<PAGE> 1
As filed with the Securities and Exchange Commission on March 22, 2000
Registration No. 333-_____
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM N-14
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
[ ] Pre-Effective Amendment No. ___ [ ] Post-Effective Amendment No. ___
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
COPIES 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 Service) 2nd Floor
Washington, D.C. 20036
Approximate Date of Proposed Public Offering: as soon as practicable after this
Registration Statement becomes effective under the Securities Act of 1933.
It is proposed that this filing will become effective on
April 21, 2000 pursuant to Rule 488.
No filing fee is required because of reliance on Section 24(f) of the
Investment Company Act of 1940, as amended.
<PAGE> 2
AIM GROWTH SERIES
CONTENTS OF REGISTRATION STATEMENT
This Registration Statement contains the following papers and documents:
o Cover Sheet
o Contents of Registration Statement
o Part A - Prospectus/Proxy Statement
o Part B - Statement of Additional Information
o Part C - Other Information
o Signature Page
o Exhibits
<PAGE> 3
AIM ADVISOR LARGE CAP VALUE FUND
A PORTFOLIO OF AIM ADVISOR FUNDS, INC.
11 GREENWAY PLAZA, SUITE 100
HOUSTON, TEXAS 77046-1173
April 20, 2000
Dear Shareholder:
Enclosed is a combined proxy statement and prospectus seeking your
approval of a proposed combination of AIM Advisor Large Cap Value Fund ("Large
Cap Value Fund") with AIM Basic Value Fund ("Basic Value Fund") (each a "Fund").
Large Cap Value Fund is a series of AIM Advisor Funds, Inc. (the "Company"), an
open-end management investment company organized as a Maryland corporation.
Basic Value Fund is a series of AIM Growth Series (the "Trust"), an open-end
management investment company organized as a Delaware business trust. If the
proposal is approved and implemented, each shareholder of Large Cap Value Fund
automatically would become a shareholder of Basic Value Fund.
The Board of Directors of the Company believes that combining the two
Funds will benefit Large Cap Value Fund's shareholders by providing them with a
portfolio that has a broader investment mandate than Large Cap Value Fund. A I M
Advisors, Inc. ("AIM") serves as investment adviser to both Funds. INVESCO, Inc.
serves as sub-adviser to Large Cap Value Fund. The portfolio management team for
Basic Value Fund is experienced and has a performance record that is generally
superior to that of the portfolio management team for Large Cap Value Fund. To
achieve its investment objective of long-term growth of capital, Basic Value
Fund may invest in a wider variety of U.S. equity securities and foreign
securities. As a result, Basic Value Fund possesses greater flexibility than
Large Cap Value Fund to respond to opportunities in the marketplace. Basic Value
Fund's expenses are expected to decline following consummation of the proposed
combination, but are expected to be slightly higher than Large Cap Value Fund's
expenses. The accompanying document describes the proposed transaction and
compares the investment policies, operating expenses, and performance histories
of the Funds.
Shareholders of Large Cap Value Fund are being asked to approve an
Agreement and Plan of Reorganization by and among the Company, the Trust, and
AIM that will govern the reorganization of Large Cap Value Fund into Basic Value
Fund. After careful consideration, the Board of Directors of the Company has
unanimously approved the proposal and recommends that you read the enclosed
materials carefully and then vote FOR the proposal.
Your vote is important. Please take a moment now to sign and return
your proxy card in the enclosed postage-paid return envelope. If we do not hear
from you after a reasonable amount of time you may receive a telephone call from
our proxy solicitor, Shareholder Communications Corporation, reminding you to
vote your shares. You may also vote your shares on the Internet at the Fund's
website at http://www.aimfunds.com by following the instructions that appear on
the enclosed proxy insert.
Thank you for your cooperation and continued support.
Sincerely,
Charles T. Bauer
Chairman
<PAGE> 4
AIM ADVISOR LARGE CAP VALUE FUND
A PORTFOLIO OF AIM ADVISOR FUNDS, INC.
11 GREENWAY PLAZA, SUITE 100
HOUSTON, TEXAS 77046-1173
--------------
NOTICE OF SPECIAL MEETING OF SHAREHOLDERS
TO BE HELD ON MAY 31, 2000
--------------
TO THE SHAREHOLDERS OF AIM ADVISOR LARGE CAP VALUE FUND:
NOTICE IS HEREBY GIVEN that a special meeting of Shareholders
("Meeting") of AIM Advisor Large Cap Value Fund ("Large Cap Value Fund"), an
investment portfolio of AIM Advisor Funds, Inc. (the "Company"), will be held at
11 Greenway Plaza, Suite 100, Houston, TX 77046-1173, on May 31, 2000, at 3:00
p.m., local time, for the following purposes:
1. To consider an Agreement and Plan of Reorganization ("Agreement")
that provides for the combination of Large Cap Value Fund and AIM Basic
Value Fund ("Basic Value Fund"), an investment portfolio of AIM Growth
Series (the "Trust") (the "Reorganization"). Pursuant to the Agreement,
all of the assets of Large Cap Value Fund will be transferred to Basic
Value Fund, Basic Value Fund will assume all of the liabilities of
Large Cap Value Fund, and the Trust will issue to each shareholder a
number of full and fractional shares of the applicable class of Basic
Value Fund having an aggregate value that, on the effective date of the
Reorganization, is equal to the aggregate net asset value of the
shareholder's shares of common stock of the corresponding class of
Large Cap Value Fund. The value of each Large Cap Value Fund
shareholder's account with Basic Value Fund immediately after the
Reorganization will be the same as the value of such shareholder's
account with Large Cap Value Fund immediately prior to the
Reorganization. The Reorganization has been structured as a tax-free
transaction. No initial sales charge will be imposed in connection with
the Reorganization; and
2. To transact such other business, not currently contemplated, that
may properly come before the Meeting, or any adjournment thereof, in
the discretion of the proxies or their substitutes.
Shareholders of record as of the close of business on April 3, 2000,
are entitled to notice of, and to vote at, the Meeting or any adjournment
thereof.
SHAREHOLDERS ARE REQUESTED TO EXECUTE AND RETURN PROMPTLY IN THE
ENCLOSED ENVELOPE THE ACCOMPANYING PROXY, WHICH IS BEING SOLICITED BY THE
MANAGEMENT OF THE COMPANY. YOU MAY ALSO VOTE YOUR SHARES THROUGH A WEB SITE
ESTABLISHED FOR THAT PURPOSE BY FOLLOWING THE INSTRUCTIONS ON THE ENCLOSED PROXY
INSERT. YOUR VOTE IS IMPORTANT FOR THE PURPOSE OF ENSURING A QUORUM AT THE
SPECIAL MEETING. PROXIES MAY BE REVOKED AT ANY TIME BEFORE THEY ARE EXERCISED BY
THE SUBSEQUENT EXECUTION AND SUBMISSION OF A REVISED PROXY, BY GIVING WRITTEN
NOTICE OF REVOCATION TO THE COMPANY AT ANY TIME BEFORE THE PROXY IS EXERCISED OR
BY VOTING IN PERSON AT THE SPECIAL MEETING.
Carol F. Relihan
Senior Vice President
and Secretary
April 20, 2000
<PAGE> 5
AIM ADVISOR LARGE CAP VALUE FUND
PORTFOLIO OF AIM ADVISOR FUNDS, INC.
11 GREENWAY PLAZA, SUITE 100
HOUSTON, TEXAS 77046-1173
TOLL FREE: (800) 454-0327
AIM BASIC VALUE FUND
PORTFOLIO OF AIM GROWTH SERIES
11 GREENWAY PLAZA, SUITE 100
HOUSTON, TEXAS 77046-1173
TOLL FREE: (800) 454-0327
COMBINED PROXY STATEMENT AND PROSPECTUS
Dated: April 20, 2000
This document is being furnished in connection with a special meeting
of shareholders of AIM Advisor Large Cap Value Fund ("Large Cap Value Fund"), an
investment portfolio of AIM Advisor Funds, Inc. (the "Company"), a Maryland
corporation, to be held at 11 Greenway Plaza, Suite 100, Houston, TX 77046 on
May 31, 2000, at 3:00 p.m., local time (such meetings and any adjournments
thereof are referred to as the "Meeting"). At the Meeting, the shareholders of
Large Cap Value Fund are being asked to consider and approve an Agreement and
Plan of Reorganization (the "Agreement") by and among the Company, acting on
behalf of Large Cap Value Fund, AIM Growth Series (the "Trust"), a Delaware
business trust, acting on behalf of AIM Basic Value Fund ("Basic Value Fund"),
and A I M Advisors, Inc. ("AIM"). The Agreement provides for the combination of
Large Cap Value Fund with Basic Value Fund (the "Reorganization"). The Agreement
is attached as Appendix I to this Combined Proxy Statement and Prospectus
("Proxy Statement/Prospectus"). THE BOARD OF DIRECTORS OF THE COMPANY HAS
UNANIMOUSLY APPROVED THE AGREEMENT AS BEING IN THE BEST INTEREST OF LARGE CAP
VALUE FUND'S SHAREHOLDERS.
Pursuant to the Agreement, all of the assets of Large Cap Value Fund
will be transferred to Basic Value Fund, Basic Value Fund will assume all of the
liabilities of Large Cap Value Fund, and the Trust will issue a number of full
and fractional shares of the applicable class of Basic Value Fund having an
aggregate value that, on the effective date of the Reorganization, is equal to
the aggregate net asset value of the shareholder's shares of common stock of the
corresponding class of Large Cap Value Fund. The value of each Large Cap Value
Fund shareholder's account with Basic Value Fund immediately after the
Reorganization will be the same as the value of such shareholder's account with
Large Cap Value Fund immediately prior to the Reorganization. The Reorganization
has been structured as a tax-free transaction. No initial sales charge will be
imposed in connection with the Reorganization.
Basic Value Fund is a diversified series of the Trust, which is an
open-end management investment company. Basic Value Fund's investment objective
is long-term growth of capital. Basic Value Fund seeks to achieve its investment
objective by investing all of its investable assets in the Value Portfolio (the
"Portfolio") which, in turn, primarily invests 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.
Prior to the closing date of the Reorganization, it is anticipated that
the master-feeder structure in which Basic Value Fund invests in the Portfolio
will be eliminated, and Basic Value Fund will invest directly in its portfolio
securities ("Restructuring"). Such Restructuring is conditioned on Basic Value
Fund's shareholders approving an investment advisory agreement with AIM. Unless
otherwise specified, the information in this Proxy Statement/Prospectus
regarding Basic Value Fund assumes that the Restructuring is consummated.
This Proxy Statement/Prospectus sets forth the information that a
shareholder of Large Cap Value Fund should know before voting on the Agreement.
It should be read and retained for future reference.
<PAGE> 6
The current Prospectus of Large Cap Value Fund, dated May 3, 1999, as
revised December 15, 1999, together with the related Statement of Additional
Information, dated May 3, 1999, as revised July 1, 1999, and supplemented
October 1, 1999 and January 24, 2000, together with the Annual Report to
Shareholders for the fiscal year ended December 31, 1999, are on file with the
Securities and Exchange Commission (the "SEC") and are incorporated by reference
into this Proxy Statement/Prospectus. The current Prospectus of Basic Value
Fund, dated May 3, 1999, as revised October 25, 1999, and supplemented February
25, 2000 and March 22, 2000, together with the related Statement of Additional
Information, dated May 3, 1999, as supplemented September 13, 1999, October 6,
1999, February 11, 2000 and March 22, 2000, together with the Annual Report to
Shareholders for the fiscal year ended December 31, 1999, are on file with the
SEC and are incorporated by reference into this Proxy Statement/Prospectus. It
is anticipated that, prior to the closing of the Reorganization, Basic Value
Fund will have collapsed its master-feeder structure, entered into an investment
advisory contract, changed its investment objective to non-fundamental, and
amended its fundamental investment restrictions. A copy of the Prospectus of
Basic Value Fund is attached as Appendix II to this Proxy Statement/Prospectus.
Such documents are available without charge by writing to A I M Fund Services,
Inc. ("AIM Distributors"), P.O. Box 4739, Houston, Texas 77210-4739 or by
calling (800) 347-4246. The SEC maintains a web site at http://www.sec.gov that
contains the prospectuses and statements of additional information described
above, material incorporated by reference, and other information about the
Company. Additional information about Large Cap Value Fund and Basic Value Fund
may also be obtained on the web at http://www.aimfunds.com.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES
AND EXCHANGE COMMISSION NOR HAS THE SECURITIES AND EXCHANGE
COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS
PROXY STATEMENT/PROSPECTUS. ANY REPRESENTATION
TO THE CONTRARY IS A CRIMINAL OFFENSE.
