 31, 1998, AIM Distributors and
GT Global collected such CDSCs in the amount of: $191,592 and $770,735,
respectively. In addition, AIM Distributors makes ongoing shareholder servicing
and trail commission payments to dealers whose clients hold Class B shares.
For the period ended May 29, 1998, pursuant to the then effective separate
distribution plans adopted under the 1940 Act Rule 12b-1 by the Trust's Board of
Trustees with respect to the Fund's Class A shares ("Old Class A Plan") and
Class B shares ("Old Class B Plan"), the Fund reimbursed GT Global for a portion
of its shareholder servicing and distribution expenses. Under the Old Class A
Plan, the Fund was permitted to pay GT Global a service fee at the annualized
rate of up to 0.25% of the average daily net assets of the Fund's Class A shares
for GT Global's expenditures incurred in servicing and maintaining shareholder
accounts, and was permitted to pay GT Global a distribution fee at the
annualized rate of up to 0.35% of the average daily net assets of the Fund's
Class A shares, less any amounts paid by the Fund as the aforementioned service
fee, for GT Global's expenditures incurred in providing services as distributor.
All expenses for which GT Global was reimbursed under the Old Class A Plan would
have been incurred within one year of such reimbursement.
For the period ended May 29, 1998, pursuant to the Old Class B Plan, the Fund
was permitted to pay GT Global a service fee at the annualized rate of up to
0.25% of the average daily net assets of the Fund's Class B shares for GT
Global's expenditures incurred in servicing and maintaining shareholder
accounts, and was permitted to pay GT Global a distribution fee at the
annualized rate of up to 0.75% of the average daily net assets of the Fund's
Class B shares for GT Global's expenditures incurred in providing services as
distributor. Expenses incurred under the Old Class B Plan in excess of 1.00%
annually were permitted to be carried forward for reimbursement in subsequent
years as long as that Plan continued in effect.
Effective as of the close of business May 29, 1998, pursuant to Rule 12b-1
under the 1940 Act, the Trust's Board of Trustees adopted a Master Distribution
Plan applicable to the Fund's Class A shares ("Class A Plan") and Class B shares
("Class B Plan"), pursuant to which the Fund compensates AIM Distributors for
the purpose of financing any activity that is intended to result in the sale of
Class A or Class B shares of the Fund. Under the Class A Plan, the Fund
compensates AIM Distributors at the annualized rate of 0.35% of the average
daily net assets of each of the Fund's Class A shares.
Pursuant to the Class B Plan, the Fund compensates AIM Distributors at an
annualized rate of 1.00% of the average daily net assets of the Fund's Class B
shares.
The Class A Plan and the Class B Plan (together, the "Plans") are designed to
compensate AIM Distributors for certain promotional and other sales-related
costs, and to implement a dealer incentive program that provides for periodic
payments to selected dealers who furnish continuing personal shareholder
services to their customers who purchase and own Class A and Class B shares of
the Fund. Payments also can be directed by AIM Distributors to financial
institutions who have entered into service agreements with respect to Class A
and Class B shares of the Fund and who provide continuing personal services to
their customers who own Class A and Class B shares of the Fund. The service fees
payable to selected financial 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 that were purchased on or after a
prescribed date set forth in the Plans.
The Manager and AIM Distributors have undertaken to limit the Fund's expenses
(exclusive of brokerage commissions, taxes, interest, and extraordinary
expenses) to the annual rate of 1.75%, 2.40%, and 1.40% of the average daily net
assets of the Fund's Class A, Class B, and Advisor Class Shares, respectively.
This undertaking may be changed or eliminated in the future. If necessary, this
limitation will be effected by waivers by the Manager of investment management
and administration fees, waivers by AIM Distributors of payments under the Class
A Plan and/or Class B Plan and/or reimbursements by the Manager or AIM
Distributors of portions of the Fund's other operating expenses.
Effective as of the close of business September 4, 1998, the Fund, pursuant to
a transfer agency and service agreement, has agreed to pay A I M Fund Services,
Inc. ("AFS") an annualized fee of $24.85 for each shareholder accounts that are
open during any calendar month (this fee includes all out-of-pocket expenses),
and an annualized fee of $0.70 per shareholder account that is closed during any
calendar month. Both fees are billed by AFS monthly in arrears on a prorated
basis of 1/12 of the annualized fee for all such accounts.
For the period January 1, 1998 to September 4, 1998, GT Global Investor
Services, Inc., an affiliate of Chancellor LGT, was the transfer agent of the
Fund. For performing shareholder servicing, reporting, and general transfer
agent services, GT Services received an annual maintenance fee of $17.50 per
account, a new account fee of $4.00 per account, a per transaction fee of $1.75
for all transactions other than exchanges and a per exchange fee of $2.25. GT
Services was also reimbursed by the
F-39
<PAGE> 451
Fund for its out-of-pocket expenses for such items as postage, forms, telephone
charges, stationery and office supplies.
The Manager is the pricing and accounting agent for the Fund. The monthly fee
for these services to the Manager is a percentage, not to exceed 0.03% annually,
of the Fund's average daily net assets. The annual fee rate is derived based on
the aggregate net assets of the funds which comprise the following investment
companies: AIM Growth Series, AIM Investment Funds, AIM Series Trust, G.T.
Global Variable Investment Series and G.T. Global Variable Investment Trust. The
fee is calculated at the rate of 0.03% to the first $5 billion of assets and
0.02% to the assets in excess of $5 billion. An amount is allocated to and paid
by each such fund based on its relative average daily net assets.
The Trust pays each of its Trustees who is not an employee, officer or
director of the Manager, AIM Distributors or AFS $5,000 per year plus $300 for
each meeting of the board or any committee thereof attended by the Trustee.
At December 31, 1998, all of the shares of beneficial interest were owned
either by the Fund or Invesco (NY), Inc.
NOTE 3-PURCHASES AND SALES OF SECURITIES
The aggregate amount of investment securities (other than short-term
securities) purchased and sold by the Fund during the year ended December 31,
1998 was $710,371,237 and $898,879,718, respectively.
The amount of unrealized appreciation (depreciation) of investment securities,
on a tax basis, as of December 31, 1998 is as follows:
<TABLE>
<S> <C>
Aggregate unrealized appreciation of investment
securities $70,168,213
- ---------------------------------------------------------------
Aggregate unrealized (depreciation) of investment
securities (8,497,878)
- ---------------------------------------------------------------
Net unrealized appreciation of investment
securities $61,670,335
===============================================================
Cost of investments is the same for tax and
financial statement purposes.
</TABLE>
NOTE 4-CALL OPTIONS CONTRACTS WRITTEN
Transactions in call options written during the year ended December 31, 1998 are
summarized as follows:
<TABLE>
<CAPTION>
CALL OPTION CONTRACTS
----------------------
NUMBER OF PREMIUMS
CONTRACTS RECEIVED
--------- ----------
<S> <C> <C>
Beginning of period -- --
- -----------------------------------------------------------------
Written 11,068 $2,262,028
- -----------------------------------------------------------------
End of period 11,068 $2,262,028
=================================================================
</TABLE>
Open call option contracts written at December 31, 1998 were as follows:
<TABLE>
<CAPTION>
DECEMBER 31,
NUMBER 1998 UNREALIZED
CONTRACT STRIKE OF PREMIUMS MARKET APPRECIATION
ISSUER MONTH PRICE CONTRACTS RECEIVED VALUE (DEPRECIATION)
- ------ -------- ------ --------- -------- ------------ --------------
<S> <C> <C> <C> <C> <C> <C>
Cablevision Systems
Corp. Jan 99 45 1230 $ 371,546 $ 691,875 $ (320,329)
- -------------------------------------------------------------------------------------------------
Outdoor Systems, Inc. Jan 99 25 7010 1,699,675 3,548,812 (1,849,137)
- -------------------------------------------------------------------------------------------------
U S Foodservice, Inc. Jan 99 50 2828 190,807 106,050 84,757
- -------------------------------------------------------------------------------------------------
$2,262,028 $4,346,737 $(2,084,709)
=================================================================================================
</TABLE>
NOTE 5-SHARE INFORMATION
Changes in the Fund's shares outstanding during the years ended December 31,
1998 and 1997 were as follows:
<TABLE>
<CAPTION>
1998 1997
--------------------------- ---------------------------
SHARES AMOUNT SHARES AMOUNT
----------- ------------- ----------- -------------
<S> <C> <C> <C> <C>
Sold:
Class A 23,952,734 $ 505,999,810 24,801,099 $ 522,081,212
- --------------------------------------------------------------------------------
Class B 5,833,056 120,542,669 9,218,434 190,231,954
- --------------------------------------------------------------------------------
Advisor Class 887,277 18,970,978 1,056,271 23,267,932
- --------------------------------------------------------------------------------
Issued as
reinvestment of
dividends:
Class A 448,265 7,998,160 1,170,749 23,490,213
- --------------------------------------------------------------------------------
Class B 471,450 8,052,203 1,240,395 24,063,873
- --------------------------------------------------------------------------------
Advisor Class 2,579 46,305 5,993 120,751
- --------------------------------------------------------------------------------
Reacquired:
Class A (27,068,413) (573,338,009) (30,338,852) (637,412,658)
- --------------------------------------------------------------------------------
Class B (9,774,765) (198,229,942) (14,376,532) (293,260,545)
- --------------------------------------------------------------------------------
Advisor Class (896,015) (18,946,814) (1,103,923) (24,248,785)
- --------------------------------------------------------------------------------
(6,143,832) $(128,904,640) (8,326,366) $(171,666,053)
================================================================================
</TABLE>
NOTE 6-EXPENSE REDUCTIONS
The Manager has directed certain portfolio trades to brokers who then paid a
portion of the Fund's expenses. For the year ended December 31, 1998, the
expenses of the Fund were reduced by $46,733 under these arrangements.
F-40
<PAGE> 452
NOTE 7-FINANCIAL HIGHLIGHTS
Shown below are the financial highlights for a share of Class A and Class B
outstanding during each of the years in the five-year period ended December 31,
1998 and for a share of Advisor Class capital stock outstanding during each of
the years in three-year period ended December 31, 1998 and the period June 1,
1995 (date operations commenced) through December 31, 1995.
<TABLE>
<CAPTION>
Class A
----------------------------------------------------
1998(a) 1997 1996 1995 1994
-------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of period $ 21.01 $ 20.77 $ 19.07 $ 17.69 $ 17.17
- ------------------------------------------------------------ -------- -------- -------- -------- --------
Income from investment operations:
Net investment income (0.24)(b) (0.20) 0.03 0.24 0.04(b)
- ------------------------------------------------------------ -------- -------- -------- -------- --------
Net gains (losses) on securities (both realized and
unrealized) (0.81) 3.00 2.96 3.93 2.55
- ------------------------------------------------------------ -------- -------- -------- -------- --------
Total from investment operations (1.05) 2.80 2.99 4.17 2.59
- ------------------------------------------------------------ -------- -------- -------- -------- --------
Less distributions:
Dividends from net investment income -- -- -- (0.21) (0.02)
- ------------------------------------------------------------ -------- -------- -------- -------- --------
Distributions from net realized gains (0.99) (2.56) (1.29) (2.58) (2.05)
- ------------------------------------------------------------ -------- -------- -------- -------- --------
Total distributions (0.99) (2.56) (1.29) (2.79) (2.07)
- ------------------------------------------------------------ -------- -------- -------- -------- --------
Net asset value, end of period $ 18.97 $ 21.01 $ 20.77 $ 19.07 $ 17.69
============================================================ ======== ======== ======== ======== ========
Total Return(C) (4.71)% 14.05% 15.65% 23.23% 15.69%
============================================================ ======== ======== ======== ======== ========
Ratios/supplemental data:
Net assets, end of period (000s omitted) $180,258 $255,674 $343,427 $396,291 $196,937
============================================================ ======== ======== ======== ======== ========
Ratio of expenses to average net assets:
With expense reductions and/or reimbursement 1.56%(d) 1.37% 1.36% 1.46% 1.58%
============================================================ ======== ======== ======== ======== ========
Without expense reductions and/or reimbursement 1.57%(d) 1.48% 1.41% -- --
============================================================ ======== ======== ======== ======== ========
Ratio of net investment income to average net assets
With expense reductions and/or reimbursement (1.09)%(d) (0.90)% 0.12% 1.24% 0.17%
============================================================ ======== ======== ======== ======== ========
Without expense reductions and/or reimbursement (1.10)%(d) (1.01)% 0.07% -- --
============================================================ ======== ======== ======== ======== ========
Portfolio turnover rate(e) 168% 190% 253% 71% 102%
============================================================ ======== ======== ======== ======== ========
</TABLE>
(a) The Fund changed investment advisors on May 29, 1998.
(b) Calculated using average shares outstanding.
(c) Does not deduct sales charges and is not annualized for periods less than
one year.
(d) Ratios are based on average net assets of $216,642,403.
(e) Portfolio turnover rates are calculated on the basis of the Fund as a whole
without distinguishing between the classes of shares issued.
<TABLE>
<CAPTION>
Class B Advisor Class
--------------------------------------------------- ----------------------------------
1998(a) 1997 1996 1995 1994(a) 1998(a) 1997 1996 1995
-------- -------- -------- -------- ------- ------- ------ ------ ------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of period $ 20.31 $ 20.28 $ 18.77 $ 17.50 $ 17.09 $21.10 $20.76 $19.05 $20.61
- -------------------------------------- -------- -------- -------- -------- ------- ------ ------ ------ ------
Income from investment operations:
Net investment income (0.38)(b) (0.34) (0.11) 0.10 (0.09) (0.17)(b) (0.15) 0.09 0.21
- -------------------------------------- -------- -------- -------- -------- ------- ------ ------ ------ ------
Net gains (losses) on securities
(both realized and unrealized) (0.78) 2.93 2.91 3.87 2.55 (0.86) 3.05 2.91 1.09
- -------------------------------------- -------- -------- -------- -------- ------- ------ ------ ------ ------
Total from investment operations (1.16) 2.59 2.80 3.97 2.46 (1.03) 2.90 3.00 1.30
- -------------------------------------- -------- -------- -------- -------- ------- ------ ------ ------ ------
Less distributions:
Dividends from net investment income -- -- -- (0.12) -- -- -- -- (0.28)
- -------------------------------------- -------- -------- -------- -------- ------- ------ ------ ------ ------
Distributions from net realized
gains (0.99) (2.56) (1.29) (2.58) (2.05) (0.99) (2.56) (1.29) (2.58)
- -------------------------------------- -------- -------- -------- -------- ------- ------ ------ ------ ------
Total distributions (0.99) (2.56) (1.29) (2.70) (2.05) (0.99) (2.56) (1.29) (2.86)
- -------------------------------------- -------- -------- -------- -------- ------- ------ ------ ------ ------
Net asset value, end of period $ 18.16 $ 20.31 $ 20.28 $ 18.77 $ 17.50 $19.08 $21.10 $20.76 $19.05
====================================== ======== ======== ======== ======== ======= ====== ====== ====== ======
Total Return(c) (5.41)% 13.35% 14.82% 22.42% 15.06% (4.59)% 14.54% 15.72% 6.01%
====================================== ======== ======== ======== ======== ======= ====== ====== ====== ======
Ratios/supplemental data:
Net assets, end of period (000s
omitted) $165,447 $255,468 $334,590 $348,435 $80,060 $913 $1,140 $1,986 $1,394
====================================== ======== ======== ======== ======== ======= ====== ====== ====== ======
Ratio of expenses to average net
assets:
With expense reductions and/or
reimbursement 2.21%(d) 2.02% 2.01% 2.11% 2.23% 1.21%(d) 1.02% 1.01% 1.11%(e)
====================================== ======== ======== ======== ======== ======= ====== ====== ====== ======
Without expense reductions and/or
reimbursement 2.22%(d) 2.13% 2.06% -- -- 1.22%(d) 1.13% 1.06% --
====================================== ======== ======== ======== ======== ======= ====== ====== ====== ======
Ratio of net investment income to
average net assets
With expense reductions and/or
reimbursement (1.74)%(d) (1.55)% (0.53)% 0.59% (0.48)% (0.74)%(d) 0.55% 0.47% 1.59%(e)
====================================== ======== ======== ======== ======== ======= ====== ====== ====== ======
Without expense reductions and/or
reimbursement (1.75)%(d) (1.66)% (0.58)% -- -- (0.75)%(d)(0.66)% 0.42% --
====================================== ======== ======== ======== ======== ======= ====== ====== ====== ======
Portfolio turnover rate(f) 168% 190% 253% 71% 102% 168% 190% 253% 71%
====================================== ======== ======== ======== ======== ======= ====== ====== ====== ======
</TABLE>
(a) The Fund changed investment advisors on May 29, 1998.
(b) Calculated using average shares outstanding.
(c) Does not deduct contingent deferred sales charges and is not annualized for
periods less than one year.
(d) Ratios are based on average net assets of $214,825,194 and $1,120,683 for
Class B and Advisor Class, respectively.
(e) Annualized.
(f) Portfolio turnover rates are calculated on the basis of the Fund as a whole
without distinguishing between the classes of shares issued.
FS-41
<PAGE> 453
REPORT OF
INDEPENDENT ACCOUNTANTS
- --------------------------------------------------------------------------------
To the Shareholders of AIM New Pacific Growth Fund (formerly GT Global New
Pacific Growth Fund) and Board of Trustees of AIM Growth Series (formerly GT
Global Growth Series):
In our opinion, the accompanying statement of assets and liabilities, including
the portfolio of investments, and the related statements of operations and of
changes in net assets and the financial highlights present fairly, in all
material respects, the financial position of the AIM New Pacific Growth Fund at
December 31, 1998, and the results of its operations, the changes in its net
assets and the financial highlights for the periods indicated, in conformity
with generally accepted accounting principles. These financial statements and
financial highlights (hereafter referred to as "financial statements") are the
responsibility of the Fund's management; our responsibility is to express an
opinion on these financial statements based on our audits. We conducted our
audits of these financial statements in accordance with generally accepted
auditing standards which require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements, assessing the
accounting principles used and significant estimates made by management, and
evaluating the overall financial statement presentation. We believe that our
audits, which included confirmation of securities at December 31, 1998 by
correspondence with the custodian and brokers, provide a reasonable basis for
the opinion expressed above.
/s/ PRICEWATERHOUSECOOPERS LLP
PRICEWATERHOUSECOOPERS LLP
BOSTON, MASSACHUSETTS
FEBRUARY 19, 1999
FS-42
<PAGE> 454
PORTFOLIO OF INVESTMENTS
December 31, 1998
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
VALUE % OF NET
EQUITY INVESTMENTS COUNTRY SHARES (NOTE 1) ASSETS
- ------------------------------------------------------------- -------- ----------- ------------ -------------
<S> <C> <C> <C> <C>
Finance (30.2%)
National Australia Bank Ltd. .............................. AUSL 371,750 $ 5,599,513 4.9
BANKS-MONEY CENTER
Samsung Fire & Marine Insurance ........................... KOR 10,500 3,937,500 3.4
INSURANCE - MULTI-LINE
Australia & New Zealand Banking Group Ltd. ................ AUSL 574,750 3,758,500 3.3
BANKS-REGIONAL
AMP Ltd.-/- ............................................... AUSL 285,150 3,609,801 3.2
INSURANCE-LIFE
HSBC Holdings PLC ......................................... HK 115,021 2,865,466 2.5
BANKS-MONEY CENTER
Lend Lease Corp., Ltd. .................................... AUSL 210,000 2,828,827 2.5
REAL ESTATE
Overseas-Chinese Banking Corp., Ltd. - Foreign ............ SING 400,000 2,715,975 2.4
BANKS-REGIONAL
Development Bank of Singapore - Foreign ................... SING 300,000 2,709,912 2.4
BANKS-MONEY CENTER
Cathay Life Insurance Co., Ltd. ........................... TWN 700,000 2,262,978 2.0
INSURANCE-LIFE
Hang Seng Bank ............................................ HK 220,000 1,966,542 1.7
BANKS-MONEY CENTER
DBS Land Ltd. ............................................. SING 800,000 1,178,539 1.0
REAL ESTATE
First Commercial Bank ..................................... TWN 700,000 979,173 0.9
BANKS-MONEY CENTER
------------
34,412,726
------------
Services (23.0%)
Telstra Corporation Ltd.-/- ............................... AUSL 1,060,800 4,955,898 4.3
TELEPHONE - REGIONAL/LOCAL
Brambles Industries Ltd. .................................. AUSL 158,050 3,846,768 3.4
BUSINESS & PUBLIC SERVICES
Singapore Press Holdings Ltd. ............................. SING 310,816 3,297,533 2.9
BROADCASTING & PUBLISHING
News Corp., Ltd. Preferred ................................ AUSL 535,350 3,255,003 2.8
BROADCASTING & PUBLISHING
Hong Kong Telecommunications Ltd. ......................... HK 1,300,200 2,274,104 2.0
TELEPHONE NETWORKS
TABCORP Holdings Ltd. ..................................... AUSL 358,600 2,195,708 1.9
LEISURE & TOURISM
Telecom Corporation of New Zealand Ltd. ................... NZ 431,200 1,870,481 1.6
TELEPHONE NETWORKS
Philippine Long Distance Telephone Co. .................... PHIL 60,290 1,555,871 1.4
TELEPHONE - LONG DISTANCE
Telekom Malaysia Bhd.{F} .................................. MAL 367,750 806,469 0.7
TELEPHONE NETWORKS
Woolworths Ltd. ........................................... AUSL 234,550 797,925 0.7
RETAILERS-OTHER
Cable & Wireless Optus Ltd.-/- ............................ AUSL 330,500 694,113 0.6
WIRELESS COMMUNICATIONS
</TABLE>
The accompanying notes are an integral part of the financial statements.
F-43
<PAGE> 455
PORTFOLIO OF INVESTMENTS (cont'd)
December 31, 1998
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
VALUE % OF NET
EQUITY INVESTMENTS COUNTRY SHARES (NOTE 1) ASSETS
- ------------------------------------------------------------- -------- ----------- ------------ -------------
<S> <C> <C> <C> <C>
Services (Continued)
Malaysia International Shipping Bhd. - Foreign{F} ......... MAL 458,000 $ 502,193 0.4
TRANSPORTATION - SHIPPING
Berjaya Sports Toto Bhd.{F} ............................... MAL 300,000 311,842 0.3
LEISURE & TOURISM
------------
26,363,908
------------
Consumer Durables (11.1%)
Cheung Kong (Holdings) Ltd. ............................... HK 950,000 6,836,429 6.0
HOUSING
Samsung Electronics ....................................... KOR 32,000 2,152,000 1.9
CONSUMER ELECTRONICS
City Developments Ltd. .................................... SING 300,000 1,300,394 1.1
HOUSING
New World Development Co., Ltd. ........................... HK 500,000 1,258,535 1.1
HOUSING
Sun Hung Kai Properties Ltd. .............................. HK 150,000 1,093,958 1.0
HOUSING
------------
12,641,316
------------
Multi-Industry/Miscellaneous (9.6%)
Hutchison Whampoa ......................................... HK 1,000,000 7,067,161 6.2
MULTI-INDUSTRY
Shanghai Industrial Holdings Ltd. ......................... HK 800,000 1,616,089 1.4
MULTI-INDUSTRY
China Development Corp. ................................... TWN 744,500 1,365,418 1.2
CONGLOMERATE
PT Telekomunikasi Indonesia ............................... INDO 2,500,000 865,385 0.8
MULTI-INDUSTRY
------------
10,914,053
------------
Energy (8.7%)
CLP Holdings Ltd. ......................................... HK 700,000 3,487,757 3.0
ELECTRICAL & GAS UTILITIES
Manila Electric Co. "B" ................................... PHIL 430,000 1,387,097 1.2
ELECTRICAL & GAS UTILITIES
Hong Kong Electric Holdings Ltd. .......................... HK 400,000 1,213,357 1.1
ELECTRICAL & GAS UTILITIES
Electricity Generating Public Co., Ltd. - Foreign-/- ...... THAI 400,900 1,090,847 0.9
ELECTRICAL & GAS UTILITIES
PTT Exploration and Production Public Co., Ltd. -
Foreign-/- ............................................... THAI 140,600 994,298 0.9
OIL
Santos Ltd. ............................................... AUSL 327,200 877,509 0.8
OIL
Korea Electric Power Corp. ................................ KOR 35,000 869,167 0.8
ELECTRICAL & GAS UTILITIES
------------
9,920,032
------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
FS-44
<PAGE> 456
PORTFOLIO OF INVESTMENTS (cont'd)
December 31, 1998
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
VALUE % OF NET
EQUITY INVESTMENTS COUNTRY SHARES (NOTE 1) ASSETS
- ------------------------------------------------------------- -------- ----------- ------------ -------------
<S> <C> <C> <C> <C>
Technology (5.7%)
LG Information & Communication ............................ KOR 85,562 $ 2,303,044 2.0
TELECOM TECHNOLOGY
Compeq Manufacturing Co., Ltd.-/- ......................... TWN 207,200 1,359,005 1.2
COMPUTERS & PERIPHERALS
Taiwan Semiconductor Manufacturing Co.-/- ................. TWN 550,000 1,213,864 1.1
SEMICONDUCTORS
Asustek Computer, Inc.-/- ................................. TWN 90,000 842,089 0.7
COMPUTERS & PERIPHERALS
Compal Electronics, Inc.-/- ............................... TWN 250,000 815,978 0.7
COMPUTERS & PERIPHERALS
------------
6,533,980
------------
Materials/Basic Industry (5.2%)
Broken Hill Proprietary Co., Ltd. ......................... AUSL 230,000 1,692,624 1.5
MISC. MATERIALS & COMMODITIES
Rio Tinto Ltd. ............................................ AUSL 116,000 1,374,724 1.2
MISC. MATERIALS & COMMODITIES
Western Mining Corporation Holdings Ltd. .................. AUSL 366,300 1,103,485 1.0
METALS - NON-FERROUS
North Ltd. ................................................ AUSL 661,000 1,076,583 0.9
METALS - STEEL
Hansol Paper Co. .......................................... KOR 57,000 650,750 0.6
PAPER/PACKAGING
------------
5,898,166
------------
Capital Goods (4.4%)
Samsung Display Devices Co. ............................... KOR 45,000 2,223,750 1.9
ELECTRICAL PLANT/EQUIPMENT
Singapore Technologies Engineering Ltd. ................... SING 1,800,000 1,680,509 1.5
AEROSPACE/DEFENSE
Cheung Kong Infrastructure Holdings ....................... HK 500,000 1,116,547 1.0
CONSTRUCTION
------------
5,020,806
------------
Consumer Non-Durables (2.9%)
Foster's Brewing Group Ltd. ............................... AUSL 1,209,371 3,273,001 2.9
BEVERAGES - ALCOHOLIC
------------ -----
TOTAL EQUITY INVESTMENTS (cost $112,323,801) ................ 114,977,988 100.8
------------ -----
<CAPTION>
NO. OF VALUE % OF NET
WARRANTS COUNTRY WARRANTS (NOTE 1) ASSETS
- ------------------------------------------------------------- -------- ----------- ------------ -------------
<S> <C> <C> <C> <C>
Merrill Lynch - Kospi 300 Call Warrants, due 3/11/99
Performance linked to equity securities. Redemption amount
100% of the final closing price of the Korean Kospi 300
Index converted to the prevailing foreign exchange rate.
(cost $1,560,001){\/} .................................... KOR 626,456 3,323,850 2.9
------------ -----
INVESTMENT MANAGEMENT
<CAPTION>
NO. OF VALUE % OF NET
RIGHTS COUNTRY RIGHTS (NOTE 1) ASSETS
- ------------------------------------------------------------- -------- ----------- ------------ -------------
<S> <C> <C> <C> <C>
Samsung Fire & Marine Insurance Rights, expire 1/13/99 .... KOR 2,137 $ 411,729 0.4
INSURANCE - MULTI-LINE
</TABLE>
The accompanying notes are an integral part of the financial statements.
FS-45
<PAGE> 457
PORTFOLIO OF INVESTMENTS (cont'd)
December 31, 1998
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
NO. OF VALUE % OF NET
RIGHTS COUNTRY RIGHTS (NOTE 1) ASSETS
- ------------------------------------------------------------- -------- ----------- ------------ -------------
<S> <C> <C> <C> <C>
Compal Electronics, Inc. Rights, expire 1/21/99 ........... TWN 250,000 389 --
COMPUTERS & PERIPHERALS
------------ -----
TOTAL RIGHTS (cost $0) ...................................... 412,118 0.4
------------ -----
<CAPTION>
VALUE % OF NET
REPURCHASE AGREEMENT (NOTE 1) ASSETS
- ------------------------------------------------------------- ------------ -------------
<S> <C> <C> <C> <C>
Dated December 31, 1998, with State Street Bank & Trust
Co., due January 4, 1999, for an effective yield of 4.50%,
collateralized by $2,730,000 U.S. Treasury Notes, 6.25%
due 4/30/01 (market value of collateral is $2,852,850,
including accrued interest). (cost $2,796,000) ........... 2,796,000 2.4
------------ -----
TOTAL INVESTMENTS (cost $116,679,802) * .................... 121,509,956 106.5
Other Assets and Liabilities ................................ (7,446,371) (6.5)
------------ -----
NET ASSETS .................................................. $114,063,585 100.0
------------ -----
------------ -----
</TABLE>
- --------------
-/- Non-income producing security.
{\/} U.S. currency denominated.
{F} Security considered illiquid due to currency and capital controls
mandated by the Malaysian government.
* For Federal income tax purposes, cost is $117,549,663 and
appreciation (depreciation) is as follows:
<TABLE>
<S> <C>
Unrealized appreciation: $ 12,087,878
Unrealized depreciation: (8,127,585)
-------------
Net unrealized appreciation: $ 3,960,293
-------------
-------------
</TABLE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
The Fund's Portfolio of Investments at December 31, 1998, was concentrated in
the following countries:
<TABLE>
<CAPTION>
PERCENTAGE OF NET ASSETS {D}
-------------------------------------------
FIXED INCOME,
RIGHTS & SHORT-TERM
COUNTRY (COUNTRY CODE/CURRENCY CODE) EQUITY WARRANTS & OTHER TOTAL
- -------------------------------------- ------ ------------- ---------- -----
<S> <C> <C> <C> <C>
Australia (AUSL/AUD) ................. 35.9 35.9
Hong Kong (HK/HKD) ................... 27.0 27.0
Indonesia (INDO/IDR) ................. 0.8 0.8
Korea (KOR/KRW) ...................... 10.6 3.3 13.9
Malaysia (MAL/MYR) ................... 1.4 1.4
New Zealand (NZ/NZD) ................. 1.6 1.6
Philippines (PHIL/PHP) ............... 2.6 2.6
Singapore (SING/SGD) ................. 11.3 11.3
Taiwan (TWN/TWD) ..................... 7.8 7.8
Thailand (THAI/THB) .................. 1.8 1.8
United States (US/USD) ............... (4.1) (4.1)
------ --- --- -----
Total ............................... 100.8 3.3 (4.1) 100.0
------ --- --- -----
------ --- --- -----
</TABLE>
- --------------
{d} Percentages indicated are based on net assets of $114,063,585.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
FORWARD FOREIGN CURRENCY CONTRACT OUTSTANDING
DECEMBER 31, 1998
<TABLE>
<CAPTION>
MARKET VALUE
(U.S. CONTRACT DELIVERY UNREALIZED
CONTRACT TO SELL: DOLLARS) PRICE DATE DEPRECIATION
- ---------------------------------------- ------------ -------- -------- -------------
<S> <C> <C> <C> <C>
Singapore Dollars....................... 3,166,553 1.64240 2/12/99 $ (455)
------------ -------------
Total Contract to Sell (Receivable
amount $3,166,098)................... 3,166,553 (455)
------------ -------------
THE VALUE OF CONTRACT TO SELL AS
PERCENTAGE OF NET ASSETS IS 2.78%
Total Open Forward Foreign Currency
Contract............................. $ (455)
-------------
-------------
</TABLE>
- ----------------
See Note 1 of Notes to Financial Statements.
The accompanying notes are an integral part of the financial statements.
FS-46
<PAGE> 458
STATEMENT OF ASSETS
AND LIABILITIES
December 31, 1998
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C>
Assets:
Investments in securities, at value (cost $116,679,802) (Note 1)............................ $121,509,956
U.S. currency.................................................................... $ 556
Foreign currencies (cost $922,547)............................................... 934,105 934,661
---------
Receivable from A I M Advisors, Inc......................................................... 497,914
Receivable for Fund shares sold............................................................. 158,884
Dividends receivable........................................................................ 93,264
Receivable for securities sold.............................................................. 93,230
Miscellaneous and interest receivable....................................................... 6,795
-----------
Total assets.............................................................................. 123,294,704
-----------
Liabilities:
Payable for Fund shares repurchased......................................................... 8,033,717
Payable for investment management and administration fees (Note 2).......................... 902,957
Payable for service and distribution expenses (Note 2)...................................... 124,251
Payable for transfer agent fees (Note 2).................................................... 58,789
Payable for custodian fees.................................................................. 33,539
Payable for professional fees............................................................... 25,912
Payable for printing and postage expenses................................................... 14,419
Payable for registration and filing fees.................................................... 4,970
Payable for Trustees' fees and expenses (Note 2)............................................ 3,618
Payable for fund accounting fees (Note 2)................................................... 3,020
Payable for open forward foreign currency contract (Note 1)................................. 455
Other accrued expenses...................................................................... 25,472
-----------
Total liabilities......................................................................... 9,231,119
-----------
Net assets.................................................................................... $114,063,585
-----------
-----------
Class A:
Net asset value and redemption price per share ($80,824,489 DIVIDED BY 15,576,633 shares
outstanding)................................................................................. $ 5.19
-----------
-----------
Maximum offering price per share (100/94.50 of $5.19) *....................................... $ 5.49
-----------
-----------
Class B:+
Net asset value and offering price per share ($31,836,790 DIVIDED BY 6,318,490 shares
outstanding)................................................................................. $ 5.04
-----------
-----------
Advisor Class:
Net asset value, offering price per share, and redemption price per share ($1,402,306 DIVIDED
BY 270,869 shares outstanding)............................................................... $ 5.18
-----------
-----------
Net assets consist of:
Paid in capital (Note 4).................................................................... $196,845,058
Accumulated net investment loss............................................................. (22,386)
Accumulated net realized loss on investments and foreign currency transactions.............. (87,598,203)
Net unrealized appreciation on translation of assets and liabilities in foreign
currencies................................................................................. 8,962
Net unrealized appreciation of investments.................................................. 4,830,154
-----------
Total -- representing net assets applicable to capital shares outstanding..................... $114,063,585
-----------
-----------
<FN>
- --------------
* On sales of $25,000 or more, the offering price is reduced.
+ Redemption price per share is equal to the net asset value per share less
any applicable contingent deferred sales charge.
</TABLE>
The accompanying notes are an integral part of the financial statements.
FS-47
<PAGE> 459
STATEMENT OF OPERATIONS
Year ended December 31, 1998
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C>
Investment income: (Note 1)
Dividend income (net of foreign withholding tax of $122,214).............................. $ 3,912,604
Interest income........................................................................... 696,245
Securities lending income................................................................. 308,990
-----------
Total investment income................................................................. 4,917,839
-----------
Expenses:
Investment management and administration fees (Note 2).................................... 1,447,661
Transfer agent fees (Note 2).............................................................. 884,800
Service and distribution expenses: (Note 2)
Class A.................................................................... $ 370,817
Class B.................................................................... 410,888 781,705
-----------
Printing and postage expenses............................................................. 218,595
Custodian fees............................................................................ 126,500
Registration and filing fees.............................................................. 121,000
Professional fees......................................................................... 85,489
Fund accounting fees (Note 2)............................................................. 40,387
Trustees' fees and expenses (Note 2)...................................................... 13,140
Other expenses (Note 1)................................................................... 113,073
-----------
Total expenses before reductions........................................................ 3,832,350
-----------
Expenses reimbursed by A I M Advisors, Inc. (Note 2).................................. (497,914)
Expense reductions (Note 5)........................................................... (88,368)
-----------
Total net expenses...................................................................... 3,246,068
-----------
Net investment income....................................................................... 1,671,771
-----------
Net realized and unrealized gain (loss) on investments and foreign currencies:
(Note 1)
Net realized loss on investments............................................. (42,030,213)
Net realized gain on foreign currency transactions........................... 1,956,431
-----------
Net realized loss during the year....................................................... (40,073,782)
Net change in unrealized appreciation on translation of assets and
liabilities in foreign currencies........................................... (1,281,283)
Net change in unrealized appreciation of investments......................... 24,192,659
-----------
Net unrealized appreciation during the year............................................. 22,911,376
-----------
Net realized and unrealized loss on investments and foreign currencies...................... (17,162,406)
-----------
Net decrease in net assets resulting from operations........................................ $(15,490,635)
-----------
-----------
</TABLE>
The accompanying notes are an integral part of the financial statements.
FS-48
<PAGE> 460
STATEMENTS OF CHANGES IN NET ASSETS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
YEAR ENDED YEAR ENDED
DECEMBER 31, DECEMBER 31,
1998 1997
------------- -------------
<S> <C> <C>
Decrease in net assets
Operations:
Net investment income.................................................... $ 1,671,771 $ 864,307
Net realized loss on investments and foreign currency transactions....... (40,073,782) (48,653,550)
Net change in unrealized appreciation (depreciation) on translation of
assets and liabilities in foreign currencies............................ (1,281,283) 1,286,651
Net change in unrealized appreciation (depreciation) of investments...... 24,192,659 (113,591,619)
------------- -------------
Net decrease in net assets resulting from operations................... (15,490,635) (160,094,211)
------------- -------------
Class A:
Distributions to shareholders: (Note 1)
From net investment income............................................... (863,346) (427,042)
From net realized gain on investments.................................... -- (15,152,919)
In excess of net investment income....................................... (13,453) --
Class B:
Distributions to shareholders: (Note 1)
From net investment income............................................... (87,694) --
From net realized gain on investments.................................... -- (6,636,532)
In excess of net investment income....................................... (1,367) --
Advisor Class:
Distributions to shareholders: (Note 1)
From net investment income............................................... (19,467) (13,447)
From net realized gain on investments.................................... -- (179,887)
In excess of net investment income....................................... (303) --
------------- -------------
Total distributions.................................................... (985,630) (22,409,827)
------------- -------------
Capital share transactions: (Note 4)
Increase from capital shares sold and reinvested......................... 1,358,431,721 1,697,761,633
Decrease from capital shares repurchased................................. (1,421,007,158) (1,836,766,167)
------------- -------------
Net decrease from capital share transactions........................... (62,575,437) (139,004,534)
------------- -------------
Total decrease in net assets............................................... (79,051,702) (321,508,572)
Net assets:
Beginning of year........................................................ 193,115,287 514,623,859
------------- -------------
End of year *............................................................ $ 114,063,585 $ 193,115,287
------------- -------------
------------- -------------
* Includes accumulated net investment loss................................ $ (22,386) $ --
------------- -------------
------------- -------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
FS-49
<PAGE> 461
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
Contained below is per share operating performance data for a share outstanding
throughout the period, total investment return, ratios and supplemental data.
This information has been derived from information provided in the financial
statements.
<TABLE>
<CAPTION>
CLASS A
-----------------------------------------------------------
YEAR ENDED DECEMBER 31,
-----------------------------------------------------------
1998 (d) 1997 (d) 1996 (d) 1995 (d) 1994
----------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C>
Per Share Operating Performance:
Net asset value, beginning of period.... $ 6.48 $ 13.12 $ 12.47 $ 12.10 $ 15.86
----------- ---------- ---------- ---------- ----------
Income from investment operations:
Net investment income (loss).......... 0.06* 0.05 0.02 0.11 0.02
Net realized and unrealized gain
(loss) on investments................ (1.30) (5.84) 2.44 0.79 (3.15)
----------- ---------- ---------- ---------- ----------
Net increase (decrease) from
investment operations.............. (1.24) (5.79) 2.46 0.90 (3.13)
----------- ---------- ---------- ---------- ----------
Distributions to shareholders:
From net investment income............ (0.05) (0.03) -- (0.10) (0.01)
From net realized gain on
investments.......................... -- (0.82) (1.81) (0.43) (0.55)
In excess of net investment income.... -- -- -- -- --
In excess of net realized gain on
investments.......................... -- -- -- -- (0.07)
----------- ---------- ---------- ---------- ----------
Total distributions................. (0.05) (0.85) (1.81) (0.53) (0.63)
----------- ---------- ---------- ---------- ----------
Net asset value, end of period.......... $ 5.19 $ 6.48 $ 13.12 $ 12.47 $ 12.10
----------- ---------- ---------- ---------- ----------
----------- ---------- ---------- ---------- ----------
Total investment return (c)............. (19.09)% (44.24)% 20.04% 7.45% (19.73)%
Ratios and supplemental data:
Net assets, end of period (in 000's).... $ 80,824 $ 135,807 $ 361,244 $ 383,722 $ 404,680
Ratio of net investment income (loss) to
average net assets..................... 1.30% 0.41% 0.17% 0.91% 0.11%
Ratio of expenses to average net assets:
With expense reductions and/or
reimbursement (Notes 2 & 5).......... 2.00% 1.66% 1.86% 1.89% 1.81%
Without expense reductions and/or
reimbursement........................ 2.40% 1.93% 1.99% 1.94% N/A
Portfolio turnover rate++............... 96% 80% 93% 63% 87%
</TABLE>
- ----------------
(a) Annualized
(b) Not annualized
(c) Total investment return does not include sales charges.