2
<PAGE> 7
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Section Title Page
- ------------- ----
<S> <C>
INTRODUCTION......................................................................4
REASONS FOR THE REORGANIZATION....................................................5
Background and Reasons for the Reorganization................................5
Board Considerations.........................................................5
SYNOPSIS..........................................................................7
The Reorganization...........................................................7
Comparison of Large Cap Value Fund and Basic Value Fund......................8
RISK FACTORS.....................................................................11
Equity Securities Risk......................................................11
Foreign Securities Risk.....................................................12
Small- and Mid-Cap Companies Risk...........................................12
COMPARISON OF INVESTMENT OBJECTIVES AND POLICIES.................................12
Investment Objectives of Basic Value Fund and Large Cap Value Fund..........12
Investment Policies of Basic Value Fund and Large Cap Value Fund............12
Portfolio Management........................................................13
Management Discussion and Analysis of Performance...........................13
FINANCIAL HIGHLIGHTS.............................................................13
ADDITIONAL INFORMATION ABOUT THE AGREEMENT.......................................17
Terms of the Reorganization.................................................17
The Reorganization..........................................................17
Other Terms.................................................................17
Federal Tax Considerations..................................................18
Accounting Treatment........................................................19
RIGHTS OF SHAREHOLDERS...........................................................19
Liability of Shareholders...................................................19
Election of Trustees/Directors; Terms.......................................19
Removal of Trustees/Directors...............................................20
Meeting of Shareholders.....................................................20
Liability of Trustees/Directors and Officers; Indemnification...............20
Termination.................................................................21
Voting Rights of Shareholders...............................................21
Dissenters' Rights..........................................................21
Amendments to Organization Documents........................................21
OWNERSHIP OF LARGE CAP VALUE FUND AND BASIC VALUE FUND SHARES....................22
Ownership of Officers and Trustees/Directors................................22
CAPITALIZATION...................................................................23
LEGAL MATTERS....................................................................23
INFORMATION FILED WITH THE SECURITIES AND EXCHANGE COMMISSION....................23
ADDITIONAL INFORMATION ABOUT LARGE CAP VALUE FUND AND BASIC VALUE FUND...........24
EXPERTS..........................................................................24
APPENDIX I.....................................Agreement and Plan of Reorganization
APPENDIX II......................................Prospectus of AIM Basic Value Fund
APPENDIX III......................Discussion of Performance of AIM Basic Value Fund
</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,
Invest with Discipline, La Familia AIM de Fondos, La Familia AIM de Fondos and
Design, and Invierta con Disciplina are registered service marks and AIM Bank
Connection, AIM Funds, AIM Funds and Design, AIM Internet Connect and AIM
Investor are service marks of A I M Management Group Inc.
3
<PAGE> 8
INTRODUCTION
This Proxy Statement/Prospectus is furnished in connection with the
solicitation of proxies by the Board of Directors of the Company from the
shareholders of Large Cap Value Fund for use at the Meeting.
All properly executed and unrevoked proxies received in time for the
Meeting will be voted in accordance with the instructions contained therein. If
no instructions are given, shares represented by proxies will be voted FOR the
proposal to approve the Agreement and in accordance with management's
recommendation on other matters. The presence in person or by proxy of one-third
of the outstanding shares of common stock of Large Cap Value Fund at the Meeting
will constitute a quorum ("Quorum"). If a Quorum is not present at the Meeting
or a Quorum is present but sufficient votes to approve the proposal described
herein ("Proposal") are not received, the persons named as proxies may propose
one or more adjournments of the Meeting to permit further solicitation of
proxies. Any such adjournment will require the affirmative vote of a majority of
the shares represented at the Meeting in person or by proxy. The persons named
as proxies will vote those proxies that they are entitled to vote FOR the
Proposal in favor of such an adjournment and will vote those proxies required to
be voted AGAINST the Proposal against such adjournment. In addition, if you
sign, date and return the proxy card, but give no voting instructions, the duly
appointed proxies may, in their discretion, vote upon such other matters as may
come before the Meeting.
Approval of the Agreement requires the affirmative vote of a majority
of the outstanding shares of Large Cap Value Fund entitled to vote cast at the
Meeting. Abstentions and broker non-votes will be counted as shares present at
the Meeting for quorum purposes, but will not be considered votes cast at the
Meeting. Broker non-votes arise from a proxy returned by a broker holding shares
for a customer which indicates that the broker has not been authorized by the
customer to vote on a proposal. Any person giving a proxy has the power to
revoke it at any time prior to its exercise by executing a superseding proxy or
by submitting a written notice of revocation to the Secretary of the Company. To
be effective, such revocation must be received by the Secretary of the Company
prior to the Meeting and must indicate your name and account number. In
addition, although mere attendance at the Meeting will not revoke a proxy, a
registered shareholder present at the Meeting may withdraw his proxy and vote in
person. Shareholders may also transact any other business not currently
contemplated that may properly come before the Meeting in the discretion of the
proxies or their substitutes.
Shareholders of record as of the close of business on April 3, 2000
(the "Record Date"), are entitled to vote at the Meeting. On the Record Date,
there were ____ Class A shares, ____ Class B shares, and ____ Class C shares of
Large Cap Value Fund outstanding. Each share is entitled to one vote for each
full share held, and a fractional vote for a fractional share held. [To the
knowledge of the Trust's management, as of the Record Date, there were no
beneficial owners of 5% or more of the outstanding shares of any class of Large
Cap Value Fund, except as indicated below in "Ownership of Large Cap Value Fund
and Basic Value Fund Shares."]
The Company has engaged the services of Shareholder Communications
Corporation ("SCC") to assist it in the solicitation of proxies for the Meeting.
The Company expects to solicit proxies principally by mail, but the Company or
SCC may also solicit proxies by telephone, facsimile, telegraph, or personal
interview. The Company officers and employees of AIM who assist in proxy
solicitation will not receive any additional or special compensation for any
such efforts. The cost of shareholder solicitation incurred in connection with
the Reorganization is anticipated to be approximately $______ and will be borne
by Large Cap Value Fund and Basic Value Fund. The Company will request
broker/dealer firms, custodians, nominees, and fiduciaries to forward proxy
material to the beneficial owners of the shares held of record by such persons.
The Company may reimburse such brokers/dealer firms, custodians, nominees, and
fiduciaries for their reasonable expenses incurred in connection with such proxy
solicitation.
The Company intends to mail this Proxy Statement/Prospectus and the
accompanying proxy on or about April 20, 2000.
4
<PAGE> 9
REASONS FOR THE REORGANIZATION
BACKGROUND AND REASONS FOR THE REORGANIZATION
The Company was organized in 1989 as a Maryland corporation, and is
registered with the SEC as an open-end, series, management investment company.
The Company was known as INVESCO Advisor Funds, Inc. prior to August 4, 1997,
and EBI Funds, Inc. prior to January 16, 1996. Large Cap Value Fund is a
diversified series of the Company. AIM became the investment adviser to each of
the Company's funds, including Large Cap Value Fund, on August 4, 1997.
INVESCO, Inc. ("INVESCO"), an affiliated company of AIM, currently serves
as sub-adviser to Large Cap Value Fund.
The Trust was organized in 1985 as a Massachusetts business trust. The
Trust was reorganized on May 29, 1998, as a Delaware business trust, and is
registered with the SEC as an open-end, series, management investment company.
Prior to May 29, 1998, the Trust was known as G.T. Global Growth Series. Basic
Value Fund, formerly AIM America Value Fund and prior thereto, GT Global America
Value Fund, is a diversified series of the Trust. AIM became the investment
adviser to Basic Value Fund on September 8, 1998, after it acquired the parent
of the prior adviser, Chancellor LGT Asset Management, Inc.
AIM proposes the Reorganization because Basic Value Fund has greater
investment flexibility and superior performance as compared to Large Cap Value
Fund. Basic Value Fund's expenses are currently higher than those of Large Cap
Value Fund. Basic Value Fund's expenses are expected to decline following
consummation of the proposed combination, but are expected to be slightly higher
than Large Cap Value Fund's expenses. AIM expects that the Reorganization would
provide benefits to both Large Cap Value Fund and Basic Value Fund by increasing
investment choices and possibly helping to achieve cost savings. As of February
16, 2000, Basic Value Fund had approximately $155.7 million in assets, and Large
Cap Value Fund had approximately $140.8 million.
BOARD CONSIDERATIONS
AIM, the investment adviser to Basic Value Fund and Large Cap Value
Fund has proposed the Reorganization and recommended that the Board of
Directors of the Company approved the Reorganization. Based upon AIM's
recommendation and extensive inquiry into a number of factors with respect to
the Reorganization, the Board of Directors of the Company, including a majority
of directors who are not "interested persons" ("Independent Directors") as that
term is defined in the Investment Company Act of 1940 ("1940 Act"), has
determined that the Reorganization is in the best interests of the shareholders
of Large Cap Value Fund, that the terms of the Reorganization are fair and
reasonable, and that the interests of Large Cap Value Fund's shareholders will
not be diluted as a result of the Reorganization.
At a meeting of the Board of Directors held on March 8, 2000, AIM
proposed that the Board of Directors approve the Reorganization of Large Cap
Value Fund into Basic Value Fund. The Board received from AIM written materials
that described the structure and tax consequences of the Reorganization and
contained information concerning Large Cap Value Fund and Basic Value Fund,
including comparative total return and fee and expense information, a comparison
of the investment objectives and policies of Large Cap Value Fund and Basic
Value Fund, pro forma expense ratios, and biographical information on the
portfolio managers of the Portfolio.
The Board made an extensive inquiry into a number of factors with
respect to the Reorganization, including: (1) the compatibility of the Funds'
investment objectives, policies, and restrictions; (2) the effect of the
Reorganization on the expense ratio of Basic Value Fund and that expense ratio
relative to each Fund's current expense ratio; (3) the capabilities, experience,
and performance of the portfolio management team for Basic Value Fund; (4) the
Funds' respective investment performances; (5) the relationship of risk versus
return for the Funds; (6) the net effect to the assets of Large Cap Value Fund
of redemptions exceeding new investments; (7) the costs to be incurred by each
Fund as a result of the Reorganization; (8) the tax consequences of the
Reorganization; (9) possible alternatives to the Reorganization, including
continuing to operate Large Cap Value Fund on a stand-alone basis or liquidating
Large Cap Value Fund; and (10) the potential benefits of the Reorganization to
other persons, especially AIM and its affiliates.
5
<PAGE> 10
In considering the Reorganization, the Board considered the fact that
Basic Value Fund has a broader investment mandate than Large Cap Value Fund and
can invest in a wider variety of U.S. equity and foreign securities than can
Large Cap Value Fund. AIM noted its belief that Basic Value Fund's ability to
invest more extensively in U.S. equity and foreign securities gives it greater
flexibility than Large Cap Value Fund to effectively respond to opportunities in
the markets. Such flexibility could, over the long term, benefit shareholders.
The Board noted that although investment in Basic Value Fund involves greater
risk than in investment in Large Cap Value Fund, Basic Value Fund has exhibited
superior performance than Large Cap Value Fund. The Board also noted that
redemptions from Large Cap Value Fund currently exceed new investments in the
Fund.
The Board noted that although the expense ratios of Basic Value Fund
are higher than Large Cap Value Fund, and the pro forma expense ratio of the
combined Basic Value Fund is slightly higher than that of Large Cap Value Fund
for Class A, Class B and Class C shares, as shown below, AIM has contractually
agreed to waive fees and reimburse expenses to limit Basic Value Fund's total
annual operating expenses (excluding interest, taxes, dividend expense on short
sales and extraordinary items) of Class A, Class B and Class C to 1.32%, 1.97%
and 1.97%, respectively, until June 30, 2001. The Board was further advised that
the expense ratio of Basic Value Fund also could decrease if, as a result of the
Reorganization, the combined Fund experienced increased sales of its shares.
Comparative Operating Expenses for the year ended December 31, 1999
<TABLE>
<CAPTION>
AIM Advisor Large Cap
Value Fund AIM Basic Value Fund Pro Forma
---------------------------- ----------------------------- -----------------------------
Class A Class B Class C Class A Class B Class C Class A Class B Class C
Shares Shares Shares Shares Shares Shares Shares Shares Shares
------- ------- ------- ------- ------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Total Expense Ratio 1.26% 1.95% 1.95% 1.69% 2.34% 2.34% 1.32% 1.97% 1.97%
</TABLE>
The Board also considered the capabilities, experience, and performance
of the portfolio management team of Basic Value Fund and the performance of
Large Cap Value Fund in relation to the performance of Basic Value Fund. AIM
advised the Board that, while past performance is no guarantee of future
results, the portfolio management team of Basic Value Fund produced superior
investment performance than the portfolio management team of Large Cap Value
Fund. As of December 31, 1999, the Morningstar ratings and Lipper Inc. rankings
for Large Cap Value Fund and Basic Value Fund were as follows:
Morningstar Rating (1)
<TABLE>
<CAPTION>
Overall 3-year 5-year 10-year
------- ------ ------ -------
<S> <C> <C> <C> <C>
Large Cap Value Fund 2 2 2 2
Basic Value Fund 3 3 n/a n/a
</TABLE>
Lipper Rank (Percentile) (2)
<TABLE>
<CAPTION>
1-year 3-year 5-year 10-year
------ ------ ------ -------
<S> <C> <C> <C> <C>
Large Cap Value Fund 87% 71% 82% 76%
Basic Value Fund 15% 38% n/a n/a
</TABLE>
- ----------
(1) Under the Morningstar rating system, the top 10% of funds in a category
receive 5 stars, the next 22.5% receive 4 stars, the middle 35% receive
3 stars, the next 22.5% receive 2 stars, and the bottom 10% receive a
single star.
(2) Under the Lipper ranking system, the lower the percentile rank the
better the performance.