(d) These selected per share data were calculated based upon average
shares outstanding during the period.
* Includes reimbursement of Fund operating expenses per share of $0.02.
+ Commencing June 1, 1995, the Fund began offering Advisor Class shares.
++ Portfolio turnover is calculated on the basis of the Fund as a whole
without distinguishing between the classes of shares issued.
N/A Not Applicable.
The accompanying notes are an integral part of the financial statements.
FS-50
<PAGE> 462
FINANCIAL HIGHLIGHTS (cont'd)
- --------------------------------------------------------------------------------
Contained below is per share operating performance data for a share outstanding
throughout the period, total investment return, ratios and supplemental data.
This information has been derived from information provided in the financial
statements.
<TABLE>
<CAPTION>
CLASS B
------------------------------------------------------------
YEAR ENDED DECEMBER 31,
------------------------------------------------------------
1998 (d) 1997 (d) 1996 (d) 1995 (d) 1994
----------- ----------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C>
Per Share Operating Performance:
Net asset value, beginning of period.... $ 6.28 $ 12.80 $ 12.29 $ 11.96 $ 15.79
----------- ----------- ---------- ---------- ----------
Income from investment operations:
Net investment income (loss).......... 0.03* (0.03) (0.06) 0.03 (0.06)
Net realized and unrealized gain
(loss) on investments................ (1.26) (5.67) 2.38 0.75 (3.15)
----------- ----------- ---------- ---------- ----------
Net increase (decrease) from
investment operations.............. (1.23) (5.70) 2.32 0.78 (3.21)
----------- ----------- ---------- ---------- ----------
Distributions to shareholders:
From net investment income............ (0.01) -- -- (0.02) --
From net realized gain on
investments.......................... -- (0.82) (1.81) (0.43) (0.55)
In excess of net investment income.... -- -- -- -- --
In excess of net realized gain on
investments.......................... -- -- -- -- (0.07)
----------- ----------- ---------- ---------- ----------
Total distributions................. (0.01) (0.82) (1.81) (0.45) (0.62)
----------- ----------- ---------- ---------- ----------
Net asset value, end of period.......... $ 5.04 $ 6.28 $ 12.80 $ 12.29 $ 11.96
----------- ----------- ---------- ---------- ----------
----------- ----------- ---------- ---------- ----------
Total investment return (c)............. (19.55)% (44.65)% 19.28% 6.54% (20.30)%
Ratios and supplemental data:
Net assets, end of period (in 000's).... $ 31,837 $ 55,820 $ 151,805 $ 130,887 $ 120,171
Ratio of net investment income (loss) to
average net assets..................... 0.65% (0.24)% (0.48)% 0.26% (0.54)%
Ratio of expenses to average net assets:
With expense reductions and/or
reimbursement (Notes 2 & 5).......... 2.65% 2.31% 2.51% 2.54% 2.46%
Without expense reductions and/or
reimbursement........................ 3.05% 2.58% 2.64% 2.59% N/A
Portfolio turnover rate++............... 96% 80% 93% 63% 87%
</TABLE>
- ----------------
(a) Annualized
(b) Not annualized
(c) Total investment return does not include sales charges.
(d) These selected per share data were calculated based upon average
shares outstanding during the period.
* Includes reimbursement of Fund operating expenses per share of $0.02.
+ Commencing June 1, 1995, the Fund began offering Advisor Class shares.
++ Portfolio turnover is calculated on the basis of the Fund as a whole
without distinguishing between the classes of shares issued.
N/A Not Applicable.
The accompanying notes are an integral part of the financial statements.
FS-51
<PAGE> 463
FINANCIAL HIGHLIGHTS (cont'd)
- --------------------------------------------------------------------------------
Contained below is per share operating performance data for a share outstanding
throughout the period, total investment return, ratios and supplemental data.
This information has been derived from information provided in the financial
statements.
<TABLE>
<CAPTION>
ADVISOR CLASS+
----------------------------------------------------
JUNE 1, 1995
YEAR ENDED DECEMBER 31, TO
------------------------------------- DECEMBER 31,
1998 (d) 1997 (d) 1996 (d) 1995 (d)
----------- ----------- ----------- -------------
<S> <C> <C> <C> <C>
Per Share Operating Performance:
Net asset value, beginning of period.... $ 6.45 $ 13.16 $ 12.45 $ 12.89
----------- ----------- ----------- -------------
Income from investment operations:
Net investment income (loss).......... 0.08* 0.08 0.07 0.09
Net realized and unrealized gain
(loss) on investments................ (1.28) (5.89) 2.45 0.05
----------- ----------- ----------- -------------
Net increase (decrease) from
investment operations.............. (1.20) (5.81) 2.52 0.14
----------- ----------- ----------- -------------
Distributions to shareholders:
From net investment income............ (0.07) (0.08) -- (0.15)
From net realized gain on
investments.......................... -- (0.82) (1.81) (0.43)
In excess of net investment income.... -- -- -- --
In excess of net realized gain on
investments.......................... -- -- -- --
----------- ----------- ----------- -------------
Total distributions................. (0.07) (0.90) (1.81) (0.58)
----------- ----------- ----------- -------------
Net asset value, end of period.......... $ 5.18 $ 6.45 $ 13.16 $ 12.45
----------- ----------- ----------- -------------
----------- ----------- ----------- -------------
Total investment return (c)............. (18.51)% (44.26)% 20.56% 1.07%(b)
Ratios and supplemental data:
Net assets, end of period (in 000's).... $ 1,402 $ 1,488 $ 1,575 $ 935
Ratio of net investment income (loss) to
average net assets..................... 1.65% 0.76% 0.52% 1.26%(a)
Ratio of expenses to average net assets:
With expense reductions and/or
reimbursement (Notes 2 & 5).......... 1.65% 1.31% 1.51% 1.54%(a)
Without expense reductions and/or
reimbursement........................ 2.05% 1.58% 1.64% 1.59%(a)
Portfolio turnover rate++............... 96% 80% 93% 63%(a)
</TABLE>
- ----------------
(a) Annualized
(b) Not annualized
(c) Total investment return does not include sales charges.
(d) These selected per share data were calculated based upon average
shares outstanding during the period.
* Includes reimbursement of Fund operating expenses per share of $0.02.
+ Commencing June 1, 1995, the Fund began offering Advisor Class shares.
++ Portfolio turnover is calculated on the basis of the Fund as a whole
without distinguishing between the classes of shares issued.
N/A Not Applicable.
The accompanying notes are an integral part of the financial statements.
FS-52
<PAGE> 464
NOTES TO
FINANCIAL STATEMENTS
December 31, 1997
- --------------------------------------------------------------------------------
1. SIGNIFICANT ACCOUNTING POLICIES (SEE ALSO NOTE 2)
AIM New Pacific Growth Fund (the "Fund") formerly, GT Global New Pacific Growth
Fund, is a separate series of AIM Growth Series (the "Trust") formerly, GT
Global Growth Series. The Trust is organized as a Delaware business trust and is
registered under the Investment Company Act of 1940, as amended ("1940 Act"), as
a diversified, open-end management investment company. The Trust has eight
series of shares in operation, each series corresponding to a distinct portfolio
of investments.
The Fund offers Class A, Class B, and Advisor Class shares, each of which has
equal rights as to assets and voting privileges. Class A and Class B each has
exclusive voting rights with respect to its distribution plan. Investment
income, realized and unrealized capital gains and losses, and the common
expenses of the Fund are allocated on a pro rata basis to each class based on
the relative net assets of each class to the total net assets of the Fund. Each
class of shares differs in its respective distribution expenses, and may differ
in its transfer agent, registration, and certain other class-specific fees and
expenses.
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statements and
the reported amounts of income and expenses during the reporting period. Actual
results could differ from those estimates. The following is a summary of
significant accounting policies in conformity with generally accepted accounting
principles consistently followed by the Fund in the preparation of the financial
statements.
(A) PORTFOLIO VALUATION
The Fund calculates the net asset value of and completes orders to purchase,
exchange or repurchase Fund shares on each business day, with the exception of
those days on which the New York Stock Exchange is closed.
Equity securities are valued at the last sale price on the exchange on which
such securities are traded or on the principal over-the-counter market in which
such securities are traded, as of the close of business on the day the
securities are being valued or, lacking any sales, at the last available bid
price. In cases where securities are traded on more than one exchange, the
securities are valued on the exchange determined by A I M Advisors, Inc. (the
"Manager") to be the primary market.
Fixed income investments are valued at the mean of representative quoted bid and
ask prices for such investments or, if such prices are not available, at prices
for investments of comparative maturity, quality and type. However, when the
Manager deems it appropriate, prices obtained for the day of valuation from a
bond pricing service will be used. Short-term investments with a maturity of 60
days or less are valued at amortized cost, adjusted for foreign exchange
translation and market fluctuation, if any.
Investments for which market quotations are not readily available (including
restricted securities which are subject to limitations on their sale) are valued
at fair value as determined in good faith by or under the direction of the
Trust's Board of Trustees.
Portfolio securities which are primarily traded on foreign exchanges are
generally valued to the preceding closing values of such securities on their
respective exchanges, and those values are then translated into U.S. dollars at
the current exchange rates, except that when an occurrence subsequent to the
time a value was so established is likely to have materially changed such value,
then the fair value of those securities will be determined by consideration of
other factors by or under the direction of the Trust's Board of Trustees.
(B) FOREIGN CURRENCY TRANSLATION
The accounting records of the Fund are maintained in U.S. dollars. The market
values of foreign securities, currency holdings, other assets and liabilities
are recorded in the books and records of the Fund after translation to U.S.
dollars based on the exchange rates on that day. The cost of each security is
determined using historical exchange rates. Income and withholding taxes are
translated at prevailing exchange rates when earned or incurred.
The Fund does not isolate that portion of the results of operations resulting
from changes in foreign exchange rates on investments from the fluctuations
arising from changes in market prices of securities held. Such fluctuations are
included with the net realized and unrealized gain or loss from investments.
Reported net realized foreign exchange gains and losses arise from sales and
maturities of short-term securities, forward foreign currency contracts, sales
of foreign currencies, currency gains or losses realized between the trade and
settlement dates on securities transactions, and the differences between the
amounts of dividends, interest, and foreign withholding taxes recorded on the
Fund's books and the U.S. dollar equivalent of the amounts actually received or
paid. Net unrealized foreign exchange gains and losses arise from changes in the
value of assets and liabilities other than investments in securities at period
end, resulting from changes in exchange rates.
(C) REPURCHASE AGREEMENTS
With respect to repurchase agreements entered into by the Fund, it is the Fund's
policy to always receive, as collateral, United States government securities or
other high quality debt securities of which the value, including accrued
interest, is at least equal to the amount to be repaid to the Fund under each
agreement at its maturity.
(D) FORWARD FOREIGN CURRENCY CONTRACTS
A forward foreign currency contract ("Forward Contract") is an agreement between
two parties to buy and sell a currency at a set price on a future date. The
market value of the Forward Contract
FS-53
<PAGE> 465
fluctuates with changes in currency exchange rates. The Forward Contract is
marked-to-market daily and the change in market value is recorded by the Fund as
an unrealized gain or loss. When the Forward Contract is closed, the Fund
records a realized gain or loss equal to the difference between the value at the
time it was opened and the value at the time it was closed. The Fund could be
exposed to risk if a counter party is unable to meet the terms of a contract or
if the value of the currency changes unfavorably. The Fund may enter into
Forward Contracts in connection with planned purchases or sales of securities,
or to hedge against adverse fluctuations in exchange rates between currencies.
(E) OPTION ACCOUNTING PRINCIPLES
When the Fund writes a call or put option, an amount equal to the premium
received is included in the Fund's "Statement of Assets and Liabilities" as an
asset and an equivalent liability. The amount of the liability is subsequently
marked-to-market to reflect the current market value of the option. The current
market value of an option listed on a traded exchange is valued at its last bid
price, or, in the case of an over-the-counter option, is valued at the average
of the last bid prices obtained from brokers, unless a quotation from only one
broker is available, in which case only that broker's price will be used. If an
option expires on its stipulated expiration date or if the Fund enters into a
closing purchase transaction, a gain or loss is realized without regard to any
unrealized gain or loss on the underlying security, and the liability related to
such option is extinguished. If a written call option is exercised, a gain or
loss is realized from the sale of the underlying security and the proceeds of
the sale are increased by the premium originally received. If a written put
option is exercised, the cost of the underlying security purchased would be
decreased by the premium originally received. The Fund can write options only on
a covered basis, which, for a call, requires that the Fund hold the underlying
security, and, for a put, requires the Fund to set aside cash, U.S. government
securities or other liquid securities in an amount not less than the exercise
price or otherwise provide adequate cover at all times while the put option is
outstanding. The Fund may use options to manage its exposure to the stock and
bond markets and to fluctuations in currency values or interest rates.
The premium paid by the Fund for the purchase of a call or put option is
included in the Fund's "Statement of Assets and Liabilities" as an investment
and subsequently "marked-to-market" to reflect the current market value of the
option. If an option which the Fund has purchased expires on the stipulated
expiration date, the Fund realizes a loss in the amount of the cost of the
option. If the Fund enters into a closing sale transaction, the Fund realizes a
gain or loss, depending on whether proceeds from the closing sale transaction
are greater or less than the cost of the option. If the Fund exercises a call
option, the cost of the securities acquired by exercising the call is increased
by the premium paid to buy the call. If the Fund exercises a put option, it
realizes a gain or loss from the sale of the underlying security, and the
proceeds from such sale are decreased by the premium originally paid.
The risk associated with purchasing options is limited to the premium originally
paid. The risk in writing a call option is that the Fund may forego the
opportunity of profit if the market value of the underlying security or index
increases and the option is exercised. The risk in writing a put option is that
the Fund may incur a loss if the market value of the underlying security or
index decreases and the option is exercised. In addition, there is the risk the
Fund may not be able to enter into a closing transaction because of an illiquid
secondary market.
(F) FUTURES CONTRACTS
A futures contract is an agreement between two parties to buy and sell a
security at a set price on a future date. Upon entering into such a contract the
Fund is required to pledge to the broker an amount of cash or securities equal
to the minimum "initial margin" requirements of the exchange on which the
contract is traded. Pursuant to the contract, the Fund agrees to receive from or
pay to the broker an amount of cash equal to the daily fluctuation in value of
the contract. Such receipts or payments are known as "variation margin" and are
recorded by the Fund as unrealized gains or losses. When the contract is closed,
the Fund records a realized gain or loss equal to the difference between the
value of the contract at the time it was opened and the value at the time it was
closed. The potential risk to the Fund is that the change in value of the
underlying securities may not correlate to the change in value of the contracts.
The Fund may use futures contracts to manage its exposure to the stock and bond
markets and to fluctuations in currency values or interest rates.
(G) SECURITY TRANSACTIONS AND RELATED INVESTMENT INCOME
Security transactions are accounted for on the trade date (date the order to buy
or sell is executed). The cost of securities sold is determined on a first-in,
first-out basis, unless otherwise specified. Dividends are recorded on the
ex-dividend date. Interest income is recorded on the accrual basis. Where a high
level of uncertainty exists as to its collection, income is recorded net of all
withholding tax with any rebate recorded when received. The Fund may trade
securities on other than normal settlement terms. This may increase the risk if
the other party to the transaction fails to deliver and causes the Fund to
subsequently invest at less advantageous prices.
(H) PORTFOLIO SECURITIES LOANED
At December 31, 1998, stocks with an aggregate value of $5,772,440 were on loan
to brokers. The loans were secured by cash collateral of $6,131,138 received by
the Fund. For the year ended December 31, 1998, the Fund received securities
lending fees of $308,990.
For international securities, cash collateral is received by the Fund against
loaned securities in an amount at least equal to 105% of the market value of the
loaned securities at the inception of each loan. This collateral must be
maintained at not less than 103% of the market value of the loaned securities
during the period of the loan. For domestic securities, cash collateral is
received by the Fund against loaned securities in an amount at least equal to
102% of the market value of the loaned securities at the inception of each loan.
This collateral must be maintained at not less than 100% of the market value of
the loaned securities during the period of each loan. The
FS-54
<PAGE> 466
cash collateral is invested in a securities lending trust which consists of a
portfolio of high quality short duration securities whose average effective
duration is restricted to 120 days or less.
(I) TAXES
It is the policy of the Fund to meet the requirements for qualification as a
"regulated investment company" under the Internal Revenue Code of 1986, as
amended ("Code"). It is also the intention of the Fund to make distributions
sufficient to avoid imposition of any excise tax under Section 4982 of the Code.
Therefore, no provision has been made for Federal taxes on income, capital
gains, and unrealized appreciation of securities held, or for excise tax on
income and capital gains. The Fund currently has a capital loss carryforward of
$81,520,585, of which $3,081,427 expires in 2005 and $78,439,158 expires in
2006.
(J) DISTRIBUTIONS TO SHAREHOLDERS
Distributions to shareholders are recorded by the Fund on the ex-date. Income
and capital gain distributions are determined in accordance with Federal income
tax regulations which may differ from generally accepted accounting principles.
These differences are primarily due to differing treatments of income and gains
on various investment securities held by the Fund and timing differences.
(K) FOREIGN SECURITIES
There are certain additional considerations and risks associated with investing
in foreign securities and currency transactions that are not inherent in
investments of domestic origin. These risks of investing in foreign markets may
include foreign currency exchange rate fluctuations, perceived credit risk,
adverse political and economic developments and possible adverse foreign
government intervention.
(L) RESTRICTED SECURITIES
The Fund is permitted to invest in privately placed restricted securities. These
securities may by resold in transactions exempt from registration or to the
public if the securities are registered. Disposal of these securities may
involve time-consuming negotiations and expense, and prompt sale at an
acceptable price may be difficult. At the end of the year, restricted
securities, if any, (excluding 144A issues), are shown at the end of the Fund's
Portfolio of Investments.
(M) INDEXED SECURITIES
The Fund may invest in indexed securities whose value is linked either directly
or indirectly to changes in foreign currencies, interest rates, equities,
indices, or other reference instruments. Indexed securities may be more volatile
than the reference instrument itself, but any loss is limited to the amount of
the original investment.
(N) LINE OF CREDIT
The Fund, along with certain other funds advised and/or administered by the
Manager, has a line of credit with BankBoston and State Street Bank and Trust
Company. The arrangements with the banks allow the Fund and certain other funds
to borrow, on a first come, first served basis, an aggregate maximum amount of
$250,000,000. The Fund is limited to borrowing up to 33 1/3% of the value of the
Fund's total assets. On December 31, 1998, the Fund had no loans outstanding.
For the year ended December 31, 1998, the weighted average outstanding daily
balance of bank loans (based on the number of days the loans were outstanding)
was $6,800,494 with a weighted average interest rate of 6.15%. Interest expense
for the year ended December 31, 1998, was $94,155 and is included in "Other
expenses" on the Statement of Operations.
2. RELATED PARTIES
A I M Advisors, Inc. (the "Manager"), an indirect wholly-owned subsidiary of
AMVESCAP PLC, is the Fund's investment manager and administrator, and INVESCO
(NY), Inc., (formerly, Chancellor LGT Asset Management, Inc.) is the Fund's
investment sub-adviser and sub-administrator. As of the close of business on May
29, 1998, Liechtenstein Global Trust AG ("LGT"), the former indirect parent
organization of Chancellor LGT Asset Management, Inc. ("Chancellor LGT"),
consummated a purchase agreement with AMVESCAP PLC pursuant to which AMVESCAP
PLC acquired LGT's Asset Management Division, which included Chancellor LGT and
certain other affiliates. As a result of this transaction, Chancellor LGT was
renamed INVESCO (NY), Inc., and is now an indirect wholly-owned subsidiary of
AMVESCAP PLC. Also, as of the close of business May 29, 1998, A I M
Distributors, Inc. ("AIM Distributors"), a wholly-owned subsidiary of the
Manager, became the Fund's distributor, and the Trust was reorganized from a
Massachusetts business trust into a Delaware business trust. Finally, as of the
close of business on September 4, 1998, A I M Fund Services, Inc. ("AFS"), an
affiliate of the Manager and AIM Distributors, replaced GT Global Investor
Services, Inc. ("GT Services") as the transfer agent of the Fund.
The Fund pays investment management and administration fees to the Manager at
the following annualized rates: 0.975% on the first $500 million of average
daily net assets of the Fund; 0.95% on the next $500 million; 0.925% of the next
$500 million and 0.90% on amounts thereafter. These fees are computed daily and
paid monthly.
AIM Distributors, an affiliate of the Manager, serves as the Fund's distributor.
For the period ended May 29, 1998, GT Global, Inc. ("GT Global"), an affiliate
of the investment sub-advisor, served as the Fund's distributor.
Class A shares are subject to initial sales charges imposed at the time of
purchase, in accordance with the schedule included in the Fund's current
prospectus. AIM Distributors collects the sales charges imposed on sales of
Class A shares, and reallows a portion of such charges to dealers through which
the sales are made. For the year ended December 31, 1998, AIM Distributors
retained sales charges of $23,466. Purchases of Class A shares exceeding
$1,000,000 may be subject to a contingent deferred sales charge ("CDSC") upon
redemption, in accordance with the Fund's current prospectus. AIM Distributors
and GT Global collected such CDSCs in the amount of $19,510 and $2,399 for the
year ended December 31, 1998, respectively. AIM Distributors also makes ongoing
shareholder servicing and trail commission payments to dealers whose clients
hold Class A shares.
FS-55
<PAGE> 467
Class B shares are not subject to initial sales charges. When Class B shares are
sold, AIM Distributors, from its own resources, pays commissions to dealers
through which the sales are made. Certain redemptions of Class B shares made
within six years of purchase are subject to CDSCs, in accordance with the Fund's
current prospectus. For the year ended December 31, 1998, AIM Distributors and
GT Global collected such CDSCs in the amount of $90,711 and $124,324,
respectively. In addition, AIM Distributors makes ongoing shareholder servicing
and trail commission payments to dealers whose clients hold Class B shares.
For the period ended May 29, 1998, pursuant to the then effective separate
distribution plans adopted under the 1940 Act Rule 12b-1 by the Trust's Board of
Trustees with respect to the Fund's Class A shares ("Class A Plan") and Class B
shares ("Class B Plan"), the Fund reimbursed GT Global for a portion of its
shareholder servicing and distribution expenses. Under the Class A Plan, the
Fund was permitted to pay GT Global a service fee at the annualized rate of up
to 0.25% of the average daily net assets of the Fund's Class A shares for GT
Global's expenditures incurred in servicing and maintaining shareholder
accounts, and was permitted to pay GT Global a distribution fee at the
annualized rate of up to 0.35% of the average daily net assets of the Fund's
Class A shares, less any amounts paid by the Fund as the aforementioned service
fee, for GT Global's expenditures incurred in providing services as distributor.
All expenses for which GT Global was reimbursed under the Class A Plan would
have been incurred within one year of such reimbursement.
For the period ended May 29, 1998, pursuant to the Class B Plan, the Fund was
permitted to pay GT Global a service fee at the annualized rate of up to 0.25%
of the average daily net assets of the Fund's Class B shares for GT Global's
expenditures incurred in servicing and maintaining shareholder accounts, and was
permitted to pay GT Global a distribution fee at the annualized rate of up to
0.75% of the average daily net assets of the Fund's Class B shares for GT
Global's expenditures incurred in providing services as distributor. Expenses
incurred under the Class B Plan in excess of 1.00% annually were permitted to be
carried forward for reimbursement in subsequent years as long as that Plan
continues in effect.
Effective as of the close of business May 29, 1998, pursuant to Rule 12b-1 under
the 1940 Act, the Trust's Board of Trustees adopted a Master Distribution Plan
applicable to the Fund's Class A shares ("Class A Plan") and Class B shares
("Class B Plan"), pursuant to which the Fund compensates AIM Distributors for
the purpose of financing any activity that is intended to result in the sale of
Class A or Class B shares of the Funds. Under the Class A Plan, the Fund
compensates AIM Distributors at the annualized rate of 0.35% of the average
daily net assets of the Fund's Class A shares. Under the Class B Plan, the Fund
compensates AIM Distributors at an annualized rate of 1.00% of the average daily
net assets of the Fund's Class B shares. Of these amounts, the Fund may pay a
service fee of 0.25% of the average daily net assets of the Class A or Class B
shares to selected dealers and financial institutions who furnish continuing
personal shareholder services to their customers who purchase and own the
appropriate class of shares of the Fund. Any amounts not paid as a service fee
under the Plans would constitute an asset-based sales charge.
The Manager and AIM Distributors have voluntarily undertaken to limit the Fund's
expenses (exclusive of brokerage commissions, taxes, interest, and extraordinary
items) to the maximum annual level of 2.00%, 2.65%, and 1.65% of the average
daily net assets of the Fund's Class A, Class B, and Advisor Class shares,
respectively. If necessary, this limitation will be effected by waivers by the
Manager of investment management and administration fees, waivers by AIM
Distributors of payments under the Class A Plan and/or Class B Plan and/or
reimbursements by the Manager or AIM Distributors of portions of the Fund's
other operating expenses.
Effective as of the close of business September 4, 1998, the Fund, pursuant to a
transfer agency and service agreement, has agreed to pay AFS an annualized fee
of $24.85 per shareholder accounts that are open during any monthly period (this
fee includes all out-of-pocket expenses), and an annualized fee of $0.70 per
shareholder account that is closed during any monthly period. Both fees shall be
billed by AFS monthly in arrears on a prorated basis of 1/12 of the annualized
fee for all such accounts.
For the period January 1, 1998 to September 4, 1998, GT Services, an affiliate
of the Manager and AIM Distributors, was the transfer agent of the Fund. For
performing shareholder servicing, reporting, and general transfer agent
services, GT Services received an annual maintenance fee of $17.50 per account,
a new account fee of $4.00 per account, a per transaction fee of $1.75 for all
transactions other than exchanges and a per exchange fee of $2.25. GT Services
was also reimbursed by the Fund for its out-of-pocket expenses for such items as
postage, forms, telephone charges, stationery and office supplies.
The Manager is the pricing and accounting agent for the Fund. The monthly fee
for these services to the Manager is a percentage, not to exceed 0.03% annually,
of the Fund's average daily net assets. The annual fee rate is derived based on
the aggregate net assets of the funds which comprise the following investment
companies: AIM Growth Series, AIM Investment Funds, AIM Investment Portfolios,
AIM Series Trust, G.T. Global Variable Investment Series and G. T. Global
Variable Investment Trust. The fee is calculated at the rate of 0.03% to the
first $5 billion of assets and 0.02% to the assets in excess of $5 billion. An
amount is allocated to and paid by each such fund based on its relative average
daily net assets.
The Trust pays each of its Trustees who is not an employee, officer or director
of the Manager, AIM Distributors or GT Services $5,000 per year plus $300 for
each meeting of the board or any committee thereof attended by the Trustee.
3. PURCHASES AND SALES OF SECURITIES
For the year ended December 31, 1998, purchases and sales of investment
securities by the Fund, other than U.S. government obligations and short-term
investments, aggregated $129,155,679 and $167,008,919, respectively. There were
no purchases or sales of U.S. government obligations by the Fund during the
year.
FS-56
<PAGE> 468
4. CAPITAL SHARES
At December 31, 1998, there were an unlimited number of shares of beneficial
interest authorized, at no par value. Transactions in capital shares of the Fund
were as follows:
CAPITAL SHARE TRANSACTIONS
<TABLE>
<CAPTION>
YEAR ENDED YEAR ENDED
DECEMBER 31, 1998 DECEMBER 31, 1997
----------------------------- -----------------------------
CLASS A SHARES AMOUNT SHARES AMOUNT
- --------------------------------------------- ------------ --------------- ------------ ---------------
<S> <C> <C> <C> <C>
Shares sold.................................. 220,054,764 $ 1,179,166,766 110,903,994 $ 1,213,154,082
Shares issued in connection with reinvestment
of distributions........................... 151,132 760,569 2,058,341 13,577,615
------------ --------------- ------------ ---------------
220,205,896 1,179,927,335 112,962,335 1,226,731,697
Shares repurchased........................... (225,597,779) (1,226,798,121) (119,529,679) (1,324,924,362)
------------ --------------- ------------ ---------------
Net decrease................................. (5,391,883) $ (46,870,786) (6,567,344) $ (98,192,665)
------------ --------------- ------------ ---------------
------------ --------------- ------------ ---------------
<CAPTION>
CLASS B
- ---------------------------------------------
<S> <C> <C> <C> <C>
Shares sold.................................. 29,096,684 $ 151,336,461 37,888,593 $ 423,842,967
Shares issued in connection with reinvestment
of distributions........................... 15,481 77,283 856,732 5,478,474
------------ --------------- ------------ ---------------
29,112,165 151,413,744 38,745,325 429,321,441
Shares repurchased........................... (31,689,112) (166,703,231) (41,705,872) (470,119,000)
------------ --------------- ------------ ---------------
Net decrease................................. (2,576,947) $ (15,289,487) (2,960,547) $ (40,797,559)
------------ --------------- ------------ ---------------
------------ --------------- ------------ ---------------
<CAPTION>
ADVISOR CLASS
- ---------------------------------------------
<S> <C> <C> <C> <C>
Shares sold.................................. 5,119,563 $ 27,073,240 4,493,439 $ 41,526,678
Shares issued in connection with reinvestment
of distributions........................... 3,439 17,402 25,872 181,817
------------ --------------- ------------ ---------------
5,123,002 27,090,642 4,519,311 41,708,495
Shares repurchased........................... (5,082,992) (27,505,806) (4,408,085) (41,722,805)
------------ --------------- ------------ ---------------
Net increase (decrease)...................... 40,010 $ (415,164) 111,226 $ (14,310)
------------ --------------- ------------ ---------------
------------ --------------- ------------ ---------------
</TABLE>
5. EXPENSE REDUCTIONS
The Manager has directed certain portfolio trades to brokers who then paid a
portion of the Fund's expenses. For the year ended December 31, 1998, the Fund's
expenses were reduced by $88,368 under these arrangements.
- --------------
FEDERAL TAX INFORMATION (UNAUDITED):
For the fiscal year ended December 31, 1998, the amount of income received by
the Fund from sources within foreign countries and possessions of the United
States was $.1659 per share (representing a total of $3,975,000). The amount of
taxes paid by the Fund to such countries for the fiscal year ended December 31,
1998 was $.005 per share (representing a total of $120,535). The following table
provides a breakdown by country of ordinary income dividends and foreign taxes
paid by the Fund during the fiscal year ended December 31, 1998:
<TABLE>
<CAPTION>
COUNTRY GROSS INCOME % FOREIGN TAX PAID %
- --------------------------------------------- -------------- ------------------
<S> <C> <C>
Australia.................................... 30.91 --
Hong Kong.................................... 30.30 --
Malaysia..................................... 1.40 5.32
New Zealand.................................. 2.51 13.30
Phillipines.................................. 0.80 7.02
Singapore.................................... 9.86 60.18
Taiwan....................................... 2.59 12.81
Various...................................... 0.50 --
------- -------
78.87 98.63
Nonqualifying................................ 1.14 1.37
United States................................ 19.99 --
------- -------
100.00% 100.00%
------- -------
------- -------
</TABLE>
FS-57
<PAGE> 469
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> 470
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE NO.
--------
<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
Depositary Receipts....................................... 6
Warrants or Rights........................................ 6
Lending of Portfolio Securities........................... 6
Commercial Bank Obligations............................... 7
Repurchase Agreements..................................... 7
Borrowing, Reverse Repurchase Agreements and "Roll"
Transactions........................................... 7
When-Issued or Forward Commitment Securities.............. 8
Temporary Defensive Strategies............................ 8
OPTIONS AND FUTURES......................................... 8
Special Risks of Options and Futures...................... 8
Writing Call Options...................................... 9
Writing Put Options....................................... 9
Purchasing Put Options.................................... 10
Purchasing Call Options................................... 10
Index Options............................................. 11
Interest Rate and Stock Index Futures Contracts........... 12
Options on Futures Contracts.............................. 13
Limitations on Use of Futures and Options on Futures...... 13
Cover..................................................... 14
RISK FACTORS................................................ 14
Illiquid Securities....................................... 14
Debt Securities........................................... 15
Equity Securities......................................... 15
Small Cap Companies....................................... 15
INVESTMENT LIMITATIONS...................................... 15
EXECUTION OF PORTFOLIO TRANSACTIONS......................... 17
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..................................... 21
Expenses of the Funds and the Portfolios.................. 21
NET ASSET VALUE DETERMINATION............................... 21
HOW TO PURCHASE AND REDEEM SHARES........................... 22
Backup Withholding........................................ 22
DIVIDEND ORDER.............................................. 23
DIVIDENDS, DISTRIBUTIONS AND TAX MATTERS................... 23
Reinvestment of Dividends and Distributions............... 23
Tax Matters............................................... 23
Taxation of the Funds..................................... 24
Reinstatement Privilege................................... 24
Taxation of the Portfolios................................ 24
Taxation of the Funds' Shareholders....................... 25
</TABLE>
2
<PAGE> 471
<TABLE>
<CAPTION>
PAGE NO.
--------
<S> <C>
SHAREHOLDER INFORMATION..................................... 25
MISCELLANEOUS INFORMATION................................... 27
Charges for Certain Account Information................... 27
Custodian................................................. 27
Transfer Agency and Accounting Agency Services............ 27
Independent Accountants................................... 27
Legal Matters............................................. 27
Shareholder Liability..................................... 27
Names..................................................... 28
Control Persons and Principal Holders of Securities....... 28
INVESTMENT RESULTS.......................................... 29
Total Return Quotations................................... 29
Performance Information................................... 30
APPENDIX.................................................... 33
Description of Bond Ratings............................... 33
Description of Commercial Paper Ratings................... 34
Absence of Rating......................................... 34
FINANCIAL STATEMENTS........................................ FS
</TABLE>
3
<PAGE> 472
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 GT 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 GT 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,
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.
On any matter submitted to a vote of shareholders, shares of a Fund will be
voted by the Fund's shareholders individually when the matter affects the
specific interest of the Fund only, such as approval of the Fund's investment
management arrangements. In addition, shares of a particular class of a Fund may
vote on matters affecting only that class. The shares of a Fund and of the
Trust's other series will be voted in the aggregate on other matters, such as
the election of Trustees and ratification of the selection of the Trust's
independent accountants.
Normally there will be no annual meeting of shareholders for any of the Funds
in any year, except as required under the Investment Company Act of 1940, as
amended (the "1940 Act"). A Trustee may be removed at any meeting of the
shareholders of the Trust by a vote of the shareholders owning at least
two-thirds of the outstanding shares. Any Trustee may call a special meeting of
shareholders for any purpose. Furthermore, Trustees shall promptly call a
meeting of shareholders solely for the purpose of removing one or more Trustees
when requested in writing to do so by shareholders holding 10% of the Trust's
outstanding shares.
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Pursuant to the Trust's Agreement and Declaration of Trust, the Trust may
issue an unlimited number of shares of each Fund. Each share of a Fund
represents an interest in the Fund only, has a par value of $0.01 per share,
represents an equal proportionate interest in the Fund with other shares of the
Fund and is entitled to such dividends and distributions out of the income
earned and gain realized on the assets belonging to the Fund as may be declared
by the Board of Trustees. Each share of a Fund is equal in earnings, assets and
voting privileges except that each class normally has exclusive voting rights
with respect to its distribution plan and bears the expenses, if any, related to
the distribution of its shares. Shares of a Fund, when issued, are fully paid
and nonassessable.
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 POLICIES
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 a 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.
Unless specifically noted, the Fund's investment policies described in this
Statement of Additional Information are not fundamental polices and may be
changed by vote of the Trust's Board of Trustees, without shareholder approval.
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.
Equity securities in which the Funds may invest include common stocks,
preferred stocks, convertible debt securities and warrants to acquire such
securities.
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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, a 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 25% of its total assets in foreign securities.
Such investments may include American Depositary Receipts ("ADRs"), American
Depositary Shares ("ADSs"), Global Depositary Receipts ("GDRs") and European
Depositary Receipts ("EDRs"). 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 underlying foreign equity securities.
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. While a
loan is outstanding, the borrower must maintain with the Fund's custodian
collateral consisting of cash, U.S. government securities or certain irrevocable
letters of credit equal to at least the value of the borrowed securities, plus
any accrued interest or such other collateral as permitted by the Fund's
investment program and regula-
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tory agencies, and as approved by the Board. The risks of lending portfolio
securities, as with other extensions of secured credit, consist of possible
delay in receiving additional collateral or in recovery of the securities and
possible loss of rights in the collateral should the borrower fail financially.
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
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. A Portfolio may borrow in
connection with meeting requests for redemption. 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
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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. A
Portfolio may borrow through reverse repurchase agreements and "roll"
transactions in connection with meeting requests for redemption.
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.
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.
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(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 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 (Euro-
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pean 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.
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
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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 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 Futures Contract of September deutschmarks 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 deutschmarks 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,
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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.
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
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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.
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
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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 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 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. 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
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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;
(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.
16
<PAGE> 485
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, 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 $113,203, $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 $61,274, $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
17
<PAGE> 486
changes appropriate. High portfolio turnover (over 100%) 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 190% and
233%, and 148% and 93%, respectively.
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.
- ---------------------------------------------------------------------------------------------------------------
</TABLE>
- ---------------
* A trustee who is an "interested person" of the Trust and A I M Advisors, Inc.
as defined in the 1940 Act.
18
<PAGE> 487
<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-advisor.
- ---------------------------------------------------------------------------------------------------------------
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.
- ---------------------------------------------------------------------------------------------------------------
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.
- ---------------------------------------------------------------------------------------------------------------
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.
- ---------------------------------------------------------------------------------------------------------------
DANA R. SUTTON (39) Vice President and Vice President and Fund Controller, A I M Advisors,
Treasurer Inc.; and Assistant Vice President and Assistant
Treasurer, Fund Management Company.
- ---------------------------------------------------------------------------------------------------------------
</TABLE>
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 an annual retainer component plus a per-meeting fee component, 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 $6,650, $5,450, $6,050
and $6,650, 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 $106,850, $90,650, $98,600
and $99,500, 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 1, 1999, the Officers and Trustees and their families as a group owned
in the aggregate beneficially or of record less than (i) 1% of the shares of the
Basic Value Fund and (ii) 3.026% of the shares of the Small Cap Fund.
INVESTMENT MANAGEMENT AND ADMINISTRATION SERVICES RELATING TO THE FUNDS AND THE
PORTFOLIOS
AIM, 11 Greenway Plaza, Suite 100, Houston, Texas 77046, was organized in 1976
and, together with its subsidiaries, manages or advises approximately 110
investment portfolios encompassing a broad range of investment objectives. AIM
and their world-wide asset management affiliates provide investment management
and/or administrative services to institutional, corporate and individual
clients around the world.
19
<PAGE> 488
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 also the sole shareholder of the Funds' principal
underwriter, AIM Distributors.
AIM Management and AIM are indirect wholly owned subsidiaries of AMVESCAP PLC,
11 Devonshire Square, London, EC2M 4YR, England. AMVESCAP PLC and its
subsidiaries are an independent management group that has 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.
In addition to the investment resources of their Houston and London offices,
AIM draws upon the expertise, personnel, data and systems of other offices in
Atlanta, Boston, Dallas, Denver, Louisville, Miami, New York, Portland (Oregon),
Frankfurt, Hong Kong, London, Singapore, Sydney, Tokyo and Toronto. In managing
the Funds and the Portfolio, AIM employs a team approach, taking advantage of
its investment resources around the world.
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 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 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).
The Funds pay AIM administration fees, computed daily and paid monthly, at the
annualized rate of 0.25% of each Fund's average daily net assets. The Funds bear
this pro rata portion of the investment management and administration fees paid
by the Portfolio to AIM. The Portfolios pay AIM such fees, computed daily and
paid monthly, based on the average daily net assets of each Portfolio, at the
annualized rate of 0.475% on the first $500 million, 0.45% on the next $500
million, 0.425% on the next $500 million and 0.40% on the amounts thereafter.
The investment management and administration fees paid by the Fund and the
Portfolio are higher than those paid by most mutual funds. The Funds pay all
expenses not assumed by AIM, AIM Distributors or other agents. AIM has
undertaken to limit each Funds expenses (exclusive of brokerage commissions,
taxes, interest and extraordinary expenses) to the annual rate of 1.40% of the
average daily net assets until May 31, 2000.
AIM may from time to time waive or reduce its fee. Voluntary fee waivers or
reductions may be rescinded at any time without further notice to investors.
During periods of voluntary fee waivers or reductions, AIM will retain its
ability to be reimbursed for such fee prior to the end of each fiscal year.
Contractual fee waivers or reductions set forth in the Fee Tables in a
Prospectus may not be terminated or amended to the Funds' detriment during the
period stated in the agreement between AIM and the Fund.
AIM also serves as the Funds' pricing and accounting agent. For these
services, AIM receives a fee based on the aggregate net assets of the funds
which comprise the following investment companies: AIM Growth Series, AIM
Investment Funds, AIM Investment Portfolios, AIM Series Trust, GT Global
Variable Investment Series and GT Global Variable Investment Trust. The fee is
calculated at the rate of 0.03% of the first $5 billion of assets, and 0.02% of
the assets in excess of $5 billion. An amount is allocated to and paid by each
such fund based on its relative average daily net assets.
For the fiscal years ended December 31, 1998, December 31, 1997 and December
31, 1996, the Small Cap Portfolio and the Value Portfolio paid fees of $159,738,
$120,544 and $73,312; and $133,235, $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 $84,258, $63,460 and $39,004; and $70,124, $39,171
and $14,722, respectively, to INVESCO (NY), Inc. For the fiscal years ended
December 31, 1998, 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 $93,076, $67,837
and $73,312; and $60,760, $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 $55,651, $63,460 and
$39,004; and $41,599, $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 $148,727,
$131,297 and $112,316; and $102,359, $113,543 and $42,209, respectively.
20
<PAGE> 489
For the fiscal years ended December 31, 1998, 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, $0 and $58,269; and $0, $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
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 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.
21
<PAGE> 490
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 "Purchasing
Shares."
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 "Exchanging Shares."
Information concerning redemption of the Funds' shares is set forth in the
Prospectuses under the heading "Redeeming 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 generally be subject to backup withholding.
Each AIM Fund, and other payers, must, according to IRS regulations, withhold
31% of redemption payments and reportable dividends (whether paid or accrued) in
the case of any shareholder who fails to provide the Fund with a taxpayer
identification number ("TIN") and a certification that he is not subject to
backup withholding.
An investor is subject to backup withholding if:
(1) the investor fails to furnish a correct TIN to the Fund, or
(2) the IRS notifies the Fund that the investor furnished an incorrect
TIN, or
(3) the investor 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
(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
22
<PAGE> 491
- 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 or their tax advisor 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.
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 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.
DIVIDENDS, DISTRIBUTIONS AND TAX MATTERS
REINVESTMENT OF DIVIDENDS AND DISTRIBUTIONS
Income dividends and capital gains distributions are automatically reinvested
in additional shares of the same class of each Fund unless the shareholder has
requested in writing to receive such dividends and distributions in cash or that
they be invested in shares of another AIM Fund, subject to the terms and
conditions set forth herein under the caption "Shareholder Information." If a
shareholder's account does not have any shares in it on a dividend or capital
gains distribution payment date, the dividend or distribution will be paid in
cash whether or not the shareholder has elected to have such dividends or
distributions reinvested.
TAX MATTERS
The following is only a summary of certain additional tax considerations
generally affecting the Funds and their shareholders that are not described in
the Prospectuses. No attempt is made to present a detailed explanation of the
tax treatment of each Fund or its shareholders, and the discussion here and in
the Prospectuses is not intended as a substitute for careful tax planning.
23
<PAGE> 492
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 "Taxation of the Portfolios" herein for a discussion of the tax
consequences to each Fund of hedging transactions engaged in by its
corresponding Portfolio.
REINSTATEMENT PRIVILEGE
For federal income tax purposes, exercise of your reinstatement privilege may
increase the amount of gain or reduce the amount of loss recognized in the
original redemption transaction, because the initial sales charge will not be
taken into account in determining such gain or loss to the extent there has been
a reduction in the initial sales charge payable upon reinstatement.
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 taxpayers' net capital gain (i.e., the excess
of net long-term capital gain over net short-term capital loss) -- 20% (10% for
taxpayers in the 15% marginal tax bracket) for gain recognized on capital assets
held for more than 12 months.
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
24
<PAGE> 493
Portfolio will be treated as having made an actual sale thereof, with the result
that gain will be recognized at that time unless the completed transaction
exception applies. 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.
Ordinary dividends and return of capital distributions 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 distribution 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.
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
25
<PAGE> 494
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. 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 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.
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.
26
<PAGE> 495
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
CHARGES FOR CERTAIN ACCOUNT INFORMATION
The Transfer Agent may impose certain copying charges for requests for copies
of shareholder account statements and other historical account information older
than the current year and the immediately preceding year.
CUSTODIAN
State Street Bank and Trust Company (the "Custodian"), 225 Franklin Street,
Boston, Massachusetts 02110 is custodian of all securities and cash of the
Portfolios. The Custodian attends to the collection of principal and income,
pays and collects all monies for securities bought and sold by the Portfolios
and performs certain other ministerial duties.
TRANSFER AGENCY AND ACCOUNTING AGENCY SERVICES
A I M Fund Services, Inc., a wholly owned subsidiary of AIM, acts as transfer
agent and dividend disbursing agent for the Funds. 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 $6,564, $6,379 and $3,900; and
$6,806, $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.
27
<PAGE> 496
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 America 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 1, 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 LGT Asset Management 401(K) Plan 57.537%
Judy Creel, Arthur Sprague, or
Robert Alley, TTEES
11 Greenway Plaza, Suite 100
Houston, TX 77046-1173
LGT Asset Management SERP Plan 36.980%
Judy Creel, Arthur Sprague, or
Robert Alley, TTEES
Attn: Debbie Nettles
11 Greenway Plaza, Suite 100
Houston, TX 77046-1173
INVESCO (NY) Asset Management Inc. 5.442%
Attn: Julio Garcia
1166 Avenue of the Americas
New York, New York 10036-2708
Basic Value Fund -- Class A AIM Foundation 15.955%
11 Greenway Plaza, Suite 2600
Houston, TX 77046
MLPF&S for the Sole Benefit of 5.814%
Its Customers
Attn: Fund Administration
4800 Deer Lake Drive East, 2nd Floor
Jacksonville, FL 32246-6484
Basic Value Fund -- Class B MLPF&S For the Sole Benefits of 5.139%
Its Customers
Attn: Fund Administration
4800 Deer Lake Drive East, 2nd Fl.
Jacksonville, Florida 32246-6484
Small Cap Fund -- Advisor Class LGT Asset Management 401(K) Plan 61.865%
Judy Creel, Arthur Sprague, or
Robert Alley, TTEES
11 Greenway Plaza, Suite 100
Houston, TX 77046-1173
Donaldson Lufkin Jenrette Securities
Corp. Inc. 12.944%
P.O. Box 2052
Jersey City, New Jersey 07303-2052
MLPF&S for the Sole Benefit of 6.742%
Its Customers
Attn: Fund Administration
4800 Deer Lake Drive East, 2nd Floor
Jacksonville, FL 32246-6484
Small Cap Fund -- Class A Jonathan C. Schoolar 5.384%
3722 Tartan Lane
Houston, TX 77025
</TABLE>
28
<PAGE> 497
<TABLE>
<CAPTION>
PERCENT
PERCENT OWNED OF
OWNED OF RECORD AND
FUND NAME AND ADDRESS OF OWNER RECORD* BENEFICIALLY
- ---- ------------------------- -------- ------------
<S> <C> <C> <C>
Small Cap Fund -- Class B MLPF&S for the Sole Benefit of 9.781%
Its Customers
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>
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 Dec. 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>
29
<PAGE> 498
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.
PERFORMANCE INFORMATION
A Fund's total return shows its overall change in value, including changes in
share price and assuming all the Fund's dividends and capital gain distributions
are reinvested. A cumulative total return reflects the Fund's performance over a
stated period of time. An average annual total return reflects the hypothetical
compounded annual rate of return that would have produced the same cumulative
total return if the Fund's performance had been constant over the entire period.
BECAUSE AVERAGE ANNUAL RETURNS TEND TO EVEN OUT VARIATIONS IN THE FUND'S RETURN,
INVESTORS SHOULD RECOGNIZE THAT SUCH RETURNS ARE NOT THE SAME AS ACTUAL
YEAR-BY-YEAR RESULTS. To illustrate the components of overall performance, the
Fund may separate its cumulative and average annual returns into income results
and capital gains or losses.
From time to time, AIM or its affiliates may waive all or a portion of their
fees and/or assume certain expenses of any Fund. Voluntary fee waivers or
reductions or commitments to assume expenses may be rescinded at any time
without further notice to investors. During periods of voluntary fee waivers or
reductions or commitments to assume expenses, AIM will retain its ability to be
reimbursed for such fee prior to the end of each fiscal year. Contractual fee
waivers or reductions or reimbursement of expenses set forth in the Fee Table in
a Prospectus may not be terminated or amended to the Funds' detriment during the
period stated in the agreement between AIM and the Fund. Fee waivers or
reductions or commitments to reduce expenses will have the effect of increasing
that Fund's yield and total return.
The performance of each Fund will vary from time to time and past results are
not necessarily indicative of future results. A Fund's performance is a function
of its portfolio management in selecting the type and quality of portfolio
securities and is affected by operating expenses of the Fund and market
conditions. A shareholder's investment in a Fund is not insured or guaranteed.
These factors should be carefully considered by the investor before making an
investment in any Fund. Further information regarding the Fund's performance is
contained in the Fund's annual report to shareholders, which is available upon
request and without charge.
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
30
<PAGE> 499
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 IBCA (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.
31
<PAGE> 500
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.
32
<PAGE> 501
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.
33
<PAGE> 502
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.
34
<PAGE> 503
FINANCIAL STATEMENTS
FS
<PAGE> 504
REPORT OF INDEPENDENT ACCOUNTANTS
To the Shareholders of AIM Basic Value Fund
(formerly AIM America Value Fund) and Board of Trustees
of AIM Growth Series:
In our opinion, the accompanying statement of assets and
liabilities, including the portfolio of investments, and
the related statements of operations and of changes in
net assets and the financial highlights present fairly,
in all material respects, the financial position of the
AIM Basic Value Fund at December 31, 1998, and the
results of its operations, the changes in its net assets
and the financial highlights for the periods indicated,
in conformity with generally accepted accounting
principles. These financial statements and financial
highlights (hereafter referred to as "financial
statements") are the responsibility of the Fund's
management; our responsibility is to express an opinion
on these financial statements based on our audits. We
conducted our audits of these financial statements in
accordance with generally accepted auditing standards
which require that we plan and perform the audit to
obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit
includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements,
assessing the accounting principles used and significant
estimates made by management, and evaluating the overall
financial statement presentation. We believe that our
audits, which included confirmation of securities at
December 31, 1998 by correspondence with the custodian
and brokers, provide a reasonable basis for the opinion
expressed above.
/s/ PRICEWATERHOUSECOOPERS LLP
PRICEWATERHOUSECOOPERS LLP
Boston, Massachusetts
February 19, 1999
FS-1
<PAGE> 505
SCHEDULE OF INVESTMENTS
December 31, 1998
<TABLE>
<CAPTION>
MARKET
SHARES VALUE
<S> <C> <C>
COMMON STOCKS-92.23%
BANKS (MAJOR REGIONAL)-2.60%
Fleet Financial Group, Inc. 16,000 $ 715,000
- --------------------------------------------------------------
BANKS (MONEY CENTER)-5.54%
BankAmerica Corp. 12,725 765,091
- --------------------------------------------------------------
Chase Manhattan Corp. (The) 4,550 309,684
- --------------------------------------------------------------
First Union Corp. 7,400 450,012
- --------------------------------------------------------------
1,524,787
- --------------------------------------------------------------
CHEMICALS (SPECIALTY)-1.41%
Sigma-Aldrich Corp. 13,200 387,750
- --------------------------------------------------------------
COMPUTERS (PERIPHERALS)-3.53%
Adaptec, Inc.(a) 23,500 412,718
- --------------------------------------------------------------
Quantum Corp.(a) 26,300 558,875
- --------------------------------------------------------------
971,593
- --------------------------------------------------------------
COMPUTERS (SOFTWARE & SERVICES)-4.71%
Adobe Systems, Inc. 9,200 430,100
- --------------------------------------------------------------
Computer Associates International,
Inc. 20,300 865,287
- --------------------------------------------------------------
1,295,387
- --------------------------------------------------------------
ELECTRIC COMPANIES-12.22%
Carolina Power & Light Co. 5,200 244,725
- --------------------------------------------------------------
DQE, Inc. 7,700 338,318
- --------------------------------------------------------------
Illinova Corp. 13,400 335,000
- --------------------------------------------------------------
Pinnacle West Capital Corp. 7,825 331,584
- --------------------------------------------------------------
GPU, Inc. 8,200 362,337
- --------------------------------------------------------------
Niagara Mohawk Power Corp. 40,500 653,062
- --------------------------------------------------------------
Northeast Utilities 23,400 374,400
- --------------------------------------------------------------
Texas Utilities Co. 15,500 723,656
- --------------------------------------------------------------
3,363,082
- --------------------------------------------------------------
ELECTRICAL EQUIPMENT-4.54%
Philips Electronics N.V.-ADR 10,600 717,487
- --------------------------------------------------------------
Raychem Corp. 16,500 533,156
- --------------------------------------------------------------
1,250,643
- --------------------------------------------------------------
ELECTRONICS (INSTRUMENTATION)-1.85%
Perkin-Elmer Corp. 5,200 507,325
- --------------------------------------------------------------
ELECTRONICS (SEMICONDUCTOR)-3.19%
Analog Devices, Inc.(a) 21,400 671,425
- --------------------------------------------------------------
Micron Technology, Inc. 4,100 207,307
- --------------------------------------------------------------
878,732
- --------------------------------------------------------------
ENGINEERING & CONSTRUCTION-1.31%
McDermott International, Inc. 14,600 360,438
- --------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
MARKET
SHARES VALUE
<S> <C> <C>
EQUIPMENT (SEMICONDUCTOR)-2.55%
Novellus Systems, Inc.(a) 14,200 $ 702,900
- --------------------------------------------------------------
FINANCIAL (DIVERSIFIED)-4.40%
Citigroup Inc. 13,900 688,050
- --------------------------------------------------------------
MGIC Investment Corp. 13,100 521,544
- --------------------------------------------------------------
1,209,594
- --------------------------------------------------------------
HEALTH CARE (LONG TERM CARE)-1.77%
HCR Manor Care, Inc.(a) 16,600 487,625
- --------------------------------------------------------------
HEALTH CARE (MANAGED CARE)-5.08%
PacifiCare Health Systems,
Inc.-Class B(a) 7,500 596,250
- --------------------------------------------------------------
United HealthCare Corp. 18,600 800,963
- --------------------------------------------------------------
1,397,213
- --------------------------------------------------------------
HEALTH CARE (DRUGS-MAJOR PHARMACEUTICALS)-1.89%
Pharmacia & Upjohn, Inc. 9,200 520,950
- --------------------------------------------------------------
HEALTH CARE (MEDICAL SUPPLIES)-2.70%
Beckman Coulter Inc. 13,700 743,225
- --------------------------------------------------------------
INSURANCE (PROPERTY CASUALTY)-3.06%
Amerin Corp.(a) 4,200 99,225
- --------------------------------------------------------------
EXEL Limited-Class A 9,900 742,500
- --------------------------------------------------------------
841,725
- --------------------------------------------------------------
MANUFACTURING (SPECIALIZED)-2.89%
Millipore Corp. 28,000 796,250
- --------------------------------------------------------------
OIL (DOMESTIC INTEGRATED)-1.73%
Atlantic Richfield Co. 7,300 476,325
- --------------------------------------------------------------
OIL (INTERNATIONAL INTEGRATED)-1.04%
Mobil Corp. 3,300 287,513
- --------------------------------------------------------------
OIL & GAS (DRILLING &
EQUIPMENT)-2.48%
ENSCO International, Inc. 26,200 280,012
- --------------------------------------------------------------
Schlumberger Ltd. 8,700 401,288
- --------------------------------------------------------------
681,300
- --------------------------------------------------------------
OIL & GAS (EXPLORATION & PRODUCTION)-0.90%
Conoco Inc.-Class A(a) 11,800 246,325
- --------------------------------------------------------------
REAL ESTATE INVESTMENT TRUST-0.51%
Starwood Hotels & Resorts(a) 6,183 140,278
- --------------------------------------------------------------
RETAIL (DEPARTMENT STORES)-5.52%
Federated Department Stores, Inc.(a) 13,500 588,093
- --------------------------------------------------------------
J.C. Penney Co., Inc. 8,600 403,125
- --------------------------------------------------------------
Saks Inc.(a) 16,700 527,094
- --------------------------------------------------------------
1,518,312
- --------------------------------------------------------------
</TABLE>
FS-2
<PAGE> 506
<TABLE>
<CAPTION>
MARKET
SHARES VALUE
<S> <C> <C>
RETAIL (SPECIALTY)-0.77%
Toys "R" Us, Inc.(a) 12,600 $ 212,625
- --------------------------------------------------------------
SERVICES (DATA PROCESSING)-3.28%
First Data Corp. 28,500 903,095
- --------------------------------------------------------------
SERVICES (FACILITIES & ENVIRONMENTAL)-0.64%
Corrections Corp. of America(a) 10,000 176,250
- --------------------------------------------------------------
TELEPHONE-4.66%
Bell Atlantic Corp. 11,200 636,300
- --------------------------------------------------------------
US West, Inc. 10,000 646,250
- --------------------------------------------------------------
1,282,550
- --------------------------------------------------------------
TOBACCO-3.31%
Philip Morris Companies, Inc. 17,050 912,175
- --------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
MARKET
SHARES VALUE
<S> <C> <C>
WASTE MANAGEMENT-2.15%
Waste Management, Inc. 12,667 $ 590,599
- --------------------------------------------------------------
Total Common Stocks (Cost
$21,863,862) 25,381,566
- --------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT
<S> <C> <C>
REPURCHASE AGREEMENT-3.73%(b)
SBC Warburg Dillon Read Inc., 4.75%,
01/04/99(c) $1,026,552 $ 1,026,552
- --------------------------------------------------------------
Total Repurchase Agreements
(Cost $1,026,552) 1,026,552
- --------------------------------------------------------------
TOTAL INVESTMENTS-95.96% 26,408,118
- --------------------------------------------------------------
OTHER ASSETS LESS LIABILITIES-4.04% 1,110,420
- --------------------------------------------------------------
NET ASSETS-100.00% $27,518,538
==============================================================
</TABLE>
Abbreviation:
ADR - American Depositary Receipt
Notes to Schedule of Investments:
(a) Non-income producing security.
(b) Collateral on repurchase agreements, including the Fund's pro-rata interest
in joint repurchase agreements, is taken into possession by the Fund upon
entering into the repurchase agreement. The collateral is marked to market
daily to ensure its market value is at least 102% of the sale price of the
repurchase agreement. The investments in some repurchase agreements are
through participation in joint accounts with other mutual funds, private
accounts, and certain non-registered investment companies managed by the
investment advisor or its affiliates.
(c) Joint repurchase agreement entered into 12/31/98 with a maturing value
$1,000,527,778. Collateralized by $2,207,068,000 U.S. Government
obligations, 0% to 6.75% due 06/30/99 to 11/15/21 with an aggregate market
value at 12/31/98 of $1,020,001,079.
See Notes to Financial Statements.
FS-3
<PAGE> 507
STATEMENT OF ASSETS AND LIABILITIES
December 31, 1998
<TABLE>
<S> <C>
ASSETS:
Investments, at market value (cost
$22,890,414) $26,408,118
- ---------------------------------------------------------
Receivables for:
Investment Advisor 118,468
- ---------------------------------------------------------
Investments sold 37,475
- ---------------------------------------------------------
Fund shares sold 1,201,931
- ---------------------------------------------------------
Dividends and interest 33,974
- ---------------------------------------------------------
Other assets 37,479
- ---------------------------------------------------------
Total assets 27,837,445
- ---------------------------------------------------------
LIABILITIES:
Payables for:
Investments purchased 37,333
- ---------------------------------------------------------
Fund shares reacquired 156,968
- ---------------------------------------------------------
Accrued investment management &
administration fees 31,765
- ---------------------------------------------------------
Accrued accounting fees 587
- ---------------------------------------------------------
Accrued distribution fees 40,203
- ---------------------------------------------------------
Accrued trustees' fees 9,702
- ---------------------------------------------------------
Accrued transfer agent fees 7,000
- ---------------------------------------------------------
Accrued operating expenses 17,075
- ---------------------------------------------------------
Accrued filing fees 18,274
- ---------------------------------------------------------
Total liabilities 318,907
- ---------------------------------------------------------
Net assets applicable to shares outstanding $27,518,538
=========================================================
NET ASSETS:
Class A $ 9,073,952
=========================================================
Class B $17,406,329
=========================================================
Advisor Class $ 1,038,257
=========================================================
SHARES OUTSTANDING, $0.01 PAR VALUE PER
SHARE:
Class A 500,450
=========================================================
Class B 978,399
=========================================================
Advisor Class 56,634
=========================================================
Class A:
Net asset value and redemption price per
share $ 18.13
- ---------------------------------------------------------
Offering price per share:
(Net asset value of $18.13
divided by 94.50%) $ 19.19
=========================================================
Class B:
Net asset value and offering price per
share $ 17.79
- ---------------------------------------------------------
Advisor Class:
Net asset value and offering price per
share $ 18.33
=========================================================
</TABLE>
STATEMENT OF OPERATIONS
For the year ended December 31, 1998
<TABLE>
<S> <C>
INVESTMENT INCOME:
Dividends (net of $416 foreign withholding
tax) $ 502,395
- ---------------------------------------------------------
Interest 53,825
- ---------------------------------------------------------
Securities lending income 2,035
- ---------------------------------------------------------
Total investment income 558,255
- ---------------------------------------------------------
EXPENSES:
Investment management & administration fees 203,359
- ---------------------------------------------------------
Accounting fees 6,806
- ---------------------------------------------------------
Custodian fees 6,265
- ---------------------------------------------------------
Trustees' fees 16,714
- ---------------------------------------------------------
Distribution fees -- Class A 29,605
- ---------------------------------------------------------
Distribution fees -- Class B 188,068
- ---------------------------------------------------------
Transfer agent fees -- Class A 31,636
- ---------------------------------------------------------
Transfer agent fees -- Class B 70,338
- ---------------------------------------------------------
Transfer agent fees -- Advisor Class 2,932
- ---------------------------------------------------------
Filing fees 43,643
- ---------------------------------------------------------
Printing fees 70,882
- ---------------------------------------------------------
Other 40,141
- ---------------------------------------------------------
Total expenses 710,389
- ---------------------------------------------------------
Less: Fee waivers (102,359)
- ---------------------------------------------------------
Net expenses 608,030
- ---------------------------------------------------------
Net investment income (loss) (49,775)
- ---------------------------------------------------------
REALIZED AND UNREALIZED GAIN (LOSS) FROM
INVESTMENT SECURITIES AND OPTION CONTRACTS:
Net realized gain (loss) from:
Investment securities 52,411
- ---------------------------------------------------------
Option contracts written (7,810)
- ---------------------------------------------------------
44,601
- ---------------------------------------------------------
Net unrealized appreciation of investment
securities 1,516,960
- ---------------------------------------------------------
Net gain from investment securities and
option contracts 1,561,561
- ---------------------------------------------------------
Net increase in net assets resulting from
operations $1,511,786
=========================================================
</TABLE>
See Notes to Financial Statements.
FS-4
<PAGE> 508
STATEMENT OF CHANGES IN NET ASSETS
For the years ended December 31, 1998 and 1997
<TABLE>
<CAPTION>
1998 1997
----------- -----------
<S> <C> <C>
OPERATIONS:
Net investment income (loss) $ (49,775) $ 22,242
- ------------------------------------------------------------------------------------------
Net realized gain from investment securities and option
contracts 44,601 1,352,859
- ------------------------------------------------------------------------------------------
Net unrealized appreciation of investment securities and
option contracts 1,516,960 2,016,032
- ------------------------------------------------------------------------------------------
Net increase in net assets resulting from operations 1,511,786 3,391,133
- ------------------------------------------------------------------------------------------
Distributions to shareholders from net investment income:
Class A -- (12,256)
- ------------------------------------------------------------------------------------------
Advisor Class -- (1,610)
- ------------------------------------------------------------------------------------------
Distributions to shareholders from net realized gains on
investment securities:
Class A (141,471) (482,262)
- ------------------------------------------------------------------------------------------
Class B (313,992) (1,128,861)
- ------------------------------------------------------------------------------------------
Advisor Class (18,735) (30,657)
- ------------------------------------------------------------------------------------------
Share transactions-net:
Class A 1,006,548 4,423,280
- ------------------------------------------------------------------------------------------
Class B 87,004 10,245,557
- ------------------------------------------------------------------------------------------
Advisor Class 562,783 197,292
- ------------------------------------------------------------------------------------------
Net increase in net assets 2,693,923 16,601,616
- ------------------------------------------------------------------------------------------
NET ASSETS:
Beginning of period 24,824,615 8,222,999
- ------------------------------------------------------------------------------------------
End of period $27,518,538 $24,824,615
==========================================================================================
NET ASSETS CONSIST OF:
Shares of beneficial interest $24,031,065 $22,421,981
- ------------------------------------------------------------------------------------------
Undistributed net investment income (loss) (2,524) --
- ------------------------------------------------------------------------------------------
Undistributed net realized gain (loss) from investment
securities and option contracts (27,707) 401,890
- ------------------------------------------------------------------------------------------
Unrealized appreciation of investment securities and
option contracts 3,517,704 2,000,744
- ------------------------------------------------------------------------------------------
$27,518,538 $24,824,615
==========================================================================================
</TABLE>
See Notes to Financial Statements.
FS-5
<PAGE> 509
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1998
NOTE 1-SIGNIFICANT ACCOUNTING POLICIES
AIM Basic Value Fund, formerly AIM America Value Fund, (the "Fund"), is a
separate series of AIM Growth Series (the "Trust"). The Trust is a Delaware
business trust and is registered under the Investment Company Act of 1940, as
amended ("1940 Act"), as an open-end management investment company. The Trust
has six diversified series of shares in operation, each series corresponding to
a distinct portfolio of investments.
The Fund invests substantially all of its investable assets in the Value
Portfolio (the "Portfolio"). The Portfolio is organized as a Delaware business
trust and is registered under the 1940 Act as a diversified, open-end management
investment company.
The Portfolio has investment objectives, policies, and limitations
substantially identical to the Fund. Therefore, the financial statements of the
Fund and the Portfolio have been presented on a consolidated basis, and
represent all activities of both the Fund and the Portfolio. At December 31,
1998, all of the shares of beneficial interest of the Portfolio were owned
either by the Fund or INVESCO (NY), Inc., which has a nominal ($100) investment
in the Portfolio.
The Fund offers Class A, Class B, and Advisor Class shares, each of which has
equal rights as to assets and voting privileges. Class A and Class B each has
exclusive voting rights with respect to its distribution plan. Investment
income, realized and unrealized capital gains and losses, and the common
expenses of the Fund are allocated on a pro rata basis to each class based on
the relative net assets of each class to the total net assets of the Fund. Each
class of shares differs in its respective distribution expenses, and may differ
in its transfer agent, registration, and certain other class-specific fees and
expenses.
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statements and
the reported amounts of income and expenses during the reporting period. Actual
results could differ from those estimates. The following is a summary of
significant accounting policies in conformity with generally accepted accounting
principles consistently followed by the Fund and Portfolio in the preparation of
the financial statements.
A. Portfolio Valuation -- The Fund calculates the net asset value of and
completes orders to purchase, exchange or repurchase Fund shares on each
business day, with the exception of those days on which the New York Stock
Exchange is closed.
Equity securities are valued at the last sale price on the exchange on
which such securities are traded or on the principal over-the-counter market
on which such securities are traded, as of the close of business on the day
the securities are being valued or, lacking any sales, at the mean between
the closing bid and asked prices. In cases where securities are traded on
more than one exchange, the securities are valued on the exchange determined
by A I M Advisors, Inc. (the "Manager") to be the primary market.
Fixed income investments are valued at the mean of representative quoted
bid and ask prices for such investments or, if such prices are not available,
at prices for investments of comparative maturity, quality and type; however,
when the Manager deems it appropriate, prices obtained for the day of
valuation from a bond pricing service will be used. Short-term investments
with a maturity of 60 days or less are valued at amortized cost which
approximates market value.
Investments for which market quotations are not readily available
(including restricted securities which are subject to limitations on their
sale) are valued at fair value as determined in good faith by or under the
direction of the Trust's Board of Trustees.
B. Repurchase Agreements -- With respect to repurchase agreements entered into
by the Portfolio, it is the Portfolio's policy to always receive, as
collateral, United States government securities or other high quality debt
securities of which the value, including accrued interest, is at least equal
to the amount to be repaid to the Portfolio under each agreement at its
maturity.
C. Option Accounting Principles -- When the Portfolio writes a call or put
option, an amount equal to the premium received is included in the Fund's
consolidated "Statement of Assets and Liabilities" as an asset and an
equivalent liability. The amount of the liability is subsequently
marked-to-market to reflect the current market value of the option. The
current market value of an option is the mean between the last bid and asked
prices on that day. If an option expires on its stipulated expiration date or
if the Portfolio enters into a closing purchase transaction, a gain or loss
is realized without regard to any unrealized gain or loss on the underlying
security, and the liability related to such option is extinguished. If a
written call option is exercised, a gain or loss is realized from the sale of
the underlying security and the proceeds of the sale are increased by the
premium originally received. If a written put option is exercised, the cost
of the underlying security purchased would be decreased by the premium
originally received. The Portfolio can write options only on a covered basis,
which, for a call, requires that the Portfolio hold the underlying security,
and, for a put, requires the Portfolio to set aside cash, U.S. government
securities or other liquid securities in an amount not less than the exercise
price or otherwise provide adequate cover at all times while the put option
is outstanding. The Portfolio may use options to manage its exposure to the
stock market and to fluctuations in interest rates.
The premium paid by the Portfolio for the purchase of a call or put option
is included in the Fund's consolidated "Statement of Assets and Liabilities"
as an investment and subsequently "marked-to-market" to reflect the current
market value of the option. If an option which the Portfolio has purchased
expires on the stipulated expiration date, the Portfolio realizes a loss in
the amount of the cost of the option. If the Portfolio enters into a closing
sale transaction, the Portfolio realizes a gain or loss, depending on whether
proceeds from the closing sale transaction are greater or less than the cost
of the option. If the Portfolio exercises a call option, the cost of the
securities acquired by exercising the call is increased by the premium paid
to buy the call. If the Portfolio exercises a put option, it realizes a gain
or loss from the sale of the underlying security,
FS-6
<PAGE> 510
and the proceeds from such sale are decreased by the premium originally paid.
The risk associated with purchasing options is limited to the premium
originally paid. The risk in writing a call option is that the Portfolio may
forego the opportunity of profit if the market value of the underlying
security or index increases and the option is exercised. The risk in writing
a put option is that the Portfolio may incur a loss if the market value of
the underlying security or index decreases and the option is exercised. In
addition, there is the risk the Portfolio may not be able to enter into a
closing transaction because of an illiquid secondary market.
D. Futures Contracts -- A futures contract is an agreement between two parties
to buy and sell a security at a set price on a future date. Upon entering
into such a contract the Portfolio is required to pledge to the broker an
amount of cash or securities equal to the minimum "initial margin"
requirements of the exchange on which the contract is traded. Pursuant to the
contract, the Portfolio agrees to receive from or pay to the broker an amount
of cash equal to the daily fluctuation in value of the contract. Such
receipts or payments are known as "variation margin" and are recorded by the
Portfolio as unrealized gains or losses. When the contract is closed, the
Portfolio records a realized gain or loss equal to the difference between the
value of the contract at the time it was opened and the value at the time it
was closed. The potential risk to the Portfolio is that the change in value
of the underlying securities may not correlate to the change in value of the
contracts. The Portfolio may use futures contracts to manage its exposure to
the stock market and to fluctuations in interest rates.
E. Security Transactions and Related Investment Income -- Security transactions
are accounted for on the trade date (date the order to buy or sell is
executed). Realized gains and losses are calculated on the basis of specific
identification of the securities sold. Dividends are recorded on the
ex-dividend date. Interest income is recorded on the accrual basis. Where a
high level of uncertainty exists as to its collection, income is recorded net
of all withholding tax with any rebate recorded when received. The Portfolio
may trade securities on other than normal settlement terms. This may increase
the risk if the other party to the transaction fails to deliver and causes
the Portfolio to subsequently invest at less advantageous prices. On December
31, 1998 additional paid-in capital was decreased by $47,251 and
undistributed net investment income was increased by $47,251 in order to
comply with the requirements of the American Institute of Certified Public
Accountants Statement of Position 93-2. Net assets of the Fund were
unaffected by the reclassifications discussed above.
F. Portfolio Securities Loaned -- At December 31, 1998, stocks with an aggregate
value listed below were on loan to brokers. The loans were secured by cash
collateral received by the Portfolio:
<TABLE>
<CAPTION>
DECEMBER 31, 1998 YEAR ENDED
---------------------------- DECEMBER 31, 1998
AGGREGATE VALUE CASH -----------------
ON LOANS COLLATERAL FEES RECEIVED
--------------- ---------- -----------------
<S> <C> <C> <C>
$1,431,825 $1,433,821 $2,035
</TABLE>
Cash collateral is received by the Portfolio against loaned securities in
the amount at least equal to 102% of the market value of the loaned
securities at the inception of each loan. This collateral must be maintained
at not less than 100% of the market value of the loaned securities during the
period of the loan. The cash collateral is invested in a securities lending
trust which consists of a portfolio of high quality short duration securities
whose average effective duration is restricted to 120 days or less.
G. Deferred Organizational Expenses -- Expenses incurred by the the Fund and the
Portfolio in connection with their organization, their initial registration
with the Securities and Exchange Commission and with various states and the
initial public offering of their shares aggregated $63,500 for the Fund and
$25,000 for the Portfolio. These expenses are being amortized on a
straight-line basis over a five-year period.
H. Taxes -- It is the policy of the Fund and the Portfolio to meet the
requirements for qualification as a "regulated investment company" under the
Internal Revenue Code of 1986, as amended ("Code"). It is also the intention
of the Fund to make distributions sufficient to avoid imposition of any
excise tax under Section 4982 of the Code. Therefore, no provision has been
made for Federal taxes on income, capital gains, or unrealized appreciation
of securities held, and excise tax on income and capital gains.
I. Distributions to Shareholders -- Distributions to shareholders are recorded
by the Fund on the ex-date. Income and capital gain distributions are
determined in accordance with Federal income tax regulations which may
differ from generally accepted accounting principles. These differences are
primarily due to differing treatments of income and gains on various
investment securities held by the Portfolio and timing differences.
J. Restricted Securities -- The Portfolio is permitted to invest in privately
placed restricted securities. These securities may be resold in transactions
exempt from registration or to the public if the securities are registered.
Disposal of these securities may involve time-consuming negotiations and
expense, and prompt sale at an acceptable price may be difficult.
K. Indexed Securities -- The Portfolio may invest in indexed securities whose
value is linked either directly or indirectly to changes in foreign
currencies, interest rates, equities, indices, or other reference
instruments. Indexed securities may be more volatile than the reference
instrument itself, but any loss is limited to the amount of the original
investment.
L. Line of Credit -- The Fund, along with certain other funds advised and/or
administered by the Manager, has a line of credit with BankBoston and State
Street Bank & Trust Company. The arrangements with the banks allow the Fund
and certain other funds to borrow, on a first come, first served basis, an
aggregate maximum amount of $250,000,000. The Fund is limited to borrowing up
to 33 1/3% of the value of the Fund's total assets.
For the year ended December 31, 1998, the average outstanding daily balance
of bank loans (based on the number of days the loans were outstanding) for
the Fund was $87,889 with a weighted average interest rate of 6.24%. Interest
expense for the Fund for the year ended December 31, 1998 was $137, and is
included in "Other Expenses" on the Statement of Operations.
FS-7
<PAGE> 511
NOTE 2-RELATED PARTIES
A I M Advisors, Inc. ("Manager") is the Fund's and the Portfolio's investment
manager and administrator. As of the close of business on May 29, 1998,
Liechtenstein Global Trust AG ("LGT"), the former indirect parent organization
of Chancellor LGT Asset Management, Inc. ("Chancellor LGT"), consummated a
purchase agreement with AMVESCAP PLC pursuant to which AMVESCAP PLC acquired
LGT's Asset Management Division, which included Chancellor LGT and certain other
affiliates. As a result of this transaction, Chancellor LGT was renamed INVESCO
(NY), Inc., and is now an indirect wholly-owned subsidiary of AMVESCAP PLC. In
connection with this transaction, A I M Advisors, Inc., an indirect wholly-owned
subsidiary of AMVESCAP PLC, became the administrator of the Fund and the
investment manager and administrator of the Portfolio. Also, on May 29, 1998,
A I M Distributors, Inc. ("AIM Distributors"), a wholly-owned subsidiary of the
Manager, became the Fund's distributor, and the Trust was reorganized from a
Massachusetts business trust into a Delaware business trust, and the Portfolio
was reorganized from a New York trust into a Delaware business trust. Finally,
on September 4, 1998, A I M Fund Services, Inc. ("AFS"), a wholly-owned
subsidiary of the Manager, became the transfer agent of the Fund.
The Fund pays the Manager administration fees at the annualized rate of 0.25%
of the Fund's average daily net assets. The Portfolio pays investment management
and administration fees to the Manager at the annualized rate of 0.475% on the
first $500 million of average daily net assets of the Portfolio; 0.45% on the
next $500 million; 0.425% on the next $500 million; and 0.40% on amounts
thereafter.
AIM Distributors serves as the Fund's distributor. For the period ended May
29, 1998, GT Global, Inc. ("GT Global"), an affiliate of Chancellor LGT, served
as the Fund's distributor. The Fund offers Class A, Class B, and Advisor Class
shares for purchase.
Class A shares are subject to initial sales charges imposed at the time of
purchase, in accordance with the schedule included in the Fund's current
prospectus. AIM Distributors collects the sales charges imposed on sales of
Class A shares, and reallows a portion of such charges to dealers through which
the sales are made. For the year ended December 31, 1998, AIM Distributors and
GT Global retained the following sales charges: $1,695 and $2,335, respectively.
Purchases of Class A shares exceeding $1,000,000 may be subject to a contingent
deferred sales charge ("CDSC") upon redemption, in accordance with the Fund's
current prospectus. No CDSC's for Class A were collected for the period ended
December 31, 1998. AIM Distributors also makes ongoing shareholder servicing and
trail commission payments to dealers whose clients hold Class A shares.
Class B shares are not subject to initial sales charges. When Class B shares
are sold, AIM Distributors from its own resources pays commissions to dealers
through which the sales are made. Certain redemptions of Class B shares made
within six years of purchase are subject to CDSCs, in accordance with the Fund's
current prospectus. For the year ended December 31, 1998, AIM Distributors and
GT Global collected such CDSCs in the amount of: $15,167 and $38,159,
respectively. In addition, AIM Distributors makes ongoing shareholder servicing
and trail commission payments to dealers whose clients hold Class B shares.
For the period ended May 29, 1998, pursuant to the then effective separate
distribution plans adopted under the 1940 Act Rule 12b-1 by the Trust's Board of
Trustees with respect to the Fund's Class A shares ("Old Class A Plan") and
Class B shares ("Old Class B Plan"), the Fund reimbursed GT Global for a portion
of its shareholder servicing and distribution expenses. Under the Old Class A
Plan, the Fund was permitted to pay GT Global a service fee at the annualized
rate of up to 0.25% of the average daily net assets of the Fund's Class A shares
for GT Global's expenditures incurred in servicing and maintaining shareholder
accounts, and was permitted to pay GT Global a distribution fee at the
annualized rate of up to 0.35% of the average daily net assets of the Fund's
Class A shares, less any amounts paid by the Fund as the aforementioned service
fee, for GT Global's expenditures incurred in providing services as distributor.
All expenses for which GT Global was reimbursed under the Old Class A Plan would
have been incurred within one year of such reimbursement.
For the period ended May 29, 1998, pursuant to the Old Class B Plan, the Fund
was permitted to pay GT Global a service fee at the annualized rate of up to
0.25% of the average daily net assets of the Fund's Class B shares for GT
Global's expenditures incurred in servicing and maintaining shareholder
accounts, and was permitted to pay GT Global a distribution fee at the
annualized rate of up to 0.75% of the average daily net assets of the Fund's
Class B shares for GT Global's expenditures incurred in providing services as
distributor. Expenses incurred under the Old Class B Plan in excess of 1.00%
annually were permitted to be carried forward for reimbursement in subsequent
years as long as that Plan continued in effect.
Effective as of the close of business May 29, 1998, pursuant to Rule 12b-1
under the 1940 Act, the Trust's Board of Trustees adopted a Master Distribution
Plan applicable to the Fund's Class A shares ("Class A Plan") and Class B shares
("Class B Plan"), pursuant to which the Fund compensates AIM Distributors for
the purpose of financing any activity that is intended to result in the sale of
Class A or Class B shares of the Fund. Under the Class A Plan, the Fund
compensates AIM Distributors at the annualized rate of 0.35% of the average
daily net assets of each of the Fund's Class A shares.
Pursuant to the Class B Plan, the Fund compensates AIM Distributors at an
annualized rate of 1.00% of the average daily net assets of the Fund's Class B
shares.
The Class A Plan and the Class B Plan (together, the "Plans") are designed to
compensate AIM Distributors for certain promotional and other sales-related
costs, and to implement a dealer incentive program that provides for periodic
payments to selected dealers who furnish continuing personal shareholder
services to their customers who purchase and own Class A and Class B shares of
the Fund. Payments also can be directed by AIM Distributors to financial
institutions who have entered into service agreements with respect to Class A
and Class B shares of the Fund and who provide continuing personal services to
their customers who own Class A and Class B shares of the Fund. The service fees
payable to selected financial 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 that were purchased on or after a
prescribed date set forth in the Plans.