6
<PAGE> 11
AIM also advised the Board that it expected to receive some immediate
benefits from the Reorganization. AIM expects to realize some administrative
benefit from the combination of Large Cap Value Fund and Basic Value Fund as a
result of economies of scale. In addition, AIM currently pays an affiliated
sub-adviser a portion of the advisory fees that it receives from Large Cap Value
Fund, and AIM Distributors, an affiliate of AIM, voluntarily waives fees for
Large Cap Value Fund. As a result of the Reorganization, AIM (or an affiliate)
would no longer waive any portion of its fees, and AIM would retain its entire
advisory fee. However, AIM will receive a lower advisory and administration fee
when the assets of Large Cap Value Fund become assets of Basic Value Fund. The
effective rate of current advisory and administration fees for Basic Value Fund
for the fiscal year ended December 31, 1999, was 0.73%. The effective rate of
current advisory and administration fees for Large Cap Value Fund for the same
period was 0.75%. However, AIM noted that it could benefit in the future if the
combined assets of Basic Value Fund grow faster after the proposed
Reorganization than the assets of Large Cap Value Fund and Basic Value Fund
separately would have grown in the absence of the Reorganization.
The Board noted that no initial sales or other charges would be imposed
on any Basic Value Fund shares issued to Large Cap Value Fund shareholders in
connection with the Reorganization. Finally, the Board reviewed the principal
terms of the Agreement. The Board also noted that Large Cap Value Fund would be
provided with an opinion of counsel that the Reorganization would be tax-free to
Large Cap Value Fund and its shareholders.
On the basis of the information provided to the Board and on their
evaluation of the Reorganization, the Board determined that the proposed
Reorganization will not dilute the interests of shareholders of Large Cap Value
Fund or Basic Value Fund and is in the best interest of the shareholders Large
Cap Value Fund in view of Basic Value Fund's broader investment mandate and
greater flexibility to invest. Therefore, the Board recommended the approval of
the Agreement by the shareholders of Large Cap Value Fund at a special meeting.
SYNOPSIS
THE REORGANIZATION
The Reorganization will result in the combination of Large Cap Value
Fund with Basic Value Fund. Large Cap Value Fund is a portfolio of the Company,
a Maryland corporation. Basic Value Fund is a portfolio of the Trust, a Delaware
business trust.
If shareholders of Large Cap Value Fund approve the Agreement and other
closing conditions are satisfied, all of the assets of Large Cap Value Fund will
be transferred to Basic Value Fund, Basic Value Fund will assume all of the
liabilities of Large Cap Value Fund, and the Trust will issue Class A shares of
Basic Value Fund to Large Cap Value Fund's Class A shareholders, Class B shares
of Basic Value Fund to Large Cap Value Fund's Class B shareholders, and Class C
shares of Basic Value Fund to Large Cap Value Fund's Class C shareholders. The
shares of Basic Value Fund issued in the Reorganization will have an aggregate
net asset value equal to the value of Large Cap Value Fund's net assets
transferred to Basic Value Fund. Shareholders will not pay any initial sales
charge for shares of Basic Value Fund received in connection with the
Reorganization. The value of each shareholder's account with Basic Value Fund
immediately after the Reorganization will be the same as the value of such
shareholder's account with Large Cap Value Fund immediately prior to the
Reorganization. A copy of the Agreement is attached as Appendix I to this Proxy
Statement/Prospectus. See "Additional Information About the Agreement" herein.
The Company will receive an opinion of Kirkpatrick & Lockhart LLP, the
Trust's counsel, to the effect that the Reorganization will constitute a
tax-free reorganization within the meaning of section 368(a)(1) of the Internal
Revenue Code of 1986, as amended ("Code"). Accordingly, no gain or loss will be
recognized to either Fund or their shareholders as a result of the
Reorganization. See "Additional Information About the Agreement - Federal
Tax Considerations" herein.
7
<PAGE> 12
COMPARISON OF LARGE CAP VALUE FUND AND BASIC VALUE FUND
Investment Objectives and Policies
The investment objective and policies of Large Cap Value Fund are
similar to the investment objective and policies of Basic Value Fund with which
it will combine.
Basic Value Fund seeks to provide long-term growth of capital by
investing primarily 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. Large Cap Value Fund seeks to achieve a high total return on investment
through growth of capital and current income, without regard to federal income
tax considerations, by investing primarily in equity securities of issuers with
market capitalizations among the largest 800 publicly traded U.S. corporations.
Investment Advisory Services
AIM serves as investment adviser, and INVESCO serves as sub-adviser, to
Large Cap Value Fund. AIM also serves as investment adviser to the Portfolio,
and it is anticipated that AIM will serve as Basic Value Fund's investment
adviser. INVESCO does not act as sub-adviser for Basic Value Fund; the
Reorganization will end INVESCO's role in the management of Large Cap Value
Fund's assets.
Performance
Set forth below are average annual total returns for the periods
indicated for Basic Value Fund and Large Cap Value Fund. The average annual
total return figures take into account sales charges applicable to purchases of
Class A shares or redemptions of Class B or Class C shares of the Funds. Past
performance cannot guarantee future results.
<TABLE>
<CAPTION>
LARGE CAP VALUE FUND BASIC VALUE FUND
CLASS A CLASS B CLASS C CLASS A CLASS B CLASS C
SHARES SHARES SHARES SHARES SHARES SHARES
------- ------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C>
1 Year Ended Dec. 31, 1999 -5.52% -5.08% -1.58% 24.75% 26.13% n/a
3 Years Ended Dec. 31, 1999 12.37% n/a 13.65% 19.33% 20.12% n/a
5 Years Ended Dec. 31, 1999 n/a n/a 17.51% n/a n/a n/a
10 Years Ended Dec. 31, 1999 n/a n/a 12.97% n/a n/a n/a
</TABLE>
Expenses
Set forth below is a comparison of annual operating expenses as a
percentage of net assets ("Expense Ratio") for the Class A, Class B, and Class C
shares of Large Cap Value Fund and Basic Value Fund for the year ended December
31, 1999. The pro forma estimated Expense Ratio of Basic Value Fund giving
effect to the Reorganization is also provided.
8
<PAGE> 13
<TABLE>
<CAPTION>
BASIC VALUE FUND PRO FORMA
LARGE CAP VALUE FUND BASIC VALUE FUND ESTIMATED
-------------------------------- --------------------------------- ---------------------------------
CLASS A CLASS B CLASS C CLASS A CLASS B CLASS C CLASS A CLASS B CLASS C
SHARES SHARES SHARES SHARES SHARES SHARES SHARES SHARES SHARES
-------- -------- -------- -------- -------- -------- -------- -------- ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
SHAREHOLDER TRANSACTION
EXPENSES
Maximum sales load on 5.50% None None 5.50% None None 5.50 % None None
purchase of shares (as a %
of offering price) (1)
Deferred Sales Charge (as a None 5.00% 1.00% None 5.00% 1.00% None 5.00% 1.00%
% of original purchase
price or redemption
proceeds, as applicable) (1)
ANNUAL OPERATING EXPENSES
(AS A % OF NET ASSETS)
Management Fees 0.75% 0.75% 0.75% 0.72% 0.72% 0.72% 0.73% 0.73% 0.73%
Rule 12b-1 Distribution 0.35% 1.00% 1.00% 0.35% 1.00% 1.00% 0.35% 1.00% 1.00%
Plan Payments(2)
All Other Expenses(3) 0.40% 0.34% 0.34% 0.64% 0.64% 0.64% 0.31% 0.31% 0.31%
---- ---- ---- ---- ---- ---- ---- ---- ----
Total Annual Fund Operating 1.50% 2.09% 2.09% 1.71% 2.36% 2.36% 1.39% 2.04% 2.04%
Expenses
Fee Waiver(4) 0.24% 0.14% 0.14% 0.02% 0.02% 0.02% 0.07% 0.07% 0.07%
---- ---- ---- ---- ---- ---- ---- ---- ----
Net Expenses 1.26% 1.95% 1.95% 1.69% 2.34% 2.34% 1.32% 1.97% 1.97%
</TABLE>
- ------------
(1) Sales charge waivers are available for Class A and reduced sales charge
purchase plans are available for Class A shares. The maximum 5% contingent
deferred sales charges ("CDSC") on Class B shares applies to redemptions
during the first year after purchase; the charge generally declines by 1%
annually thereafter, reaching zero after six years. The maximum CDSCs on
Class C shares apply to redemptions only during the first year after
purchase.
(2) 12b-1 distribution fees include asset-based sales charges.
(3) "Other expenses" include custody, transfer agent, legal and audit fees and
other operating expenses.
(4) AIM Distributors has contractually agreed to limit Large Cap Value Fund's
Class A shares' Rule 12b-1 distribution plan payments to 0.25%, and AIM has
agreed to waive 0.35% of administrative fees on assets in excess of $50
million. AIM has agreed to reimburse incremental master-feeder expenses
incurred by Basic Value Fund. Further, AIM has contractually agreed to
waive fees and reimburse expenses to limit Basic Value Fund's Proforma
total annual operating expenses (excluding interest, taxes, dividend
expense on short sales and extraordinary items) of Class A, Class B and
Class C to 1.32%, 1.97% and 1.97%, respectively, until June 30, 2001.
Hypothetical Example of Effect of Expenses
An investor would have directly or indirectly paid the following
expenses on a $10,000 investment under the existing and estimated fees and
expenses stated above, assuming a 5% annual return.
9
<PAGE> 14
<TABLE>
<CAPTION>
ONE THREE FIVE TEN
YEAR YEARS YEARS YEARS(3)
---- ----- ----- --------
<S> <C> <C> <C> <C>
LARGE CAP VALUE FUND
Class A shares (1)....................... $694 $998 $1,323 $2,242
Class B shares:
Assuming complete redemption at end
of period (2)...................... $712 $955 $1,324 $2,270
Assuming no redemption................ $212 $655 $1,124 $2,270
Class C shares..........................
Assuming complete redemption at end
of period (2)...................... $312 $655 $1,124 $2,421
Assuming no redemption................ $212 $655 $1,124 $2,421
BASIC VALUE FUND
Class A shares (1)....................... $714 $1,059 $1,427 $2,458
Class B shares:
Assuming complete redemption at end
of period (2)..................... $739 $1,036 $1,460 $2,535
Assuming no redemption................ $239 $736 $1,260 $2,535
Class C shares...........................
Assuming complete redemption at end
of period (2)..................... $339 $736 $1,260 $2,696
Assuming no redemption................ $239 $736 $1,260 $2,696
COMBINED FUND
Class A shares (1)....................... $684 $966 $1,269 $2,127
Class B shares:
Assuming complete redemption at end
of period(2)....................... $707 $940 $1,298 $2,202
Assuming no redemption................ $207 $640 $1,098 $2,202
Class C shares...........................
Assuming complete redemption at end
of period (2)...................... $307 $640 $1,098 $2,369
Assuming no redemption................ $207 $640 $1,098 $2,369
</TABLE>
- ------------
(1) Assumes payment of maximum sales charge by the investor.
(2) Assumes payment of the applicable CDSC.
(3) For Class B shares, this number reflects the conversion to Class A
shares eight years following the end of the calendar month in which
the purchase was made.
THE "HYPOTHETICAL EXAMPLE" IS NOT A REPRESENTATION OF PAST OR FUTURE
EXPENSES. THE FUND'S ACTUAL EXPENSES, AND AN INVESTOR'S DIRECT AND INDIRECT
EXPENSES, MAY BE MORE OR LESS THAN THOSE SHOWN. TO THE EXTENT FUND EXPENSES ARE
WAIVED OR REIMBURSED, THE AMOUNT AN INVESTOR WOULD PAY WILL BE LOWER. THE TABLE
AND THE ASSUMPTION IN THE EXAMPLE OF A 5% ANNUAL RETURN ARE REQUIRED BY
REGULATIONS OF THE SEC APPLICABLE TO ALL MUTUAL FUNDS. THE 5% ANNUAL RETURN IS
NOT A PREDICTION OF AND DOES NOT REPRESENT THE FUND'S PROJECTED OR ACTUAL
PERFORMANCE.
The actual expenses attributable to each class of a Fund's shares will
depend upon, among other things, the level of average net assets and the extent
to which a Fund incurs variable expenses, such as transfer agency costs.
10
<PAGE> 15
Sales Charges
No sales charges are applicable to shares of Basic Value Fund received
in connection with the Reorganization.
The Class A shares of both Basic Value Fund and Large Cap Value Fund
are sold subject to a maximum initial sales charge of 5.50%. Class B shares of
both Funds are sold subject to a maximum contingent deferred sales charge
("CDSC") of 5.00% of the lesser of the net asset value ("NAV") at time of
purchase or sale, which declines to zero after six years. The Class C shares of
both Funds are sold without initial sales charges but are subject to a maximum
CDSC of 1.00% of the lesser of the NAV at time of purchase or sale, only during
the first year. For purposes of calculating the CDSC, the holding period for the
Class B and Class C shares distributed to Class B and Class C shareholders of
Large Cap Value Fund, respectively, will be treated as having the same period
that the shares of Large Cap Value Fund previously held. New purchases of Class
A, Class B, and Class C shares of Basic Value Fund by any shareholders will be
subject to their terms, including, for example, for Class A shares, the 5.50%
initial sales charge. As is currently the case for both Funds, no CDSC will be
applied to redemptions of Class B shares that represent reinvested dividends or
other distributions, nor will Class A shares so acquired be subject to any
initial sales charge.
Distribution; Purchase, Exchange and Redemption
Shares of Basic Value Fund and Large Cap Value Fund are distributed by
AIM Distributors. The Class A shares of Basic Value Fund and Large Cap Value
Fund pay a fee in the amount of 0.35% of average daily net assets to AIM
Distributors for distribution services. AIM Distributors has contractually
agreed to waive 0.10% of the fee relating to Class A shares of Large Cap Value
Fund. The Class B and Class C shares of Basic Value Fund and Large Cap Value
Fund pay AIM Distributors fees at an annual rate of 1.00% of the average daily
net assets attributable to the Class B and Class C shares, respectively, for
distribution services. For more information, see the discussion under the
heading "Shareholder Information - Distribution and Service (12b-1) Fees" in the
Basic Value Fund Prospectus attached as Appendix II to this Proxy
Statement/Prospectus.
Purchase and redemption procedures are the same for Basic Value Fund
and Large Cap Value Fund. Shares of Basic Value Fund and Large Cap Value Fund
may be exchanged for shares of other funds within The AIM Family of Funds(R) of
the same class, as provided in each Fund's prospectus. No initial sales charge
will be imposed on the shares being acquired, and no CDSC will be imposed on the
shares being disposed of, through an exchange. However, a CDSC may apply to
redemptions of an AIM Fund's Class B or Class C shares acquired through an
exchange. Exchanges will be subject to minimum investment and other requirements
of the Fund into which exchanges are made.
RISK FACTORS
Basic Value Fund and Large Cap Value Fund are subject to substantially
similar investment risks as a result of their investment in equity securities of
U.S. issuers and foreign securities. Basic Value Fund is subject to additional
risk as a result of its investment in a greater percentage of equity securities
of small- and mid-cap U.S. issuers. The principal risks to Basic Value Fund from
investing in equity securities, foreign securities, and small- and mid-cap
companies are discussed herein.
EQUITY SECURITIES RISK
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.
11
<PAGE> 16
Equity securities, particularly common stock, generally represent the
most junior position in an issuer's capital structure and entitle holders to an
interest in the assets in an issuer, if any, remaining after all more senior
claims have been satisfied.
FOREIGN SECURITIES RISK
Foreign securities have additional risks, including exchange rate
changes, political and economic upheaval, the relative lack of information about
these companies, relatively low market liquidity, and the potential lack of
strict financial and accounting controls and standards.
SMALL-AND MID-CAP COMPANIES RISK
Small-cap companies and, to a lesser degree, mid-cap companies may be
more vulnerable than larger companies to adverse business, economic, or market
developments. Smaller companies may 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, smaller 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 Basic Value Fund's position in
securities of such companies may be substantial in relation to the market for
such securities. Accordingly, it may be difficult for Basic Value Fund to
dispose of securities of these small-cap companies at prevailing market prices
in order to meet redemptions.
COMPARISON OF INVESTMENT OBJECTIVES AND POLICIES
INVESTMENT OBJECTIVES OF BASIC VALUE FUND AND LARGE CAP VALUE FUND
Basic Value Fund seeks long-term growth of capital.
Large Cap Value Fund seeks high total return on investment through
growth of capital and current income, without regard to federal income tax
considerations.
INVESTMENT POLICIES OF BASIC VALUE FUND AND LARGE CAP VALUE FUND
Under normal market conditions, Basic Value Fund normally invests at
least 65% of its total assets in equity securities, including common stocks,
preferred stocks, convertible debt securities, and warrants to acquire such
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. Basic Value Fund 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. It may also
invest up to 25% of its total assets in foreign securities.
In managing Basic Value Fund, 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 change.
12
<PAGE> 17
In anticipation of or in response to adverse market conditions, for
cash management purposes, or for defensive purposes, Basic Value Fund may
temporarily hold all or a portion of its assets in cash, money market
instruments, shares of affiliated money market funds, or high-quality debt
securities. As a result, Basic Value Fund may not achieve its investment
objective.
Under normal market conditions, Large Cap Value Fund invests at least
65% of its investments in equity securities including common stocks and, to a
lesser extent, convertible securities, of selected companies with market
capitalizations among the largest 800 publicly traded U.S. corporations. The
portfolio managers may also invest up to 10% of its total assets in non-Canadian
foreign securities and unsponsored American Depositary Receipts (ADRs). The
portfolio managers may also invest up to 25% of Large Cap Value Fund's total
assets in Canadian securities and sponsored ADRs.
In order to identify the securities having the best relative values,
the portfolio managers start with a list of securities of the 800 largest
publicly traded U.S. corporations, which they reduce to a proprietary database
system and fundamental analysis. The portfolio managers consider whether to sell
a particular security when it no longer qualifies for the list of eligible
securities.
In anticipation of or in response to adverse market conditions, for
cash management purposes, or for defensive purposes, Large Cap Value Fund may
temporarily hold all or a portion of its assets in cash, money market
instruments, shares of affiliated money market funds, bonds, or other debt
securities. As a result, Large Cap Value Fund may not achieve its investment
objective.
PORTFOLIO MANAGEMENT
Michael C. Harhai and R. Terrence Irrgang are primarily responsible for
the day-to-day management of the Large Cap Value Fund. Mr. Harhai has been
portfolio manager for Large Cap Value Fund and has been associated with INVESCO
and/or its affiliates, an indirect wholly owned subsidiary of AMVESCAP PLC,
since 1993. Mr. Irrgang has been portfolio manager for Large Cap Value Fund and
has been associated with INVESCO and/or its affilitates since 1992.
Bret W. Stanley and Evan G. Harrel are primarily responsible for the
day-to-day management of the Basic Value Fund. Mr. Stanley has been portfolio
manager for Basic Value Fund since 1998 and has been associated with AIM 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. Mr.
Harrel has been portfolio manager for Basic Value Fund since 1998 and has been
associated with AIM 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.
MANAGEMENT DISCUSSION AND ANALYSIS OF PERFORMANCE
A discussion of the performance of Basic Value Fund for the twelve
month period ended December 31, 1999, is set forth in Appendix III to this Proxy
Statement/Prospectus.
FINANCIAL HIGHLIGHTS
The financial highlights table is intended to help you understand Basic
Value Fund's financial performance. Certain information reflects financial
results for a single Basic Value Fund share.
The total returns in the table represent the rate that an investor
would have earned (or lost) on an investment in Basic Value Fund (assuming
reinvestment of all dividends and distributions).
This information has been audited by PricewaterhouseCoopers LLP, whose
report, along with Basic Value Fund's financial statements, is included in Basic
Value Fund's annual report, which is available upon request.
13
<PAGE> 18
Total return information in this table may be affected by special
market factors, including Basic Value Fund's investments in initial public
offerings, which may have a magnified impact on Basic Value Fund due to its
small asset base. There is no guarantee that, as Basic Value Fund's assets grow,
it will continue to experience substantially similar performance.
<TABLE>
<CAPTION>
Class A
---------------------------------------------------------------------------
October 18
to
Year ended December 31, December 31,
--------------------------------------------------------- ---------------
1999(a) 1998 1997(a) 1996(a) 1995(a)
---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of period ........... $ 18.13 $ 17.25 $ 14.65 $ 12.76 $ 11.43
---------- ---------- ---------- ---------- ----------
Income from investment operations:
Net investment income (loss) ................ 0.05 0.04 0.09 (0.01) 0.03
Net gains on securities (both realized and
unrealized) ............................... 5.75 1.16 3.87 1.94 1.30
---------- ---------- ---------- ---------- ----------
Total from investment operations ........... 5.80 1.20 3.96 1.93 1.33
---------- ---------- ---------- ---------- ----------
Less distributions:
Dividends from net investment income ........ -- -- (0.03) -- --
Distributions from net realized gains ....... (0.09) (0.32) (1.33) (0.04) --
---------- ---------- ---------- ---------- ----------
Total distributions ....................... (0.09) (0.32) (1.36) (0.04) --
---------- ---------- ---------- ---------- ----------
Net asset value, end of period ................. $ 23.84 $ 18.13 $ 17.25 $ 14.65 $ 12.76
---------- ---------- ---------- ---------- ----------
Total return (b) ............................... 32.04% 7.02% 27.23% 15.12% 11.64%
---------- ---------- ---------- ---------- ----------
Ratios/supplemental data:
Net assets, end of period (000's omitted) ...... $ 70,791 $ 9,074 $ 7,688 $ 2,529 $ 870
---------- ---------- ---------- ---------- ----------
Ratio of expenses to average net assets:
With fee waivers and/or reimbursements ...... 1.69%(c) 1.74% 1.99% 2.00% 2.00%(d)
Without fee waivers and/or reimbursements ... 1.71%(c) 2.11% 2.97% 5.51% 50.54%(d)
Ratio of net investment income (loss) to
average net assets:
With fee waivers and/or reimbursements ...... 0.23%(c) 0.25% 0.56% (0.10)% 1.10%(d)
Without fee waivers and/or reimbursements ... 0.21%(c) (0.08)% (0.42)% (3.61)% (47.44)%(d)
Ratio of interest expense to average net
assets ...................................... -- -- 0.03% -- --
Portfolio turnover rate ........................ 63% 148% 93% 256% --
</TABLE>
- ---------------------
(a) Calculated using average shares outstanding.
(b) Does not deduct sales charges and is not annualized for periods
less than one year.
(c) Ratios are based on average net assets of $31,870,865.
(d) Annualized.
14
<PAGE> 19
<TABLE>
<CAPTION>
Class B
---------------------------------------------------------------------------
October 18
to
Year ended December 31, December 31,
--------------------------------------------------------- ------------
1999(a) 1998 1997(a) 1996(a) 1995(a)
---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of period ........... $ 17.79 $ 17.04 $ 14.54 $ 12.75 $ 11.43
---------- ---------- ---------- ---------- ----------
Income from investment operations:
Net investment income (loss) ................ (0.09) (0.08) (0.01) (0.10) 0.01
Net gains on securities (both realized and
unrealized) ................................ 5.62 1.15 3.83 1.93 1.31
---------- ---------- ---------- ---------- ----------
Total from investment operations ........... 5.53 1.07 3.82 1.83 1.32
---------- ---------- ---------- ---------- ----------
Less distributions:
Dividends from net investment income ........ -- -- -- -- --
Distributions from net realized gains ....... (0.09) (0.32) (1.32) (0.04) --
---------- ---------- ---------- ---------- ----------
Total distributions ....................... (0.09) (0.32) (1.32) (0.04) --
---------- ---------- ---------- ---------- ----------
Net asset value, end of period ................. $ 23.23 $ 17.79 $ 17.04 $ 14.54 $ 12.75
---------- ---------- ---------- ---------- ----------
Total return (b) ............................... 31.13% 6.34% 26.44% 14.35% 11.55%
---------- ---------- ---------- ---------- ----------
Ratios/supplemental data:
Net assets, end of period (000's omitted) ...... $ 55,785 $ 17,406 $ 16,717 $ 5,503 $ 1,254
---------- ---------- ---------- ---------- ----------
Ratio of expenses to average net assets:
With fee waivers and/or reimbursements ...... 2.34%(c) 2.39% 2.64% 2.65% 2.65%(d)
Without fee waivers and/or reimbursements ... 2.36%(c) 2.76% 3.62% 6.16% 51.19%(d)
Ratio of net investment income (loss) to
average net assets:
With fee waivers and/or reimbursements ...... (0.42)%(c) (0.40)% (0.09)% (0.75)% 0.45%(d)
Without fee waivers and/or reimbursements ... (0.44)%(c) (0.72)% (1.07)% (4.26)% (48.09)%(d)
Ratio of interest expense to average net
assets ...................................... -- -- 0.03% -- --
Portfolio turnover rate ........................ 63% 148% 93% 256% --
</TABLE>
- ---------------------------
(a) Calculated using average shares outstanding.
(b) Does not deduct contingent deferred sales charges and is not
annualized for periods less than one year.
(c) Ratios are based on average net assets of $31,150,693.
(d) Annualized.
15
<PAGE> 20
<TABLE>
<CAPTION>
Class C
------------
May 3
to
December 31,
------------
1999(a)
------------
<S> <C>
Net asset value, beginning of period ....................... $ 21.07
---------
Income from investment operations:
Net investment income (loss) ............................ (0.06)
Net gains on securities (both realized and
unrealized) ........................................... 2.31
---------
Total from investment operations ....................... 2.25
---------
Less distributions:
Dividends from net investment income .................... --
Distributions from net realized gains on
investments ........................................... (0.09)
---------
Total distributions ................................... (0.09)
---------
Net asset value, end of period ............................. $ 23.23
---------
Total return (b) ........................................... 10.72%
---------
Ratios/supplemental data:
Net assets, end of period (000's omitted) .................. $ 7,669
---------
Ratio of expenses to average net assets:
With fee waivers and/or reimbursements .................. 2.34%(c)
Without fee waivers and/or reimbursements ............... 2.36%(c)
Ratio of net investment income (loss) to average
net assets:
With fee waivers and/or reimbursements .................. (0.42)%(c)
Without fee waivers and/or reimbursements ............... (0.44)%(c)
Ratio of interest expense to average net assets ............ --
Portfolio turnover rate .................................... 63%
</TABLE>
- -----------
(a) Calculated using average shares outstanding.
(b) Does not deduct contingent deferred sales charges and is not
annualized for periods less than one year.
(c) Ratios are annualized and based on average net assets of
$2,389,446.
16
<PAGE> 21
ADDITIONAL INFORMATION ABOUT THE AGREEMENT
TERMS OF THE REORGANIZATION
The terms and conditions under which the Reorganization may be
consummated are set forth in the Agreement. Significant provisions of the
Agreement are summarized below; however, this summary is qualified in its
entirety by reference to the Agreement, a copy of which is attached as Appendix
I to this Proxy Statement/Prospectus.