The Manager and AIM Distributors have undertaken to limit the Fund's expenses
(exclusive of brokerage commissions, taxes, interest, and extraordinary
expenses) to the annual rate of 1.75%, 2.40%, and 1.40% of the average daily net
assets of the Fund's Class A, Class B, and Advisor Class shares, respectively.
This
FS-8
<PAGE> 512
undertaking may be changed or eliminated in the future. If necessary, this
limitation will be effected by waivers by the Manager of investment management
and administration fees, waivers by AIM Distributors of payments under the Class
A Plan and/or Class B Plan and/or reimbursements by the Manager or AIM
Distributors of portions of the Fund's other operating expenses.
Effective as of the close of business September 4, 1998, the Fund, pursuant to
a transfer agency and service agreement, has agreed to pay A I M Fund Services,
Inc. ("AFS") an annualized fee of $24.85 for each shareholder account that is
open during any calendar month (this fee includes all out-of-pocket expenses),
and an annualized fee of $0.70 per shareholder account that is closed during any
calendar month. Both fees are billed by AFS monthly in arrears on a prorated
basis of 1/12 of the annualized fee for all such accounts.
For the period January 1, 1998 to September 4, 1998, GT Global Investor
Services, Inc., an affiliate of Chancellor LGT, was the transfer agent of the
Fund. For performing shareholder servicing, reporting, and general transfer
agent services, GT Services received an annual maintenance fee of $17.50 per
account, a new account fee of $4.00 per account, a per transaction fee of $1.75
for all transactions other than exchanges and a per exchange fee of $2.25. GT
Services was also reimbursed by the Fund for its out-of-pocket expenses for such
items as postage, forms, telephone charges, stationery and office supplies.
The Manager is the pricing and accounting agent for the Fund. The monthly fee
for these services to the Manager is a percentage, not to exceed 0.03% annually,
of the Fund's average daily net assets. The annual fee rate is derived based on
the aggregate net assets of the funds which comprise the following investment
companies: AIM Growth Series, AIM Investment Funds, AIM Series Trust, G.T.
Global Variable Investment Series and G.T. Global Variable Investment Trust. The
fee is calculated at the rate of 0.03% to the first $5 billion of assets and
0.02% to the assets in excess of $5 billion. An amount is allocated to and paid
by each such fund based on its relative average daily net assets.
The Portfolio pays each of its Trustees who is not an employee, officer or
director of the Manager, AIM Distributors or AFS $500 per year plus $150 for
each meeting of the board or any committee thereof attended by the Trustee.
At December 31, 1998, all of the shares of beneficial interest of the
Portfolio were owned either by the Fund or Invesco (NY), Inc.
NOTE 3-PURCHASES AND SALES OF SECURITIES
The aggregate amount of investment securities (other than short-term securities)
purchased and sold by the Portfolio during the year ended December 31, 1998 was
$39,540,620 and $39,657,090, respectively.
The amount of unrealized appreciation (depreciation) of investment securities,
on a tax basis, as of December 31, 1998 is as follows:
<TABLE>
<S> <C>
Aggregate unrealized appreciation of investment
securities $4,110,581
- ---------------------------------------------------------------
Aggregate unrealized (depreciation) of investment
securities (688,180)
- ---------------------------------------------------------------
Net unrealized appreciation of investment
securities $3,422,401
===============================================================
</TABLE>
Cost of investments for tax purposes is $22,985,717.
NOTE 4-SHARE INFORMATION
Changes in the Fund's shares outstanding during the years ended December 31,
1998 and 1997 were as follows:
<TABLE>
<CAPTION>
1998 1997
----------------------- -----------------------
SHARES AMOUNT SHARES AMOUNT
-------- ------------ --------- -----------
<S> <C> <C> <C> <C>
Sold:
Class A 472,964 $ 8,362,868 781,797 $13,117,280
- ------------------------------------------------------------------------
Class B 587,988 10,276,429 1,148,582 19,043,834
- ------------------------------------------------------------------------
Advisor Class 41,555 747,776 14,203 230,962
- ------------------------------------------------------------------------
Issued as
reinvestment of
dividends:
Class A 7,580 134,463 26,859 454,725
- ------------------------------------------------------------------------
Class B 16,572 288,515 60,093 1,004,744
- ------------------------------------------------------------------------
Advisor Class 1,044 18,735 1,920 32,714
- ------------------------------------------------------------------------
Reacquired:
Class A (424,737) (7,490,783) (536,657) (9,148,725)
- ------------------------------------------------------------------------
Class B (607,196) (10,477,940) (606,167) (9,803,021)
- ------------------------------------------------------------------------
Advisor Class (11,248) (203,728) (3,834) (66,384)
- ------------------------------------------------------------------------
84,522 $ 1,656,335 886,796 $14,866,129
========================================================================
</TABLE>
NOTE 5-EXPENSE REDUCTIONS
The Manager has directed certain portfolio trades to brokers who then paid a
portion of the Portfolio's expenses. For the year ended December 31, 1998, the
expenses of the Portfolio were reduced by $1,546 under these arrangements.
FS-9
<PAGE> 513
NOTE 6-FINANCIAL HIGHLIGHTS
Shown below are the financial highlights for a share of Class A, Class B, and
Advisor Class outstanding during each of the years in the three-year period
ended December 31, 1998 and the period October 18, 1995 (date operations
commenced) through December 31, 1995:
<TABLE>
<CAPTION>
CLASS A
--------------------------------------------------
1998(a) 1997 1996 1995
------- ------- ------- -------
<S> <C> <C> <C> <C>
Net asset value, beginning of period $17.25 $ 14.65 $ 12.76 $ 11.43
- ------------------------------------------------------------ ------ ------- ------- -------
Income from investment operations:
Net investment income(b) 0.04 0.09(c) (0.01)(c) 0.03(c)
- ------------------------------------------------------------ ------ ------- ------- -------
Net gains on securities (both realized and unrealized) 1.16 3.87 1.94 1.30
- ------------------------------------------------------------ ------ ------- ------- -------
Total from investment operations 1.20 3.96 1.93 1.33
- ------------------------------------------------------------ ------ ------- ------- -------
Less distributions:
Dividends from net investment income -- (0.03) -- --
- ------------------------------------------------------------ ------ ------- ------- -------
Distributions from net realized gains (0.32) (1.33) (0.04) --
- ------------------------------------------------------------ ------ ------- ------- -------
Total distributions (0.32) (1.36) (0.04) --
- ------------------------------------------------------------ ------ ------- ------- -------
Net asset value, end of period $18.13 $ 17.25 $ 14.65 $ 12.76
============================================================ ====== ======= ======= =======
Total Return(d) 7.02% 27.23% 15.12% 11.64%
============================================================ ====== ======= ======= =======
Ratios/supplemental data:
Net assets, end of period (000s omitted) $9,074 $ 7,688 $ 2,529 $ 870
============================================================ ====== ======= ======= =======
Ratio of expenses to average net assets:
With expense reductions and/or reimbursement 1.74%(e) 1.99% 2.00% 2.00%(f)
- ------------------------------------------------------------ ------ ------- ------- -------
Without expense reductions and/or reimbursement 2.11%(e) 2.97% 5.51% 50.54%(f)
============================================================ ====== ======= ======= =======
Ratio of net investment income to average net assets:
With expense reductions and/or reimbursement 0.25%(e) 0.56% (0.10)% 1.10%(f)
- ------------------------------------------------------------ ------ ------- ------- -------
Without expense reductions and/or reimbursement (0.08)%(e) (0.42)% (3.61)% (47.44)%(f)
============================================================ ====== ======= ======= =======
Ratio of interest expense to average net assets(g) -- 0.03% -- --
============================================================ ====== ======= ======= =======
Portfolio turnover rate(g) 148% 93% 256% --
============================================================ ====== ======= ======= =======
</TABLE>
(a) The Fund changed Investment Advisors on May 29, 1998.
(b) Before reimbursement the net investment loss per share would have been
$(0.02), $(0.07), $(0.50), and $(1.11) for 1998-1995, respectively.
(c) Calculated using average shares outstanding.
(d) Does not deduct sales charges and is not annualized for periods less than
one year.
(e) Ratios are based on average net assets of $8,458,715.
(f) Annualized.
(g) Portfolio turnover rates and ratio of interest expense to average net assets
are calculated on the basis of the Value Portfolio as a whole without
distinguishing between the classes of shares issued.
FS-10
<PAGE> 514
NOTE 6-FINANCIAL HIGHLIGHTS (continued)
<TABLE>
<CAPTION>
CLASS B ADVISOR CLASS
---------------------------------------------------- -----------
1998(a) 1997 1996 1995 1998(a)
------- -------- ------- -------- -------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of period $ 17.04 $ 14.54 $ 12.75 $ 11.43 $17.37
- ------------------------------------------------------ ------- -------- ------- -------- ------
Income from investment operations:
Net investment income(b) (0.08) (0.01)(c) (0.10)(c) 0.01(c) 0.07
- ------------------------------------------------------ ------- -------- ------- -------- ------
Net gains on securities (both realized and
unrealized) 1.15 3.83 1.93 1.31 1.21
- ------------------------------------------------------ ------- -------- ------- -------- ------
Total from investment operations 1.07 3.82 1.83 1.32 1.28
- ------------------------------------------------------ ------- -------- ------- -------- ------
Less distributions:
Dividends from net investment income -- -- -- -- --
- ------------------------------------------------------ ------- -------- ------- -------- ------
Distributions from net realized gains (0.32) (1.32) (0.04) -- (0.32)
- ------------------------------------------------------ ------- -------- ------- -------- ------
Total distributions (0.32) (1.32) (0.04) -- (0.32)
- ------------------------------------------------------ ------- -------- ------- -------- ------
Net asset value, end of period $ 17.79 $ 17.04 $ 14.54 $ 12.75 $18.33
====================================================== ======= ======== ======= ======== ======
Total Return(d) 6.34% 26.44% 14.35% 11.55% 7.43%
====================================================== ======= ======== ======= ======== ======
Ratios/supplemental data:
Net assets, end of period (000s omitted) $17,406 $ 16,717 $ 5,503 $ 1,254 $1,038
====================================================== ======= ======== ======= ======== ======
Ratio of expenses to average net assets:
With expense reductions and/or reimbursement 2.39%(e) 2.64% 2.65% 2.65%(f) 1.39%(e)
- ------------------------------------------------------ ------- -------- ------- -------- ------
Without expense reductions and/or reimbursement 2.76%(e) 3.62% 6.16% 51.19%(f) 1.76%(e)
====================================================== ======= ======== ======= ======== ======
Ratio of net investment income to average net assets:
With expense reductions and/or reimbursement (0.40)%(e) (0.09)% (0.75)% 0.45%(f) 0.60%(e)
- ------------------------------------------------------ ------- -------- ------- -------- ------
Without expense reductions and/or reimbursement (0.72)%(e) (1.07)% (4.26)% (48.09)%(f) 0.23%(e)
====================================================== ======= ======== ======= ======== ======
Ratio of interest expense to average net assets(f) -- 0.03% -- -- --
====================================================== ======= ======== ======= ======== ======
Portfolio turnover rate(g) 148% 93% 256% -- 148%
====================================================== ======= ======== ======= ======== ======
<CAPTION>
ADVISOR CLASS
------------------------------------
1997 1996 1995
------- ------- --------
<S> <C> <C> <C>
Net asset value, beginning of period $ 14.72 $ 12.77 $ 11.43
- ------------------------------------------------------ ------- ------- --------
Income from investment operations:
Net investment income(b) 0.15(c) 0.03(c) 0.04(c)
- ------------------------------------------------------ ------- ------- --------
Net gains on securities (both realized and
unrealized) 3.91 1.96 1.30
- ------------------------------------------------------ ------- ------- --------
Total from investment operations 4.06 1.99 1.34
- ------------------------------------------------------ ------- ------- --------
Less distributions:
Dividends from net investment income (0.07) -- --
- ------------------------------------------------------ ------- ------- --------
Distributions from net realized gains (1.34) (0.04) --
- ------------------------------------------------------ ------- ------- --------
Total distributions (1.41) (0.04) --
- ------------------------------------------------------ ------- ------- --------
Net asset value, end of period $ 17.37 $ 14.72 $ 12.77
====================================================== ======= ======= ========
Total Return(d) 27.78% 15.58% 11.72%
====================================================== ======= ======= ========
Ratios/supplemental data:
Net assets, end of period (000s omitted) $ 439 $ 191 $ 81
====================================================== ======= ======= ========
Ratio of expenses to average net assets:
With expense reductions and/or reimbursement 1.64% 1.65% 1.65%(f)
- ------------------------------------------------------ ------- ------- --------
Without expense reductions and/or reimbursement 2.62% 5.16% 50.19%(f)
====================================================== ======= ======= ========
Ratio of net investment income to average net assets:
With expense reductions and/or reimbursement 0.91% 0.25% 1.45%(f)
====================================================== ======= ======= ========
Without expense reductions and/or reimbursement (0.07)% (3.26)% (47.09)%(f)
====================================================== ======= ======= ========
Ratio of interest expense to average net assets(f) 0.03% -- --
====================================================== ======= ======= ========
Portfolio turnover rate(g) 93% 256% --
====================================================== ======= ======= ========
</TABLE>
(a) The Fund changed Investment Advisors on May 29, 1998.
(b) Before reimbursement the net investment loss per share would have been
$(0.15), $(0.17), $(0.59), and $(1.13) for 1998-1995, respectively for Class
B, $0.02, $(0.01), $(0.46) and $(1.10) for 1998-1995, respectively for
Advisor Class.
(c) Calculated based upon average shares outstanding during the period.
(d) Does not deduct contingent deferred sales charges and is not annualized for
periods less than one year.
(e) Ratios are based on average net assets of $18,806,810 and $783,941 for Class
B and Advisor Class, respectively.
(f) Annualized.
(g) Portfolio turnover rates and ratio of interest expense to average net assets
are calculated on the basis of the Portfolio as a whole without
distinguishing between the classes of shares issued.
FS-11
<PAGE> 515
REPORT OF INDEPENDENT ACCOUNTANTS
To the Shareholders of AIM Small Cap Growth Fund
(formerly AIM Small Cap Equity Fund) and Board of
Trustees of AIM Growth Series (formerly GT Global Growth
Series):
In our opinion, the accompanying statement of assets and
liabilities, including the portfolio of investments, and
the related statements of operations and of changes in
net assets and the financial highlights present fairly,
in all material respects, the financial position of the
AIM Small Cap Growth Fund at December 31, 1998, and the
results of its operations, the changes in its net assets
and the financial highlights for the periods indicated,
in conformity with generally accepted accounting
principles. These financial statements and financial
highlights (hereafter referred to as "financial
statements") are the responsibility of the Fund's
management; our responsibility is to express an opinion
on these financial statements based on our audits. We
conducted our audits of these financial statements in
accordance with generally accepted auditing standards
which require that we plan and perform the audit to
obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit
includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements,
assessing the accounting principles used and significant
estimates made by management, and evaluating the overall
financial statement presentation. We believe that our
audits, which included confirmation of securities at
December 31, 1998 by correspondence with the custodian
and brokers, provide a reasonable basis for the opinion
expressed above.
/s/ PRICEWATERHOUSECOOPERS LLP
PRICEWATERHOUSECOOPERS LLP
Boston, Massachusetts
February 19, 1999
FS-12
<PAGE> 516
SCHEDULE OF INVESTMENTS
DECEMBER 31, 1998
<TABLE>
<CAPTION>
MARKET
SHARES VALUE
<S> <C> <C>
DOMESTIC COMMON STOCKS-78.64%
AEROSPACE/DEFENSE-0.17%
Hawk Corp.(a) 10,300 $ 86,263
- --------------------------------------------------------------
AIRLINES-0.14%
Mesaba Holdings, Inc.(a) 3,500 72,188
- --------------------------------------------------------------
AUTO PARTS & EQUIPMENT-0.74%
Tower Automotive, Inc.(a) 15,600 389,025
- --------------------------------------------------------------
BANKING (REGIONAL)-0.91%
Centennial Bancorp(a) 6,500 121,875
- --------------------------------------------------------------
Columbia Bancorp 20,000 180,000
- --------------------------------------------------------------
Fort Bend Holdings Corp. 5,000 122,500
- --------------------------------------------------------------
Silicon Valley Bancshares(a) 3,000 51,094
- --------------------------------------------------------------
475,469
- --------------------------------------------------------------
BIOTECHNOLOGY-0.86%
Curative Health Services, Inc.(a) 1,400 46,900
- --------------------------------------------------------------
Scios, Inc.(a) 38,900 403,582
- --------------------------------------------------------------
450,482
- --------------------------------------------------------------
BROADCASTING (TELEVISION, RADIO & CABLE)-0.55%
Cox Radio, Inc.-Class A(a) 6,800 287,300
- --------------------------------------------------------------
CHEMICALS (SPECIALTY)-0.81%
Cambrex Corp. 8,400 201,600
- --------------------------------------------------------------
ChiRex, Inc.(a) 6,000 128,250
- --------------------------------------------------------------
OM Group, Inc. 2,500 91,250
- --------------------------------------------------------------
421,100
- --------------------------------------------------------------
COMMUNICATIONS EQUIPMENT-2.97%
Brightpoint, Inc.(a) 20,000 275,000
- --------------------------------------------------------------
Excel Switching Corp.(a) 7,100 269,800
- --------------------------------------------------------------
Periphonics Corp.(a) 35,000 461,560
- --------------------------------------------------------------
REMEC, Inc.(a) 20,000 360,000
- --------------------------------------------------------------
VideoServer, Inc.(a) 10,000 183,750
- --------------------------------------------------------------
1,550,110
- --------------------------------------------------------------
COMPUTERS (HARDWARE)-0.39%
Visual Networks, Inc.(a) 5,500 206,250
- --------------------------------------------------------------
COMPUTERS (NETWORKING)-0.28%
ACT Networks, Inc.(a) 12,000 147,000
- --------------------------------------------------------------
COMPUTERS (PERIPHERALS)-1.44%
Actel Corp.(a) 15,000 300,000
- --------------------------------------------------------------
Cybex Computer Products Corp.(a) 3,600 105,750
- --------------------------------------------------------------
QLogic Corp.(a) 1,100 143,963
- --------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
MARKET
SHARES VALUE
<S> <C> <C>
COMPUTERS (PERIPHERALS)-(CONTINUED)
Xircom, Inc.(a) 6,000 $ 204,000
- --------------------------------------------------------------
753,713
- --------------------------------------------------------------
COMPUTERS (SOFTWARE &
SERVICES)-10.46%
AnswerThink Consulting Group,
Inc.(a) 12,600 338,625
- --------------------------------------------------------------
Best Software, Inc.(a) 4,000 95,000
- --------------------------------------------------------------
Computer Management Sciences,
Inc.(a) 19,100 331,863
- --------------------------------------------------------------
Concord Communications, Inc.(a) 8,200 465,350
- --------------------------------------------------------------
Documentum, Inc.(a) 2,900 154,969
- --------------------------------------------------------------
Engineering Animation, Inc.(a) 3,700 199,800
- --------------------------------------------------------------
Entrust Technologies, Inc. 12,900 307,988
- --------------------------------------------------------------
InfoSpace.com, Inc.(a) 10,000 381,250
- --------------------------------------------------------------
Internet America, Inc.(a) 6,000 174,000
- --------------------------------------------------------------
ISS Group, Inc.(a) 3,000 165,000
- --------------------------------------------------------------
Macromedia, Inc.(a) 10,000 336,875
- --------------------------------------------------------------
MAPICS, Inc.(a) 19,300 318,450
- --------------------------------------------------------------
Metro Information Services, Inc.(a) 12,400 372,000
- --------------------------------------------------------------
MindSpring Enterprises, Inc.(a) 2,000 122,125
- --------------------------------------------------------------
Pervasive Software, Inc.(a) 10,000 192,500
- --------------------------------------------------------------
QuadraMed Corp.(a) 5,000 102,500
- --------------------------------------------------------------
ScanSource, Inc.(a) 11,000 236,500
- --------------------------------------------------------------
Software AG Systems, Inc.(a) 20,000 362,500
- --------------------------------------------------------------
Spyglass, Inc.(a) 12,000 264,000
- --------------------------------------------------------------
Stac Software, Inc.(a) 20,000 27,500
- --------------------------------------------------------------
USWeb Corp.(a) 14,000 369,250
- --------------------------------------------------------------
Wiztec Solutions Ltd.(a) 10,000 144,375
- --------------------------------------------------------------
5,462,420
- --------------------------------------------------------------
CONSUMER (JEWELRY, NOVELTIES AND GIFTS)-0.80%
Department 56, Inc.(a) 3,200 120,200
- --------------------------------------------------------------
Fossil, Inc.(a) 7,000 201,250
- --------------------------------------------------------------
Media Arts Group, Inc.(a) 7,000 98,438
- --------------------------------------------------------------
419,888
- --------------------------------------------------------------
CONSUMER FINANCE-0.42%
AmeriCredit Corp.(a) 15,800 218,238
- --------------------------------------------------------------
ELECTRICAL EQUIPMENT-1.89%
AFC Cable Systems, Inc.(a) 5,000 168,125
- --------------------------------------------------------------
General Cable Corp. 15,200 311,600
- --------------------------------------------------------------
Hadco Corp.(a) 1,700 59,500
- --------------------------------------------------------------
Hypercom Corp.(a) 12,500 123,438
- --------------------------------------------------------------
Optimal Robotics Corp.(a) 10,000 140,000
- --------------------------------------------------------------
Sawtek Inc.(a) 4,900 85,750
- --------------------------------------------------------------
</TABLE>
FS-13
<PAGE> 517
<TABLE>
<CAPTION>
MARKET
SHARES VALUE
<S> <C> <C>
ELECTRICAL EQUIPMENT-(CONTINUED)
SLI, Inc.(a) 3,500 $ 97,125
- --------------------------------------------------------------
985,538
- --------------------------------------------------------------
ELECTRONICS (SEMICONDUCTORS)-2.36%
Apex PC Solutions, Inc.(a) 5,000 144,375
- --------------------------------------------------------------
Applied Micro Circuits Corp.(a) 3,100 105,303
- --------------------------------------------------------------
Hi/Fn, Inc.(a) 5,069 119,757
- --------------------------------------------------------------
RF Micro Devices, Inc.(a) 7,000 324,625
- --------------------------------------------------------------
Sipex Corp.(a) 8,000 281,000
- --------------------------------------------------------------
TranSwitch Corp.(a) 6,700 260,881
- --------------------------------------------------------------
1,235,941
- --------------------------------------------------------------
ENTERTAINMENT-0.26%
SFX Entertainment, Inc.-Class A(a) 2,500 137,188
- --------------------------------------------------------------
EQUIPMENT (SEMICONDUCTOR)-0.51%
Asyst Technologies, Inc.(a) 7,500 152,813
- --------------------------------------------------------------
Etec Systems, Inc.(a) 2,900 116,000
- --------------------------------------------------------------
268,813
- --------------------------------------------------------------
FOODS-1.47%
Ben & Jerry's Homemade, Inc.-Class
A(a) 13,000 290,875
- --------------------------------------------------------------
Fresh Del Monte Produce Inc.(a) 3,000 65,063
- --------------------------------------------------------------
Hain Food Group, Inc. (The)(a) 6,200 155,000
- --------------------------------------------------------------
Horizon Organic Holding Corp.(a) 4,000 62,000
- --------------------------------------------------------------
United Natural Foods, Inc.(a) 8,000 193,000
- --------------------------------------------------------------
765,938
- --------------------------------------------------------------
HEALTH CARE (DRUGS-GENERIC AND OTHER)-3.47%
Anesta Corp.(a) 5,000 133,125
- --------------------------------------------------------------
Barr Laboratories, Inc.(a) 11,800 566,400
- --------------------------------------------------------------
Jones Pharma, Inc. 18,800 686,200
- --------------------------------------------------------------
Medicis Pharmaceutical-Class A(a) 3,000 178,875
- --------------------------------------------------------------
Parexel International Corp.(a) 10,000 250,000
- --------------------------------------------------------------
1,814,600
- --------------------------------------------------------------
HEALTH CARE (HOSPITAL
MANAGEMENT)-0.13%
New American Healthcare Corp.(a) 6,300 70,481
- --------------------------------------------------------------
HEALTH CARE (MEDICAL PRODUCTS & SUPPLIES)-1.92%
Colorado MEDtech, Inc.(a) 25,000 331,250
- --------------------------------------------------------------
Hologic, Inc.(a) 8,000 97,000
- --------------------------------------------------------------
Osteotech, Inc.(a) 5,000 232,500
- --------------------------------------------------------------
PSS World Medical, Inc.(a) 11,700 269,100
- --------------------------------------------------------------
Xomed Surgical Products, Inc.(a) 2,250 72,000
- --------------------------------------------------------------
1,001,850
- --------------------------------------------------------------
HEALTH CARE (SPECIALIZED
SERVICES)-3.23%
Hooper Holmes, Inc. 12,200 353,800
- --------------------------------------------------------------
Orthodontic Centers of America,
Inc.(a) 16,000 311,000
- --------------------------------------------------------------
Physician Reliance Network, Inc.(a) 38,300 502,688
- --------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
MARKET
SHARES VALUE
<S> <C> <C>
HEALTH CARE (SPECIALIZED SERVICES)-(CONTINUED)
Superior Consultant Holdings
Corp.(a) 5,000 $ 217,500
- --------------------------------------------------------------
Total Renal Care Holdings, Inc.(a) 10,300 304,493
- --------------------------------------------------------------
1,689,481
- --------------------------------------------------------------
INSURANCE (LIFE & HEALTH)-1.36%
Healthcare Recoveries, Inc.(a) 14,000 238,000
- --------------------------------------------------------------
Reinsurance Group of America, Inc. 7,800 473,850
- --------------------------------------------------------------
711,850
- --------------------------------------------------------------
INSURANCE (PROPERTY &
CASUALTY)-0.52%
FPIC Insurance Group, Inc. 3,000 142,500
- --------------------------------------------------------------
Medical Assurance, Inc. 3,850 127,291
- --------------------------------------------------------------
269,791
- --------------------------------------------------------------
INSURANCE BROKERS-0.39%
Clark/Bardes Holdings, Inc.(a) 12,200 205,875
- --------------------------------------------------------------
INVESTMENT MANAGEMENT-0.85%
Knight/Trimark Group, Inc.-Class
A(a) 18,600 445,238
- --------------------------------------------------------------
IRON & STEEL-0.44%
Gibraltar Steel Corp.(a) 10,000 227,500
- --------------------------------------------------------------
LEISURE TIME (PRODUCTS)-1.94%
Acclaim Entertainment, Inc.(a) 20,000 245,000
- --------------------------------------------------------------
JAKKS Pacific, Inc.(a) 7,500 80,625
- --------------------------------------------------------------
Noodle Kidoodle, Inc.(a) 20,000 190,000
- --------------------------------------------------------------
THQ, Inc.(a) 9,000 252,000
- --------------------------------------------------------------
Zomax Optical Media, Inc.(a) 15,000 243,750
- --------------------------------------------------------------
1,011,375
- --------------------------------------------------------------
LODGING (HOTELS)-0.63%
ExecuStay Corp.(a) 25,400 330,200
- --------------------------------------------------------------
MACHINERY (DIVERSIFIED)-0.12%
Gradall Industries, Inc.(a) 4,400 63,250
- --------------------------------------------------------------
MANUFACTURING (DIVERSIFIED)-0.39%
Matthews International Corp.-Class A 2,300 72,450
- --------------------------------------------------------------
Spartech Corp. 6,000 132,000
- --------------------------------------------------------------
204,450
- --------------------------------------------------------------
OFFICE EQUIPMENT & SUPPLIES-1.01%
CompX International, Inc.(a) 6,800 179,350
- --------------------------------------------------------------
Knoll, Inc.(a) 11,700 346,613
- --------------------------------------------------------------
525,963
- --------------------------------------------------------------
OIL & GAS (DRILLING &
EQUIPMENT)-0.32%
Cal Dive International, Inc.(a) 3,500 72,625
- --------------------------------------------------------------
Gulfmark Offshore Inc.(a) 6,000 94,500
- --------------------------------------------------------------
167,125
- --------------------------------------------------------------
OIL & GAS (EXPLORATION AND PRODUCTION)-0.66%
Cabot Oil & Gas Corp.-Class A 4,000 60,000
- --------------------------------------------------------------
</TABLE>
FS-14
<PAGE> 518
<TABLE>
<CAPTION>
MARKET
SHARES VALUE
<S> <C> <C>
OIL & GAS (EXPLORATION AND
PRODUCTION)-(CONTINUED)
Evergreen Resources, Inc.(a) 5,900 $ 104,725
- --------------------------------------------------------------
Louis Dreyfus Natural Gas Corp.(a) 2,000 28,500
- --------------------------------------------------------------
Newfield Exploration Co.(a) 5,700 118,988
- --------------------------------------------------------------
Seagull Energy Corp.(a) 5,000 31,563
- --------------------------------------------------------------
343,776
- --------------------------------------------------------------
PERSONAL CARE-0.70%
D & K Healthcare Resources, Inc.(a) 5,000 136,250
- --------------------------------------------------------------
Steiner Leisure Ltd.(a) 4,300 137,600
- --------------------------------------------------------------
Twinlab Corp.(a) 7,000 91,875
- --------------------------------------------------------------
365,725
- --------------------------------------------------------------
PUBLISHING-0.62%
Information Holdings, Inc.(a) 20,500 322,875
- --------------------------------------------------------------
REAL ESTATE INVESTMENT TRUST-0.35%
Correctional Properties Trust 10,000 180,621
- --------------------------------------------------------------
RESTAURANTS-1.15%
P.F. Chang's China Bistro, Inc.(a) 10,000 227,500
- --------------------------------------------------------------
PJ America, Inc.(a) 12,000 217,500
- --------------------------------------------------------------
Taco Cabana-Class A(a) 20,000 155,000
- --------------------------------------------------------------
600,000
- --------------------------------------------------------------
RETAIL (COMPUTERS &
ELECTRONICS)-0.55%
Tweeter Home Entertainment Group,
Inc.(a) 10,000 287,500
- --------------------------------------------------------------
RETAIL (DISCOUNTERS)-1.46%
99 Cents Only Stores(a) 15,500 761,438
- --------------------------------------------------------------
RETAIL (DRUG STORES)-0.49%
Duane Reade, Inc.(a) 6,700 257,950
- --------------------------------------------------------------
RETAIL (FOOD CHAINS)-0.30%
Wild Oats Markets Inc.(a) 5,000 157,500
- --------------------------------------------------------------
RETAIL (HOME SHOPPING)-1.74%
DM Management Co.(a) 38,950 740,050
- --------------------------------------------------------------
Micro Warehouse, Inc.(a) 5,000 169,063
- --------------------------------------------------------------
909,113
- --------------------------------------------------------------
RETAIL (SPECIALTY)-2.55%
Blue Rhino Corp.(a) 13,000 289,250
- --------------------------------------------------------------
CSK Auto Corp.(a) 3,300 88,069
- --------------------------------------------------------------
Hollywood Entertainment Corp.(a) 10,000 272,500
- --------------------------------------------------------------
Renters Choice, Inc.(a) 8,000 254,000
- --------------------------------------------------------------
Rent-Way, Inc.(a) 8,000 194,500
- --------------------------------------------------------------
School Specialty, Inc. 6,000 126,000
- --------------------------------------------------------------
UBid, Inc.(a) 1,000 106,626
- --------------------------------------------------------------
1,330,945
- --------------------------------------------------------------
RETAIL (SPECIALTY APPAREL)-1.59%
Buckle, Inc. (The)(a) 5,200 124,800
- --------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
MARKET
SHARES VALUE
<S> <C> <C>
RETAIL (SPECIALTY APPAREL)-(CONTINUED)
Chico's Fas, Inc.(a) 10,000 $ 233,750
- --------------------------------------------------------------
Children's Place Retail Stores, Inc.
(The)(a) 14,000 351,750
- --------------------------------------------------------------
Goody's Family Clothing, Inc.(a) 11,900 119,372
- --------------------------------------------------------------
829,672
- --------------------------------------------------------------
SAVINGS & LOAN COMPANY-0.66%
TeleBanc Financial Corp.(a) 10,100 343,400
- --------------------------------------------------------------
SERVICES
(ADVERTISING/MARKETING)-2.08%
Abacus Direct Corp.(a) 2,000 91,000
- --------------------------------------------------------------
Hagler Bailly, Inc.(a) 5,000 100,000
- --------------------------------------------------------------
HA-LO Industries, Inc.(a) 3,000 112,875
- --------------------------------------------------------------
Healthworld Corp.(a) 10,000 103,750
- --------------------------------------------------------------
Lamar Advertising Co.(a) 8,600 320,350
- --------------------------------------------------------------
Metris Companies Inc. 4,000 201,250
- --------------------------------------------------------------
Professional Detailing, Inc.(a) 5,500 155,375
- --------------------------------------------------------------
1,084,600
- --------------------------------------------------------------
SERVICES (COMMERCIAL &
CONSUMER)-7.04%
American Dental Partners, Inc.(a) 20,900 241,656
- --------------------------------------------------------------
Bright Horizons Family Solutions,
Inc.(a) 10,000 270,000
- --------------------------------------------------------------
Championship Auto Racing Teams,
Inc.(a) 14,300 423,638
- --------------------------------------------------------------
Comfort Systems USA, Inc.(a) 22,600 403,975
- --------------------------------------------------------------
Iron Mountain, Inc.(a) 24,150 870,909
- --------------------------------------------------------------
ITT Educational Services, Inc.(a) 10,200 346,800
- --------------------------------------------------------------
LaSalle Partners, Inc.(a) 5,000 147,188
- --------------------------------------------------------------
Metzler Group, Inc.(a) 6,600 321,338
- --------------------------------------------------------------
Strayer Education, Inc. 6,000 211,500
- --------------------------------------------------------------
United Road Services, Inc.(a) 23,900 439,163
- --------------------------------------------------------------
3,676,167
- --------------------------------------------------------------
SERVICES (COMPUTER SYSTEMS)-2.74%
Analysts International Corp. 7,300 140,525
- --------------------------------------------------------------
Cotelligent Group, Inc.(a) 5,000 106,563
- --------------------------------------------------------------
Insight Enterprises, Inc.(a) 23,250 1,182,844
- --------------------------------------------------------------
1,429,932
- --------------------------------------------------------------
SERVICES (DATA PROCESSING)-2.02%
Lason Holdings, Inc.(a) 13,600 791,350
- --------------------------------------------------------------
Mecon, Inc.(a) 25,000 262,500
- --------------------------------------------------------------
1,053,850
- --------------------------------------------------------------
SERVICES (EMPLOYMENT)-1.40%
Data Processing Resources Corp.(a) 12,200 356,850
- --------------------------------------------------------------
Personnel Group of America, Inc.(a) 21,400 374,500
- --------------------------------------------------------------
731,350
- --------------------------------------------------------------
SERVICES (FACILITIES & ENVIRONMENTAL)-2.27%
Casella Waste Systems, Inc.(a) 10,000 371,250
- --------------------------------------------------------------
Cornell Corrections, Inc.(a) 11,100 210,900
- --------------------------------------------------------------
</TABLE>
FS-15
<PAGE> 519
<TABLE>
<CAPTION>
MARKET
SHARES VALUE
<S> <C> <C>
SERVICES (FACILITIES &
ENVIRONMENTAL)-(CONTINUED)
GP Strategies Corp.(a) 10,000 $ 150,000
- --------------------------------------------------------------
Tetra Tech, Inc.(a) 10,000 270,625
- --------------------------------------------------------------
Waste Connections, Inc.(a) 10,000 183,750
- --------------------------------------------------------------
1,186,525
- --------------------------------------------------------------
TELECOMMUNICATIONS (CELLULAR/WIRELESS)-0.76%
Boston Communications Group, Inc.(a) 10,000 130,000
- --------------------------------------------------------------
Metro One Telecommunications,
Inc.(a) 20,000 265,000
- --------------------------------------------------------------
395,000
- --------------------------------------------------------------
TEXTILES (APPAREL)-0.29%
Quicksilver, Inc.(a) 5,000 150,000
- --------------------------------------------------------------
TEXTILES (SPECIALTY)-0.49%
Happy Kids, Inc.(a) 20,000 255,000
- --------------------------------------------------------------
TRUCKERS-0.15%
Hub Group, Inc.(a) 4,000 77,500
- --------------------------------------------------------------
WASTE MANAGEMENT-2.43%
Allied Waste Industries, Inc.(a) 26,565 627,598
- --------------------------------------------------------------
Eastern Environmental Services,
Inc.(a) 14,400 426,600
- --------------------------------------------------------------
KTI, Inc.(a) 10,000 216,250
- --------------------------------------------------------------
1,270,448
- --------------------------------------------------------------
Total Domestic Common Stocks
(Cost $31,794,190) 41,072,780
- --------------------------------------------------------------
FOREIGN STOCKS & OTHER EQUITY INTERESTS-2.49%
BERMUDA-0.67%
Annuity and Life Re, Ltd.
(Insurance-Life) 13,000 351,000
- --------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
MARKET
SHARES VALUE
<S> <C> <C>
CANADA-0.36%
Architel Systems Corp. (Electrical
Equipment)(a) 15,000 $ 189,375
- --------------------------------------------------------------
FRANCE-0.72%
Business Objects S.A.-ADR(a) 11,500 373,750
- --------------------------------------------------------------
ISRAEL-0.34%
Fundtech Ltd.
(Computers-Software)(a) 8,525 175,828
- --------------------------------------------------------------
NETHERLANDS-0.24%
Core Laboratories N.V. (Oil &
Gas-Drilling & Equipment)(a) 6,700 128,137
- --------------------------------------------------------------
UNITED KINGDOM-0.16%
ICON, PLC-ADR (Biotechnology)(a) 2,500 83,750
- --------------------------------------------------------------
Total Foreign Stocks and Other
Equity Interests (Cost
$946,565) 1,301,840
- --------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT
<S> <C> <C>
U.S. TREASURY SECURITIES-3.80%
U.S. TREASURY BILLS-3.80%(b)(c)
4.44%, 03/25/99 (Cost $1,984,429) $2,005,000 $ 1,984,429
- --------------------------------------------------------------
REPURCHASE AGREEMENT-10.74%(d)
SBC Warburg Dillon Read Inc., 4.75%,
01/04/99(e) (Cost $5,607,969) 5,607,969 5,607,969
- --------------------------------------------------------------
TOTAL INVESTMENTS-95.67% 49,967,018
- --------------------------------------------------------------
OTHER ASSETS LESS LIABILITIES-4.33% 2,263,845
- --------------------------------------------------------------
NET ASSETS-100.00% $52,230,863
==============================================================
</TABLE>
Notes to Schedule of Investments
(a) Non-income producing security.
(b) U.S. Treasury bills are traded on a discount basis. In such cases the
interest rate shown represents the rate of discount paid or received at the
time of purchase by the Fund.
(c) A portion of the principal balance was pledged as collateral to cover margin
requirements for open futures contracts. See Note 5.
(d) Collateral on repurchase agreements, including the Fund's pro-rata interest
in joint repurchase agreements, is taken into possession by the Fund upon
entering into the repurchase agreement. The collateral is marked to market
daily to ensure its market value is at least 102% of the sales price of the
repurchase agreement. The investments in some repurchase agreements are
through participation in joint accounts with other mutual funds, private
accounts, and certain non-registered investment companies managed by the
investment advisor or its affiliates.
(e) Joint repurchase agreement entered into 12/31/98 with a maturing value of
$1,000,527,778. Collateralized by $2,207,068,000 U.S. Government
obligations, 0% to 6.75% with a market value at 12/31/98 of $1,020,001,079.
Abbreviation:
ADR - American Depositary Receipt
See Notes to Financial Statements
FS-16
<PAGE> 520
STATEMENT OF ASSETS AND LIABILITIES
DECEMBER 31, 1998
<TABLE>
<S> <C>
ASSETS:
Investments, at market value (cost
$34,735,184) $44,359,049
- ---------------------------------------------------------
Repurchase agreement (cost $5,607,969) 5,607,969
- ---------------------------------------------------------
Receivables for:
Investments sold 445,267
- ---------------------------------------------------------
Fund shares sold 2,665,706
- ---------------------------------------------------------
Dividends and interest 1,724
- ---------------------------------------------------------
Variation margin 38,750
- ---------------------------------------------------------
Other assets 50,560
- ---------------------------------------------------------
Total assets 53,169,025
- ---------------------------------------------------------
LIABILITIES:
Payables for:
Investments purchased 327,944
- ---------------------------------------------------------
Fund shares reacquired 501,597
- ---------------------------------------------------------
Accrued investment management &
administration fees 17,798
- ---------------------------------------------------------
Accrued accounting fees 790
- ---------------------------------------------------------
Accrued distribution fees 30,568
- ---------------------------------------------------------
Accrued trustees' fees 10,919
- ---------------------------------------------------------
Accrued transfer agent fees 8,700
- ---------------------------------------------------------
Accrued operating expenses 39,846
- ---------------------------------------------------------
Total liabilities 938,162
- ---------------------------------------------------------
Net assets applicable to shares outstanding $52,230,863
- ---------------------------------------------------------
NET ASSETS:
Class A $24,737,557
=========================================================
Class B $26,447,897
=========================================================
Advisor Class $ 1,045,409
=========================================================
SHARES OUTSTANDING, $0.01 PAR VALUE PER
SHARE:
Class A 1,452,229
=========================================================
Class B 1,589,687
=========================================================
Advisor Class 60,748
=========================================================
Class A:
Net asset value and redemption price per
share $ 17.03
- ---------------------------------------------------------
Offering price per share:
(Net asset value of $17.03
divided by 94.50%) $ 18.02
=========================================================
Class B:
Net asset value and offering price per
share $ 16.64
=========================================================
Advisor Class:
Net asset value and offering price per
share $ 17.21
=========================================================
</TABLE>
STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1998
<TABLE>
<S> <C>
INVESTMENT INCOME:
Dividends $ 42,607
- ---------------------------------------------------------
Interest 94,407
- ---------------------------------------------------------
Security lending income 17,459
- ---------------------------------------------------------
Total investment income 154,473
- ---------------------------------------------------------
EXPENSES:
Investment management & administration fees 243,996
- ---------------------------------------------------------
Accounting fees 6,564
- ---------------------------------------------------------
Custodian fees 31,093
- ---------------------------------------------------------
Trustees' fees 20,474
- ---------------------------------------------------------
Distribution fees -- Class A 44,266
- ---------------------------------------------------------
Distribution fees -- Class B 192,719
- ---------------------------------------------------------
Transfer agent fees -- Class A 41,468
- ---------------------------------------------------------
Transfer agent fees -- Class B 63,188
- ---------------------------------------------------------
Transfer agent fees -- Advisor Class 5,847
- ---------------------------------------------------------
Printing 95,135
- ---------------------------------------------------------
Professional fees 54,802
- ---------------------------------------------------------
Other 59,001
- ---------------------------------------------------------
Total expenses 858,553
- ---------------------------------------------------------
Less: expense reimbursements/reductions (148,727)
- ---------------------------------------------------------
Net expenses 709,826
- ---------------------------------------------------------
Net investment income (loss) (555,353)
- ---------------------------------------------------------
REALIZED AND UNREALIZED GAIN (LOSS) FROM
INVESTMENT SECURITIES AND FUTURES
CONTRACTS:
Net realized gain (loss) from:
Investment securities 1,040,498
- ---------------------------------------------------------
Futures contracts (52,075)
- ---------------------------------------------------------
988,423
- ---------------------------------------------------------
Net unrealized appreciation of:
Investment securities 8,737,666
- ---------------------------------------------------------
Futures contracts 153,000
- ---------------------------------------------------------
8,890,666
- ---------------------------------------------------------
Net gain from investment securities,
foreign currencies and futures
contracts 9,879,089
- ---------------------------------------------------------
Net increase in net assets resulting from
operations $ 9,323,736
=========================================================
</TABLE>
See Notes to Financial Statements.
FS-17
<PAGE> 521
STATEMENT OF CHANGES IN NET ASSETS
FOR THE YEARS ENDED DECEMBER 31, 1998 AND 1997
<TABLE>
<CAPTION>
1998 1997
----------- -----------
<S> <C> <C>
OPERATIONS:
Net investment income (loss) $ (555,353) $ (449,560)
- ------------------------------------------------------------------------------------------
Net realized gain from investment securities and futures
contracts 988,423 2,524,251
- ------------------------------------------------------------------------------------------
Net unrealized appreciation of investment securities and
futures contracts 8,890,666 1,674,235
- ------------------------------------------------------------------------------------------
Net increase in net assets resulting from operations 9,323,736 3,748,926
- ------------------------------------------------------------------------------------------
Distributions to shareholders from net realized gains on
investment securities:
Class A (576,954) (213,287)
- ------------------------------------------------------------------------------------------
Class B (733,412) (410,555)
- ------------------------------------------------------------------------------------------
Advisor Class (30,675) (32,021)
- ------------------------------------------------------------------------------------------
Share transactions-net:
Class A 9,846,073 990,794
- ------------------------------------------------------------------------------------------
Class B 1,291,586 8,950,465
- ------------------------------------------------------------------------------------------
Advisor Class (600,234) 1,099,105
- ------------------------------------------------------------------------------------------
Net increase in net assets 18,520,120 14,133,427
- ------------------------------------------------------------------------------------------
NET ASSETS:
Beginning of period 33,710,743 19,577,316
- ------------------------------------------------------------------------------------------
End of period $52,230,863 $33,710,743
==========================================================================================
NET ASSETS CONSIST OF:
Shares of beneficial interest $42,095,396 $31,557,971
- ------------------------------------------------------------------------------------------
Undistributed net investment income (loss) -- --
- ------------------------------------------------------------------------------------------
Undistributed net realized gain from investment securities
and futures contracts 348,602 1,256,573
- ------------------------------------------------------------------------------------------
Unrealized appreciation of investment securities and
futures contracts 9,786,865 896,199
- ------------------------------------------------------------------------------------------
$52,230,863 $33,710,743
==========================================================================================
</TABLE>
See Notes to Financial Statements.
FS-18
<PAGE> 522
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1998
NOTE 1-SIGNIFICANT ACCOUNTING POLICIES
AIM Small Cap Growth Fund, formerly AIM Small Cap Equity Fund, (the "Fund"), is
a separate series of AIM Growth Series (the "Trust"). The Trust is a Delaware
business trust and is registered under the Investment Company Act of 1940, as
amended ("1940 Act"), as an open-end management investment company. The Trust
has six diversified series of shares in operation, each series corresponding to
a distinct portfolio of investments.
The Fund invests substantially all of its investable assets in the Small Cap
Portfolio ("the Portfolio"). The Portfolio is organized as a Delaware business
trust and is registered under the 1940 Act as a diversified, open-end management
investment company.
The Portfolio has investment objectives, policies, and limitations
substantially identical to the Fund. Therefore, the financial statements of the
Fund and the Portfolio have been presented on a consolidated basis, and
represent all activities of both the Fund and the Portfolio. At December 31,
1998, all of the shares of beneficial interest of the Portfolio were owned
either by the Fund or INVESCO (NY), Inc., which has a nominal ($100) investment
in the Portfolio.
The Fund offers Class A, Class B, and Advisor Class shares, each of which has
equal rights as to assets and voting privileges. Class A and Class B each has
exclusive voting rights with respect to its distribution plan. Investment
income, realized and unrealized capital gains and losses, and the common
expenses of the Fund are allocated on a pro rata basis to each class based on
the relative net assets of each class to the total net assets of the Fund. Each
class of shares differs in its respective distribution expenses, and may differ
in its transfer agent, registration, and certain other class-specific fees and
expenses.
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statements and
the reported amounts of income and expenses during the reporting period. Actual
results could differ from those estimates. The following is a summary of
significant accounting policies in conformity with generally accepted accounting
principles consistently followed by the Fund and Portfolio in the preparation of
the financial statements.
A. Portfolio Valuation -- The Fund calculates the net asset value of and
completes orders to purchase, exchange or repurchase Fund shares on each
business day, with the exception of those days on which the New York Stock
Exchange is closed.
Equity securities are valued at the last sale price on the exchange on
which such securities are traded or on the principal over-the-counter market
on which such securities are traded, as of the close of business on the day
the securities are being valued or, lacking any sales, at the mean between
the closing bid and asked prices. In cases where securities are traded on
more than one exchange, the securities are valued on the exchange determined
by A I M Advisors, Inc. (the "Manager") to be the primary market.
Fixed income investments are valued at the mean of representative quoted
bid and ask prices for such investments or, if such prices are not available,
at prices for investments of comparative maturity, quality and type; however,
when the Manager deems it appropriate, prices obtained for the day of
valuation from a bond pricing service will be used. Short-term investments
with a maturity of 60 days or less are valued at amortized cost, which
approximates market value.
Investments for which market quotations are not readily available
(including restricted securities which are subject to limitations on their
sale) are valued at fair value as determined in good faith by or under the
direction of the Trust's Board of Trustees.
B. Repurchase Agreements -- With respect to repurchase agreements entered into
by the Portfolio, it is the Portfolio's policy to always receive, as
collateral, United States government securities or other high quality debt
securities of which the value, including accrued interest, is at least equal
to the amount to be repaid to the Portfolio under each agreement at its
maturity.
C. Option Accounting Principles -- When the Portfolio writes a call or put
option, an amount equal to the premium received is included in Fund's
consolidated "Statement of Assets and Liabilities" as an asset and an
equivalent liability. The amount of the liability is subsequently
marked-to-market to reflect the current market value of the option. The
current market value of an option is the mean between the last bid and asked
prices. If an option expires on its stipulated expiration date or if the
Portfolio enters into a closing purchase transaction, a gain or loss is
realized without regard to any unrealized gain or loss on the underlying
security, and the liability related to such option is extinguished. If a
written call option is exercised, a gain or loss is realized from the sale of
the underlying security and the proceeds of the sale are increased by the
premium originally received. If a written put option is exercised, the cost
of the underlying security purchased would be decreased by the premium
originally received. The Portfolio can write options only on a covered basis,
which, for a call, requires that the Portfolio hold the underlying security,
and, for a put, requires the Portfolio to set aside cash, U.S. government
securities or other liquid securities in an amount not less than the exercise
price or otherwise provide adequate cover at all times while the put option
is outstanding. The Portfolio may use options to manage its exposure to the
stock market and to fluctuations in interest rates.
The premium paid by the Portfolio for the purchase of a call or put option
is included in Fund's consolidated "Statement of Assets and Liabilities" as
an investment and subsequently "marked-to-market" to reflect the current
market value of the option. If an option which the Portfolio has purchased
expires on the stipulated expiration date, the Portfolio realizes a loss in
the amount of the cost of the option. If the Portfolio enters into a closing
sale transaction, the Portfolio realizes a gain or loss, depending on whether
proceeds from the closing sale transaction are greater or less than the cost
of the option. If the Portfolio exercises a call option, the cost of the
securities acquired by exercising the call is increased by the premium paid
to buy the call. If the Portfolio exercises a put option, it realizes a gain
or loss from the sale of the underlying security,
FS-19
<PAGE> 523
and the proceeds from such sale are decreased by the premium originally paid.
The risk associated with purchasing options is limited to the premium
originally paid. The risk in writing a call option is that the Portfolio may
forego the opportunity of profit if the market value of the underlying
security or index increases and the option is exercised. The risk in writing
a put option is that the Portfolio may incur a loss if the market value of
the underlying security or index decreases and the option is exercised. In
addition, there is the risk the Portfolio may not be able to enter into a
closing transaction because of an illiquid secondary market.
D. Futures Contracts -- A futures contract is an agreement between two parties
to buy and sell a security at a set price on a future date. Upon entering
into such a contract the Portfolio is required to pledge to the broker an
amount of cash or securities equal to the minimum "initial margin"
requirements of the exchange on which the contract is traded. Pursuant to the
contract, the Portfolio agrees to receive from or pay to the broker an amount
of cash equal to the daily fluctuation in value of the contract. Such
receipts or payments are known as "variation margin" and are recorded by the
Portfolio as unrealized gains or losses. When the contract is closed, the
Portfolio records a realized gain or loss equal to the difference between the
value of the contract at the time it was opened and the value at the time it
was closed. The potential risk to the Portfolio is that the change in value
of the underlying securities may not correlate to the change in value of the
contracts. The Portfolio may use futures contracts to manage its exposure to
the stock market and to fluctuations in interest rates.
E. Security Transactions and Related Investment Income -- Security transactions
are accounted for on the trade date (date the order to buy or sell is
executed). Realized gains and losses are calculated on the basis of specific
identification of the Securities sold. Dividends are recorded on the
ex-dividend date. Interest income is recorded on the accrual basis. Where a
high level of uncertainty exists as to its collection, income is recorded net
of all withholding tax with any rebate recorded when received. The Portfolio
may trade securities on other than normal settlement terms. This may increase
the risk if the other party to the transaction fails to deliver and causes
the Portfolio to subsequently invest at less advantageous prices.
On December 31, 1998, undistributed net investment income was increased and
undistributed net realized gains was decreased by $555,353 in order to comply
with the requirements of the American Institute of Certified Public
Accountants Statement of Position 93-2. Net assets of the Fund were
unaffected by the reclassifications discussed above.
F. Portfolio Securities Loaned -- At December 31, 1998, stocks with an aggregate
value listed below were on loan to brokers. The loans were secured by cash
collateral received by the Portfolio:
<TABLE>
<CAPTION>
DECEMBER 31, 1998 PERIOD ENDED
---------------------------- DECEMBER 31, 1998
AGGREGATE VALUE CASH -----------------
ON LOANS COLLATERAL FEES RECEIVED
--------------- ---------- -----------------
<S> <C> <C>
$5,453,825 $5,571,152 $17,459
</TABLE>
Cash collateral is received by the Portfolio against loaned securities in
the amount at least equal to 102% of the market value of the loaned
securities at the inception of each loan. This collateral must be maintained
at not less than 100% of the market value of the loaned securities during the
period of the loan. The cash collateral is invested in a securities lending
trust which consists of a portfolio of high quality short duration securities
whose average effective duration is restricted to 120 days or less.
G. Deferred Organizational Expenses -- Expenses incurred by the AIM Small Cap
Growth Fund and the Portfolio in connection with their organization, their
initial registration with the Securities and Exchange Commission and with
various states and the initial public offering of their shares aggregated
$63,500 for the Fund and $25,000 for the Portfolio. These expenses are being
amortized on a straight-line basis over a five-year period.
H. Taxes -- It is the policy of the Fund and the Portfolio to meet the
requirements for qualification as a "regulated investment company" under the
Internal Revenue Code of 1986, as amended ("Code"). It is also the intention
of the Fund to make distributions sufficient to avoid imposition of any
excise tax under Section 4982 of the Code. Therefore, no provision has been
made for Federal taxes on income, capital gains, or unrealized appreciation
of securities held, and excise tax on income and capital gains.
I. Distributions to Shareholders -- Distributions to shareholders are recorded
by the Fund on the ex-date. Income and capital gain distributions are
determined in accordance with Federal income tax regulations which may
differ from generally accepted accounting principles. These differences are
primarily due to differing treatments of income and gains on various
investment securities held by the Portfolio and timing differences.
J. Restricted Securities -- The Portfolio is permitted to invest in privately
placed restricted securities. These securities may be resold in transactions
exempt from registration or to the public if the securities are registered.
Disposal of these securities may involve time-consuming negotiations and
expense, and prompt sale at an acceptable price may be difficult.
K. Indexed Securities -- The Portfolio may invest in indexed securities whose
value is linked either directly or indirectly to changes in foreign
currencies, interest rates, equities, indices, or other reference
instruments. Indexed securities may be more volatile than the reference
instrument itself, but any loss is limited to the amount of the original
investment.
L. Line of Credit -- The Fund, along with certain other funds advised and/or
administered by the Manager, has a line of credit with BankBoston and State
Street Bank & Trust Company. The arrangements with the banks allow the Fund
and certain other funds to borrow, on a first come, first served basis, an
aggregate maximum amount of $250,000,000. The Fund is limited to borrowing up
to 33 1/3% of the value of the Fund's total assets.
For the year ended December 31, 1998, the average outstanding daily balance
of bank loans (based on the number of days the loans were outstanding) for
the Fund was $591,476 with a weighted average interest rate of 5.87%.
Interest expense for the Fund for the year ended December 31, 1998 was
$3,706, and is included in "Other Expenses" on the Statement of Operations.
FS-20
<PAGE> 524
NOTE 2-RELATED PARTIES
A I M Advisors, Inc. (the "Manager") is the Fund's and the Portfolio's
investment manager and administrator. As of the close of business on May 29,
1998, Liechtenstein Global Trust AG ("LGT"), the former indirect parent
organization of Chancellor LGT Asset Management, Inc. ("Chancellor LGT"),
consummated a purchase agreement with AMVESCAP PLC pursuant to which AMVESCAP
PLC acquired LGT's Asset Management Division, which included Chancellor LGT and
certain other affiliates. As a result of this transaction, Chancellor LGT was
renamed INVESCO (NY), Inc., and is now an indirect wholly-owned subsidiary of
AMVESCAP PLC. In connection with this transaction, A I M Advisors, Inc., an
indirect wholly-owned subsidiary of AMVESCAP PLC, became the administrator of
the Fund and the investment manager and administrator of the Portfolio. Also, on
May 29, 1998, A I M Distributors, Inc. ("AIM Distributors"), a wholly-owned
subsidiary of the Manager, became the Fund's distributor, and the Trust was
reorganized from a Massachusetts business trust into a Delaware business trust,
and the Portfolio was reorganized from a New York trust into a Delaware business
trust. Finally, on September 4, 1998, A I M Fund Services, Inc. ("AFS"), a
wholly-owned subsidiary of the Manager, became the transfer agent of the Fund.
The Fund pays the Manager administration fees at the annualized rate of 0.25%
of the Fund's average daily net assets. The Portfolio pays investment management
and administration fees to the Manager at the annualized rate of 0.475% on the
first $500 million of average daily net assets of the Portfolio; 0.45% on the
next $500 million; 0.425% on the next $500 million; and 0.40% on amounts
thereafter. These fees are computed daily and paid monthly.
AIM Distributors, serves as the Fund's distributor. For the period ended May
29, 1998, GT Global, Inc. ("GT Global"), an affiliate of Chancellor LGT, served
as the Funds' distributor. The Fund offers Class A, Class B, and Advisor Class
shares for purchase.
Class A shares are subject to initial sales charges imposed at the time of
purchase, in accordance with the schedule included in the Fund's current
prospectus. AIM Distributors collects the sales charges imposed on sales of
Class A shares, and reallows a portion of such charges to dealers through which
the sales are made. For the year ended December 31, 1998, AIM Distributors and
GT Global retained the following sales charges: $12,218 and $6,814,
respectively. Purchases of Class A shares exceeding $1,000,000 may be subject to
a contingent deferred sales charge ("CDSC") upon redemption, in accordance with
the Fund's current prospectus. AIM Distributors also makes ongoing shareholder
servicing and trail commission payments to dealers whose clients hold Class A
shares.
Class B shares are not subject to initial sales charges. When Class B shares
are sold, AIM Distributors from its own resources pays commissions to dealers
through which the sales are made. Certain redemptions of Class B shares made
within six years of purchase are subject to CDSCs, in accordance with the Fund's
current prospectus. For the year ended December 31, 1998, AIM Distributors and
GT Global collected such CDSCs in the amount of: $244 and $16,156, respectively.
In addition, AIM Distributors makes ongoing shareholder servicing and trail
commission payments to dealers whose clients hold Class B shares.
For the period ended May 29, 1998, pursuant to the then effective separate
distribution plans adopted under the 1940 Act Rule 12b-1 by the Trust's Board of
Trustees with respect to the Fund's Class A shares ("Old Class A Plan") and
Class B shares ("Old Class B Plan"), the Fund reimbursed GT Global for a portion
of its shareholder servicing and distribution expenses. Under the Old Class A
Plan, the Fund was permitted to pay GT Global a service fee at the annualized
rate of up to 0.25% of the average daily net assets of the Fund's Class A shares
for GT Global's expenditures incurred in servicing and maintaining shareholder
accounts, and was permitted to pay GT Global a distribution fee at the
annualized rate of up to 0.35% of the average daily net assets of the Fund's
Class A shares, less any amounts paid by the Fund as the aforementioned service
fee, for GT Global's expenditures incurred in providing services as distributor.
All expenses for which GT Global was reimbursed under the Old Class A Plan would
have been incurred within one year of such reimbursement.
For the period ended May 29, 1998, pursuant to the Old Class B Plan, the Fund
was permitted to pay GT Global a service fee at the annualized rate of up to
0.25% of the average daily net assets of the Fund's Class B shares for GT
Global's expenditures incurred in servicing and maintaining shareholder
accounts, and was permitted to pay GT Global a distribution fee at the
annualized rate of up to 0.75% of the average daily net assets of the Fund's
Class B shares for GT Global's expenditures incurred in providing services as
distributor. Expenses incurred under the Old Class B Plan in excess of 1.00%
annually were permitted to be carried forward for reimbursement in subsequent
years as long as that Plan continued in effect.
Effective as of the close of business May 29, 1998, pursuant to Rule 12b-1
under the 1940 Act, the Trust's Board of Trustees adopted a Master Distribution
Plan applicable to the Fund's Class A shares ("Class A Plan") and Class B shares
("Class B Plan"), pursuant to which the Fund compensates AIM Distributors for
the purpose of financing any activity that is intended to result in the sale of
Class A or Class B shares of the Fund. Under the Class A Plan, the Fund
compensates AIM Distributors at the annualized rate of 0.35% of the average
daily net assets of the Fund's Class A shares.
Pursuant to the Class B Plan, the Fund compensates AIM Distributors at an
annualized rate of 1.00% of the average daily net assets of the Fund's Class B
shares.
The Class A Plan and the Class B Plan (together, the "Plans") are designed to
compensate AIM Distributors for certain promotional and other sales-related
costs, and to implement a dealer incentive program that provides for periodic
payments to selected dealers who furnish continuing personal shareholder
services to their customers who purchase and own Class A and Class B shares of
the Fund. Payments also can be directed by AIM Distributors to financial
institutions who have entered into service agreements with respect to Class A
and Class B shares of the Fund and who provide continuing personal services to
their customers who own Class A and Class B shares of the Fund. The service fees
payable to selected financial 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 that were purchased on or after a
prescribed date set forth in the Plans.
The Manager and AIM Distributors have undertaken to limit the Fund's expenses
(exclusive of brokerage commissions, taxes, interest, and extraordinary
expenses) to the annual rate of 1.75%, 2.40%, and 1.40% of the average daily net
assets of the Fund's Class A, Class B, and Advisor Class shares, respectively.
This
FS-21
<PAGE> 525
undertaking may be changed or eliminated in the future. If necessary, this
limitation will be effected by waivers by the Manager of investment management
and administration fees, waivers by AIM Distributors of payments under the Class
A Plan and/or Class B Plan and/or reimbursements by the Manager or AIM
Distributors of portions of the Fund's other operating expenses.
Effective as of the close of business September 4, 1998, the Fund, pursuant to
a transfer agency and service agreement, has agreed to pay A I M Fund Services,
Inc. ("AFS") an annualized fee of $24.85 for each shareholder account that is
open during any calendar month (this fee includes all out-of-pocket expenses),
and an annualized fee of $0.70 per shareholder account that is closed during any
calendar month fees are billed by AFS monthly in arrears on a prorated basis of
1/12 of the annualized fee for all such accounts.
For the period January 1, 1998 to September 4, 1998, GT Global Investor
Services, Inc., an affiliate of Chancellor LGT, was the transfer agent of the
Fund. For performing shareholder servicing, reporting, and general transfer
agent services, GT Services received an annual maintenance fee of $17.50 per
account, a new account fee of $4.00 per account, a per transaction fee of $1.75
for all transactions other than exchanges and a per exchange fee of $2.25. GT
Services was also reimbursed by the Fund for its out-of-pocket expenses for such
items as postage, forms, telephone charges, stationery and office supplies.
The Manager is the pricing and accounting agent for the Fund. The monthly fee
for these services to the Manager is a percentage, not to exceed 0.03% annually,
of the Fund's average daily net assets. The annual fee rate is derived based on
the aggregate net assets of the funds which comprise the following investment
companies: AIM Growth Series, AIM Investment Funds, AIM Series Trust, G.T.
Global Variable Investment Series and G.T. Global Variable Investment Trust. The
fee is calculated at the rate of 0.03% of the first $5 billion of assets of such
investment companies, and 0.02% of the assets in excess of $5 billion. An amount
is allocated to and paid by each such fund based on its relative average daily
net assets.
The Trust pays each of its Trustees who is not an employee, officer or
director of the Manager, AIM Distributors or GT Services $5,000 per year plus
$300 for each meeting of the board or any committee thereof attended by the
Trustee. The Portfolio pays each of its Trustees who is not an employee, officer
or director of the Manager, AIM Distributors or AFS $500 per year plus $150 for
each meeting of the board or any committee thereof attended by the Trustee.
At December 31, 1998, all of the shares of beneficial interest of the
Portfolio were owned either by the Fund or INVESCO (NY), Inc.
NOTE 3-PURCHASES AND SALES OF SECURITIES
The aggregate amount of investment securities (other than short-term
securities) purchased and sold by the Portfolio during the year ended December
31, 1998 was $61,020,877 and $61,119,926, respectively.
The amount of unrealized appreciation (depreciation) of investment securities,
on a tax basis, as of December 31, 1998 is as follows:
<TABLE>
<S> <C>
Aggregate unrealized appreciation of investment
securities $10,571,589
- ---------------------------------------------------------------
Aggregate unrealized (depreciation) of investment
securities (967,318)
- ---------------------------------------------------------------
Net unrealized appreciation of investment
securities $ 9,604,271
===============================================================
</TABLE>
Cost of investments for tax purposes is $34,754,778.
NOTE 4-SHARE INFORMATION
Changes in the Fund's shares outstanding during the years ended December 31,
1998 and 1997 were as follows:
<TABLE>
<CAPTION>
1998 1997
------------------------- -------------------------
SHARES AMOUNT SHARES AMOUNT
---------- ------------ ---------- ------------
<S> <C> <C> <C> <C>
Sold:
Class A 2,808,949 $ 42,444,424 2,067,494 $ 28,341,345
- ----------------------------------------------------------------------------
Class B 1,807,272 26,359,785 2,192,656 29,216,057
- ----------------------------------------------------------------------------
Advisor Class 63,569 992,118 156,123 2,292,127
- ----------------------------------------------------------------------------
Issued as
reinvestment of
dividends:
Class A 35,278 549,813 14,194 195,720
- ----------------------------------------------------------------------------
Class B 45,364 690,497 26,438 359,234
- ----------------------------------------------------------------------------
Advisor Class 1,482 23,320 507 7,039
- ----------------------------------------------------------------------------
Reacquired:
Class A (2,155,365) (33,148,164) (1,992,960) (27,546,271)
- ----------------------------------------------------------------------------
Class B (1,772,161) (25,758,696) (1,570,899) (20,624,826)
- ----------------------------------------------------------------------------
Advisor Class (114,990) (1,615,672) (80,540) (1,200,061)
- ----------------------------------------------------------------------------
719,398 $ 10,537,425 813,013 $ 11,040,364
============================================================================
</TABLE>
NOTE 5-FUTURES CONTRACTS
On December 31, 1998, $100,000 principal amount of U.S. Treasury obligations
were pledged as collateral to cover margin requirements for futures contracts.
Open contracts were as follows:
<TABLE>
<CAPTION>
NO. OF MONTH/
CONTRACT CONTRACTS COMMITMENT APPRECIATION
-------- --------- ---------- --------------
<S> <C> <C> <C>
Russell 2000 Index 10 March 99 $153,000
</TABLE>
NOTE 6-EXPENSE REDUCTIONS
The Manager has directed certain portfolio trades to brokers who then paid a
portion of the Portfolio's expenses. For the year ended December 31, 1998, the
expenses of the Portfolio were reduced by $1,695 under these arrangements.
FS-22
<PAGE> 526
NOTE 7-FINANCIAL HIGHLIGHTS
Shown below are the financial highlights for a share of Class A, Class B, and
Advisor Class outstanding during each of the years in the three-year period
ended December 31, 1998 and the period October 18, 1995 (date operations
commenced) through December 31, 1995;
<TABLE>
<CAPTION>
CLASS A
-------------------------------------------
1998(a) 1997 1996 1995
------- ------- ------ ------
<S> <C> <C> <C> <C>
Net asset value, beginning of period $ 14.27 $ 12.52 $11.80 $11.43
- ------------------------------------------------------------ ------- ------- ------ ------
Income from investment operations:
Net investment income(b) (0.19)(c) (0.18)(c) (0.05)(c) 0.04(c)
- ------------------------------------------------------------ ------- ------- ------ ------
Net gains on securities (both realized and unrealized) 3.45 2.20 1.69 0.33
- ------------------------------------------------------------ ------- ------- ------ ------
Total from investment operations 3.26(b) 2.02 1.64 0.37
- ------------------------------------------------------------ ------- ------- ------ ------
Less distributions:
- ------------------------------------------------------------ ------- ------- ------ ------
Distributions from net realized gains (0.50) (0.27) (0.92) --
- ------------------------------------------------------------ ------- ------- ------ ------
Total distributions (0.50) (0.27) (0.92) --
- ------------------------------------------------------------ ------- ------- ------ ------
Net asset value, end of period $ 17.03 $ 14.27 $12.52 $11.80
============================================================ ======= ======= ====== ======
Total Return(d) 23.15% 16.23% 13.81% 3.24%
============================================================ ======= ======= ====== ======
Ratios/supplemental data:
Net assets, end of period (000s omitted) $24,737 $10,896 $8,448 $1,931
============================================================ ======= ======= ====== ======
Ratio of expenses to average net assets:
With expense reductions and/or reimbursement 1.75%(e) 1.92% 2.00% 2.00%(f)
============================================================ ======= ======= ====== ======
Without expense reductions and/or reimbursement 2.19%(e) 2.52% 3.09% 24.20%(f)
============================================================ ======= ======= ====== ======
Ratio of net investment income to average net assets:
With expense reductions and/or reimbursement (1.29)%(e) (1.40)% (0.38)% 1.68%(f)
============================================================ ======= ======= ====== ======
Without expense reductions and/or reimbursement (1.73)%(e) (2.00)% (1.47)% (20.52)%(f)
============================================================ ======= ======= ====== ======
Ratio of interest expense to average net assets(g) 0.01% -- -- --
============================================================ ======= ======= ====== ======
Portfolio turnover rate(g) 190% 233% 150% --
============================================================ ======= ======= ====== ======
</TABLE>
(a) The Fund charged Investment Advisors on May 29, 1998.
(b) Before reimbursement the net investment loss per share would have been
$(0.24), $(0.25), $(0.19), and $(0.47) for 1998-1995, respectively.
(c) Calculated using average shares outstanding.
(d) Does not deduct sales charges and is not annualized for periods less than
one year.
(e) Ratios are based on average net assets of $12,647,418.
(f) Annualized
(g) Portfolio turnover rates and ratio of interest expense to average net assets
are calculated on the basis of the Portfolio as a whole without
distinguishing between the classes of shares issued.
<TABLE>
<CAPTION>
CLASS B ADVISOR CLASS
--------------------------------------- -------------------------------------
1998(a) 1997 1996 1995 1998(a) 1997 1996 1995
------- ------- ------- ------ ------ ------ ------ -------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of period $ 14.06 $ 12.42 $ 11.78 $11.43 $14.39 $12.58 $11.81 $ 11.43
- ------------------------------------------- ------- ------- ------- ------ ------ ------ ------ -------
Income from investment operations:
Net investment income(b) (0.29)(c) (0.26)(c) (0.14)(c) 0.02(c) (0.14)(c) (0.14)(c) -- 0.05(c)
- ------------------------------------------- ------- ------- ------- ------ ------ ------ ------ -------
Net gains on securities (both
realized and unrealized) 3.37 2.17 1.70 0.33 3.46 2.22 1.69 0.33
- ------------------------------------------- ------- ------- ------- ------ ------ ------ ------ -------
Total from investment
operations 3.08 1.91 1.56 0.35 3.32 2.08 1.69 0.38
- ------------------------------------------- ------- ------- ------- ------ ------ ------ ------ -------
Less distributions:
- ------------------------------------------- ------- ------- ------- ------ ------ ------ ------ -------
Distributions from net
realized gains (0.50) (0.27) (0.92) -- (0.50) (0.27) (0.92) --
- ------------------------------------------- ------- ------- ------- ------ ------ ------ ------ -------
Total distributions (0.50) (0.27) (0.92) -- (0.50) (0.27) (0.92) --
- ------------------------------------------- ------- ------- ------- ------ ------ ------ ------ -------
Net asset value, end of period $ 16.64 $ 14.06 $ 12.42 $11.78 $17.21 $14.39 $12.58 $ 11.81
=========================================== ======= ======= ======= ====== ====== ====== ====== =======
Total Return(d) 22.22% 15.47% 13.14% 3.06% 23.38% 16.63% 14.22% 3.32%
=========================================== ======= ======= ======= ====== ====== ====== ====== =======
Ratios/supplemental data:
Net assets, end of period (000s omitted) $26,448 $21,222 $10,694 $2,024 $1,045 $1,592 $ 435 $ 52
=========================================== ======= ======= ======= ====== ====== ====== ====== =======
Ratio of expenses to average net assets:
With expense reductions
and/or reimbursement 2.40%(e) 2.57% 2.65% 2.65%(f) 1.40%(e) 1.57% 1.65% 1.65%(f)
=========================================== ======= ======= ======= ====== ====== ====== ====== =======
Without expense reductions
and/or reimbursement 2.85%(e) 3.17% 3.74% 24.85%(f) 1.84%(e) 2.17% 2.74% 23.85%(f)
=========================================== ======= ======= ======= ====== ====== ====== ====== =======
Ratio of net investment income to
average net assets:
With expense reductions
and/or reimbursement (1.95)%(e) (2.05)% (1.03)% 1.03%(f) (0.94)%(e) (1.05)% (0.03)% 2.03%(f)
=========================================== ======= ======= ======= ====== ====== ====== ====== =======
Without expense reductions
and/or reimbursement (2.39)%(e) (2.65)% (2.12)% --(f) (1.38)%(e) (1.65)% (1.12)% (20.17)%(f)
=========================================== ======= ======= ======= ====== ====== ====== ====== =======
Ratio of interest expense
to average net assets(g) 0.01% -- -- -- 0.01% -- -- --
=========================================== ======= ======= ======= ====== ====== ====== ====== =======
Portfolio turnover rate(g) 190% 233% 150% -- 190% 233% 150% --%
=========================================== ======= ======= ======= ====== ====== ====== ====== =======
</TABLE>
(a) The Fund changed Investment Advisors on May 29, 1998.
(b) Before reimbursement the net investment loss per share would have been
$(0.35), $(0.33), $(0.28), and $(0.49) for 1998-1995, respectively for Class
B, $(0.20), $(0.21), $(0.14), and $(0.46) for 1998-1995, respectively for
Advisor Class.
(c) Calculated using average shares outstanding.
(d) Does not deduct contingent deferred sales charges and is not annualized for
periods less than one year.
(e) Ratios are based on average net assets of $19,271,876 for Class B and
$1,783,361 for Advisor Class.
(f) Annualized
(g) Portfolio turnover rates and ratio of interest expense to average net assets
are calculated on the basis of the Small Cap Growth Portfolio as a whole
without distinguishing between the classes of shares issued.
FS-23
<PAGE> 527
PART C
OTHER INFORMATION
Item 23. Exhibits:
<TABLE>
<CAPTION>
Exhibit
Number Description
- ------- -----------
<S> <C> <C>
a (1) - (a) Agreement and Declaration of Trust of Registrant, dated
May 7, 1998, was filed as an Exhibit to Registrant's
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, was filed as an
Exhibit to Registrant's Post-Effective Amendment No. 46 to the
Registration Statement on Form N-1A, filed on February 12,
1999, and is hereby incorporated by reference.
- (c) Second Amendment, dated December 10, 1998, to the
Agreement and Declaration of Trust, dated May 7, 1998, is
filed herewith electronically.
- (d) Third Amendment, dated February 16,1999, to the Agreement
and Declaration of Trust, dated May 7, 1998, is filed herewith
electronically.
- (e) Fourth Amendment, dated February 16, 1999, to the
Agreement and Declaration of Trust is filed herewith
electronically.
b (1) - (a) By-Laws of Registrant, dated May 7, 1998, were filed as an
Exhibit to Registrant's Post-Effective Amendment No. 43 to the
Registration Statement on Form N-1A, filed on June 1, 1998,
and are hereby incorporated by reference.
- (b) Amendment No. 1, dated December 10, 1998, to the By-Laws
of Registrant, dated May 7, 1998, is filed herewith
electronically.
(2) - Amended and Restated By-Laws of Registrant, dated December 10,
1998, are filed herewith electronically.
c - Provisions of instruments defining the rights of holders of
Registrant's securities are contained in Articles II, VI, VII,
VIII and IX of Registrant's Agreement and Declaration of
Trust, which was filed as an Exhibit to Registrant's
Post-Effective Amendment No. 43 to the Registration Statement
on Form N-1A, filed on June 1, 1998, and is hereby
incorporated by reference. Such provisions are also contained
in Articles IV, V, VI, VII and VIII of Registrant's Amended
and Restated By-Laws, which are filed herewith electronically.
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 Registrant's 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) - Form of Amended and Restated Investment Management and
Administration Contract between Registrant and A I M Advisors,
Inc., is filed herewith electronically.
(3) - Administration Contract, dated May 29, 1998, between
Registrant and A I M Advisors, Inc., was filed as an Exhibit
to Registrant's Post-Effective Amendment No. 45 to the
Registration
</TABLE>
C-1
<PAGE> 528
<TABLE>
<S> <C> <C>
Statement on Form N-1A filed on August 26, 1998, and is hereby
incorporated by reference.
(4) - 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 Registrant's
Post-Effective Amendment No. 45 to the Registration Statement
on Form N-1A filed on August 26, 1998.
(5) - 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
Registrant's Post-Effective Amendment No. 45 to the
Registration Statement on Form N-1A filed on August 26, 1998.
(6) - 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.
(7) - 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.
(8) - Amended and Restated Sub-Advisory Contract, dated February
12, 1999, between A I M Advisors, Inc. and INVESCO Asset
Management Limited, with respect to Registrant, is filed
herewith electronically.
(9) - Form of Sub-Advisory Contract, dated April 1, 1999, between
A I M Advisors, Inc. and INVESCO Asset Management (Japan)
Limited, with respect to Registrant, is filed herewith
electronically.
(10) - Form of Sub-Advisory Contract, dated April 1, 1999, between
A I M Advisors, Inc. and INVESCO Asia Limited, with respect to
Registrant, is filed herewith electronically.
(11) - Investment Management and Administration Contract, dated May
29, 1998, between Growth Portfolio and A I M Advisors, Inc.,
was filed as an Exhibit to Registrant's Post-Effective
Amendment No. 45 to the Registration Statement on Form N-1A
filed on August 26, 1998, and is hereby incorporated by
reference.
(12) - 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, was filed as an Exhibit to
Registrant's Post-Effective Amendment No. 45 to the
Registration Statement on Form N-1A filed on 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 Registrant's 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) - 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 Registrant's 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) - 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 Registrant's Post-
</TABLE>
C-2
<PAGE> 529
<TABLE>
<S> <C> <C>
Effective Amendment No. 45 to the Registration Statement on
Form N-1A filed on August 26, 1998, and is hereby
incorporated by reference.
(4) - Master Distribution Agreement, dated May 3, 1999, between
Registrant and A I M Distributors, Inc., with respect to Class
A and Class C shares, is filed herewith electronically.
(5) - Amendment No.1, dated March 18, 1999, to the Distribution
Agreement, dated May 29, 1998, between Registrant and A I M
Distributors, Inc., with respect to Class B shares is filed
herewith electronically.
(6) - Amendment No. 1, dated March 18, 1999, to the Distribution
Agreement, dated May 29, 1998, between Registrant and A I M
Distributors, Inc., with respect to Advisor Class shares is
filed herewith electronically.
(7) - Form of Selected Dealer Agreement between A I M Distributors,
Inc. and selected dealers was filed as an Exhibit to
Registrant's Post-Effective Amendment No. 46 to the
Registration Statement on Form N-1A, filed on February 12,
1999, and is hereby incorporated by reference.
(8) - Form of Bank Selling Group Agreement between A I M
Distributors, Inc. and banks was filed as an Exhibit to
Registrant's Post-Effective Amendment No. 46 to the
Registration Statement on Form N-1A, filed on February 12,
1999, and is hereby incorporated by reference.
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 was filed
as an Exhibit to Registrant's Post-Effective Amendment No. 46
to the Registration Statement on Form N-1A, filed on February
12, 1999, and is hereby incorporated by reference.
- (b) Amendment (1994) to the Custodian Contract, dated
September 15, 1988, between State Street Bank and Trust
Company and Registrant was filed as an Exhibit to Registrant's
Post-Effective Amendment No. 46 to the Registration Statement
on Form N-1A, filed on February 12, 1999, and is hereby
incorporated by reference.
- (c) Amendment, dated June 20, 1995, to the Custodian Contract,
dated September 15, 1988, between State Street Bank and Trust
Company and Registrant was filed as an Exhibit to Registrant's
Post-Effective Amendment No. 46 to the Registration Statement
on Form N-1A, filed on February 12, 1999, and is hereby
incorporated by reference.
- (d) Notice of Addition of Funds, dated August 1, 1995, to the
Custodian Contract dated September 15, 1988, between State
Street Bank and Trust Company and Registrant is filed herewith
electronically.
- (e) Notice of Transfer, dated May 28, 1998, to the Custodian,
amending the Custodian Contract dated September 15, 1988,
between State Street Bank and Trust Company and Registrant was
filed as an Exhibit to Registrant's Post-Effective Amendment
No. 46 to the Registration Statement on Form N-1A, filed on
February 12, 1999, and is hereby incorporated by reference.