THE REORGANIZATION
Basic Value Fund will acquire all of the assets of Large Cap Value Fund
in exchange for shares of Basic Value Fund and the assumption by Basic Value
Fund of the liabilities of Large Cap Value Fund. Consummation of the
Reorganization (the "Closing") is expected to occur on June 19, 2000, at 8:00
a.m. Eastern Time (the "Effective Time") on the basis of values calculated as of
the close of the customary trading session of the NYSE on June 16, 2000.
At the Effective Time, all of the assets of Large Cap Value Fund shall
be delivered to the Custodian for the account of Basic Value Fund in exchange
for the assumption by Basic Value Fund of all of the liabilities of any kind of
Large Cap Value Fund and delivery by AIM Growth Series directly to (i) the Large
Cap Value Fund Class A shareholders of a number of Basic Value Fund Class A
shares (including, if applicable, fractional shares rounded to the nearest
thousandth) and to (ii) the Large Cap Value Fund Class B shareholders of a
number of Basic Value Fund Class B shares (including, if applicable, fractional
shares rounded to the nearest thousandth) and to (iii) the Large Cap Value Fund
Class C shareholders of a number of Basic Value Fund Class C shares (including,
if applicable, fractional shares rounded to the nearest thousandth), having an
aggregate net asset value equal to the net value of the assets of Large Cap
Value Fund so transferred, assigned, and delivered.
OTHER TERMS
The Agreement may be amended by mutual agreement of the Company and the
Trust notwithstanding shareholder approval thereof by Large Cap Value Fund's
shareholders, provided that following such approval no amendment shall be made
that has a material adverse effect on the interests of Large Cap Value Fund's
shareholders.
Both the Company and the Trust have made representations and warranties
in the Agreement that are customary in matters such as the Reorganization. The
obligations of the Company and the Trust pursuant to the Agreement with respect
to Large Cap Value Fund or Basic Value Fund are subject to various conditions,
including the following: (a) the assets of Large Cap Value Fund to be acquired
by Basic Value Fund with which it will be combined shall constitute at least 90%
of the fair market value of the net assets and at least 70% of the fair market
value of the gross assets held by Large Cap Value Fund immediately prior to the
Reorganization; (b) the Trust's Registration Statement on Form N-14 under the
Securities Act of 1933 (the "1933 Act") shall have been filed with the SEC and
such Registration Statement shall have become effective, and no stop-order
suspending the effectiveness of the Registration Statement shall have been
issued, and no proceeding for that purpose shall have been initiated or
threatened by the SEC (and not withdrawn or terminated); (c) the shareholders of
Large Cap Value Fund shall have approved the Agreement; and (d) the Company and
the Trust shall have received an opinion from Kirkpatrick & Lockhart LLP that
the Reorganization will not result in the recognition of gain or loss for
Federal income tax purposes for Large Cap Value Fund, Basic Value Fund, or their
shareholders.
Large Cap Value Fund and Basic Value Fund have each agreed to bear
their own expenses in connection with the Reorganization.
The Board of Directors of the Company may waive without shareholder
approval any default by the Trust or any failure by the Trust to satisfy any of
the conditions to the Company's obligations as long as such a waiver will not
have a material adverse effect on the benefits intended under the Agreement for
the shareholders of Large Cap
17
<PAGE> 22
Value Fund. The Agreement may be terminated and the Reorganization may be
abandoned by either the Company or the Trust at any time by mutual agreement of
the Company and the Trust, or by either party in the event that Large Cap Value
Fund shareholders do not approve the Agreement or if the Closing does not occur
on or before December 31, 2000.
FEDERAL TAX CONSIDERATIONS
The exchange of Large Cap Value Fund's Assets for Basic Value Fund
shares and Basic Value Fund's assumption of the liabilities of Large Cap Value
Fund is intended to qualify for federal income tax purposes as a tax-free
reorganization under section 368 of the Internal Revenue Code of 1986, as
amended ("Code"). The Trust will receive an opinion of Kirkpatrick & Lockhart
LLP, its counsel, substantially to the effect that:
(i) The acquisition of the assets of the Large Cap Value Fund by the
Basic Value Fund in exchange solely for the Basic Value Fund Shares and
the Basic Value Fund's assumption of the Large Cap Value Fund's
liabilities, followed by the distribution of those Shares pro rata to
the Large Cap Value Fund Shareholders constructively in exchange for
their Large Cap Value Fund Shares, as provided in the Agreement, will
qualify as a "reorganization" within the meaning of section 368(a) of
the Code, and each of the Large Cap Value Fund and the Basic Value Fund
will be a "party to a reorganization" within the meaning of 368(b) of
the Code.
(ii) The Large Cap Value Fund will recognize no gain or loss on the
transfer of its assets to the Basic Value Fund in exchange solely for
Basic Value Fund Shares and the Basic Value Fund's assumption of the
Large Cap Value Fund's liabilities or on the distribution of those
Shares to the Large Cap Value Fund Shareholders.
(iii) The Basic Value Fund will recognize no gain or loss on its
receipt of the assets of the Large Cap Value Fund in exchange solely
for Basic Value Fund Shares and its assumption of the Large Cap Value
Fund's liabilities.
(iv) The Basic Value Fund's basis for the assets of the Large Cap Value
Fund transferred to it will be the same as the Large Cap Value Fund's
basis therefor immediately before the Reorganization, and the Basic
Value Fund's holding period for those assets will include the Large Cap
Value Fund's holding period therefor.
(v) A Large Cap Value Fund Shareholder will recognize no gain or loss
on the receipt of Basic Value Fund Shares in constructive exchange for
all its Large Cap Value Fund Shares pursuant to the Reorganization.
(vi) A Large Cap Value Fund Shareholder's aggregate basis for the Basic
Value Fund Shares received thereby in the Reorganization will be the
same as the aggregate basis for its Large Cap Value Fund Shares to be
constructively surrendered in exchange therefor, and its holding period
for those Basic Value Fund Shares will include its holding period for
those Large Cap Value Fund Shares, provided the Large Cap Value Fund
Shareholder held the Large Cap Value Fund Shares as capital assets at
the Effective Time.
The opinion may state that no opinion is expressed as to the effect of
the Reorganization on the Funds or any shareholder with respect to any asset as
to which any unrealized gain or loss is required to be recognized for federal
income tax purposes at the end of a taxable year (or on the termination or
transfer thereof) under a mark-to-market system of accounting.
Utilization by Basic Value Fund after the Reorganization of
pre-Reorganization capital losses realized by Large Cap Value Fund could be
subject to limitation in future years under the Code.
Shareholders of Large Cap Value Fund should consult their tax advisers
regarding the effect, if any, of the Reorganization in light of their individual
circumstances. Because the foregoing discussion only relates to the
18
<PAGE> 23
federal income tax consequences of the Reorganization, those shareholders also
should consult their tax advisers as to state and local tax consequences, if
any, of the Reorganization.
ACCOUNTING TREATMENT
The Reorganization will be accounted for on a tax-free combined basis.
Accordingly, the book cost basis to Basic Value Fund of the assets of Large Cap
Value Fund will be the same as the book cost basis of such assets to Large Cap
Value Fund.
RIGHTS OF SHAREHOLDERS
The Trust is a Delaware business trust and the Company is a Maryland
corporation. There are many similarities between the two forms of organization.
For example, the responsibilities, powers, and fiduciary duties of the directors
of the Company are substantially the same as those of the trustees of the Trust.
There are, however, certain differences between the two forms of
organization. The operations of the Trust, as a Delaware business trust, are
governed by its Agreement and Declaration of Trust, as amended (the "Declaration
of Trust") and Delaware law. The operations of the Company, a Maryland
corporation, are governed by its Articles of Incorporation, and amendments and
supplements thereto, and applicable Maryland law.
LIABILITY OF SHAREHOLDERS
Shareholders of a Maryland corporation generally do not have personal
liability for the corporation's obligations, except that a shareholder may be
liable to the extent that he receives any distributions which exceeds the amount
which he could properly receive under Maryland law or where such liability is
necessary to prevent fraud.
The Delaware Business Trust Act provides that shareholders of a
Delaware business trust shall be entitled to the same limitations of liability
extended to shareholders of private for-profit corporations. There is, however,
a remote possibility that, under certain circumstances, shareholders of a
Delaware business trust might be held personally liable for the trust's
obligations to the extent the courts of another state that does not recognize
such limited liability were to apply the laws of such state to a controversy
involving such obligations. The Trust's Declaration of Trust provides that
shareholders of Basic Value Fund shall not be subject to any personal liability
for acts or obligations of Basic Value Fund and that every written agreement,
obligation, or other undertaking made or issued by Basic Value Fund shall
contain a provision to the effect that shareholders are not personally liable
thereunder. In addition, the Declaration of Trust provides for indemnification
out of Basic Value Fund's property for any shareholder held personally liable
solely by reason of his or her being or having been a shareholder. Therefore,
the risk of any shareholder incurring financial loss beyond his investment due
to shareholder liability is limited to circumstances in which Basic Value Fund
itself is unable to meet its obligations and the express disclaimer of
shareholder liabilities is determined not to be effective. Given the nature of
the assets and operations of Basic Value Fund, the possibility of Basic Value
Fund being unable to meet its obligations is considered remote, and even if a
claim were brought against Basic Value Fund and a court determined that
shareholders were personally liable, it would likely not impose a material
obligation on a shareholder.
ELECTION OF TRUSTEES/DIRECTORS; TERMS
The shareholders of the Company have elected the directors of the
Company. Each director serves until a successor is elected, subject to earlier
death, incapacitation, resignation, retirement or removal (see below).
Shareholders may elect successors to such directors only at annual or special
meetings of shareholders.
19
<PAGE> 24
The shareholders of the Trust have elected the trustees of the Trust.
Such trustees serve for the life of AIM Growth Series, subject to the earlier
death, incapacitation, resignation, retirement or removal (see below).
Shareholders may elect successors to such trustees only at annual or special
meetings of shareholders.
REMOVAL OF TRUSTEES/DIRECTORS
A director of the Company may be removed by the affirmative vote of the
holders of a majority of the outstanding shares of the Company.
A trustee of the Trust may be removed at any time by vote of at least
two-thirds of the trustees or by vote of two-thirds of the outstanding shares of
the Trust. The Declaration of Trust provides that vacancies may be filled by
appointment by the remaining trustees.
MEETING OF SHAREHOLDERS
The Company is not required to hold annual meetings of shareholders and
does not intend to do so unless required by the 1940 Act. The Company's Bylaws
provide that a special meeting of shareholders may be called by the Chairman of
the Board of Directors, the President, a majority of the Board of Directors. In
addition, the Company's Bylaws provide that a special meeting of shareholders
may be called by the Secretary upon receipt of a request in writing, signed by
holders of shares entitled to cast at least 10% of the votes entitled to be cast
at the special meeting. Requests for special meetings must, among other things,
state the purpose of such meeting and the matters to be voted upon. No special
meeting need be called to consider any matter previously voted upon at a special
meeting called by the shareholders during the preceding twelve months, unless
requested by a majority of all shares entitled to vote at such meeting.
The Trust is not required to hold annual meetings of shareholders
unless required by the 1940 Act and does not intend to do so. The Bylaws of the
Trust provide that a majority of the trustees may call special meetings of
shareholders and the trustees shall call a special meeting of the shareholders
upon written request of the holders of not less than 10% of Basic Value Fund's
shares. Special meetings may be called for the purpose of electing trustees or
for any other action requiring shareholder approval, or for any matter deemed by
the trustees to be necessary or desirable.
LIABILITY OF TRUSTEES/DIRECTORS AND OFFICERS; INDEMNIFICATION
Maryland law requires indemnification of a corporation's directors and
officers if a director or officer has been successful on the merits or otherwise
in the defense of certain proceedings unless limited by its charter. Maryland
law also permits indemnification for other matters unless it is established that
the act or omission giving rise to the proceeding was committed in bad faith, a
result of active and deliberate dishonesty, or one in which a director or
officer actually received an improper benefit. The Company's Articles of
Incorporation provides that the Company shall indemnify and advance expenses to
its currently acting and its former directors to the fullest extent that
indemnification of directors is permitted by Maryland law.
Delaware law provides that trustees of a business trust shall not be
liable to the business trust or its shareholders for acting in good faith
reliance on the provisions of its governing instrument and that the trustees'
liabilities may be expanded or restricted by such instrument. Under the Trust's
Declaration of Trust, the trustees and officers of the Trust are not liable for
any act or omission or any conduct whatsoever in their capacity as trustees,
except for liability to the trust or shareholders due to willful misfeasance,
bad faith, gross negligence or reckless disregard of the duties involved in the
conduct of the office of trustee. Delaware law allows a business trust to
indemnify and hold harmless any trustee or other person against any and all
claims and demands. The Trust's Declaration of Trust provides for the
indemnification of its trustees and officers to the fullest extent permitted by
Delaware law or other applicable law.
20
<PAGE> 25
TERMINATION
Maryland law provides that the Company may be dissolved by the vote of
a majority of the Board of Directors and two-thirds of the shares entitled to
vote on the dissolution.
The Trust or any series or class of shares of beneficial interest in
the Trust may be terminated by a majority shareholder vote of the Trust or the
affected series or class, respectively, or if there are fewer than 100
shareholders of record of the Trust or of such terminating series or class, the
trustees pursuant to written notice to the shares of the Trust or the affected
series or class.