</TABLE>
C-3
<PAGE> 530
<TABLE>
<S> <C> <C>
- (f) Amendment, dated January 26, 1999, to the Custodian
Contract, dated September 15, 1988, between State Street Bank
and Trust Company and Registrant was filed as an Exhibit to
Registrant's Post-Effective Amendment No. 46 to the
Registration Statement on Form N-1A, filed on February 12,
1999, and is hereby incorporated by reference.
h (1) - (a) Transfer Agency and Service Agreement between Registrant
and A I M Fund Services, Inc., dated September 8, 1998, was
filed as an Exhibit to Registrant's Post-Effective Amendment
No. 46 to the Registration Statement on Form N-1A, filed on
February 12, 1999, and is hereby incorporated by reference.
- (b) Amendment No. 1, dated May 3, 1999, 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
December 23, 1994, between Registrant and First Data Investor
Services Group, Inc. (formerly, The Shareholder Services
Group, Inc.), was filed as an Exhibit to Registrant's
Post-Effective Amendment No. 45 to the Registration Statement
on Form N-1A filed on August 26, 1998, and is hereby
incorporated by reference.
- (b) Amendment No. 1, dated October 4, 1995, 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 Registrant's Post-Effective
Amendment No. 45 to the Registration Statement on Form N-1A
filed on August 26, 1998, and 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 Registrant's Post-Effective
Amendment No. 45 to the Registration Statement on Form N-1A
filed on August 26, 1998, and 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 Registrant's Post-Effective
Amendment No. 45 to the Registration Statement on Form N-1A
filed on August 26, 1998, and 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.) was
filed as an Exhibit to Registrant's Post-Effective Amendment
No. 46 to the Registration Statement on Form N-1A, filed on
February 12, 1999, and is hereby incorporated by reference.
- (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.) was
filed as an Exhibit to Registrant's Post-Effective Amendment
No. 46 to the Registration Statement on Form N-1A, filed on
February 12, 1999, and is hereby incorporated by reference.
- (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
</TABLE>
C-4
<PAGE> 531
<TABLE>
<S> <C> <C>
- Exhibit to Registrant's Post-Effective Amendment No. 45 to the
Registration Statement on Form N-1A filed on August 26, 1998,
and 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 Registrant's
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) - (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 Registrant's 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 was
filed as an Exhibit to Registrant's Post-Effective Amendment
No. 46 to the Registration Statement on Form N-1A, filed on
February 12, 1999, and is hereby incorporated by reference.
i (1) - Opinion and Consent of Kirkpatrick & Lockhart LLP is filed
herewith electronically.
(2) - Opinion and Consent of Delaware Counsel is filed herewith
electronically.
j - Consent of PricewaterhouseCoopers LLP is filed herewith
electronically.
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 was filed as an Exhibit to Registrant's
Post-Effective Amendment No. 46 to the Registration Statement
on Form N-1A, filed on February 12, 1999.
(2) - Distribution Plan adopted pursuant to Rule 12b-1 with respect
to Class B shares was filed as an Exhibit to Registrant's
Post-Effective Amendment No. 46 to the Registration Statement
on Form N-1A, filed on February 12, 1999, and is hereby
incorporated by reference.
(3) - Master Distribution Plan pursuant to Rule 12b-1, dated May 3,
1999, with respect to Class A and Class C shares is filed
herewith electronically.
(4) - Amendment No. 1, dated March 18, 1999, to the Distribution
Plan adopted pursuant to Rule 12b-1 with respect to Class B
shares is filed herewith electronically.
(5) - Form of Shareholder Service Agreement to be used in connection
with Registrant's Distribution Plans was filed as an Exhibit
to Registrant's Post-Effective Amendment No. 46 to the
Registration Statement on Form N-1A, filed on February 12,
1999, and is hereby incorporated by reference.
(6) - Form of Bank Shareholder Service Agreement to be used in
connection with Registrant's Distribution Plans was filed as
an Exhibit to Registrant's Post-Effective Amendment No. 46 to
the Registration Statement on Form N-1A, filed on February 12,
1999, and is hereby incorporated by reference.
</TABLE>
C-5
<PAGE> 532
<TABLE>
<S> <C> <C>
(7) - Form of Agency Pricing Agreement (for Class A Shares) to be
used in connection with Registrant's Distribution Plans was
filed as an Exhibit to Registrant's Post-Effective Amendment
No. 46 to the Registration Statement on Form N-1A, filed on
February 12, 1999, and is hereby incorporated by reference.
(8) - 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 was filed as an Exhibit
to Registrant's Post-Effective Amendment No. 46 to the
Registration Statement on Form N-1A, filed on February 12,
1999, and is hereby incorporated by reference.
n - Financial Data Schedules are filed herewith electronically.
o - Rule 18f-3 Multiple Class Plan was filed as an Exhibit to
Registrant's Post-Effective Amendment No. 45 to the
Registration Statement on Form N-1A filed on August 26, 1998,
and is hereby incorporated by reference.
</TABLE>
Item 24. Persons Controlled by or Under Common Control with Registrant
Provide a list or diagram of all persons directly or indirectly
controlled by or under common control with the 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 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
Amended and Restated By-Laws and applicable law.
Article VII, Section 3 of the Registrant's Amended and Restated By-Laws
also provides that every person who is, or has been, a Trustee or
officer of the Registrant shall be indemnified by the Trust to the
fullest extent permitted by the Delaware Business Trust Act, the
Registrant's Amended and Restated By-Laws and other applicable law.
A I M Advisors, Inc. ("AIM"), the Registrant and other investment
companies managed by AIM, their respective officers, trustees,
directors and employees (the "Insured Parties") are
C-6
<PAGE> 533
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.
Section 9 of the Investment Management and Administration Contract
between the Registrant and AIM provides that AIM shall not be liable,
and each series of the Registrant shall indemnify AIM and its
directors, officers and employees, for any costs or liabilities arising
from any error of judgment or mistake of law or any loss suffered by
any series of the Registrant or the Registrant in connection with the
matters to which the Investment Management and Administration Contract
relates except a loss resulting from willful misfeasance, bad faith or
gross negligence on the part of AIM in the performance by AIM of its
duties or from reckless disregard by AIM of its obligations and duties
under the Investment Management and Administration Contract.
Section 7 of the Sub-Advisory Contract between AIM and INVESCO Asia
Limited, Section 7 of the Sub-Advisory Contract between AIM and INVESCO
Asset Management Limited and Section 7 of the Sub-Advisory Contract
between AIM and INVESCO Asset Management (Japan) Limited,
(collectively, the "Sub-Advisory Contracts") provide that the
Sub-advisors shall not be liable for any costs or liabilities arising
from any error of judgment or mistake of law or any loss suffered by
any series of the Registrant or the Registrant in connection with the
matters to which the Sub-Advisory Contracts relate except a loss
resulting from willful misfeasance, bad faith or gross negligence on
the part of the Sub-advisors in the performance by the Sub-advisors of
their duties or from reckless disregard by the Sub-advisors of their
obligations and duties under the Sub-Advisory Contracts.
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 "Fund 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.,
INVESCO Asia Limited, INVESCO Asset Management Limited and INVESCO
Asset Management (Japan) Limited is included in Schedule A and Schedule
D of Part I of each entity's Form ADV (File No. 801-12313, File No.
801-47856, File No. [801-50197] and File No. 801-52601, 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)
C-7
<PAGE> 534
AIM Funds Group
AIM International Funds, Inc.
AIM Investment Funds
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
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
& 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
Glenda A. Dayton Vice President None
</TABLE>
- ----------------------------------------
* 11 Greenway Plaza, Suite 100, Houston, Texas 77046-1173
C-8
<PAGE> 535
<TABLE>
<CAPTION>
Name and Principal Position and Offices Position and Offices
Business Address* with Principal Underwriter with Registrant
- ------------------ -------------------------- --------------------
<S> <C> <C>
Sidney M. Dilgren Vice President None
Tony D. Green Vice President None
Dawn M. Hawley Vice President & Treasurer None
Ofelia M. Mayo Vice President, General Counsel Assistant Secretary
& Assistant Secretary
Charles H. McLaughlin Vice President None
Ivy B. McLemore Vice President None
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
Gary K. Wendler Vice President None
Norman W. Woodson 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
Sheila R. Brown Assistant Vice President None
Scott E. Burman Assistant Vice President None
Tisha B. Christopher Assistant Vice President None
Mary E. Gentempo Assistant Vice President None
Simon R. Hoyle Assistant Vice President None
Kathryn A. Jordan Assistant Vice President None
Mary C. Mangham Assistant Vice President None
Kim T. McAuliffe Assistant Vice President None
</TABLE>
- ----------------------------------------
* 11 Greenway Plaza, Suite 100, Houston, Texas 77046-1173
C-9
<PAGE> 536
<TABLE>
<CAPTION>
Name and Principal Position and Offices Position and Offices
Business Address* with Principal Underwriter with Registrant
- ------------------ -------------------------- --------------------
<S> <C> <C>
David B. O'Neil Assistant Vice President None
Rebecca Starling-Klatt Assistant Vice President None
Nicholas D. White Assistant Vice President None
Nancy L. Martin Assistant General Counsel Assistant Secretary
& Assistant Secretary
Samuel D. Sirko Assistant General Counsel Vice President &
& Assistant Secretary 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) 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
Asia Limited, 12/F, Three Exchange Square, 8 Connaught Place, Hong
Kong, INVESCO Asset Management Ltd., 11 Devonshire Square, London EC2M
4YR, England and INVESCO Asset Management (Japan) Limited, Imperial
Tower, 1-1-1 Uchisaiwai-cho, Chiyoda-Ku, Tokyo 100-0011, and its
custodian, State Street Bank and Trust Company, 225 Franklin Street,
Boston, Massachusetts 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, Massachusetts 02110.
C-10
<PAGE> 537
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-11
<PAGE> 538
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 14th day of
April, 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>
/s/ ROBERT H. GRAHAM Chairman, Trustee & President April 14 1999
- ----------------------------- (Principal Executive Officer)
(Robert H. Graham)
/s/ C. DEREK ANDERSON Trustee April 14 1999
- -----------------------------
(C. Derek Anderson)
/s/ FRANK S. BAYLEY Trustee April 14 1999
- -----------------------------
(Frank S. Bayley)
/s/ ARTHUR C. PATTERSON Trustee April 14 1999
- -----------------------------
(Arthur C. Patterson)
/s/ RUTH H. QUIGLEY Trustee April 14 1999
- -----------------------------
(Ruth H. Quigley)
/s/ KENNETH W. CHANCEY Vice President & April 14 1999
- ----------------------------- Principal Financial
(Kenneth W. Chancey) and Accounting Officer
</TABLE>
<PAGE> 539
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 14th day of
April, 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 April 14, 1999
- ----------------------------- (Principal Executive Officer)
(Robert H. Graham)
/s/ C. DEREK ANDERSON Trustee April 14, 1999
- -----------------------------
(C. Derek Anderson)
/s/ FRANK S. BAYLEY Trustee April 14, 1999
- -----------------------------
(Frank S. Bayley)
/s/ ARTHUR C. PATTERSON Trustee April 14, 1999
- -----------------------------
(Arthur C. Patterson)
/s/ RUTH H. QUIGLEY Trustee April 14, 1999
- -----------------------------
(Ruth H. Quigley)
/s/ KENNETH W. CHANCEY Vice President & April 14, 1999
- ----------------------------- Principal Financial
(Kenneth W. Chancey) and Accounting Officer
</TABLE>
<PAGE> 540
INDEX TO EXHIBITS
AIM GROWTH SERIES
<TABLE>
<CAPTION>
Exhibit
Number Description
- ------- -----------
<S> <C>
a(1)(c) Second Amendment, dated December 10, 1998, to the Agreement and
Declaration of Trust, dated May 7, 1998
a(1)(d) Third Amendment, dated February 16, 1999, to the Agreement and
Declaration of Trust, dated May 7, 1998
a(1)(e) Fourth Amendment, dated February 16, 1999, to the Agreement and
Declaration of Trust, dated May 7, 1998
b(1)(b) Amendment No. 1, dated December 10, 1998, to the By-Laws of
Registrant, dated May 7, 1998
b(2) Amended and Restated By-Laws of Registrant, dated December 10, 1998
d(2) Form of Amended and Restated Investment Management and
Administration Contract between Registrant and A I M Advisors, Inc.
d(6) Sub-Advisory Contract, dated December 14, 1998, between A I M
Advisors, Inc. and INVESCO (NY), Inc., with respect to Registrant
d(7) Form of Sub-Advisory Contract, dated December 14, 1998, between
A I M Advisors, Inc. and INVESCO Asset Management Limited, with
respect to Registrant
d(8) Amended and Restated Sub-Advisory Contract, dated February 12, 1999,
between A I M Advisors, Inc. and INVESCO Asset Management Limited,
with respect to Registrant
d(9) Form of Sub-Advisory Contract, dated April 1, 1999, between A I M
Advisors, Inc. and INVESCO Asset Management (Japan) Limited, with
respect to Registrant
d(10) Form of Sub-Advisory Contract, dated April 1, 1999, between A I M
Advisors, Inc. and INVESCO Asia Limited, with respect to Registrant
e(4) Master Distribution Agreement, dated May 3, 1999, between Registrant
and A I M Distributors, Inc., with respect to Class A and Class C
shares
e(5) Amendment No.1, dated March 18, 1999, to the Distribution Agreement,
dated May 29, 1998, between Registrant and A I M Distributors, Inc.,
with respect to Class B shares
e(6) Amendment No. 1, dated March 18, 1999, to the Distribution
Agreement, dated May 29, 1998, between Registrant and A I M
Distributors, Inc., with respect to Advisor Class shares
g(1)(d) Notice of Addition of Funds, dated August 1, 1995, to the Custodian
Contract dated September 15, 1988, between State Street Bank and
Trust Company and Registrant
</TABLE>
<PAGE> 541
<TABLE>
<S> <C>
h(1)(b) Amendment No. 1, dated May 3, 1999, to the Transfer Agency and
Service Agreement between Registrant and A I M Fund Services, Inc.
i(1) Opinion and Consent of Kirkpatrick & Lockhart LLP
i(2) Opinion and Consent of Delaware Counsel
j Consent of PricewaterhouseCoopers LLP
m(3) Master Distribution Plan pursuant to Rule 12b-1, dated May 3, 1999,
with respect to Class A and Class C shares
m(4) Amendment No. 1, dated March 18, 1999, to the Distribution Plan
adopted pursuant to Rule 12b-1 with respect to Class B shares
n Financial Data Schedules
</TABLE>
<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 10th day of December,
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, 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: December 10, 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.
/s/ DEREK ANDERSON /s/ FRANK S. BAYLEY
- ----------------------------- ---------------------------------------
C. Derek Anderson, Trustee Frank S. Bayley, Trustee
/s/ ROBERT H. GRAHAM /s/ ARTHUR C. PATTERSON
- ----------------------------- --------------------------------------
Robert H. Graham, 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)(d)
THIRD AMENDMENT
TO
AGREEMENT AND DECLARATION OF TRUST
OF
AIM GROWTH SERIES
THIS THIRD AMENDMENT TO AGREEMENT AND DECLARATION OF TRUST OF AIM
GROWTH SERIES (the "Amendment") is entered into as of the 16th day of February,
1999, 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 and the Shareholders of AIM
International Growth Fund and AIM Worldwide Growth Fund have approved the
Agreement and Plan of Reorganization, dated as of November 4, 1998, between the
Trust, on behalf of AIM International Growth Fund and AIM Worldwide Growth Fund,
and AIM International Funds, Inc., on behalf of AIM International Equity Fund
and AIM Global Growth Fund, pursuant to which AIM International Growth Fund
would be reorganized into AIM International Equity Fund and AIM Worldwide Growth
Fund would be reorganized into AIM Global Growth Fund (the "Reorganization");
and
WHEREAS, the Reorganization was consummated as of the close of business
on February 12, 1999; and
WHEREAS, the Trustees of the Trust have directed that promptly
following the Reorganization, the Trust shall terminate AIM International Growth
Fund and AIM Worldwide Growth Fund in accordance with Delaware law;
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
Effective: February 16, 1999"
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.
/s/ DEREK ANDERSON /s/ FRANK S. BAYLEY
- --------------------------------- -----------------------------------
C. Derek Anderson, Trustee Frank S. Bayley, Trustee
/s/ ROBERT H. GRAHAM /s/ ARTHUR C. PATTERSON
- --------------------------------- -----------------------------------
Robert H. Graham, Trustee Arthur C. Patterson, Trustee
/s/ RUTH H. QUIGLEY
- ---------------------------------
Ruth H. Quigley, Trustee
[THIS IS THE SIGNATURE PAGE FOR
THE THIRD AMENDMENT TO AGREEMENT AND DECLARATION OF TRUST
OF AIM GROWTH SERIES]
<PAGE> 1
EXHIBIT a(1)(e)
FOURTH AMENDMENT
TO
AGREEMENT AND DECLARATION OF TRUST
OF
AIM INVESTMENT FUNDS
THIS FOURTH AMENDMENT TO AGREEMENT AND DECLARATION OF TRUST OF AIM
INVESTMENT FUNDS (the "Amendment") is entered into as of the 16th day of
February, 1999, 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 Investment Funds, a Delaware business
trust (the "Trust"), entered into as of May 7, 1998, as amended (the
"Agreement").
WHEREAS, the Trustees of the Trust and the Shareholders of AIM Emerging
Markets Fund have approved the Plan of Reorganization and Termination, dated as
of November 30, 1998, adopted by the Trust on behalf of AIM Emerging Markets
Fund and AIM Developing Markets Fund, pursuant to which AIM Emerging Markets
Fund would be reorganized into AIM Developing Markets Fund (the
"Reorganization"); and
WHEREAS, the Reorganization was consummated as of the close of business
on February 12, 1999; and
WHEREAS, the Trustees of the Trust have directed that promptly
following the Reorganization, the Trust shall terminate AIM Emerging Markets
Fund in accordance with Delaware law;
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 Investment Funds shall be divided into the following Portfolios and
Classes:
Class A, Class B, Class C and Advisor Class
-------------------------------------------
AIM Developing Markets Fund
AIM Global Growth & Income Fund
AIM Latin American Growth Fund
AIM Global Consumer Products and Services Fund
AIM Global Financial Services Fund
AIM Global Health Care Fund
AIM Global Infrastructure Fund
AIM Global Resources Fund
AIM Global Telecommunications Fund
AIM Global Government Income Fund
AIM Emerging Markets Debt Fund
AIM Strategic Income Fund
As previously provided in the Third Amendment to Agreement and Declaration of
Trust of AIM Investment Funds, dated as of February 4, 1999, the name of AIM
Global Telecommunications Fund shall be changed, effective June 1, 1999, to 'AIM
Global Telecommunications and Technology Fund.'
Date: February 16, 1999"
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 Investment Funds as of the day and year first above written.
/s/ DEREK ANDERSON /s/ FRANK S. BAYLEY
- --------------------------------- -----------------------------------
C. Derek Anderson, Trustee Frank S. Bayley, Trustee
/s/ ROBERT H. GRAHAM /s/ ARTHUR C. PATTERSON
- --------------------------------- -----------------------------------
Robert H. Graham, Trustee Arthur C. Patterson, Trustee
/s/ RUTH H. QUIGLEY
- ---------------------------------
Ruth H. Quigley, Trustee
[THIS IS THE SIGNATURE PAGE FOR
THE FOURTH AMENDMENT TO AGREEMENT AND DECLARATION OF TRUST
OF AIM INVESTMENT FUNDS]
<PAGE> 1
EXHIBIT b(1)(b)
AMENDMENT NO. 1
TO
BYLAWS
OF
AIM GROWTH SERIES
EFFECTIVE: DECEMBER 10, 1998
Article IV, Section 1 of the ByLaws of AIM Growth Series (the "Trust") is
amended by replacing the third and fourth sentences thereof with the following
sentence:
At all meetings of the shareholders, every shareholder of
record entitled to vote thereat shall be entitled to vote
either in person or by proxy, which term shall include
proxies provided through written, electronic, telephonic,
computerized, facsimile, telecommunications, telex or oral
communication or by any other form of communication, each
pursuant to such voting procedures and through such systems
as are authorized by the Trustees or one or more executive
officers of the Trust.
<PAGE> 1
EXHIBIT b(2)
AMENDED AND RESTATED BYLAWS
OF
AIM GROWTH SERIES,
A DELAWARE BUSINESS TRUST
ADOPTED EFFECTIVE MAY 7, 1998
AMENDED EFFECTIVE DECEMBER 10, 1998
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<S> <C>
ARTICLE I OFFICES........................................................................ 1
Section 1. Registered Office............................................................ 1
Section 2. Other Offices................................................................ 1
ARTICLE II TRUSTEES...................................................................... 1
Section 1. Number....................................................................... 1
Section 2. Term......................................................................... 1
Section 3. Vacancy...................................................................... 2
Section 4. Delegation of Power.......................................................... 2
Section 5. Inability to Serve Full Term................................................. 2
Section 6. Powers....................................................................... 2
Section 7. Meetings of the Trustees..................................................... 2
Section 8. Regular Meetings............................................................. 3
Section 9. Quorum....................................................................... 3
Section 10. Action Without Meeting...................................................... 3
Section 11. Designation, Powers, and Name of Committees................................. 3
Section 12. Minutes of Committee........................................................ 3
Section 13. Compensation of Trustees.................................................... 4
ARTICLE III OFFICERS..................................................................... 4
Section 1. Executive Officers........................................................... 4
Section 2. Term of Office............................................................... 4
Section 3. President.................................................................... 4
Section 4. Chairman of the Board........................................................ 4
Section 5. Other Officers............................................................... 5
Section 6. Secretary.................................................................... 5
Section 7. Treasurer.................................................................... 5
Section 8. Surety Bond.................................................................. 5
ARTICLE IV MEETINGS OF SHAREHOLDERS...................................................... 5
Section 1. Purpose...................................................................... 5
Section 2. Nominations of Trustees...................................................... 6
Section 3. Election of Trustees......................................................... 6
Section 4. Notice of Meetings........................................................... 6
Section 5. Special Meetings............................................................. 6
Section 6. Notice of Special Meeting.................................................... 6
Section 7. Conduct of Special Meeting................................................... 6
Section 8. Quorum....................................................................... 7
Section 9. Organization of Meetings..................................................... 7
Section 10. Voting Standard............................................................. 7
Section 11. Voting Procedure............................................................ 7
Section 12. Action Without Meeting...................................................... 8
</TABLE>
i
<PAGE> 3
<TABLE>
<S> <C>
ARTICLE V NOTICES................................................................. 8
Section 1. Methods of Giving Notice.............................................. 8
Section 2. Written Waiver........................................................ 8
ARTICLE VI CERTIFICATES OF SHARES................................................. 8
Section 1. Issuance.............................................................. 8
Section 2. Countersignature...................................................... 9
Section 3. Lost Certificates..................................................... 9
Section 4. Transfer of Shares.................................................... 9
Section 5. Fixing Record Date.................................................... 9
Section 6. Registered Shareholders............................................... 9
ARTICLE VII GENERAL PROVISIONS.................................................... 10
Section 1. Dividends and Distributions........................................... 10
Section 2. Redemptions........................................................... 10
Section 3. Indemnification....................................................... 10
Section 4. Advance Payments of Indemnifiable Expenses............................ 10
Section 5. Seal.................................................................. 11
Section 6. Severability.......................................................... 11
Section 7. Headings.............................................................. 11
ARTICLE VIII AMENDMENTS........................................................... 11
Section 1. Amendments............................................................ 11
</TABLE>
ii
<PAGE> 4
AMENDED AND RESTATED BYLAWS
OF
AIM GROWTH SERIES,
A DELAWARE BUSINESS TRUST
Capitalized terms not specifically defined herein
shall have the meanings ascribed to them in the Trust's
Agreement and Declaration of Trust ("Agreement").
ARTICLE I
OFFICES
Section 1. Registered Office. The registered office of AIM Growth
Series (the "Trust") shall be in the County of New Castle, State of Delaware.
Section 2. Other Offices. The Trust may also have offices at such other
places both within and without the State of Delaware as the Trustees may from
time to time determine or the business of the Trust may require.
ARTICLE II
TRUSTEES
Section 1. Number. The number of Trustees shall initially be five, and
thereafter shall be such number as shall be fixed from time to time by
resolution of the Board of Trustees; provided, however, that the number of
Trustees shall in no event be less than two nor more than twelve.
Section 2. Term. The Trustees shall hold office during the lifetime of
the Trust, except (a) that any Trustee may resign his trusteeship or may retire
by written instrument signed by him and delivered to the other Trustees, which
shall take effect upon such delivery or upon such later date as is specified
therein; (b) that any Trustee may be removed at any time by written instrument,
signed by at least two-thirds of the number of Trustees prior to such removal,
specifying the date when such removal shall become effective; (c) that any
Trustee who has died, become physically or mentally incapacitated by reason of
disease or otherwise, or is otherwise unable to serve, may be retired by written
instrument signed by a majority of the other Trustees, specifying the date of
his retirement; and (d) that a Trustee may be removed at any meeting of the
shareholders of the Trust.
Section 3. Vacancy. In case of the declination to serve, death,
resignation, retirement or removal of a Trustee, or a Trustee is otherwise
unable to serve, or an increase in the number of Trustees, a vacancy shall
occur. Whenever a vacancy in the Trustees shall occur, until such vacancy is
filled, the other Trustees shall have all the powers hereunder and the
certification of
<PAGE> 5
the other Trustees of such vacancy shall be conclusive. In the case of an
existing vacancy, the remaining Trustees may fill such vacancy by appointing
such other person as they in their discretion shall see fit, or may leave such
vacancy unfilled or may reduce the number of Trustees to not less than two
Trustees. Such appointment shall be evidenced by a written instrument signed by
a majority of the Trustees in office or by resolution of the Trustees, duly
adopted, which shall be recorded in the minutes of a meeting of the Trustees,
whereupon the appointment shall take effect.
An appointment of a Trustee may be made by the Trustees then in office
in anticipation of a vacancy to occur by reason of retirement, resignation or
increase in number of Trustees effective at a later date, provided that said
appointment shall become effective only at or after the effective date of said
retirement, resignation or increase in number of Trustees. As soon as any
Trustee appointed pursuant to Sections 2 and 3 of Article II of these Amended
and Restated Bylaws, or elected pursuant to Section 3 of Article IV, and the
Agreement shall have accepted this appointment in writing and agreed in writing
to be bound by the terms of the Trust Agreement, the Trust estate shall vest in
the new Trustee or Trustees, together with the continuing Trustees, without any
further act or conveyance, and he shall be deemed a Trustee hereunder.
Section 4. Delegation of Power. Any Trustee may, by power of attorney,
delegate his power for a period not exceeding six months at any one time to any
other Trustee or Trustees, provided that in no case shall less than two Trustees
personally exercise the other powers hereunder except as herein otherwise
expressly provided.
Section 5. Inability to Serve Full Term. The declination to serve,
death, resignation, retirement, removal, incapacity, or inability of the
Trustees, or any one of them, shall not operate to terminate the Trust or to
revoke any existing agency created pursuant to the terms of the Agreement.
Section 6. Powers. The Trustees shall have exclusive and absolute
control over the trust property and over the business of the Trust to the same
extent as if the Trustees were the sole owners of the trust property and
business in their own right, but with such powers of delegation as may be
permitted by the Agreement. The Trustees shall have power to conduct the
business of the Trust and carry on its operations in any and all of its branches
and maintain offices both within and without the State of Delaware, in any and
all states of the United States of America, in the District of Columbia, in any
and all commonwealths, territories, dependencies, colonies, or possessions of
the United States of America, and in any foreign jurisdiction and to do all such
other things and execute all such instruments as they deem necessary, proper or
desirable in order to promote the interests of the Trust although such things
are not herein specifically mentioned. Any determination as to what is in the
interests of the Trust made by the Trustees in good faith shall be conclusive.
In construing the provisions of these Amended and Restated Bylaws and the
Agreement, the presumption shall be in favor of a grant of power to the
Trustees.
Section 7. Meetings of the Trustees. The Trustees of the Trust may hold
meetings, both regular and special, either within or without the State of
Delaware.
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<PAGE> 6
Section 8. Regular Meetings. Regular meetings of the Board of Trustees
shall be held each year, at such time and place as the Board of Trustees may
determine.
Section 9. Notice of Meetings. Notice of the time, date, and place of
all meetings of the Trustees shall be given to each Trustee by telephone,
facsimile, electronic-mail, or other electronic mechanism sent to his or her
home or business address at least twenty-four hours in advance of the meeting or
in person at another meeting of the Trustees or by written notice mailed to his
or her home or business address at least seventy-two hours in advance of the
meeting.
Section 10. Quorum. At all meetings of the Trustees, a majority of the
Trustees then in office (but in no event less than two Trustees) shall
constitute a quorum for the transaction of business and the act of a majority of
the Trustees present at any meeting at which there is a quorum shall be the act
of the Board of Trustees, except as may be otherwise specifically provided by
applicable law or by the Agreement or these Amended and Restated Bylaws. If a
quorum shall not be present at any meeting of the Board of Trustees, the
Trustees present thereat may adjourn the meeting from time to time, without
notice other than announcement at the meeting, until a quorum shall be present.
Section 11. Action Without Meeting. Unless otherwise restricted by the
Agreement or these Amended and Restated Bylaws, any action required or permitted
to be taken at any meeting of the Board of Trustees or of any committee thereof
may be taken without a meeting by unanimous written consent of the Trustees or
committee members (or by written consent of a majority of the Trustees if the
President of the Trust determines that such exceptional circumstances exist, and
are of such urgency, as to make unanimous written consent impossible or
impractical, which determination shall be conclusive and binding on all Trustees
and not otherwise subject to challenge) and the writing or writings are filed
with the minutes of proceedings of the board or committee.
Section 12. Designation, Powers and Name of Committees. The Board of
Trustees may, by resolution passed by a majority of the whole Board, designate
one or more committees, each committee to consist of two or more of the Trustees
of the Trust. The Board may designate one or more Trustee as alternate members
of any committee, who may replace any absent or disqualified member at any
meeting of such committee. Each committee, to the extent provided in the
resolution, shall have and may exercise the powers of the Board of Trustees in
the management of the business and affairs of the Trust; provided, however, that
in the absence or disqualification of any member of such committee or
committees, the member or members thereof present at any meeting and not
disqualified from voting, whether or not such members constitute a quorum, may
unanimously appoint another member of the Board of Trustees to act at the
meeting in the place of any such absent or disqualified member. Such committee
or committees shall have such name or names as may be determined from time to
time by resolution adopted by the Board of Trustees.
Section 13. Minutes of Committee. Each committee shall keep regular
minutes of its meetings and report the same to the Board of Trustees when
required.
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<PAGE> 7
Section 14. Compensation of Trustees. The Trustees as such shall be
entitled to reasonable compensation for their services as determined from time
to time by the Board of Trustees. Nothing herein shall in any way prevent the
employment of any Trustee for advisory, management, administrative, legal,
accounting, investment banking, underwriting, brokerage, or investment dealer or
other services and the payment for the same by the Trust.
ARTICLE III
OFFICERS
Section 1. Executive Officers. The initial executive officers of the
Trust shall be elected by the Board of Trustees as soon as practicable after the
organization of the Trust. The executive officers may include a Chairman of the
Board, and shall include a President, one or more Vice Presidents (the number
thereof to be determined by the Board of Trustees), a Secretary and a Treasurer.
The Chairman of the Board, if any, shall be selected from among the Trustees.
The Board of Trustees may also in its discretion appoint Assistant Vice
Presidents, Assistant Secretaries, Assistant Treasurers, and other officers,
agents and employees, who shall have such authority and perform such duties as
the Board may determine. The Board of Trustees may fill any vacancy which may
occur in any office. Any two offices, except for those of President and Vice
President, may be held by the same person, but no officer shall execute,
acknowledge or verify any instrument on behalf of the Trust in more than one
capacity, if such instrument is required by law or by these Amended and Restated
Bylaws to be executed, acknowledged or verified by two or more officers.
Section 2. Term of Office. Unless otherwise specifically determined by
the Board of Trustees, the officers shall serve at the pleasure of the Board of
Trustees. If the Board of Trustees in its judgment finds that the best interests
of the Trust will be served, the Board of Trustees may remove any officer of the
Trust at any time with or without cause. The Trustees may delegate this power to
the President with respect to any other officer. Such removal shall be without
prejudice to the contract rights, if any, of the person so removed. Any officer
may resign from office at any time by delivering a written resignation to the
Trustees or the President. Unless otherwise specified therein, such resignation
shall take effect upon delivery.
Section 3. President. The President shall be the chief executive
officer of the Trust and, subject to the Board of Trustees, shall generally
manage the business and affairs of the Trust. If there is no Chairman of the
Board, or if the Chairman of the Board has been appointed but is absent, the
President shall, if present, preside at all meetings of the shareholders and the
Board of Trustees.
Section 4. Chairman of the Board. The Chairman of the Board, if any,
shall preside at all meetings of the shareholders and the Board of Trustees, if
the Chairman of the Board is present. The Chairman of the Board shall have such
other powers and duties as shall be determined by the Board of Trustees, and
shall undertake such other assignments as may be requested by the President.
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<PAGE> 8
Section 5. Other Officers. The Chairman of the Board or one or more
Vice Presidents shall have and exercise such powers and duties of the President
in the absence or inability to act of the President, as may be assigned to them,
respectively, by the Board of Trustees or, to the extent not so assigned, by the
President. In the absence or inability to act of the President, the powers and
duties of the President not otherwise assigned by the Board of Trustees or the
President shall devolve upon the Chairman of the Board, or in the Chairman's
absence, the Vice Presidents in the order of their election.
Section 6. Secretary. The Secretary shall (a) have custody of the seal
of the Trust; (b) attend meetings of the shareholders, the Board of Trustees,
and any committees of Trustees and keep the minutes of such meetings of
shareholders, Board of Trustees and any committees thereof; and (c) issue all
notices of the Trust. The Secretary shall have charge of the shareholder records
and such other books and papers as the Board may direct, and shall perform such
other duties as may be incidental to the office or which are assigned by the
Board of Trustees. The Secretary shall also keep or cause to be kept a
shareholder book, which may be maintained by means of computer systems,
containing the names, alphabetically arranged, of all persons who are
shareholders of the Trust, showing their places of residence, the number and
class or series of any class of shares of beneficial interest held by them,
respectively, and the dates when they became the record owners thereof, and such
book shall be open for inspection as prescribed by the laws of the State of
Delaware.
Section 7. Treasurer. The Treasurer shall have the care and custody of
the funds and securities of the Trust and shall deposit the same in the name of
the Trust in such bank or banks or other depositories, subject to withdrawal in
such manner as these Amended and Restated Bylaws or the Board of Trustees may
determine. The Treasurer shall, if required by the Board of Trustees, give such
bond for the faithful discharge of duties in such form as the Board of Trustees
may require.
Section 8. Surety Bond. The Trustees may require any officer or agent
of the Trust to execute a bond (including, without limitation, any bond required
by the Investment Company Act of 1940, as amended ("1940 Act") and the rules and
regulations of the Securities and Exchange Commission ("Commission") to the
Trust in such sum and with such surety or sureties as the Trustees may
determine, conditioned upon the faithful performance of his or her duties to the
Trust, including responsibility for negligence and for the accounting of any of
the Trust's property, funds, or securities that may come into his or her hands.
ARTICLE IV
MEETINGS OF SHAREHOLDERS
Section 1. Purpose. All meetings of the shareholders for the election
of Trustees shall be held at such place as may be fixed from time to time by the
Trustees, or at such other place either within or without the State of Delaware
as shall be designated from time to time by the Trustees and stated in the
notice indicating that a meeting has been called for such purpose. Meetings of
shareholders may be held for any purpose determined by the Trustees and may be
held at such time and place, within or without the State of Delaware as shall be
stated in the notice of the
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<PAGE> 9
meeting or in a duly executed waiver of notice thereof. At all meetings of the
shareholders, every shareholder of record entitled to vote thereat shall be
entitled to vote either in person or by proxy, which term shall include proxies
provided through written, electronic, telephonic, computerized, facsimile,
telecommunications, telex or oral communication or by any other form of
communication, each pursuant to such voting procedures and through such systems
as are authorized by the Trustees or one or more executive officers of the
Trust. Unless a proxy provides otherwise, such proxy is not valid more than
eleven months after its date. A proxy with respect to shares held in the name of
two or more persons shall be valid if executed by any one of them unless at or
prior to exercise of the proxy the Trust receives a specific written notice to
the contrary from any one of them. A proxy purporting to be executed by or on
behalf of a shareholder shall be deemed valid unless challenged at or prior to
its exercise and the burden of proving invalidity shall rest on the challenger.
Section 2. Nominations of Trustees. Nominations of individuals for
election to the board of trustees shall be made by the Board of Trustees or a
nominating committee of the Board of Trustees, if one has been established (the
"Nominating Committee"). Any shareholder of the Trust may submit names of
individuals to be considered by the Nominating Committee or the Board of
Trustees, as applicable, provided, however, (i) that such person was a
shareholder of record at the time of submission of such names and is entitled to
vote at the meeting, and (ii) that the Nominating Committee or the Board of
Trustees, as applicable, shall make the final determination of persons to be
nominated.
Section 3. Election of Trustees. All meetings of shareholders for the
purpose of electing Trustees shall be held on such date and at such time as
shall be designated from time to time by the Trustees and stated in the notice
of the meeting, at which the shareholders shall elect by a plurality vote any
number of Trustees as the notice for such meeting shall state are to be elected,
and transact such other business as may properly be brought before the meeting
in accordance with Section 1 of this Article IV.
Section 4. Notice of Meetings. Written notice of any meeting stating
the place, date, and hour of the meeting shall be given to each shareholder
entitled to vote at such meeting not less than ten days before the date of the
meeting in accordance with Article V hereof.
Section 5. Special Meetings. Special meetings of the shareholders, for
any purpose or purposes, unless otherwise prescribed by applicable law or by the
Agreement, may be called by any Trustee; provided, however, that the Trustees
shall promptly call a meeting of the shareholders solely for the purpose of
removing one or more Trustees, when requested in writing so to do by the record
holders of not less than ten percent of the outstanding shares of the Trust.
Section 6. Notice of Special Meeting. Written notice of a special
meeting stating the place, date, and hour of the meeting and the purpose of
purposes for which the meeting is called, shall be given not less than ten days
before the date of the meeting, to each shareholder entitled to vote at such
meeting.
Section 7. Conduct of Special Meeting. Business transacted at any
special meeting of shareholders shall be limited to the purpose stated in the
notice.
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<PAGE> 10
Section 8. Ouorum. The holders of one-third of the shares of beneficial
interests that are issued and outstanding and entitled to vote thereat, present
in person or represented by proxy, shall constitute a quorum at all meetings of
the shareholders for the transaction of business except as otherwise provided by
applicable law or by the Agreement. If, however, such quorum shall not be
present or represented at any meeting of the shareholders, the vote of the
holders of a majority of shares cast shall have power to adjourn the meeting
from time to time, without notice other than announcement at the meeting, until
a quorum shall be present or represented. At such adjourned meeting, at which a
quorum shall be present or represented, any business may be transacted which
might have been transacted at the meeting as originally notified.
Section 9. Organization of Meetings.
(a) The Chairman of the Board of Trustees shall preside at
each meeting of shareholders. In the absence of the Chairman of the Board, the
meeting shall be chaired by the President, or if the President shall not be
present, by a Vice President. In the absence of all such officers, the meeting
shall be chaired by a person elected for such purpose at the meeting. The
Secretary of the Trust, if present, shall act as Secretary of such meetings, or
if the Secretary is not present, an Assistant Secretary of the Trust shall so
act, and if no Assistant Secretary is present, then a person designated by the
Secretary of the Trust shall so act, and if the Secretary has not designated a
person, then the meeting shall elect a secretary for the meeting.
(b) The Board of Trustees of the Trust shall be entitled to
make such rules and regulations for the conduct of meetings of shareholders as
it shall deem necessary, appropriate or convenient. Subject to such rules and
regulations of the Board of Trustees, if any, the chairman of the meeting shall
have the right and authority to prescribe such rules, regulations and procedures
and to do all such acts as, in the judgment of such chairman, are necessary,
appropriate or convenient for the proper conduct of the meeting, including,
without limitation, establishing: an agenda or order of business for the
meeting; rules and procedures for maintaining order at the meeting and the
safety of those present; limitations on participation in such meeting to
shareholders of record of the Trust and their duly authorized and constituted
proxies, and such other persons as the chairman shall permit; restrictions on
entry to the meeting after the time fixed for the commencement thereof;
limitations on the time allotted to questions or comments by participants; and
regulation of the opening and closing of the polls for balloting on matters
which are to be voted on by ballot, unless and to the extent the Board of
Trustees or the chairman of the meeting determines that meetings of shareholders
shall not be required to be held in accordance with the rules of parliamentary
procedure.
Section 10. Voting Standard. When a quorum is present at any meeting,
the vote of the holders of a majority of the shares cast shall decide any
question brought before such meeting, unless the question is one on which, by
express provision of applicable law, the Agreement, these Amended and Restated
Bylaws, or applicable contract, a different vote is required, in which case such
express provision shall govern and control the decision of such question.
Section 11. Voting Procedure. Each whole share shall be entitled to one
vote, and each fractional share shall be entitled to a proportionate fractional
vote. On any matter submitted to a vote of the shareholders, all shares shall
be voted together, except when required by applicable
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<PAGE> 11
law or when the Trustees have determined that the matter affects the interests
of one or more Portfolios (or Classes), then only the shareholders of such
Portfolios (or Classes) shall be entitled to vote thereon.
Section 12. Action Without Meeting. Unless otherwise provided in the
Agreement or applicable law, any action required to be taken at any meeting of
shareholders of the Trust, or any action which may be taken at any meeting of
such shareholders, may be taken without a meeting, without prior notice and
without a vote, if a consent in writing, setting forth the action so taken,
shall be signed by the holders of outstanding shares having not less than the
minimum number of votes that would be necessary to authorize or take such action
at a meeting at which all shares entitled to vote thereon were present and
voted. Prompt notice of the taking of any such action without a meeting by less
than unanimous written consent shall be given to those shareholders who have not
consented in writing.
ARTICLE V
NOTICES
Section 1. Methods of Giving Notice. Whenever, under the provisions of
applicable law or of the Agreement or of these Amended and Restated Bylaws,
notice is required to be given to any Trustee or shareholder, it shall not,
unless otherwise provided herein, be construed to mean personal notice, but such
notice may be given orally in person, or by telephone (promptly confirmed in
writing) or in writing, by mail addressed to such Trustee or shareholder, at his
address as it appears on the records of the Trust, with postage thereon prepaid,
and such notice shall be deemed to be given at the time when the same shall be
deposited in the United States mail. Notice to Trustees or members of a
committee may also be given by telex, telegram, telecopier or via overnight
courier. If sent by telex or telecopier, notice to a Trustee or member of a
committee shall be deemed to be given upon transmittal; if sent by telegram,
notice to a Trustee or member of a committee shall be deemed to be given when
the telegram, so addressed, is delivered to the telegraph company, and if sent
via overnight courier, notice to a Trustee or member of a committee shall be
deemed to be given when delivered against a receipt therefor.
Section 2. Written Waiver. Whenever any notice is required to be given
under the provisions of applicable law or of the Agreement or of these Amended
and Restated Bylaws, a waiver thereof in writing, signed by the person or
persons entitled to said notice, whether before or after the time stated
therein, shall be deemed equivalent thereto.
ARTICLE VI
CERTIFICATES OF SHARES
Section 1. Issuance. Upon request, every holder of shares in the Trust
shall be entitled to have a certificate, signed by, or in the name of the Trust
by, a Trustee, certifying the number of shares owned by him in the Trust.
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<PAGE> 12
Section 2. Countersignature. Where a certificate is countersigned (1)
by a transfer agent other than the Trust or its employee, or, (2) by a registrar
other than the Trust or its employee, the signature of the Trustee may be a
facsimile.
Section 3. Lost Certificates. The Board of Trustees may direct a new
certificate or certificates to be issued in place of any certificate or
certificates therefore issued by the Trust alleged to have been lost, stolen or
destroyed, upon the making of an affidavit of the fact by the person claiming
the certificate to be lost, stolen or destroyed. When authorizing such issue of
a new certificate or certificates, the Board of Trustees may, in its discretion
and as a condition precedent to the issuance thereof, require the owner of such
lost, stolen or destroyed certificate or certificates, or his legal
representative, to advertise the same in such manner as it shall require and/or
to give the Trust a bond in such sum as it may direct as indemnity against any
claim that may be made against the Trust with respect to the certificate alleged
to have been lost, stolen or destroyed.
Section 4. Transfer of Shares. The Trustees shall make such rules as
they consider appropriate for the transfer of shares and similar matters. To the
extent certificates are issued in accordance with Section 1 of this Article VI,
upon surrender to the Trust or the transfer agent of the Trust of such
certificate for shares duly endorsed or accompanied by proper evidence of
succession, assignment or authority to transfer, it shall be the duty of the
Trust to issue a new certificate to the person entitled thereto, cancel the old
certificate and record the transaction upon its books.
Section 5. Fixing Record Date. In order that the Trustees may determine
the shareholders entitled to notice of or to vote at any meeting of shareholders
or any adjournment thereof, or to express consent to action in writing without a
meeting, or entitled to receive payment of any dividend or other distribution of
allotment of any rights, or entitled to exercise any rights in respect of any
change, conversion or exchange of beneficial interests or for the purpose of any
other lawful action, the Board of Trustees may fix a record date, which record
date shall not precede the date upon which the resolution fixing the record date
is adopted by the Board of Trustees, and which record date shall not be more
than ninety nor less than ten days before the date of such meeting, nor more
than ten days after the date upon which the resolution fixing the record date is
adopted by the Board of Trustees for action by shareholder consent in writing
without a meeting, nor more than ninety days prior to any other action. A
determination of shareholders of record entitled to notice of or to vote at a
meeting of shareholders shall apply to any adjournment of the meeting; provided,
however, that the Board of Trustees may fix a new record date for the adjourned
meeting.
Section 6. Registered Shareholders. The Trust shall be entitled to
recognize the exclusive right of a person registered on its books as the owner
of shares to receive dividends, and to vote as such owner, and to hold liable
for calls and assessments a person registered on its books as the owner of
shares, and shall not be bound to recognize any equitable or other claim to
interest in such share or shares on the part of any other person, whether or not
it shall have express or other notice hereof, except as otherwise provided by
the laws of Delaware.
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ARTICLE VII
GENERAL PROVISIONS
Section 1. Dividends and Other Distributions. The Trustees may from
time to time declare and pay dividends and make other distributions with respect
to any Portfolio, or Class thereof, which may be from income, capital gains or
capital. The amount of such dividends or other distributions and the payment of
them and whether they are in cash or any other Trust Property shall be wholly in
the discretion of the Trustees.
Section 2. Redemptions. Any holder of record of shares of a particular
Portfolio, or Class thereof, shall have the right to require the Trust to redeem
his shares, or any portion thereof, subject to the terms and conditions set
forth in the registration statement in effect from time to time. The redemption
price may in any case or cases be paid wholly or partly in kind if the Trustees
determine that such payment is advisable in the interest of the remaining
shareholders of the Portfolio or Class thereof for which the shares are being
redeemed. Subject to the foregoing, the fair value, selection and quantity of
securities or other property so paid or delivered as all or part of the
redemption price may be determined by or under authority of the Trustees. In no
case shall the Trust be liable for any delay of any Person in transferring
securities selected for delivery as all or part of any payment in kind.
The Trustees may, at their option, and at any time, have the right to
redeem shares of any shareholder of a particular Portfolio or Class thereof in
accordance with Section 2 of this Article VII. The Trustees may refuse to
transfer or issue shares to any person to the extent that the same is necessary
to comply with applicable law or advisable to further the purposes for which the
Trust is formed.
If, at any time when a request for transfer or redemption of Shares of
any Portfolio is received by the Trust or its agent, the, value of the shares of
such Portfolio in a Shareholder's account is less than Five Hundred Dollars
($500.00), after giving effect to such transfer or redemption, the Trust may, at
any time following such transfer or redemption and upon giving thirty (30) days'
notice to the Shareholder, cause the remaining Shares of such Portfolio in such
Shareholder's account to be redeemed at net asset value in accordance with such
procedures set forth above.
Section 3. Indemnification. Every person who is, or has been, a Trustee
or officer of the Trust shall be indemnified by the Trust to the fullest extent
permitted by the Delaware Business Trust Act, these Amended and Restated Bylaws
and other applicable law.
Section 4. Advance Payments of Indemnifiable Expenses. To the maximum
extent permitted by the Delaware Act and other applicable law, the Trust or
applicable Portfolio may advance to a Covered Person, in connection with the
preparation and presentation of a defense to any claim, action, suit, or
proceeding, expenses for which the Covered Person would ultimately be entitled
to indemnification; provided that the Trust or applicable Portfolio has received
an undertaking by or on behalf of such Covered Person that such amount will be
paid over by him to the Trust or applicable Portfolio if it is ultimately
determined that he is not entitled to
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indemnification for such expenses, and further provided that (i) such Covered
Person shall have provided appropriate security for such undertaking, (ii) the
Trust is insured against losses arising out of any such advance payments, or
(iii) either a majority of the Trustees who are not interested persons (as
defined in the 1940 Act) of the Trust nor parties to the matter, or independent
legal counsel in a written opinion shall have determined, based upon a review of
readily available facts (as opposed to a full trial-type inquiry) that there is
reason to believe that such Covered Person will not be disqualified from
indemnification for such expenses.
Section 5. Seal. The business seal shall have inscribed thereon the
name of the business trust, the year of its organization and the word "Business
Seal, Delaware." The seal may be used by causing it or a facsimile thereof to be
impressed or affixed or otherwise reproduced. Any officer or Trustee of the
Trust shall have authority to affix the corporate seal of the Trust to any
document requiring the same.
Section 6. Severability. The provisions of these Amended and Restated
Bylaws are severable. If the Board of Trustees determines, with the advice of
counsel, that any provision hereof conflicts with the 1940 Act, the regulated
investment company provisions of the Internal Revenue Code, or other applicable
laws and regulations, the conflicting provision shall be deemed never to have
constituted a part of these Amended and Restated Bylaws; provided, however, that
such determination shall not affect any of the remaining provisions of these
Amended and Restated Bylaws or render invalid or improper any action taken or
omitted prior to such determination. If any provision hereof shall be held
invalid or unenforceable in any jurisdiction, such invalidity or
unenforceability shall attach only to such provision only in such jurisdiction
and shall not affect any other provision of these Amended and Restated Bylaws.
Section 7. Headings. Headings are placed in these Amended and Restated
Bylaws for convenience of reference only and in case of any conflict, the text
of these Amended and Restated Bylaws rather than the headings shall control.
ARTICLE VIII
AMENDMENTS
Section 1. Amendments. These Amended and Restated Bylaws may be altered
or repealed at any regular or special meeting of the Board of Trustees without
prior notice. These Amended and Restated Bylaws may also be altered or repealed
at any special meeting of the shareholders, but only if the Board of Trustees
resolves to put a proposed alteration or repealer to the vote of the
shareholders and notice of such alteration or repealer is contained in a notice
of the special meeting being held for such purpose.
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EXHIBIT d(2)
AIM GROWTH SERIES
AMENDED AND RESTATED
INVESTMENT MANAGEMENT AND ADMINISTRATION CONTRACT
BETWEEN
AIM GROWTH SERIES
AND
A I M ADVISORS, INC.
Contract made as of March 18, 1999, between AIM Growth Series, a
Delaware business trust ("Company), and A I M Advisors, Inc., a Delaware
corporation (the "Adviser").
WHEREAS the Company is registered under the Investment Company Act of
1940, as amended ("1940 Act"), as an open-end management investment company, and
has offered for public sale shares of AIM Worldwide Growth Fund, AIM
International Growth Fund, AIM New Pacific Growth Fund, AIM Europe Growth Fund,
AIM Japan Growth Fund, and AIM Mid Cap Growth Fund, each being a series of the
Company's shares of beneficial interest; and
WHEREAS the Company hereafter may establish additional series of its
shares (any such additional series, together with the series named in the
paragraph immediately preceding, are collectively referred to herein as the
"Funds," and singly may be referred to as a "Fund"); and
WHEREAS the Company desired to retain Adviser as investment manager and
administrator to furnish certain investment advisory, portfolio management and
administration services to the Company and the Funds, and the Company and the
Adviser entered into an Investment Management and Administration Contract on May
29, 1998 (the "Advisory Agreement"); and
WHEREAS the Company and the Advisor desire to amend and restate the
Advisory Agreement to (i) change the name of AIM Mid Cap Growth Fund to AIM Mid
Cap Equity Fund as of September 8, 1998 and (ii) remove AIM International Growth
Fund and AIM Worldwide Growth Fund since these funds ceased operations on
February 12, 1999;
NOW, THEREFORE, in consideration of the premises and the mutual
covenants herein contained, it is agreed between the parties hereto as follows:
1. Appointment. The Company hereby appoints Adviser as investment manager and
administrator of each Fund for the period and on the terms set forth in this
Contract. Adviser accepts such appointment and agrees to render the services
herein set forth, for the compensation herein provided.
1
<PAGE> 2
2. Duties as Investment Manager.
(a) Subject to the supervision of the Company's Board of Trustees
("Board"), 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. 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) Adviser agrees that in placing orders with brokers and dealers it
will attempt to obtain the best net results in terms of price and execution.
Consistent with this obligation Adviser may, in its discretion, purchase and
sell portfolio securities to and from brokers and dealers who sell shares of the
Funds or provide the Funds or Adviser's other clients with research, analysis,
advice and similar services. Adviser may pay to brokers and dealers, in return
for research and analysis, a higher commission or spread than may be charged by
other brokers and dealers, subject to Adviser's determining in good faith that
such commission or spread is reasonable in terms either of the particular
transaction or of the overall responsibility of Adviser to the Funds and its
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 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 Adviser simultaneously places orders to purchase or sell the
same security on behalf of a Fund and one or more other accounts advised by
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. The Company
recognizes that in some cases this procedure may adversely affect the results
obtained for each Fund.
(c) Adviser will oversee the maintenance of all books and records with
respect to the securities transactions of the Funds, and will furnish the Board
with such periodic and special reports as the Board reasonably may request. In
compliance with the requirements of Rule 31a-3 under the 1940 Act, 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. Duties as Administrator. Adviser will administer the affairs of each Fund
subject to the supervision of the Board and the following understandings:
(a) Adviser will supervise all aspects of the operations of each Fund,
including the oversight of transfer agency and custodial services, except as
hereinafter set forth; provided, however, that nothing herein contained shall be
deemed to relieve or deprive the Board of its responsibility for control of the
conduct of the affairs of the Funds.
2
<PAGE> 3
(b) At Adviser's expense, Adviser will provide the Company and the
Funds with such corporate, administrative and clerical personnel (including
officers of the Company) and services as are reasonably deemed necessary or
advisable by the Board.
(c) Adviser will arrange, but not pay, for the periodic preparation,
updating, filing and dissemination (as applicable) of each Fund's prospectus,
statement of additional information, proxy material, tax returns and required
reports with or to the Fund's shareholders, the Securities and Exchange
Commission and other appropriate federal or state regulatory authorities.
(d) Adviser will provide the Company and the Funds with, or obtain for
them, adequate office space and all necessary office equipment and services,
including telephone service, heat, utilities, stationery supplies and similar
items.
4. Further Duties. In all matters relating to the performance of this Contract,
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.
5. Delegation of Adviser's Duties as Investment Manager and Administrator. With
respect to one or more of the Funds, Adviser may enter into one or more
contracts ("Sub-Advisory or Sub-Administration Contract") with a sub-adviser or
sub-administrator in which Adviser delegates to such sub-adviser or
sub-administrator the performance of any or all of the services specified in
Paragraphs 2 and 3 of this Contract, provided that: (i) each Sub-Advisory and
Sub-Administration Contract imposes on the sub-adviser or sub-administrator
bound thereby all the duties and conditions to which Adviser is subject with
respect to the services under Paragraphs 2, 3 and 4 of this Contract; (ii) each
Sub-Advisory and Sub-Administration Contract meets all requirements of the 1940
Act and rules thereunder, and (iii) Adviser shall not enter into a Sub-Advisory
or Sub-Administration Contract unless it is approved by the Board prior to
implementation.
6. Services Not Exclusive. The services furnished by Adviser hereunder are not
to be deemed exclusive and 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 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.
7. Expenses.
(a) During the term of this Contract, each Fund will bear all expenses,
not specifically assumed by Adviser, incurred in its operations and the offering
of its shares.
3
<PAGE> 4
(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
Adviser under this Contract; (iii) investment consulting fees and related costs;
(iv) expenses of organizing the Company and the Fund; (v) expenses of preparing
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 and supplements thereto, 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 or the Fund; (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) All general expenses of the Company and joint expenses of the Funds
shall be allocated among each Fund on a basis deemed fair and equitable by
Adviser, subject to the Board's supervision.
(d) Adviser will assume the cost of any compensation for services
provided to the Company received by the officers of the Company and by the
Trustees of the Company who are not Independent Trustees.
(e) The payment or assumption by Adviser of any expense of the Company
or any Fund that Adviser is not required by this Contract to pay or assume shall
not obligate Adviser to pay or assume the same or any similar expense of the
Company or any Fund on any subsequent occasion.
4
<PAGE> 5
8. Compensation.
(a) For the services provided to a Fund under this Contract, the
Company shall pay the Adviser an annual fee, payable monthly, based upon the
average daily net assets of such Fund as forth in Appendix A attached hereto.
Such compensation shall be paid solely from the assets of such Fund.
(b) For the services provided under this Contract, each Fund as
hereafter may be established will pay to Adviser a fee in an amount to be agreed
upon in a written Appendix to this Contract executed by the Company on behalf of
such Fund and by Adviser.
(c) The fee shall be computed daily and paid monthly to 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.
9. Limitation of Liability of Adviser and Indemnification. Adviser shall not be
liable and each Fund shall indemnify Adviser and its directors, officers and
employees, 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 Adviser in the
performance by Adviser of its duties or from reckless disregard by Adviser of
its obligations and duties under this Contract. Any person, even though also an
officer, partner, employee, or agent of Adviser, who may be or become an
officer, Trustee, 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 Adviser even though paid by it.
10. 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.
5
<PAGE> 6
(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 Adviser or by 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.
11. Amendment of this Contract. 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.
12. 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.
13. License Agreement. The Company shall have the non-exclusive right to use
the name "AIM" to designate any current or future series of shares only so long
as A I M Advisors, Inc. serves as investment manager or adviser to the Company
with respect to such series of shares.
14. Limitation of Shareholder Liability. It is expressly agreed that the
obligations of the Company hereunder shall not be binding upon any of the
Trustees, shareholders, nominees, officers, agents or employees of the Company
personally, but shall only bind the assets and property of the Funds, as
provided in the Company's Agreement and Declaration of Trust. The execution and
delivery of this Contract have been authorized by the Trustees of the Company
and shareholders of the Funds, and this Contract has been executed and delivered
by an authorized officer of the Company acting as such; neither such
authorization by such Trustees and shareholders nor such execution and delivery
by such officer shall be deemed to have been made by any of them individually or
to impose any liability on any of them personally, but shall bind only the
assets and property of the Funds, as provided in the Company's Agreement and
Declaration of Trust.
6
<PAGE> 7
15. Miscellaneous. The captions in this Contract are included for convenience
of reference only and in no way define or limit 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.
Attest: AIM GROWTH SERIES
By: By:
-------------------------- -------------------------------
Name: Name:
Title: Title:
Attest: A I M ADVISORS, INC.
By: By:
-------------------------- -------------------------------
Name: Name:
Title: Title:
7
<PAGE> 8
APPENDIX A
TO
AMENDED AND RESTATED
INVESTMENT MANAGEMENT AND ADMINISTRATION CONTRACT
OF
AIM GROWTH SERIES
The Company shall pay the Adviser, out of the assets of a Fund, as full
compensation for all services rendered and all facilities furnished hereunder, a
management fee for such Fund set forth below. Such fee shall be calculated by
applying the following annual rates to the average daily net assets of such Fund
for the calendar year computed in the manner used for the determination of the
net asset value of shares of such Fund.
AIM EUROPE GROWTH FUND, AIM JAPAN GROWTH FUND,
AIM NEW PACIFIC GROWTH FUND
<TABLE>
<CAPTION>
NET ASSETS ANNUAL RATE
- ---------- -----------
<S> <C>
First $ 500 million.................................................. .975%
Next $ 500 million................................................... .95%
Next $ 500 million................................................... .925%
On amounts thereafter................................................ .90%
</TABLE>
AIM MID CAP EQUITY FUND
<TABLE>
<CAPTION>
NET ASSETS ANNUAL RATE
- ---------- -----------
<S> <C>
First $ 500 million.................................................. .725%
Next $ 500 million................................................... .70%
Next $ 500 million................................................... .675%
On amounts thereafter................................................ .65%
</TABLE>
8
<PAGE> 1
EXHIBIT d(6)
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: /s/ NANCY L. MARTIN By: /s/ ROBERT H. GRAHAM
----------------------- ------------------------------
Name: Robert H. Graham
Title: President
INVESCO (NY), INC.
Attest: /s/ ILLEGIBLE By: /s/ LUIS AGUILAR
----------------------- ------------------------------
Name: LUIS AGUILAR
Title: Vice President
<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(7)
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
1
<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
2
<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.
3
<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.
4
<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.
5
<PAGE> 6
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: /s/ ROBERT H. GRAHAM
---------------------------- ------------------------------
Name: Robert H. Graham
Title: President
INVESCO ASSET MANAGEMENT LIMITED
Attest: By:
---------------------------- ------------------------------
Name:
Title:
<PAGE> 7
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>
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(8)
AIM GROWTH SERIES
AMENDED AND RESTATED
SUB-ADVISORY CONTRACT
BETWEEN
A I M ADVISORS, INC.
AND
INVESCO ASSET MANAGEMENT LIMITED
Contract made as of February 12, 1999, 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 a "Fund" and
collectively, the "Funds"), each Fund being a series of the Company's shares of
beneficial interest; and
WHEREAS Adviser previously retained Sub-Adviser as investment
sub-adviser in order to furnish certain advisory services to the Funds, and
Adviser and Sub-Adviser entered into a Sub-Advisory Contract dated as of
December 14, 1998 with respect to the Funds ("Sub-Advisory Contract); and
WHEREAS Adviser and Sub-Adviser desire to amend and restate the
Sub-Advisory Contract to remove AIM Worldwide Growth Fund and AIM International
Growth Fund from the list of Funds since each ceased operations as of February
12, 1999;
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.
1
<PAGE> 2
(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 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.
2
<PAGE> 3
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; (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.
3
<PAGE> 4
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.
(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.
4
<PAGE> 5
(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.
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.
5
<PAGE> 6
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: /s/ P. MICHELLE GRACE By: /s/ ROBERT H. GRAHAM
---------------------------- ------------------------------
Name: Robert H. Graham
Title: President
INVESCO ASSET MANAGEMENT LIMITED
Attest: /s/ ILLEGIBLE By: /s/ ILLEGIBLE
---------------------------- ------------------------------
Name: Illegible
Title: Director
<PAGE> 7
APPENDIX A
TO
AIM GROWTH SERIES
AMENDED AND RESTATED
SUB-ADVISORY CONTRACT
BETWEEN
A I M ADVISORS, INC.
AND
INVESCO ASSET MANAGEMENT LIMITED
AIM Europe 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(9)
AIM GROWTH SERIES
SUB-ADVISORY CONTRACT
BETWEEN
A I M ADVISORS, INC.
AND
INVESCO ASSET MANAGEMENT (JAPAN) LIMITED
Contract made as of April 1, 1999, between A I M Advisors, Inc., a
Delaware corporation ("Adviser"), and INVESCO Asset Management (Japan) Limited,
a corporation organized under the laws of Japan ("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 Japan Growth Fund, such 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 Fund, 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 the 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 the 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 the 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 Fund or provide the Fund, 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 responsibility of the
1
<PAGE> 2
Adviser and the Sub-Adviser to the Fund and their other clients and that the
total commissions or spreads paid by the 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 Fund, 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, the 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 the 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; (iii) investment consulting fees
2
<PAGE> 3
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 the 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 the 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 the 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.
3
<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 the
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 the 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 the Fund.
(c) Notwithstanding the foregoing, with respect to the 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.
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
4
<PAGE> 5
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.
5
<PAGE> 6
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: Robert H. Graham
Title: President
INVESCO ASSET MANAGEMENT (JAPAN) LIMITED
Attest: By:
------------------------- --------------------------------------
Name:
Title:
6
<PAGE> 7
APPENDIX A
TO
AIM GROWTH SERIES
SUB-ADVISORY CONTRACT
BETWEEN
A I M ADVISORS, INC.
AND
INVESCO ASSET MANAGEMENT (JAPAN) LIMITED
AIM JAPAN 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>
7
<PAGE> 1
EXHIBIT d(10)
AIM GROWTH SERIES
SUB-ADVISORY CONTRACT
BETWEEN
A I M ADVISORS, INC.
AND
INVESCO ASIA LIMITED
Contract made as of April 1, 1999, between A I M Advisors, Inc., a
Delaware corporation ("Adviser"), and INVESCO Asia Limited, a corporation
organized under the laws of Hong Kong ("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, such
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 Fund, 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 the 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 the 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 the 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 Fund or provide the Fund, 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 responsibility of the
1
<PAGE> 2
Adviser and the Sub-Adviser to the Fund and their other clients and that the
total commissions or spreads paid by the 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 Fund, 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, the 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 the 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; (iii) investment consulting fees
2
<PAGE> 3
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 the 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 the 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 the 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.
3
<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 the
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 the 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 the Fund.
(c) Notwithstanding the foregoing, with respect to the 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.
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
4
<PAGE> 5
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.
5
<PAGE> 6
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: Robert H. Graham
Title: President
INVESCO ASIA LIMITED
Attest: By:
------------------------- --------------------------------------
Name:
Title:
6
<PAGE> 7
APPENDIX A
TO
AIM GROWTH SERIES
SUB-ADVISORY CONTRACT
BETWEEN
A I M ADVISORS, INC.
AND
INVESCO ASIA LIMITED
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>
7
<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 3rd day of May, 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: /s/ ROBERT H. GRAHAM
/s/ OFELIA M. MAYO -----------------------------------
- ------------------------------ Name: Robert H. Graham
Name: Offelia M. Mayo Title: President
Title: Assistant Secretary
A I M DISTRIBUTORS, INC.
Attest:
By: /s/ MICHAEL J. CEMO
/s/ LISA A. MOSS -----------------------------------
- ------------------------------ Name: Michael J. Cemo
Name: Lisa A. Moss Title: President
Title: Assistant Secretary
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)
AMENDMENT NO. 1
DISTRIBUTION AGREEMENT
BETWEEN
AIM GROWTH SERIES
AND
A I M DISTRIBUTORS, INC.
CLASS B SHARES
The Distribution Agreement (the "Agreement"), dated May 29, 1998, by
and between AIM Growth Series, a Delaware business trust, and A I M
Distributors, Inc., a Delaware corporation, is hereby amended as follows:
Schedule A of the Agreement is hereby deleted in its entirety and
replaced with the following:
"SCHEDULE A
TO
DISTRIBUTION AGREEMENT
OF
AIM GROWTH SERIES
CLASS B 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"
All other terms and provisions of the Agreement not amended herein
shall remain in full force and effect.
Date: March 18, 1999
AIM GROWTH SERIES
Attest: /s/ KATHLEEN J. PFLUEGER By: /s/ ROBERT H. GRAHAM
------------------------------- -------------------------------
Assistant Secretary President
(SEAL)
A I M DISTRIBUTORS, INC.
Attest: /s/ P. MICHELLE GRACE By: /s/ MICHAEL J. CEMO
------------------------------- -------------------------------
Assistant Secretary President
(SEAL)
<PAGE> 1
EXHIBIT e(6)
AMENDMENT NO. 1
DISTRIBUTION AGREEMENT
BETWEEN
AIM GROWTH SERIES
AND
A I M DISTRIBUTORS, INC.
ADVISOR CLASS SHARES
The Distribution Agreement (the "Agreement"), dated May 29, 1998, by
and between AIM Growth Series, a Delaware business trust, and A I M
Distributors, Inc., a Delaware corporation, is hereby amended as follows:
Appendix A of the Agreement is hereby deleted in its entirety and
replaced with the following:
"APPENDIX A
TO
DISTRIBUTION AGREEMENT
OF
AIM GROWTH SERIES
ADVISOR CLASS 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"
All other terms and provisions of the Agreement not amended herein
shall remain in full force and effect.
Date: March 18, 1999
AIM GROWTH SERIES
Attest: /s/ KATHLEEN J. PFLUEGER By: /s/ ROBERT H. GRAHAM
------------------------------- -------------------------------
Assistant Secretary President
(SEAL)
A I M DISTRIBUTORS, INC.
Attest: /s/ P. MICHELLE GRACE By: /s/ MICHAEL J. CEMO
------------------------------- -------------------------------
Assistant Secretary President
(SEAL)
<PAGE> 1
EXHIBIT g(1)(d)
[G.T. GLOBAL MUTUAL FUNDS LETTERHEAD]
VIA FEDERAL EXPRESS
Sharon Baker Morin, Esq.
State Street Bank and Trust Company
1776 Heritage Drive
North Quincy, Massachusetts 02171-2197
Dear Sharon:
Pursuant to Section 17 of the Custodian Contract between State Street Bank
and Trust Company ("State Street") and G.T. Global Growth Series, dated as of
September 15, 1988 we request that G.T. Global: America Small Cap Growth Fund
("Small Cap") and G.T. Global: America Value Fund ("Value") be added as
Portfolios governed by that Custodian Contract. The addition of Small Cap and
Value is effective as of August 1, 1995. Please indicate State Street's
acceptance of this request by having a duly authorized officer of State Street
sign in the space indicated below.
Sincerely,
G.T. Global Growth Series
/s/ PETER R. GUARINO
----------------------------------
Name Peter R. Guarino
Assistant Secretary
----------------------------------
Title
Accepted by State Street
Bank and Trust Company
/s/ [ILLEGIBLE]
- -------------------------------
Name
Executive Vice President
- -------------------------------
Title
<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: May 3, 1999
AIM GROWTH SERIES
Attest: /s/ OFELIA M. MAYO By: /s/ ROBERT H. GRAHAM
----------------------------- -----------------------------------
Assistant Secretary Robert H. Graham
President
(SEAL)
A I M FUND SERVICES, INC.
Attest: /s/ LISA A. MOSS By: /s/ JOHN CALDWELL
----------------------------- ----------------------------------
Assistant Secretary John Caldwell
President
(SEAL)
<PAGE> 1
EXHIBIT i(1)
-------------------------------
KIRKPATRICK & LOCKHART LLP
-------------------------------
1800 MASSACHUSETTS AVENUE, NW
2nd FLOOR
WASHINGTON, DC 20036-1800
TELEPHONE: (202) 778-9000
FACSIMILE: (202) 778-9100
www.kl.com
ARTHUR J. BROWN
(202) 778-9046
[email protected]
April 13, 1999
AIM Growth Series
11 Greenway Plaza
Suite 100
Houston, Texas 77046
Ladies and Gentlemen:
We have acted as counsel to AIM Growth Series, a Delaware business
trust (the "Trust"), in connection with Post-Effective Amendment No. 47 ("PEA")
to the Trust's Registration Statement on Form N-1A (File No. 2-57526) relating
to the issuance and sale of Shares of the Trust. You have requested our opinion
with respect to the matters set forth below.
In this opinion letter, the term "Shares" refers to the Class C
shares of beneficial interest in each series of the Trust listed in Schedule A
attached to this opinion letter (each, a "Portfolio"), that may be issued
during the time that the PEA is effective and has not been superseded by
another post-effective amendment.
In connection with rendering the opinions set forth below, we have
examined copies, believed by us to be genuine, of the Trust's Agreement and
Declaration of Trust dated as of May 7, 1998, and Bylaws, and any amendments
thereto, and such other documents relating to its organization and operation as
we have deemed relevant to our opinions, as set forth herein. With respect to
matters governed by the laws of the State of Delaware (excluding the securities
laws thereof), we have relied solely on the opinion letter of Potter Anderson &
Corroon LLP, special Delaware counsel to the Trust, an executed copy of which
is appended hereto as Exhibit A.
The opinions set forth in this letter are limited to the laws and
facts in existence on the date hereof, and are further limited to the laws
(other than laws relating to choice of law) of the State of Delaware that in
our experience are normally applicable to the issuance of shares of beneficial
interest by business trusts and to the Securities Act of 1933, as amended (the
"1933 Act"), the Investment Company Act of 1940, as amended (the "1940 Act"),
and the rules and regulations of the Securities and Exchange Commission (the
"SEC") thereunder.
<PAGE> 2
- -------------------------
KIRPATRICK & lOCKHART LLP
- -------------------------
AIM Growth Series
April 13, 1999
Page 2
Based on and subject to the foregoing, and the additional
qualifications and other matters set forth below, it is our opinion that as of
the date hereof the Shares, when sold in accordance with the terms contemplated
by the PEA, including receipt by the Trust of full payment for the Shares and
compliance with the 1933 Act and 1940 Act, will have been validly issued and
will be fully paid and non-assessable.
We are furnishing this opinion letter to you solely in connection
with the issuance of the Shares. You may not rely on this opinion letter in any
other connection, and it may not be furnished to or relied upon by any other
person for any purpose, without specific prior written consent.
The foregoing opinions are rendered as of the date of this letter,
except as otherwise indicated. We assume no obligation to update or supplement
our opinions to reflect any changes of law or fact that may occur.
We hereby consent to this opinion letter accompanying the PEA when
it is filed with the SEC and to the reference to our firm in the statements of
additional information that are being filed as part of such PEA.
Very truly yours,
KIRKPATRICK & LOCKHART LLP
By: /s/ Arthur J. Brown
-----------------------------
Arthur J. Brown
<PAGE> 3
- -------------------------
KIRPATRICK & lOCKHART LLP
- -------------------------
SCHEDULE A
AIM GROWTH SERIES
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
<PAGE> 1
EXHIBIT i(2)
[POTTER ANDERSON & CORROON LLP LETTERHEAD]
April 13, 1999
AIM Growth Series
11 Greenway Plaza
Suite 100
Houston, Texas 77046
Re: Issuance of Class C Shares
Ladies and Gentlemen:
We have acted as special Delaware counsel for AIM Growth Series, a
Delaware business trust (the "Trust"), in connection with the proposed issuance
of Class C shares (collectively, the "Shares") in each series of the Trust
referred to in Schedule A attached hereto (each, a "Portfolio"). Initially
capitalized terms used herein and not otherwise defined are used herein as
defined in that certain Agreement and Declaration of Trust dated as of May 7,
1998, entered into among William J. Guilfoyle, C. Derek Anderson, Frank S.
Bayley, Arthur C. Patterson, and Ruth H. Quigley, as Trustees, and the
Shareholders of the Trust (the "Original Declaration").
For purposes of giving the opinions hereinafter set forth, we have
examined only the following documents and have conducted no independent factual
investigation of our own:
1. The Certificate of Trust for the Trust, dated as of May 7, 1998,
as filed in the Office of the Secretary of State of the State of Delaware (the
"Secretary of State") on May 7, 1998;
2. The Original Declaration;
<PAGE> 2
AIM Growth Series
April 13, 1999
Page 2
3. The First Amendment to Agreement and Declaration of Trust of the
Trust entered into as of September 8, 1998 (the "First Amendment");
4. The Second Amendment to Agreement and Declaration of Trust of
the Trust entered into as of December 10, 1998 (the "Second Amendment");
5. The Third Amendment to Agreement and Declaration of Trust of the
Trust entered into as of February 16, 1999 (the "Third Amendment," together
with the First Amendment, the Second Amendment and the Original Declaration, the
"Declaration");
6. Schedule A to the Declaration as in effect on the date hereof;
7. The By-laws of the Trust;
8. Resolutions of the Trustees approving the issuance of the
Shares; and
9. A Certificate of Good Standing for the Trust, dated April 13,
1999, obtained from the Secretary of State.
As to certain facts material to the opinions expressed herein,
we have relied upon the representations and warranties contained in the
documents examined by us.
Based upon the foregoing, and upon an examination of such
questions of law of the State of Delaware as we have considered necessary or
appropriate, and subject to the assumptions, qualifications, limitations and
exceptions set forth herein, we are of the opinion that:
1. The Trust has been duly created and is validly existing in good
standing as a business trust under the Delaware Act.
2. Each Portfolio has been duly created and is validly existing as
a series under Section 3804 of the Delaware Act.
3. The Declaration constitutes the legal, valid and binding
obligation of the Trustees, enforceable against the Trustees, in accordance
with its terms.
4. Subject to the other qualifications set forth herein, the Shares
have been duly authorized and when the Shares shall have been issued in
accordance with the Declaration, the Resolutions, and the By-laws, such Shares
will be validly issued, fully paid, and non-assessable undivided beneficial
interests in the assets of the Portfolios of which they form a part, as the
case may be.
5. When and if the actions referred to in paragraph 4 have
occurred, the holders of the Shares as beneficial owners of the Shares will be
entitled to the same limitation of
<PAGE> 3
AIM Growth Series
April 13, 1999
Page 3
personal liability extended to stockholders of private corporations for profit
organized under the General Corporation Law of the State of Delaware.
In addition to the assumptions and qualifications set forth
above, all of the foregoing opinions contained herein are subject to the
following assumptions, qualifications, limitations and exceptions:
a. The foregoing opinions are limited to the laws of
the State of Delaware presently in effect, excluding the securities laws
thereof. We have not considered and express no opinion on the laws of any
other jurisdiction, including, without limitation, federal laws and rules and
regulations relating thereto.
b. We have assumed that the issuance of Shares does
not contravene (i) any contractual restriction binding on the Trust or the
Portfolios thereof, or (ii) any law, rule or regulation applicable to the
Trust or such Portfolio, as the case may be (exclusive of any Delaware law,
rule or regulation). In addition, we have assumed the legal capacity of any
natural persons who are parties to any of the documents examined by us.
c. The foregoing opinion regarding the enforceability
of the Declaration is subject to (i) applicable bankruptcy, insolvency,
moratorium, fraudulent conveyance, fraudulent transfer and similar laws
relating to or affecting creditors rights generally including, without
limitation, the Delaware Uniform Fraudulent Conveyance Act, the provisions of
the United States Bankruptcy Code and the Delaware insolvency statutes, (ii)
principles of equity including, without limitation, concepts of materiality,
good faith, fair dealing, conscionability and reasonableness (regardless of
whether such enforceability is considered in a proceeding in equity or at law),
(iii) applicable law relating to fiduciary duties, and (iv) public policy
limitations with respect to exculpation, contribution and indemnity provisions.
d. We have assumed that all signatures on documents
examined by us are genuine, that all documents submitted to us as originals
are authentic and that all documents submitted to us as copies conform with
the originals.
e. We have assumed that the Declaration, the By-laws,
and the Resolutions, collectively, constitute the entire agreement with
respect to the subject matter thereof, including (i) the terms applicable to
the Shares, and (ii) the power and authority of the Trustees.
f. We have assumed that no event set forth in
Section 9.3(a) of the Declaration has occurred with respect to the Trust or
any Portfolio.
g. Notwithstanding any provision in the Declaration
to the contrary, we note that upon the occurrence of an event set forth in
Section 9.3(a) thereof, with respect to the Trust or a Portfolio, as the case
may be, the Trust or such Portfolio, as applicable, cannot make any payments
or distributions to the Shareholders thereof until their respective creditors'
claims are either paid in full or reasonable provision for payment thereof
has been made.
<PAGE> 4
AIM Growth Series
April 13, 1999
Page 4
h. With respect to the enforceability of any provision
of the Declaration wherein the parties provide for the appointment of a
liquidator, we note that upon the application of any beneficial owner, the
Delaware Court of Chancery has the power, upon cause shown, to wind up the
affairs of a Delaware business trust or series thereof and in connection
therewith to appoint a liquidating trustee other than the one agreed to by the
beneficial owners thereof.
i. We have assumed that none of the By-laws or the
Resolutions has been amended, modified, or revoked in any manner from the date
of its adoption, and that each of the By-laws and the Resolutions remains in
full force and effect on the date hereof.
j. We have assumed that the Trust maintains separate
and distinct records for each Portfolio and that the Trust and the Trustees
hold and account for the assets belonging to each such Portfolio separately
from the other assets of any other Portfolio and the assets of the Trust
generally, if any.
k. We note that we do not assume responsibility for
the contents of any registration statement pursuant to which the shares have
been, are, or may be sold.
This opinion is rendered solely for your benefit in connection
with the matters set forth herein and, without our prior written consent, may
not be furnished (except that it may be filed as part of the Trust's
Registration Statement on Form N-1A and may be otherwise furnished to any
federal, state or local regulatory agencies or regulators having appropriate
jurisdiction and entitled to such disclosure) or quoted to, or relied upon by,
any other person or entity for any purpose. Kirkpatrick & Lockhart LLP may rely
on this opinion with respect to the matters set forth herein in connection
with its opinion being delivered on even date herewith.
Very truly yours,
/s/ POTTER ANDERSON & CORROON LLP
<PAGE> 5
SCHEDULE A
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
<PAGE> 1
EXHIBIT j
CONSENT OF INDEPENDENT ACCOUNTANTS
To the Trustees of AIM Growth Series:
RE: AIM Basic Value Fund (formerly AIM America Value Fund),
AIM Europe Growth Fund,
AIM Japan Growth Fund,
AIM Mid Cap Equity Fund (formerly AIM Mid Cap Growth Fund),
AIM New Pacific Growth Fund and
AIM Small Cap Growth Fund (formerly AIM Small Cap Equity Fund).