VOTING RIGHTS OF SHAREHOLDERS
Shareholders of a Maryland corporation such as the Company are entitled
to vote on, among other things, those matters which effect fundamental changes
in the corporate structure (such as a merger, consolidation or sale of
substantially all of the assets of the corporation) as provided by Maryland
corporation law.
The Trust's Declaration of Trust grants shareholders power to vote only
with respect to the following: (i) election of trustees; (ii) removal of
trustees; (iii) approval of investment advisory contracts, as required by the
1940 Act; (iv) termination of the Trust or a series of class of its shares of
beneficial interest; (v) amendment of the Declaration of Trust; (vi) sale of all
or substantially all of the assets of the Trust or one of its investment
portfolios; (vii) merger or consolidation of the Trust or any of its investment
portfolios, with certain exceptions; and (viii) approval of such additional
matters as may be required by law or as the trustees, in their sole discretion,
shall determine.
DISSENTERS' RIGHTS
Under Maryland law, the Company shareholders may not demand the fair
value of their shares from the successor company in a transaction involving the
transfer of Large Cap Value Fund's assets, and are bound by the terms of the
transaction.
Neither Delaware law nor the Declaration of Trust confers upon the
Trust's shareholders appraisal or dissenters' rights.
AMENDMENTS TO ORGANIZATION DOCUMENTS
Consistent with Maryland law, the Company reserves the right to amend,
alter, change, or repeal any provision contained in their Articles of
Incorporation in the manner now or hereafter prescribed by statute, including
any amendment that alters the contract rights, as expressly set forth in the
Articles of Incorporation, of any outstanding stock, and all rights conferred on
shareholders are granted subject to this reservation. The Board of Directors of
the Company may approve amendments to the Articles of Incorporation to classify
or reclassify unissued shares of a class of stock without shareholder approval.
Other amendments to the Company's Articles of Incorporation may be adopted if
approved by a vote of a majority of the shares at any meeting at which a quorum
is present. The Company's Bylaws provide that the Bylaws may be amended at any
regular meeting or special meeting of the stockholders provided that notice of
such amendment is contained in the notice of the special meeting. Except as to
any particular Bylaw which is specified as not subject to amendment by the Board
of Directors, the Bylaws may be also amended by the affirmative vote of a
majority of the Board of Directors at any regular or special meetings of the
Board.
Consistent with Delaware law, the Board of Trustees of the Trust may,
without shareholder approval, amend the Declaration of Trust at any time, except
that no amendment may be made which reduces the indemnification provided to
shareholders or former shareholders or which change the preferences, voting
powers,
21
<PAGE> 26
rights, and privileges of outstanding shares in a manner materially adverse to
the shareholders of such shares, without approval of the affected shareholders.
The trustees shall have the power to alter, amend, or repeal the Bylaws of the
Trust or adopt new Bylaws at any time.
OWNERSHIP OF LARGE CAP VALUE FUND AND BASIC VALUE FUND SHARES
Listed below is the name, address and percent ownership of each person
who as of April 3, 2000, to the knowledge of the Company, owned beneficially
five percent or more of any class of the outstanding shares of Large Cap Value
Fund:
[MANAGEMENT DOES NOT KNOW OF ANY PERSON WHO BENEFICIALLY OWNS 5% OR
MORE OF LARGE CAP VALUE FUND SHARES.]
LARGE CAP VALUE FUND
<TABLE>
<CAPTION>
NUMBER OF SHARES PERCENT BENEFICIAL
NAME AND ADDRESS CLASS OF SHARES OWNED OWNERSHIP
---------------- --------------- ---------------- ------------------
<S> <C> <C> <C>
</TABLE>
Listed below is the name, address and percent ownership of each person
who as of April 3, 2000, to the knowledge of the Trust, owned beneficially
five percent or more of any class of the outstanding shares of Basic Value Fund:
[MANAGEMENT DOES NOT KNOW OF ANY PERSON WHO BENEFICIALLY OWNS 5% OR
MORE OF BASIC VALUE FUND SHARES.]
BASIC VALUE FUND
<TABLE>
<CAPTION>
NUMBER OF SHARES PERCENT BENEFICIAL
NAME AND ADDRESS CLASS OF SHARES OWNED OWNERSHIP
---------------- --------------- ---------------- ------------------
<S> <C> <C> <C>
</TABLE>
OWNERSHIP OF OFFICERS AND TRUSTEES/DIRECTORS
To the best of the knowledge of the Company, the beneficial ownership
of shares of Large Cap Value Fund by officers or directors of the Company as a
group constituted less than one percent of the outstanding shares of such fund
as of April 3, 2000. To the best of the knowledge of the Trust, the beneficial
ownership of shares of Basic Value Fund by officers or trustees of the Trust as
a group constituted less than one percent of the outstanding shares of such fund
as of April 3, 2000.
22
<PAGE> 27
CAPITALIZATION
The following table shows the capitalization of each Fund as of
December 31, 1999 and on a pro forma combined basis (unaudited) as of that date,
giving effect to the Reorganization.
<TABLE>
<CAPTION>
BASIC VALUE FUND: LARGE CAP VALUE FUND: PRO FORMA CLASS A
CLASS A CLASS A COMBINED
---------------- -------------------- -----------------
<S> <C> <C> <C>
Net Assets $70,790,769 $12,011,184 $82,801,953
Shares Outstanding 2,969,093 549,760 3,472,963
Net Asset Value Per Share $ 23.84 $ 21.85 $ 23.84
</TABLE>
<TABLE>
<CAPTION>
BASIC VALUE FUND: LARGE CAP VALUE FUND: PRO FORMA CLASS B
CLASS B CLASS B COMBINED
---------------- -------------------- -----------------
<S> <C> <C> <C>
Net Assets $55,784,561 $6,572,901 $62,357,462
Shares Outstanding 2,401,002 302,862 2,683,917
Net Asset Value Per Share $ 23.23 $ 21.70 $ 23.23
</TABLE>
<TABLE>
<CAPTION>
BASIC VALUE FUND: LARGE CAP VALUE FUND: PRO FORMA CLASS C
CLASS C CLASS C COMBINED
---------------- -------------------- -----------------
<S> <C> <C> <C>
Net Assets $7,669,005 $142,672,365 $150,341,370
Shares Outstanding 330,070 6,575,037 6,472,055
Net Asset Value Per Share $ 23.23 $ 21.70 $ 23.23
</TABLE>
LEGAL MATTERS
Certain legal matters concerning the Trust and its participation in the
Reorganization, the issuance of shares of Basic Value Fund in connection with
the Reorganization, and the tax consequences of the Reorganization will be
passed upon by Kirkpatrick & Lockhart LLP, 1800 Massachusetts Avenue, N.W.,
Washington, D.C. 20036-1800, counsel to the Trust. Certain legal matters
concerning the Company and its participation in the Reorganization will be
passed upon by Ballard Spahr Andrews & Ingersoll, LLP, 1735 Market Street, 51st
Floor, Philadelphia, PA 19103-7599.
INFORMATION FILED WITH THE SECURITIES AND EXCHANGE COMMISSION
This Proxy Statement/Prospectus and the related Statements of
Additional Information do not contain all the information set forth in the
registration statements and the exhibits relating thereto and annual reports
which the Company and the Trust have filed with the SEC pursuant to the
requirements of the 1933 Act and the 1940 Act, to which reference is hereby
made. The SEC file number for the Company's registration statement containing
the Prospectus and Statement of Additional Information relating to Large Cap
Value Fund is Registration No. 2-87377. Such Prospectus and Statement of
Additional Information are incorporated herein by reference. The SEC file number
for the Trust's registration statement containing the Prospectus and Statement
of Additional Information relating to Basic Value Fund is Registration No.
2-57526. Such Prospectus and Statement of Additional Information are
incorporated herein by reference.
The Company and the Trust are subject to the informational requirements
of the 1940 Act and in accordance therewith files reports and other information
with the SEC. Reports, proxy statements, registration statements and other
information filed by the Company and the Trust (including the Registration
Statement of the
23
<PAGE> 28
Trust relating to the Basic Value Fund on Form N-14 of which this Proxy
Statement/Prospectus is a part and which is hereby incorporated by reference)
may be inspected without charge and copied at the public reference facilities
maintained by the SEC at Room 1014, Judiciary Plaza, 450 Fifth Street, NW,
Washington, DC 20549, and at the following regional offices of the SEC: 7 World
Trade Center, New York, NY 10048; and 500 West Madison Street, l4th Floor,
Chicago, IL 6066l. Copies of such material may also be obtained from the Public
Reference Section of the SEC at 450 Fifth Street, N.W., Washington, D.C. 20549
at the prescribed rates. The SEC maintains an internet web site at
http://www.sec.gov that contains information regarding the Company, the Trust,
and other registrants that file electronically with the SEC.
ADDITIONAL INFORMATION ABOUT LARGE CAP VALUE FUND AND BASIC VALUE FUND
For more information with respect to the Trust and Basic Value Fund
concerning the following topics, please refer to the Basic Value Fund Prospectus
as indicated: (i) see "Investment Objectives and Strategies" and "Fund
Management" for further information regarding the Trust and Basic Value Fund;
(ii) see discussion in "Investment Objectives and Strategies," "Fund
Management," and "Other Information" for further information regarding
management of Basic Value Fund; (iii) see "Fund Management" and "Other
Information" for further information regarding the shares of Basic Value Fund;
(iv) see "Fund Management," "Other Information," and "Shareholder Information"
for further information regarding the purchase, redemption and repurchase of
shares of Basic Value Fund.
For more information with respect to the Company and Large Cap Value
Fund concerning the following topics, please refer to the Large Cap Value Fund
Prospectus as indicated: (i) see "Investment Objectives and Strategies" and
"Fund Management" for further information regarding the Company and Large Cap
Value Fund; (ii) see discussion in "Investment Objectives and Strategies," "Fund
Management," and "Other Information" for further information regarding
management of Large Cap Value Fund; (iii) see "Fund Management" and "Other
Information" for further information regarding the shares of Large Cap Value
Fund; (iv) see "Fund Management," "Other Information," and "Shareholder
Information" for further information regarding the purchase, redemption and
repurchase of shares of Large Cap Value Fund.
EXPERTS
The audited financial statements of Basic Value Fund incorporated by
reference herein and in its Statement of Additional Information have been
audited by PricewaterhouseCoopers LLP, independent accountants, whose report
hereon is included in the Fund's Annual Report to Shareholders for the fiscal
year ended December 31, 1999. The financial statements audited by
PricewaterhouseCoopers LLP have been incorporated herein by reference in
reliance on its report given on its authority as experts in auditing and
accounting.
The audited financial statements of Large Cap Value Fund incorporated
by reference herein and in its Statement of Additional Information have been
audited by KPMG LLP, independent accountants, whose report thereon is included
in the Fund's Annual Reports to Shareholders for the fiscal year ended December
31, 1999. The financial statements audited by KPMG LLP have been incorporated
herein by reference in reliance on its report given on its authority as experts
in auditing and accounting.