We consent to the inclusion in Post-Effective Amendment No. 47 under the
Securities Act of 1933, as amended, and Amendment No. 43 under the Investment
Company Act of 1940, as amended, to the Registration Statement on Form N-1A, of
AIM Growth Series, of our reports dated February 19, 1999, on our audit of the
financial statements and financial highlights of the above referenced funds,
which reports are included in the Annual Report to Shareholders for the periods
stated therein and, which are also included in this Registration Statement. We
also consent to the references to our Firm under the captions "Financial
Highlights" in the Prospectuses and "Independent Accountants" in the Statement
of Additional Information.
/s/ PricewaterhouseCoopers LLP
PricewaterhouseCoopers LLP
Boston, Massachusetts
April 12, 1999
<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: /s/ OFELIA M. MAYO By: /s/ ROBERT H. GRAHAM
------------------------- --------------------------------
Assistant Secretary President
Effective as of May 3, 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)
AMENDMENT NO. 1
DISTRIBUTION PLAN
OF
AIM GROWTH SERIES
(CLASS B SHARES)
The Distribution Plan (the "Plan"), dated as of May 29, 1998, pursuant
to Rule 12b-1 of AIM Growth Series, a Delaware business trust, is hereby amended
as follows:
Schedule A of the Plan is hereby deleted in its entirety and replaced
with the following:
"SCHEDULE A
TO
DISTRIBUTION PLAN
OF
AIM GROWTH SERIES
(CLASS B SHARES)
<TABLE>
<CAPTION>
Maximum Maximum Maximum
Asset-Based Service Fee Aggregate Fee
Fund Sales Charge
<S> <C> <C> <C>
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%
AIM Small Cap Growth Fund 0.75% 0.25% 1.00%"
</TABLE>
All other terms and provisions of the Plan not amended herein shall remain
in full force and effect.
Dated: March 18, 1999
AIM GROWTH SERIES
(on behalf of its Class B Shares)
Attest: /s/ KATHLEEN J. PFLUEGER By: /s/ ROBERT H. GRAHAM
------------------------------- -------------------------------
Assistant Secretary President
<TABLE> <S> <C>
<ARTICLE> 6
<LEGEND>
THIS LEGEND CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE FUND'S
ANNUAL FINANCIAL STATEMENTS AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO
SUCH FINANCIAL STATEMENTS.
</LEGEND>
<CIK> 0000202032
<NAME> AIM GROWTH SERIES
<SERIES>
<NUMBER> 081
<NAME> AIM BASIC VALUE FUND - CLASS A
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> JAN-01-1998
<PERIOD-END> DEC-31-1998
<INVESTMENTS-AT-COST> 22,890
<INVESTMENTS-AT-VALUE> 26,408
<RECEIVABLES> 1,392
<ASSETS-OTHER> 37
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 27,837
<PAYABLE-FOR-SECURITIES> 37
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 282
<TOTAL-LIABILITIES> 319
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 24,031
<SHARES-COMMON-STOCK> 500
<SHARES-COMMON-PRIOR> 445
<ACCUMULATED-NII-CURRENT> (3)
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 0
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 3,490
<NET-ASSETS> 27,518
<DIVIDEND-INCOME> 502
<INTEREST-INCOME> 54
<OTHER-INCOME> 2
<EXPENSES-NET> (608)
<NET-INVESTMENT-INCOME> (50)
<REALIZED-GAINS-CURRENT> 0
<APPREC-INCREASE-CURRENT> 1,562
<NET-CHANGE-FROM-OPS> 1,512
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 0
<DISTRIBUTIONS-OF-GAINS> (141)
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 473
<NUMBER-OF-SHARES-REDEEMED> (425)
<SHARES-REINVESTED> 8
<NET-CHANGE-IN-ASSETS> 2,694
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 203
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 710
<AVERAGE-NET-ASSETS> 27,549
<PER-SHARE-NAV-BEGIN> 17.25
<PER-SHARE-NII> 0.04
<PER-SHARE-GAIN-APPREC> 1.16
<PER-SHARE-DIVIDEND> 0.00
<PER-SHARE-DISTRIBUTIONS> (0.32)
<RETURNS-OF-CAPITAL> 0.00
<PER-SHARE-NAV-END> 18.13
<EXPENSE-RATIO> 0.25
<AVG-DEBT-OUTSTANDING> 88
<AVG-DEBT-PER-SHARE> 0.055
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<LEGEND>
THIS LEGEND CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE FUND'S
ANNUAL FINANCIAL STATEMENTS AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO
SUCH FINANCIAL STATEMENTS.
</LEGEND>
<CIK> 0000202032
<NAME> AIM GROWTH SERIES
<SERIES>
<NUMBER> 082
<NAME> AIM BASIC VALUE FUND - CLASS B
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> JAN-01-1998
<PERIOD-END> DEC-31-1998
<INVESTMENTS-AT-COST> 22,890
<INVESTMENTS-AT-VALUE> 26,408
<RECEIVABLES> 1,392
<ASSETS-OTHER> 37
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 27,837
<PAYABLE-FOR-SECURITIES> 37
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 282
<TOTAL-LIABILITIES> 319
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 24,031
<SHARES-COMMON-STOCK> 978
<SHARES-COMMON-PRIOR> 981
<ACCUMULATED-NII-CURRENT> (3)
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 0
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 3,490
<NET-ASSETS> 27,518
<DIVIDEND-INCOME> 502
<INTEREST-INCOME> 54
<OTHER-INCOME> 2
<EXPENSES-NET> (608)
<NET-INVESTMENT-INCOME> (50)
<REALIZED-GAINS-CURRENT> 0
<APPREC-INCREASE-CURRENT> 1,562
<NET-CHANGE-FROM-OPS> 1,512
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 0
<DISTRIBUTIONS-OF-GAINS> (314)
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 588
<NUMBER-OF-SHARES-REDEEMED> (607)
<SHARES-REINVESTED> 17
<NET-CHANGE-IN-ASSETS> 2,694
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 203
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 710
<AVERAGE-NET-ASSETS> 27,549
<PER-SHARE-NAV-BEGIN> 17.04
<PER-SHARE-NII> (0.08)
<PER-SHARE-GAIN-APPREC> 1.15
<PER-SHARE-DIVIDEND> 0.00
<PER-SHARE-DISTRIBUTIONS> (0.32)
<RETURNS-OF-CAPITAL> 0.00
<PER-SHARE-NAV-END> 17.79
<EXPENSE-RATIO> (0.40)
<AVG-DEBT-OUTSTANDING> 88
<AVG-DEBT-PER-SHARE> 0.055
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<LEGEND>
THIS LEGEND CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE FUND'S
ANNUAL FINANCIAL STATEMENTS AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO
SUCH FINANCIAL STATMENTS.
</LEGEND>
<CIK> 0000202032
<NAME> AIM GROWTH SERIES
<SERIES>
<NUMBER> 083
<NAME> AIM BASIC VALUE FIND - ADVISOR CLASS
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> JAN-01-1998
<PERIOD-END> DEC-31-1998
<INVESTMENTS-AT-COST> 22,890
<INVESTMENTS-AT-VALUE> 26,408
<RECEIVABLES> 1,392
<ASSETS-OTHER> 37
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 27,837
<PAYABLE-FOR-SECURITIES> 37
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 282
<TOTAL-LIABILITIES> 319
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 24,031
<SHARES-COMMON-STOCK> 57
<SHARES-COMMON-PRIOR> 25
<ACCUMULATED-NII-CURRENT> (3)
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 0
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 3,490
<NET-ASSETS> 27,518
<DIVIDEND-INCOME> 502
<INTEREST-INCOME> 54
<OTHER-INCOME> 2
<EXPENSES-NET> (608)
<NET-INVESTMENT-INCOME> (50)
<REALIZED-GAINS-CURRENT> 0
<APPREC-INCREASE-CURRENT> 1,562
<NET-CHANGE-FROM-OPS> 1,512
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 0
<DISTRIBUTIONS-OF-GAINS> (19)
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 42
<NUMBER-OF-SHARES-REDEEMED> (11)
<SHARES-REINVESTED> 1
<NET-CHANGE-IN-ASSETS> 2,694
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 203
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 710
<AVERAGE-NET-ASSETS> 27,549
<PER-SHARE-NAV-BEGIN> 17.37
<PER-SHARE-NII> 0.07
<PER-SHARE-GAIN-APPREC> 1.21
<PER-SHARE-DIVIDEND> 0.00
<PER-SHARE-DISTRIBUTIONS> (0.32)
<RETURNS-OF-CAPITAL> 0.00
<PER-SHARE-NAV-END> 18.33
<EXPENSE-RATIO> 0.53
<AVG-DEBT-OUTSTANDING> 88
<AVG-DEBT-PER-SHARE> 0.055
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<LEGEND>
THIS LEGEND CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE FUND'S
ANNUAL FINANCIAL STATEMENTS AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO
SUCH FINANCIAL STATEMENTS.
</LEGEND>
<CIK> 0000202032
<NAME> AIM GROWTH SERIES
<SERIES>
<NUMBER> 021
<NAME> AIM EUROPE GROWTH FUND - CLASS A
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> JAN-01-1998
<PERIOD-END> DEC-31-1998
<INVESTMENTS-AT-COST> 456,119
<INVESTMENTS-AT-VALUE> 521,652
<RECEIVABLES> 7,424
<ASSETS-OTHER> 574
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 529,650
<PAYABLE-FOR-SECURITIES> 573
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 12,425
<TOTAL-LIABILITIES> 12,998
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 364,202
<SHARES-COMMON-STOCK> 26,485
<SHARES-COMMON-PRIOR> 28,421
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 86,905
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 65,545
<NET-ASSETS> 516,652
<DIVIDEND-INCOME> 9,217
<INTEREST-INCOME> 782
<OTHER-INCOME> 563
<EXPENSES-NET> (12,413)
<NET-INVESTMENT-INCOME> (1,851)
<REALIZED-GAINS-CURRENT> 119,057
<APPREC-INCREASE-CURRENT> 6,407
<NET-CHANGE-FROM-OPS> 123,613
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 0
<DISTRIBUTIONS-OF-GAINS> (28,578)
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 284,179
<NUMBER-OF-SHARES-REDEEMED> (287,680)
<SHARES-REINVESTED> 1,565
<NET-CHANGE-IN-ASSETS> 25,398
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 5,643
<INTEREST-EXPENSE> 1,550
<GROSS-EXPENSE> 12,444
<AVERAGE-NET-ASSETS> 581,969
<PER-SHARE-NAV-BEGIN> 14.32
<PER-SHARE-NII> (0.03)
<PER-SHARE-GAIN-APPREC> 2.35
<PER-SHARE-DIVIDEND> 0.00
<PER-SHARE-DISTRIBUTIONS> (0.97)
<RETURNS-OF-CAPITAL> 0.00
<PER-SHARE-NAV-END> 15.67
<EXPENSE-RATIO> 1.75
<AVG-DEBT-OUTSTANDING> 24,253
<AVG-DEBT-PER-SHARE> 0.666
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<LEGEND>
THIS LEGEND CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE FUND'S
ANNUAL FINANCIAL STATEMENTS AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO
SUCH FINANCIAL STATEMENTS.
</LEGEND>
<CIK> 0000202032
<NAME> AIM GROWTH SERIES
<SERIES>
<NUMBER> 022
<NAME> AIM EUROPE GROWTH FUND - CLASS B
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> JAN-01-1998
<PERIOD-END> DEC-31-1998
<INVESTMENTS-AT-COST> 456,119
<INVESTMENTS-AT-VALUE> 521,652
<RECEIVABLES> 7,424
<ASSETS-OTHER> 574
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 529,650
<PAYABLE-FOR-SECURITIES> 573
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 12,425
<TOTAL-LIABILITIES> 12,998
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 364,202
<SHARES-COMMON-STOCK> 6,551
<SHARES-COMMON-PRIOR> 5,764
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 86,905
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 65,545
<NET-ASSETS> 516,652
<DIVIDEND-INCOME> 9,217
<INTEREST-INCOME> 782
<OTHER-INCOME> 563
<EXPENSES-NET> (12,413)
<NET-INVESTMENT-INCOME> (1,851)
<REALIZED-GAINS-CURRENT> 119,057
<APPREC-INCREASE-CURRENT> 6,407
<NET-CHANGE-FROM-OPS> 123,613
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 0
<DISTRIBUTIONS-OF-GAINS> (6,161)
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 29,683
<NUMBER-OF-SHARES-REDEEMED> (29,266)
<SHARES-REINVESTED> 370
<NET-CHANGE-IN-ASSETS> 25,398
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 5,643
<INTEREST-EXPENSE> 1,550
<GROSS-EXPENSE> 12,444
<AVERAGE-NET-ASSETS> 581,969
<PER-SHARE-NAV-BEGIN> 14.06
<PER-SHARE-NII> (0.14)
<PER-SHARE-GAIN-APPREC> 2.31
<PER-SHARE-DIVIDEND> 0.00
<PER-SHARE-DISTRIBUTIONS> (0.97)
<RETURNS-OF-CAPITAL> 0.00
<PER-SHARE-NAV-END> 15.26
<EXPENSE-RATIO> 2.40
<AVG-DEBT-OUTSTANDING> 24,253
<AVG-DEBT-PER-SHARE> 0.666
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<LEGEND>
THIS LEGEND CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE FUND'S
ANNUAL FINANCIAL STATEMENTS AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO
SUCH FINANCIAL STATEMENTS.
</LEGEND>
<CIK> 0000202032
<NAME> AIM GROWTH SERIES
<SERIES>
<NUMBER> 023
<NAME> AIM EUROPE GROWTH FUND - ADVISOR CLASS
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> JAN-01-1998
<PERIOD-END> DEC-31-1998
<INVESTMENTS-AT-COST> 456,119
<INVESTMENTS-AT-VALUE> 521,652
<RECEIVABLES> 7,424
<ASSETS-OTHER> 574
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 529,650
<PAYABLE-FOR-SECURITIES> 573
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 12,425
<TOTAL-LIABILITIES> 12,998
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 364,202
<SHARES-COMMON-STOCK> 104
<SHARES-COMMON-PRIOR> 225
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 86,905
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 65,545
<NET-ASSETS> 516,652
<DIVIDEND-INCOME> 9,217
<INTEREST-INCOME> 782
<OTHER-INCOME> 563
<EXPENSES-NET> (12,413)
<NET-INVESTMENT-INCOME> (1,851)
<REALIZED-GAINS-CURRENT> 119,057
<APPREC-INCREASE-CURRENT> 6,407
<NET-CHANGE-FROM-OPS> 123,613
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 0
<DISTRIBUTIONS-OF-GAINS> (89)
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 6,484
<NUMBER-OF-SHARES-REDEEMED> (6,611)
<SHARES-REINVESTED> 6
<NET-CHANGE-IN-ASSETS> 25,398
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 5,643
<INTEREST-EXPENSE> 1,550
<GROSS-EXPENSE> 12,444
<AVERAGE-NET-ASSETS> 581,969
<PER-SHARE-NAV-BEGIN> 14.41
<PER-SHARE-NII> 0.02
<PER-SHARE-GAIN-APPREC> 2.36
<PER-SHARE-DIVIDEND> 0.00
<PER-SHARE-DISTRIBUTIONS> (0.97)
<RETURNS-OF-CAPITAL> 0.00
<PER-SHARE-NAV-END> 15.82
<EXPENSE-RATIO> 1.40
<AVG-DEBT-OUTSTANDING> 24,253
<AVG-DEBT-PER-SHARE> 0.666
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<LEGEND>
THIS LEGEND CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE FUND'S
ANNUAL FINANCIAL STATEMENTS AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO
SUCH FINANCIAL STATEMENTS.
</LEGEND>
<CIK> 0000202032
<NAME> AIM GROWTH SERIES
<SERIES>
<NUMBER> 041
<NAME> AIM JAPAN GROWTH FUND - CLASS A
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> JAN-01-1998
<PERIOD-END> DEC-31-1998
<INVESTMENTS-AT-COST> 64,112
<INVESTMENTS-AT-VALUE> 64,110
<RECEIVABLES> 2,784
<ASSETS-OTHER> 1
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 66,895
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 4,498
<TOTAL-LIABILITIES> 4,498
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 85,080
<SHARES-COMMON-STOCK> 4,227
<SHARES-COMMON-PRIOR> 4,973
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> (20,069)
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> (2,615)
<NET-ASSETS> 62,396
<DIVIDEND-INCOME> 491
<INTEREST-INCOME> 802
<OTHER-INCOME> 54
<EXPENSES-NET> (1,615)
<NET-INVESTMENT-INCOME> (268)
<REALIZED-GAINS-CURRENT> (14,774)
<APPREC-INCREASE-CURRENT> 16,254
<NET-CHANGE-FROM-OPS> 1,212
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 0
<DISTRIBUTIONS-OF-GAINS> (54)
<DISTRIBUTIONS-OTHER> (1)
<NUMBER-OF-SHARES-SOLD> 31,462
<NUMBER-OF-SHARES-REDEEMED> (32,214)
<SHARES-REINVESTED> 5
<NET-CHANGE-IN-ASSETS> (36,788)
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 740
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 1,894
<AVERAGE-NET-ASSETS> 77,151
<PER-SHARE-NAV-BEGIN> 8.96
<PER-SHARE-NII> (0.02)
<PER-SHARE-GAIN-APPREC> (0.03)
<PER-SHARE-DIVIDEND> 0.00
<PER-SHARE-DISTRIBUTIONS> (0.01)
<RETURNS-OF-CAPITAL> 0.00
<PER-SHARE-NAV-END> 8.90
<EXPENSE-RATIO> 1.96
<AVG-DEBT-OUTSTANDING> 48
<AVG-DEBT-PER-SHARE> 0.006
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<LEGEND>
THIS LEGEND CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE FUND'S
ANNUAL FINANCIAL STATEMENTS AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO
SUCH FINANCIAL STATEMENTS.
</LEGEND>
<CIK> 0000202032
<NAME> AIM GROWTH SERIES
<SERIES>
<NUMBER> 042
<NAME> AIM JAPAN GROWTH FUND - CLASS B
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> JAN-01-1998
<PERIOD-END> DEC-31-1998
<INVESTMENTS-AT-COST> 64,112
<INVESTMENTS-AT-VALUE> 64,110
<RECEIVABLES> 2,784
<ASSETS-OTHER> 1
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 66,895
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 4,498
<TOTAL-LIABILITIES> 4,498
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 85,080
<SHARES-COMMON-STOCK> 2,670
<SHARES-COMMON-PRIOR> 2,798
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> (20,069)
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> (2,615)
<NET-ASSETS> 62,396
<DIVIDEND-INCOME> 491
<INTEREST-INCOME> 802
<OTHER-INCOME> 54
<EXPENSES-NET> (1,615)
<NET-INVESTMENT-INCOME> (268)
<REALIZED-GAINS-CURRENT> (14,774)
<APPREC-INCREASE-CURRENT> 16,254
<NET-CHANGE-FROM-OPS> 1,212
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 0
<DISTRIBUTIONS-OF-GAINS> (31)
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 3,641
<NUMBER-OF-SHARES-REDEEMED> (3,773)
<SHARES-REINVESTED> 3
<NET-CHANGE-IN-ASSETS> (36,788)
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 740
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 1,894
<AVERAGE-NET-ASSETS> 77,151
<PER-SHARE-NAV-BEGIN> 8.67
<PER-SHARE-NII> (0.07)
<PER-SHARE-GAIN-APPREC> (0.04)
<PER-SHARE-DIVIDEND> 0.00
<PER-SHARE-DISTRIBUTIONS> (0.01)
<RETURNS-OF-CAPITAL> 0.00
<PER-SHARE-NAV-END> 8.55
<EXPENSE-RATIO> 2.61
<AVG-DEBT-OUTSTANDING> 48
<AVG-DEBT-PER-SHARE> 0.006
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<LEGEND>
THIS LEGEND CONTAINS SUMARY FINANCIAL INFORMATION EXTRACTED FROM THE FUND'S
ANNUAL FINANCIAL STATEMENTS AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO
SUCH FINANCIAL STATEMENTS.
</LEGEND>
<CIK> 0000202032
<NAME> AIM GROWTH SERIES
<SERIES>
<NUMBER> 043
<NAME> AIM JAPAN GROWTH FUND - ADVISOR CLASS
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> JAN-01-1998
<PERIOD-END> DEC-31-1998
<INVESTMENTS-AT-COST> 64,112
<INVESTMENTS-AT-VALUE> 64,110
<RECEIVABLES> 2,784
<ASSETS-OTHER> 1
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 66,895
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 4,498
<TOTAL-LIABILITIES> 4,498
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 85,080
<SHARES-COMMON-STOCK> 219
<SHARES-COMMON-PRIOR> 3,353
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> (20,069)
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> (2,615)
<NET-ASSETS> 62,396
<DIVIDEND-INCOME> 491
<INTEREST-INCOME> 802
<OTHER-INCOME> 54
<EXPENSES-NET> (1,615)
<NET-INVESTMENT-INCOME> (268)
<REALIZED-GAINS-CURRENT> (14,774)
<APPREC-INCREASE-CURRENT> 16,254
<NET-CHANGE-FROM-OPS> 1,212
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 0
<DISTRIBUTIONS-OF-GAINS> (2)
<DISTRIBUTIONS-OTHER> (0)
<NUMBER-OF-SHARES-SOLD> 1,662
<NUMBER-OF-SHARES-REDEEMED> (4,795)
<SHARES-REINVESTED> 0
<NET-CHANGE-IN-ASSETS> (36,788)
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 740
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 1,894
<AVERAGE-NET-ASSETS> 77,151
<PER-SHARE-NAV-BEGIN> 9.05
<PER-SHARE-NII> 0.01
<PER-SHARE-GAIN-APPREC> (0.04)
<PER-SHARE-DIVIDEND> 0.00
<PER-SHARE-DISTRIBUTIONS> (0.01)
<RETURNS-OF-CAPITAL> 0.00
<PER-SHARE-NAV-END> 9.01
<EXPENSE-RATIO> 1.61
<AVG-DEBT-OUTSTANDING> 48
<AVG-DEBT-PER-SHARE> 0.006
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<LEGEND>
THIS LEGEND CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE FUND'S
ANNUAL FINANCIAL STATEMENTS AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO
SUCH FINANCIAL STATEMENTS.
</LEGEND>
<CIK> 0000202032
<NAME> AIM GROWTH SERIES
<SERIES>
<NUMBER> 011
<NAME> AIM MID CAP EQUITY FUND - CLASS A
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> JAN-01-1998
<PERIOD-END> DEC-31-1998
<INVESTMENTS-AT-COST> 282,889
<INVESTMENTS-AT-VALUE> 344,559
<RECEIVABLES> 8,324
<ASSETS-OTHER> 733
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 353,616
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 6,998
<TOTAL-LIABILITIES> 6,998
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 295,648
<SHARES-COMMON-STOCK> 9,502
<SHARES-COMMON-PRIOR> 12,169
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> (8,616)
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 59,586
<NET-ASSETS> 346,618
<DIVIDEND-INCOME> 1,161
<INTEREST-INCOME> 613
<OTHER-INCOME> 256
<EXPENSES-NET> (8,156)
<NET-INVESTMENT-INCOME> (6,126)
<REALIZED-GAINS-CURRENT> (7,289)
<APPREC-INCREASE-CURRENT> (5,896)
<NET-CHANGE-FROM-OPS> (19,311)
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 0
<DISTRIBUTIONS-OF-GAINS> (8,639)
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 23,953
<NUMBER-OF-SHARES-REDEEMED> (27,068)
<SHARES-REINVESTED> 448
<NET-CHANGE-IN-ASSETS> (165,664)
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 3,141
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 8,203
<AVERAGE-NET-ASSETS> 433,313
<PER-SHARE-NAV-BEGIN> 21.01
<PER-SHARE-NII> (0.24)
<PER-SHARE-GAIN-APPREC> (0.81)
<PER-SHARE-DIVIDEND> 0.00
<PER-SHARE-DISTRIBUTIONS> (0.99)
<RETURNS-OF-CAPITAL> 0.00
<PER-SHARE-NAV-END> 18.97
<EXPENSE-RATIO> (1.09)
<AVG-DEBT-OUTSTANDING> 9,979
<AVG-DEBT-PER-SHARE> 0.506
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<LEGEND>
THIS LEGEND CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE FUND'S
ANNUAL FINANCIAL STATEMENTS AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO
SUCH FINANCIAL STATEMENTS.
</LEGEND>
<CIK> 0000202032
<NAME> AIM GROWTH SERIES
<SERIES>
<NUMBER> 012
<NAME> AIM MID CAP EQUITY FUND - CLASS B
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> JAN-01-1998
<PERIOD-END> DEC-31-1998
<INVESTMENTS-AT-COST> 282,889
<INVESTMENTS-AT-VALUE> 344,559
<RECEIVABLES> 8,324
<ASSETS-OTHER> 733
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 353,616
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 6,998
<TOTAL-LIABILITIES> 6,998
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 295,648
<SHARES-COMMON-STOCK> 9,110
<SHARES-COMMON-PRIOR> 12,581
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> (8,616)
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 59,586
<NET-ASSETS> 346,618
<DIVIDEND-INCOME> 1,161
<INTEREST-INCOME> 613
<OTHER-INCOME> 256
<EXPENSES-NET> (8,156)
<NET-INVESTMENT-INCOME> (6,126)
<REALIZED-GAINS-CURRENT> (7,289)
<APPREC-INCREASE-CURRENT> (5,896)
<NET-CHANGE-FROM-OPS> (19,311)
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 0
<DISTRIBUTIONS-OF-GAINS> (8,762)
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 5,833
<NUMBER-OF-SHARES-REDEEMED> (9,775)
<SHARES-REINVESTED> 471
<NET-CHANGE-IN-ASSETS> (165,664)
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 3,141
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 8,203
<AVERAGE-NET-ASSETS> 433,313
<PER-SHARE-NAV-BEGIN> 20.31
<PER-SHARE-NII> (0.38)
<PER-SHARE-GAIN-APPREC> (0.78)
<PER-SHARE-DIVIDEND> 0.00
<PER-SHARE-DISTRIBUTIONS> (0.99)
<RETURNS-OF-CAPITAL> 0.00
<PER-SHARE-NAV-END> 18.16
<EXPENSE-RATIO> (1.74)
<AVG-DEBT-OUTSTANDING> 9,979
<AVG-DEBT-PER-SHARE> 0.506
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<LEGEND>
THIS LEGEND CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE FUND'S
ANNUAL FINANCIAL STATEMENTS AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO
SUCH FINANCIAL STATEMENTS.
</LEGEND>
<CIK> 0000202032
<NAME> AIM GROWTH SERIES
<SERIES>
<NUMBER> 013
<NAME> AIM MID CAP EQUITY FUND - ADVISOR CLASS
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> JAN-01-1998
<PERIOD-END> DEC-31-1998
<INVESTMENTS-AT-COST> 282,889
<INVESTMENTS-AT-VALUE> 344,559
<RECEIVABLES> 8,324
<ASSETS-OTHER> 733
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 353,616
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 6,998
<TOTAL-LIABILITIES> 6,998
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 295,648
<SHARES-COMMON-STOCK> 48
<SHARES-COMMON-PRIOR> 54
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> (8,616)
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 59,586
<NET-ASSETS> 346,618
<DIVIDEND-INCOME> 1,161
<INTEREST-INCOME> 613
<OTHER-INCOME> 256
<EXPENSES-NET> (8,156)
<NET-INVESTMENT-INCOME> (6,126)
<REALIZED-GAINS-CURRENT> (7,289)
<APPREC-INCREASE-CURRENT> (5,896)
<NET-CHANGE-FROM-OPS> (19,311)
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 0
<DISTRIBUTIONS-OF-GAINS> (46)
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 887
<NUMBER-OF-SHARES-REDEEMED> (896)
<SHARES-REINVESTED> 3
<NET-CHANGE-IN-ASSETS> (165,664)
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 3,141
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 8,203
<AVERAGE-NET-ASSETS> 433,313
<PER-SHARE-NAV-BEGIN> 21.10
<PER-SHARE-NII> (0.17)
<PER-SHARE-GAIN-APPREC> (0.86)
<PER-SHARE-DIVIDEND> 0.00
<PER-SHARE-DISTRIBUTIONS> (0.99)
<RETURNS-OF-CAPITAL> 0.00
<PER-SHARE-NAV-END> 19.08
<EXPENSE-RATIO> (0.74)
<AVG-DEBT-OUTSTANDING> 9,979
<AVG-DEBT-PER-SHARE> 0.506
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<LEGEND>
THIS LEGEND CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE FUND'S
ANNUAL FINANCIAL STATEMENTS AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO
SUCH FINANCIAL STATEMENTS.
</LEGEND>
<CIK> 0000202032
<NAME> AIM GROWTH SERIES
<SERIES>
<NUMBER> 051
<NAME> AIM NEW PACIFIC GROWTH FUND - CLASS A
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> JAN-01-1998
<PERIOD-END> DEC-31-1998
<INVESTMENTS-AT-COST> 116,680
<INVESTMENTS-AT-VALUE> 121,510
<RECEIVABLES> 850
<ASSETS-OTHER> 935
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 123,295
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 9,231
<TOTAL-LIABILITIES> 9,231
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 196,845
<SHARES-COMMON-STOCK> 15,577
<SHARES-COMMON-PRIOR> 20,969
<ACCUMULATED-NII-CURRENT> (22)
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> (87,598)
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 4,839
<NET-ASSETS> 114,064
<DIVIDEND-INCOME> 3,913
<INTEREST-INCOME> 696
<OTHER-INCOME> 309
<EXPENSES-NET> (3,246)
<NET-INVESTMENT-INCOME> 1,672
<REALIZED-GAINS-CURRENT> (40,074)
<APPREC-INCREASE-CURRENT> 22,911
<NET-CHANGE-FROM-OPS> (15,491)
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> (863)
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> (13)
<NUMBER-OF-SHARES-SOLD> 220,055
<NUMBER-OF-SHARES-REDEEMED> (225,598)
<SHARES-REINVESTED> 151
<NET-CHANGE-IN-ASSETS> (79,052)
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 1,448
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 3,832
<AVERAGE-NET-ASSETS> 148,912
<PER-SHARE-NAV-BEGIN> 6.48
<PER-SHARE-NII> 0.06
<PER-SHARE-GAIN-APPREC> (1.30)
<PER-SHARE-DIVIDEND> (0.05)
<PER-SHARE-DISTRIBUTIONS> 0.00
<RETURNS-OF-CAPITAL> 0.00
<PER-SHARE-NAV-END> 5.19
<EXPENSE-RATIO> 2.00
<AVG-DEBT-OUTSTANDING> 1,509
<AVG-DEBT-PER-SHARE> 0.051
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<LEGEND>
THIS LEGEND CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE FUND'S
ANNUAL FINANCIAL STATEMENTS AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO
SUCH FINANCIAL STATEMENTS.
</LEGEND>
<CIK> 0000202032
<NAME> AIM GROWTH SERIES
<SERIES>
<NUMBER> 052
<NAME> AIM NEW PACIFIC GROWTH FUND - CLASS B
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> JAN-01-1998
<PERIOD-END> DEC-31-1998
<INVESTMENTS-AT-COST> 116,680
<INVESTMENTS-AT-VALUE> 121,510
<RECEIVABLES> 850
<ASSETS-OTHER> 935
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 123,295
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 9,231
<TOTAL-LIABILITIES> 9,231
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 196,845
<SHARES-COMMON-STOCK> 6,318
<SHARES-COMMON-PRIOR> 8,895
<ACCUMULATED-NII-CURRENT> (22)
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> (87,598)
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 4,839
<NET-ASSETS> 114,064
<DIVIDEND-INCOME> 3,913
<INTEREST-INCOME> 696
<OTHER-INCOME> 309
<EXPENSES-NET> (3,246)
<NET-INVESTMENT-INCOME> 1,672
<REALIZED-GAINS-CURRENT> (40,074)
<APPREC-INCREASE-CURRENT> 22,911
<NET-CHANGE-FROM-OPS> (15,491)
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> (88)
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> (1)
<NUMBER-OF-SHARES-SOLD> 29,097
<NUMBER-OF-SHARES-REDEEMED> (31,689)
<SHARES-REINVESTED> 15
<NET-CHANGE-IN-ASSETS> (79,052)
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 1,448
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 3,832
<AVERAGE-NET-ASSETS> 148,912
<PER-SHARE-NAV-BEGIN> 6.28
<PER-SHARE-NII> 0.03
<PER-SHARE-GAIN-APPREC> (1.26)
<PER-SHARE-DIVIDEND> (0.01)
<PER-SHARE-DISTRIBUTIONS> 0.00
<RETURNS-OF-CAPITAL> 0.00
<PER-SHARE-NAV-END> 5.04
<EXPENSE-RATIO> 2.65
<AVG-DEBT-OUTSTANDING> 1,509
<AVG-DEBT-PER-SHARE> 0.051
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<LEGEND>
THIS LEGEND CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE FUND'S
ANNUAL FINANCIAL STATEMENTS AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO
SUCH FINANCIAL STATEMENTS.
</LEGEND>
<CIK> 0000202032
<NAME> AIM GROWTH SERIES
<SERIES>
<NUMBER> 053
<NAME> AIM NEW PACIFIC GROWTH FUND - ADVISOR CLASS
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> JAN-01-1998
<PERIOD-END> DEC-31-1998
<INVESTMENTS-AT-COST> 116,680
<INVESTMENTS-AT-VALUE> 121,510
<RECEIVABLES> 850
<ASSETS-OTHER> 935
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 123,295
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 9,231
<TOTAL-LIABILITIES> 9,231
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 196,845
<SHARES-COMMON-STOCK> 271
<SHARES-COMMON-PRIOR> 231
<ACCUMULATED-NII-CURRENT> (22)
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> (87,598)
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 4,839
<NET-ASSETS> 114,064
<DIVIDEND-INCOME> 3,913
<INTEREST-INCOME> 696
<OTHER-INCOME> 309
<EXPENSES-NET> (3,246)
<NET-INVESTMENT-INCOME> 1,672
<REALIZED-GAINS-CURRENT> (40,074)
<APPREC-INCREASE-CURRENT> 22,911
<NET-CHANGE-FROM-OPS> (15,491)
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> (19)
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> (0)
<NUMBER-OF-SHARES-SOLD> 5,120
<NUMBER-OF-SHARES-REDEEMED> (5,083)
<SHARES-REINVESTED> 3
<NET-CHANGE-IN-ASSETS> (79,052)
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 1,448
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 3,832
<AVERAGE-NET-ASSETS> 148,912
<PER-SHARE-NAV-BEGIN> 6.45
<PER-SHARE-NII> 0.08
<PER-SHARE-GAIN-APPREC> (1.28)
<PER-SHARE-DIVIDEND> (0.07)
<PER-SHARE-DISTRIBUTIONS> 0.00
<RETURNS-OF-CAPITAL> 0.00
<PER-SHARE-NAV-END> 5.18
<EXPENSE-RATIO> 1.65
<AVG-DEBT-OUTSTANDING> 1,509
<AVG-DEBT-PER-SHARE> 0.051
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<LEGEND>
THIS LEGEND CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE FUND'S
ANNUAL FINANCIAL STATEMENTS AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO
SUCH FINANCIAL STATEMENTS.
</LEGEND>
<CIK> 0000202032
<NAME> AIM GROWTH SERIES
<SERIES>
<NUMBER> 071
<NAME> AIM SMALL CAP GROWTH FUND - CLASS A
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> JAN-01-1998
<PERIOD-END> DEC-31-1998
<INVESTMENTS-AT-COST> 40,333
<INVESTMENTS-AT-VALUE> 49,967
<RECEIVABLES> 3,202
<ASSETS-OTHER> 0
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 53,169
<PAYABLE-FOR-SECURITIES> 328
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 610
<TOTAL-LIABILITIES> 938
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 42,095
<SHARES-COMMON-STOCK> 1,452
<SHARES-COMMON-PRIOR> 763
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 349
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 9,787
<NET-ASSETS> 52,231
<DIVIDEND-INCOME> 43
<INTEREST-INCOME> 104
<OTHER-INCOME> 7
<EXPENSES-NET> (710)
<NET-INVESTMENT-INCOME> (556)
<REALIZED-GAINS-CURRENT> 988
<APPREC-INCREASE-CURRENT> 8,891
<NET-CHANGE-FROM-OPS> 9,323
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 0
<DISTRIBUTIONS-OF-GAINS> (577)
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 2,809
<NUMBER-OF-SHARES-REDEEMED> (2,155)
<SHARES-REINVESTED> 35
<NET-CHANGE-IN-ASSETS> 18,520
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 0
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 859
<AVERAGE-NET-ASSETS> 34,643
<PER-SHARE-NAV-BEGIN> 14.27
<PER-SHARE-NII> (0.19)
<PER-SHARE-GAIN-APPREC> 3.45
<PER-SHARE-DIVIDEND> 0.00
<PER-SHARE-DISTRIBUTIONS> (0.50)
<RETURNS-OF-CAPITAL> 0.00
<PER-SHARE-NAV-END> 17.03
<EXPENSE-RATIO> (1.29)
<AVG-DEBT-OUTSTANDING> 591,476
<AVG-DEBT-PER-SHARE> 0.191
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<LEGEND>
THIS LEGEND CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FORM THE FUND'S
ANNUAL FINANCIAL STATEMENTS AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO
SUCH FINANCIAL STATEMENTS.
</LEGEND>
<CIK> 0000202032
<NAME> AIM GROWTH SERIES
<SERIES>
<NUMBER> 072
<NAME> AIM SMALL CAP GROWTH FUND - CLASS B
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> JAN-01-1998
<PERIOD-END> DEC-31-1998
<INVESTMENTS-AT-COST> 40,333
<INVESTMENTS-AT-VALUE> 49,967
<RECEIVABLES> 3,202
<ASSETS-OTHER> 0
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 53,169
<PAYABLE-FOR-SECURITIES> 328
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 610
<TOTAL-LIABILITIES> 938
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 42,095
<SHARES-COMMON-STOCK> 1,590
<SHARES-COMMON-PRIOR> 1,509
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 349
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 9,787
<NET-ASSETS> 52,231
<DIVIDEND-INCOME> 43
<INTEREST-INCOME> 104
<OTHER-INCOME> 7
<EXPENSES-NET> (710)
<NET-INVESTMENT-INCOME> (556)
<REALIZED-GAINS-CURRENT> 988
<APPREC-INCREASE-CURRENT> 8,891
<NET-CHANGE-FROM-OPS> 9,323
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 0
<DISTRIBUTIONS-OF-GAINS> (733)
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 1,807
<NUMBER-OF-SHARES-REDEEMED> (1,772)
<SHARES-REINVESTED> 45
<NET-CHANGE-IN-ASSETS> 18,520
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 0
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 859
<AVERAGE-NET-ASSETS> 34,643
<PER-SHARE-NAV-BEGIN> 14.06
<PER-SHARE-NII> (0.29)
<PER-SHARE-GAIN-APPREC> 3.37
<PER-SHARE-DIVIDEND> 0.00
<PER-SHARE-DISTRIBUTIONS> (0.50)
<RETURNS-OF-CAPITAL> 0.00
<PER-SHARE-NAV-END> 16.64
<EXPENSE-RATIO> (1.95)
<AVG-DEBT-OUTSTANDING> 591,476
<AVG-DEBT-PER-SHARE> 0.191
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<LEGEND>
THIS LEGEND CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE FUND'S
ANNUAL FINANCIAL STATEMENTS AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO
SUCH FINANCIAL STATEMENTS.
</LEGEND>
<CIK> 0000202032
<NAME> AIM GROWTH SERIES
<SERIES>
<NUMBER> 073
<NAME> AIM SMALL CAP GROWTH FUND - ADVISOR CLASS
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> JAN-01-1998
<PERIOD-END> DEC-31-1998
<INVESTMENTS-AT-COST> 40,333
<INVESTMENTS-AT-VALUE> 49,967
<RECEIVABLES> 3,202
<ASSETS-OTHER> 0
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 53,169
<PAYABLE-FOR-SECURITIES> 328
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 610
<TOTAL-LIABILITIES> 938
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 42,095
<SHARES-COMMON-STOCK> 61
<SHARES-COMMON-PRIOR> 111
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 349
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 9,787
<NET-ASSETS> 52,231
<DIVIDEND-INCOME> 43
<INTEREST-INCOME> 104
<OTHER-INCOME> 7
<EXPENSES-NET> (710)
<NET-INVESTMENT-INCOME> (556)
<REALIZED-GAINS-CURRENT> 988
<APPREC-INCREASE-CURRENT> 8,891
<NET-CHANGE-FROM-OPS> 9,323
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 0
<DISTRIBUTIONS-OF-GAINS> (31)
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 64
<NUMBER-OF-SHARES-REDEEMED> (115)
<SHARES-REINVESTED> 1
<NET-CHANGE-IN-ASSETS> 18,520
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 0
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 859
<AVERAGE-NET-ASSETS> 34,643
<PER-SHARE-NAV-BEGIN> 14.39
<PER-SHARE-NII> (0.14)
<PER-SHARE-GAIN-APPREC> 3.46
<PER-SHARE-DIVIDEND> 0.00
<PER-SHARE-DISTRIBUTIONS> (0.50)
<RETURNS-OF-CAPITAL> 0.00
<PER-SHARE-NAV-END> 17.21
<EXPENSE-RATIO> (0.94)
<AVG-DEBT-OUTSTANDING> 591,476
<AVG-DEBT-PER-SHARE> 0.191
</TABLE>