24
<PAGE> 29
APPENDIX I
AGREEMENT
and
PLAN OF REORGANIZATION
for
AIM ADVISOR LARGE CAP VALUE FUND
and
AIM BASIC VALUE FUND
March 22, 2000
<PAGE> 30
TABLE OF CONTENTS
<TABLE>
<S> <C>
ARTICLE 1 DEFINITIONS........................................................I-2
Section 1.1 Definitions...................................................I-2
ARTICLE 2 TRANSFER OF ASSETS.................................................I-5
Section 2.1 Reorganizations...............................................I-5
Section 2.2 Computation of Net Asset Value................................I-6
Section 2.3 Closing of Acquired Fund's Share Transfer Books...............I-6
Section 2.4 Delivery......................................................I-6
Section 2.5 Termination of Series.........................................I-7
Section 2.6 Issuance of Acquiring Fund Shares.............................I-7
Section 2.7 Investment Securities.........................................I-7
Section 2.8 Liabilities...................................................I-7
ARTICLE 3 REPRESENTATIONS AND WARRANTIES OF AAF..............................I-8
Section 3.1 Organization; Authority.......................................I-8
Section 3.2 Registration and Regulation of AAF............................I-8
Section 3.3 Financial Statements..........................................I-8
Section 3.4 No Material Adverse Changes; Contingent Liabilities...........I-8
Section 3.5 Acquired Fund Shares; Liabilities; Business Operations........I-9
Section 3.6 Accountants...................................................I-9
Section 3.7 Binding Obligation............................................I-9
Section 3.8 No Breaches or Defaults.......................................I-9
Section 3.9 Authorizations or Consents...................................I-10
Section 3.10 Permits.....................................................I-10
Section 3.11 No Actions, Suits or Proceedings............................I-10
Section 3.12 Contracts...................................................I-11
Section 3.13 Properties and Assets.......................................I-11
Section 3.14 Taxes.......................................................I-11
Section 3.15 Benefit and Employment Obligations..........................I-12
Section 3.16 Brokers.....................................................I-12
Section 3.17 Voting Requirements.........................................I-12
Section 3.18 State Takeover Statutes.....................................I-12
Section 3.19 Books and Records...........................................I-12
Section 3.20 Prospectus and Statement of Additional Information..........I-12
Section 3.21 No Distribution.............................................I-13
Section 3.22 Liabilities.................................................I-13
Section 3.23 Value of Shares.............................................I-13
Section 3.24 Shareholder Expenses........................................I-13
Section 3.25 Intercompany Indebtedness...................................I-13
Section 3.26 Diversification of Assets...................................I-13
ARTICLE 4 REPRESENTATIONS AND WARRANTIES OF AGS.............................I-13
Section 4.1 Organization; Authority......................................I-13
</TABLE>
I-i
<PAGE> 31
<TABLE>
<S> <C>
Section 4.2 Registration and Regulation of AGS...........................I-13
Section 4.3 Financial Statements.........................................I-14
Section 4.4 No Material Adverse Changes; Contingent Liabilities..........I-14
Section 4.5 Registration of Acquiring Fund Shares........................I-14
Section 4.6 Accountants..................................................I-15
Section 4.7 Binding Obligation...........................................I-15
Section 4.8 No Breaches or Defaults......................................I-15
Section 4.9 Authorizations or Consents...................................I-16
Section 4.10 Permits.....................................................I-16
Section 4.11 No Actions, Suits or Proceedings............................I-16
Section 4.12 Taxes.......................................................I-16
Section 4.13 Brokers.....................................................I-17
Section 4.14 Representations Concerning the Reorganization...............I-17
Section 4.15 Prospectus and Statement of Additional Information..........I-18
Section 4.16 Value of Shares.............................................I-18
Section 4.17 Intercompany Indebtedness; Consideration....................I-18
ARTICLE 5 COVENANTS.........................................................I-18
Section 5.1 Conduct of Business..........................................I-18
Section 5.2 Announcements................................................I-20
Section 5.3 Expenses.....................................................I-20
Section 5.4 Further Assurances...........................................I-20
Section 5.5 Notice of Events.............................................I-20
Section 5.6 Access to Information........................................I-20
Section 5.7 Consents, Approvals and Filings..............................I-20
Section 5.8 Submission of Agreement to Shareholders......................I-21
ARTICLE 6 CONDITIONS PRECEDENT TO THE REORGANIZATION........................I-21
Section 6.1 Conditions Precedent of AGS..................................I-21
Section 6.2 Mutual Conditions............................................I-22
Section 6.3 Conditions Precedent of AAF..................................I-23
ARTICLE 7 TERMINATION OF AGREEMENT..........................................I-23
Section 7.1 Termination..................................................I-23
Section 7.2 Survival After Termination...................................I-24
ARTICLE 8 MISCELLANEOUS.....................................................I-24
Section 8.1 Survival of Representations and Warranties...................I-24
Section 8.2 Governing Law................................................I-24
Section 8.3 Binding Effect, Persons Benefitting, No Assignment...........I-24
Section 8.4 Obligations of AGS and AAF...................................I-24
Section 8.5 Amendments...................................................I-25
Section 8.6 Enforcement..................................................I-25
Section 8.7 Interpretation...............................................I-25
Section 8.8 Counterparts.................................................I-25
Section 8.9 Entire Agreement; Schedules..................................I-25
</TABLE>
I-ii
<PAGE> 32
<TABLE>
<S> <C>
Section 8.10 Notices.....................................................I-26
Section 8.11 Representations by AIM Advisors.............................I-26
Schedule 6.1(d) Opinion of Counsel to AGS
Schedule 6.2(g) Tax Opinion
Schedule 6.3(d) Opinion of Counsel to AAF
</TABLE>
I-iii
<PAGE> 33
AGREEMENT AND PLAN OF REORGANIZATION
AGREEMENT AND PLAN OF REORGANIZATION, dated as of March 22, 2000 (this
"Agreement"), by and among AIM Advisor Funds, Inc., a Maryland corporation
("AAF"), acting on behalf of AIM Advisor Large Cap Value Fund, a series of AAF
(the "Acquired Fund"), AIM Growth Series, a Delaware business trust ("AGS"),
acting on behalf of AIM Basic Value Fund, a series of AGS the ("Acquiring
Fund"), and A I M Advisors, Inc. ("AIM Advisors"), a Delaware corporation.
WITNESSETH
WHEREAS, AAF is an investment company registered with the Securities
and Exchange Commission (the "SEC") under the Investment Company Act of 1940
(the "Investment Company Act") that offers separate series of its shares
representing interests in its investment portfolio; and
WHEREAS, the Acquired Fund is a series of AAF; and
WHEREAS, AGS is an investment company registered with the SEC under the
Investment Company Act that offers separate series of its shares representing
interests in its investment portfolios; and
WHEREAS, the Acquiring Fund is a series of AGS; and
WHEREAS, AIM Advisors provides investment advisory services to both the
Acquired Fund and the Acquiring Fund; and
WHEREAS, the Acquired Fund desires to provide for its reorganization
through the transfer of all of its assets to the Acquiring Fund in exchange
solely for the assumption by the Acquiring Fund of all of its liabilities and
the issuance by AGS of shares of the Acquiring Fund in the manner set forth in
this Agreement; and
WHEREAS, this Agreement is intended to be, and is adopted by the
parties as, a "plan of reorganization" within the meaning of the regulations
under Section 368 of the Internal Revenue Code of 1986, as amended.
NOW, THEREFORE, in consideration of the foregoing premises and the
agreements and undertakings contained in this Agreement, AAF, AGS and AIM
Advisors agree as follows:
<PAGE> 34
ARTICLE 1
DEFINITIONS
Section 1.1 Definitions. For all purposes of this Agreement, the
following terms shall have the respective meanings set forth in this Section 1.1
(such definitions to be equally applicable to both the singular and plural forms
of the terms herein defined):
"AAF" means AIM Advisor Funds, Inc., a Maryland corporation.
"AAF Registration Statement" means the registration statement on Form
N-1A of AAF, as amended, Registration No. 811-3886.
"Acquired Fund" means AIM Advisor Large Cap Value Fund, a separate
series of AAF.
"Acquired Fund Class A Shareholders" means the holders of record as of
the Effective Time of Class A Shares.
"Acquired Fund Class A Shares" means Class A shares of common stock of
the Acquired Fund issued by AAF.
"Acquired Fund Class B Shareholders" means the holders of record as of
the Effective Time of Class B Shares.
"Acquired Fund Class B Shares" means Class B shares of common stock of
the Acquired Fund issued by AAF.
"Acquired Fund Class C Shareholders" means the holders of record as of
the Effective Time of Class C Shares.
"Acquired Fund Class C Shares" means Class C shares of common stock of
the Acquired Fund issued by AAF.
"Acquired Fund Financial Statements" shall have the meaning set forth
in Section 3.3 of this Agreement.
"Acquired Fund Net Value" means the value of the Assets less the amount
of the liabilities determined pursuant to Section 2.2(c) of this Agreement.
"Acquired Fund Shareholders" means the holders of record as of the
Effective Time of the issued and outstanding capital stock of the Acquired Fund.
"Acquired Fund Shareholders Meeting" means a meeting of the
shareholders of the Acquired Fund convened in accordance with applicable law and
the Articles of Incorporation of AAF to consider and vote upon the approval of
this Agreement and the Reorganization contemplated by this Agreement.
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"Acquired Fund Shares" means the Acquired Fund's Class A shares, Class
B shares, and Class C shares.
"Acquiring Fund" means AIM Basic Value Fund, a separate series of AGS.
"Acquiring Fund Class A Shares" means Class A shares of beneficial
interest in the Acquiring Fund issued by AGS.
"Acquiring Fund Class B Shares" means Class B shares of beneficial
interest in the Acquiring Fund issued by AGS.
"Acquiring Fund Class C Shares" means Class C shares of beneficial
interest in the Acquiring Fund issued by AGS.
"Acquiring Fund Financial Statements" shall have the meaning set forth
in Section 4.3 of this Agreement.
"Acquiring Fund Shares" means shares of beneficial interest in the
Acquiring Fund issued by AGS pursuant to Section 2.6 of this Agreement.
"Advisers Act" means the Investment Advisers Act of 1940, as amended,
and all rules and regulations of the SEC adopted pursuant thereto.
"Affiliated Person" means an affiliated person as defined in Section
2(a)(3) of the Investment Company Act.
"Agreement" means this Agreement and Plan of Reorganization, together
with all schedules attached hereto and all amendments hereto and thereof.
"AGS" means AIM Growth Series, a Delaware business trust.
"AGS Registration Statement" means the registration statement on Form
N-1A of AGS, as amended, Registration No. 811-2699.
"Assets" means all cash, cash equivalents, securities, receivables
(including interest and dividends receivable), claims and rights of action,
rights to register shares under applicable securities laws, books and records,
deferred and prepaid expenses shown as assets on the Acquired Fund's books, and
other property owned by the Acquired Fund at the Valuation Time.
"Benefit Plan" means any material "employee benefit plan" (as defined
in Section 3(3) of ERISA) and any material bonus, deferred compensation,
incentive compensation, stock ownership, stock purchase, stock option, phantom
stock, vacation, retirement, profit sharing, welfare plans or other plan,
arrangement or understanding maintained or contributed to by AAF on behalf of
the Acquired Fund, or otherwise providing benefits to any current or former
employee, officer or trustee of AAF.
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"Closing" means the transfer of the Assets to the Acquiring Fund, the
assumption of the Liabilities by the Acquiring Fund and the issuance of the
Acquiring Fund Shares directly to the Acquired Fund Shareholders as described in
Section 2.1 of this Agreement.
"Closing Date" means June 19, 2000, or such other date as the parties
may mutually determine.
"Code" means the Internal Revenue Code of 1986, as amended, and all
rules and regulations adopted pursuant thereto.
"Custodian" means State Street Bank and Trust Company acting in its
capacity as custodian for the assets of each Fund.
"Effective Time" means 8:00 a.m. Eastern Time on the Closing Date.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended, and all rules or regulations adopted pursuant thereto.
"Exchange Act" means the Securities Exchange Act of 1934, as amended,
and all rules and regulations adopted pursuant thereto.
"Fund" means the Acquired Fund or the Acquiring Fund.
"Governmental Authority" means any foreign, U.S. or state government,
government agency, department, board, commission (including the SEC) or
instrumentality, and any court, tribunal or arbitrator of competent
jurisdiction, and any governmental or non-governmental self-regulatory
organization, agency or authority (including the National Association of
Securities Dealers, Inc., the Commodity Futures Trading Commission, the National
Futures Association, the Investment Management Regulatory Organization Limited
and the Office of Fair Trading).
"Investment Company Act" means the Investment Company Act of 1940, as
amended, and all rules and regulations adopted pursuant thereto.
"Liabilities" means all of the Acquired Fund's liabilities, debts,
obligations, and duties of whatever kind or nature, whether absolute, accrued,
contingent, or otherwise, whether or not arising in the ordinary course of
business, whether or not determinable at the Valuation Time, and whether or not
specifically referred to in this Agreement.
"Lien" means any pledge, lien, security interest, charge, claim or
encumbrance of any kind.
"Material Adverse Effect" means an effect that would cause a change in
the condition (financial or otherwise), properties, assets or prospects of an
entity having an adverse monetary effect in an amount equal to or greater than
$50,000.
"Permit" shall have the meaning set forth in Section 3.10 of this
Agreement.
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"Person" means an individual or a corporation, partnership, limited
liability company, joint venture, association, trust, unincorporated
organization or other entity.
"Reorganization" means the acquisition of all of the Assets by the
Acquiring Fund in consideration of the assumption by the Acquiring Fund of all
of the Liabilities and the issuance by AGS of Acquiring Fund Shares directly to
Acquired Fund Shareholders as described in this Agreement, and the termination
of the Acquired Fund's status as a designated series of shares of AAF.
"Required Shareholder Vote" shall have the meaning set forth in Section
3.17 of this Agreement.
"Return" means any return, report or form or any attachment thereto
required to be filed with any taxing authority.
"SEC" means the United States Securities and Exchange Commission.
"Securities Act" means the Securities Act of 1933, as amended, and all
rules and regulations adopted pursuant thereto.
"Tax" means any tax or similar governmental charge, impost or levy --
including income taxes (including alternative minimum tax), franchise taxes,
transfer taxes or fees, sales taxes, use taxes, gross receipts taxes, value
added taxes, employment taxes, excise taxes, ad valorem taxes, property taxes,
withholding taxes, payroll taxes, or windfall profit taxes -- together with any
related penalties, fines, additions to tax or interest, imposed by the United
States or any state, county, local or foreign government or subdivision or
agency thereof.
"Valuation Time" means the close of regular trading on the NYSE on the
Closing Date.
ARTICLE 2
TRANSFER OF ASSETS
Section 2.1 Reorganization. At the Effective Time, all of the Assets
shall be delivered to the Custodian for the account of the Acquiring Fund in
exchange for the assumption by the Acquiring Fund of all of the Liabilities and
delivery by AGS directly to (a) the Acquired Fund Class A Shareholders of a
number of the Acquiring Fund Class A Shares (including, if applicable,
fractional shares rounded to the nearest thousandth) determined by dividing the
Acquired Fund Net Value attributable to the Acquired Fund Class A Shares by the
net asset value of an Acquiring Fund Class A Share as of the Valuation Time, (b)
the Acquired Fund Class B Shareholders of a number of the Acquiring Fund Class B
Shares (including, if applicable, fractional shares rounded to the nearest
thousandth) determined by dividing the Acquired Fund Net Value attributable to
the Acquired Fund Class B Shares by the net asset value of an Acquiring Fund
Class B Share as of the Valuation Time, and (c) the Acquired Fund Class C
Shareholders of a number of the Acquiring Fund Class C Shares (including, if
applicable, fractional shares rounded to the nearest thousandth) determined by
dividing the Acquired Fund Net Value attributable to the Acquired Fund Class C
Shares by the net asset value of an
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Acquiring Fund Class C Share as of the Valuation Time. Upon delivery of the
Assets, the Acquiring Fund will receive good and marketable title thereto free
and clear of all Liens.
Section 2.2 Computation of Net Asset Value.
(a) The net asset value of each class of the Acquiring Fund Shares, and
the Acquired Fund Net Value, shall, in each case, be determined as of the
Valuation Time.
(b) The net asset value of each class of the Acquiring Fund Shares
shall be computed in accordance with the policies and procedures of the
Acquiring Fund as described in the AGS Registration Statement.
(c) The Acquired Fund Net Value shall be computed in accordance with
the policies and procedures of the Acquired Fund as described in the AAF
Registration Statement.
(d) All computations pursuant to paragraphs (b) and (c) shall be made
by agreement of AAF and AGS. The parties agree to use commercially reasonable
efforts to resolve any material pricing differences between the prices of
portfolio securities determined in accordance with their respective pricing
policies and procedures.
(e) If, immediately before the Valuation Time, (i) the NYSE is closed
to trading or trading thereon is restricted or (ii) trading or the reporting of
trading on the NYSE or elsewhere is disrupted, so that accurate appraisal of the
Acquired Fund's Net Value and the net asset value per share of the Acquiring
Fund's Shares is impracticable, the Effective Time shall be postponed until the
first Business Day after the day when such trading shall have been fully resumed
and such reporting shall have been restored.
Section 2.3 Closing of Acquired Fund's Share Transfer Books. The share
transfer books of the Acquired Fund will be permanently closed as of the
Valuation Time, and only requests for the redemption of Acquired Fund Shares
received in proper form prior to the Valuation Time shall be accepted by the
Acquired Fund. Redemption requests thereafter received by the Acquired Fund
shall be deemed to be redemption requests for Acquiring Fund Shares to be
distributed to the Acquired Fund Shareholders under this Agreement (assuming
that the transactions contemplated by this Agreement have been consummated).
Section 2.4 Delivery.
(a) The Assets shall be delivered by AAF to the Custodian on the
Closing Date. No later than three (3) business days preceding the Closing Date,
AAF shall instruct the Custodian to transfer the Assets to the account of the
Acquiring Fund at the Effective Time. The Assets so delivered shall be duly
endorsed in proper form for transfer in such condition as to constitute a good
delivery thereof, in accordance with the custom of brokers, and shall be
accompanied by all necessary state stock transfer stamps, if any, or a check for
the appropriate purchase price thereof. Cash held by the Acquired Fund shall be
delivered at the Effective Time and shall be in the form of currency or wire
transfer in Federal funds, payable to the order of the account of the Acquiring
Fund at the Custodian.
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(b) If, on the Closing Date, the Acquired Fund is unable to make
delivery in the manner contemplated by Section 2.4(a) of securities purchased by
it prior to the Closing Date that have not yet been delivered to the Acquired
Fund or its broker, then AGS shall waive the delivery requirements of Section
2.4(a) with respect to such undelivered securities if the Acquired Fund has
delivered to the Custodian by or on the Closing Date, and with respect to such
undelivered securities, executed copies of an agreement of assignment and escrow
agreement and due bills executed on behalf of said broker or brokers, together
with such other documents as may be required by AGS or the Custodian, including
brokers' confirmation slips.
Section 2.5 Termination of Series. As soon as reasonably practicable,
but in all events within six months, after the Closing Date, the status of the
Acquired Fund as a designated series of shares of AAF shall be terminated;
provided, however, that such termination shall not be required if the
Reorganization is not consummated.
Section 2.6 Issuance of Acquiring Fund Shares. At the Effective Time,
(a) each Acquired Fund Class A Shareholder shall be issued that number of full
and fractional Acquiring Fund Class A Shares having a net asset value equal to
the Acquired Fund Net Value attributable to the Acquired Fund Class A Shares
then held by such Acquired Fund Shareholder; (b) each Acquired Fund Class B
Shareholder shall be issued that number of full and fractional Acquiring Fund
Class B Shares having a net asset value equal to the Acquired Fund Net Value
attributable to the Acquired Fund Class B Shares then held by such Acquired Fund
Shareholder; and (c) each Acquired Fund Class C Shareholder shall be issued that
number of full and fractional Acquiring Fund Class C Shares having a net asset
value equal to the Acquired Fund Net Value attributable to the Acquired Fund
Class C Shares then held by such Acquired Fund Shareholder. All issued and
outstanding capital stock of the Acquired Fund shall thereupon be canceled on
the books of AAF. AAF shall provide instructions to the transfer agent of AGS
with respect to the Acquiring Fund Shares to be issued to each Acquired Fund
Shareholder. AGS shall have no obligation to inquire as to the validity,
propriety or correctness of any such instruction, but shall, in each case,
assume that such instruction is valid, proper and correct. AGS shall record on
its books the ownership of each class of Acquiring Fund Shares by Acquired Fund
Shareholders and shall forward a confirmation of such ownership to each of them.
No redemption or repurchase of such Acquiring Fund Shares credited to former
Acquired Fund Shareholders in respect of Acquired Fund shares represented by
unsurrendered shares certificates shall be permitted until such certificates
have been surrendered to AGS for cancellation, or if such certificates are lost
or misplaced, until lost certificate affidavits have been executed and delivered
to AGS.
Section 2.7 Investment Securities. AIF's fund accounting and pricing
agent shall deliver at the Closing a certificate of an authorized officer
thereof verifying that the information (including adjusted basis and holding
period, by lot) concerning the Assets, including all portfolio securities, as
reflected on the Acquiring Fund's books immediately following the Closing does
or will conform to such information on the Acquired Fund's books immediately
before the Closing.
Section 2.8 Liabilities. The Acquired Fund shall use reasonable best
efforts to discharge all of its known Liabilities, so far as may be possible,
prior to the Closing Date.
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ARTICLE 3
REPRESENTATIONS AND WARRANTIES OF AAF
AAF, on behalf of the Acquired Fund, represents and warrants to AGS
that:
Section 3.1 Organization; Authority. AAF is duly organized, validly
existing and in good standing under the Maryland General Corporation Law, with
all requisite corporate power and authority to enter into this Agreement and
perform its obligations hereunder.
Section 3.2 Registration and Regulation of AAF. AAF is duly registered
with the SEC as an investment company under the Investment Company Act, the
Acquired Fund is a duly established and designated series thereof, and all
Acquired Fund Shares that have been or are being offered for sale have been duly
registered under the Securities Act and have been duly registered, qualified or
are exempt from registration or qualification under the securities laws of each
state or other jurisdiction in which such shares have been or are being offered
for sale, and no action has been taken by AAF to revoke or rescind any such
registration or qualification. The Acquired Fund is in compliance in all
material respects with all applicable laws, rules and regulations, including,
without limitation, the Investment Company Act, the Securities Act, the Exchange
Act and all applicable state securities laws. The Acquired Fund is in compliance
in all material respects with the investment policies and restrictions
applicable to it set forth in the AAF Registration Statement currently in
effect. The value of the net Assets is determined using portfolio valuation
methods that comply in all material respects with the requirements of the
Investment Company Act and the policies of the Acquired Fund, and all purchases
and redemptions of Acquired Fund Shares have been effected at the net asset
value per share calculated in such manner.
Section 3.3 Financial Statements. The books of account and related
records of the Acquired Fund fairly reflect in reasonable detail its assets,
liabilities and transactions in accordance with generally accepted accounting
principles applied on a consistent basis. The audited financial statements for
the fiscal year ended December 31, 1999, of the Acquired Fund previously
delivered to AGS (the "Acquired Fund Financial Statements") present fairly in
all material respects the financial position of the Acquired Fund as at the
dates indicated and the results of operations and changes in net assets for the
periods then ended in accordance with generally accepted accounting principles
applied on a consistent basis for the periods then ended.
Section 3.4 No Material Adverse Changes; Contingent Liabilities. Since
December 31, 1999, no material adverse change has occurred in the financial
condition, results of operations, business, assets or liabilities, other than
changes resulting from any change in general conditions in the financial or
securities markets or the performance of any investments made by the Acquired
Fund or occurring in the ordinary course of business, of the Acquired Fund or
the status of the Acquired Fund as a regulated investment company under the
Code. There are no contingent Liabilities not disclosed in the Acquired Fund
Financial Statements that are required to be disclosed in accordance with
generally accepted accounting principles.
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Section 3.5 Acquired Fund Shares; Liabilities; Business Operations.
(a) The Acquired Fund Shares have been duly authorized and validly
issued and are fully paid and non-assessable.
(b) AAF's management is unaware of any plan or intention of Acquired
Fund Shareholders to redeem, sell, or otherwise dispose of (i) any portion of
their Acquired Fund Shares before the Reorganization to any person "related"
(within the meaning of Section 1.368-1(e)(3) of the Income Tax Regulations under
the Code) to either Fund or (b) any portion of the Acquiring Fund Shares to be
received by them in the Reorganization to any person related (within such
meaning) to Acquiring Fund.
(c) At the time of its Reorganization, the Acquired Fund shall not have
outstanding any warrants, options, convertible securities or any other type of
right pursuant to which any Person could acquire Acquired Fund Shares, except
for the right of investors to acquire Acquired Fund Shares at net asset value in
the normal course of its business as a series of an open-end management
investment company operating under the Investment Company Act.
(d) From the date it commenced operations and ending on the Closing
Date, the Acquired Fund will have conducted its "historic business" (within the
meaning of Section 1.368-1(d)(2) of the Income Tax Regulations under the Code)
in a substantially unchanged manner. In anticipation of the Reorganization, the
Acquired Fund will not dispose of assets that, in the aggregate, will result in
less than 50% of its "historic business assets" (within the meaning of Section
1.368-1(d)(3) of those regulations) being transferred to the Acquiring Fund.
(e) AAF does not have, and has not had during the six months prior to
the date of this Agreement, any employees, and shall not hire any employees from
and after the date of this Agreement through the Closing Date.
Section 3.6 Accountants. KPMG LLP, which has reported upon the Acquired
Fund Financial Statements for the fiscal year ended December 31, 1999, are
independent public accountants as required by the Securities Act and the
Exchange Act.
Section 3.7 Binding Obligation. This Agreement has been duly
authorized, executed and delivered by AAF on behalf of the Acquired Fund and,
when this Agreement has been duly authorized, executed and delivered by AGS on
behalf of the Acquiring Fund and approved by the Acquired Fund's shareholders,
will constitute the legal, valid and binding obligation of AAF enforceable
against AAF in accordance with its terms from and with respect to the revenues
of the Acquired Fund and the Assets, except as the enforceability hereof may be
limited by bankruptcy, insolvency, reorganization or similar laws relating to or
affecting creditors' rights generally, or by general equity principles (whether
applied in a court of law or a court of equity and including limitations on the
availability of specific performance or other equitable remedies).
Section 3.8 No Breaches or Defaults. The execution and delivery of this
Agreement by AAF on behalf of the Acquired Fund and the performance by AAF of
its
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obligations hereunder have been duly authorized by all necessary corporate
action on the part of AAF, other than the Acquired Fund's shareholders'
approval, and do not, and on the Closing Date will not, (i) result in any
violation of the Articles of Incorporation or by-laws of AAF and (ii) result in
a breach of any of the terms or provisions of, or constitute (with or without
the giving of notice or the lapse of time or both) a default under, or give rise
to a right of termination, cancellation or acceleration of any obligation or to
the loss of a material benefit under, or result in the creation or imposition of
any Lien upon any property of the Acquired Fund or the Assets (except for such
breaches or defaults or Liens that would not reasonably be expected,
individually or in the aggregate, to have a Material Adverse Effect) under (A)
any indenture, mortgage or loan agreement or any other material agreement or
instrument to which AAF is a party or by which it may be bound and which relates
to the Assets or to which any property of the Acquired Fund may be subject; (B)
any Permit; or (C) any existing applicable law, rule, regulation, judgment,
order or decree of any Governmental Authority having jurisdiction over AAF or
any property of the Acquired Fund. The Acquired Fund is not under the
jurisdiction of a court in a proceeding under Title 11 of the United States Code
or similar case within the meaning of Section 368(a)(3)(A) of the Code.
Section 3.9 Authorizations or Consents. Other than those that shall
have been obtained or made on or prior to the Closing Date and those that must
be made after the Closing Date to comply with Section 2.5 of this Agreement, no
authorization or approval or other action by, and no notice to or filing with,
any Governmental Authority will be required to be obtained or made by AAF in
connection with its due execution and delivery of this Agreement and its
consummation of the transactions contemplated hereby.
Section 3.10 Permits. AAF has in full force and effect all approvals,
consents, authorizations, certificates, filings, franchises, licenses, notices,
permits and rights of Governmental Authorities (collectively, "Permits")
necessary for it to conduct its business as presently conducted as it relates to
the Acquired Fund, and there has occurred no default under any Permit, except
for the absence of Permits and for defaults under Permits the absence or default
of which would not reasonably be expected to have, individually or in the
aggregate, a Material Adverse Effect. To the knowledge of AAF there are no
proceedings relating to the suspension, revocation or modification of any
Permit, except for such that would not reasonably be expected, individually or
in the aggregate, to have a Material Adverse Effect.
Section 3.11 No Actions, Suits or Proceedings.
(a) There is no pending action, litigation or proceeding, nor, to the
knowledge of AAF, has any litigation been overtly threatened in writing or, if
probable of assertion, orally, against AAF before any Governmental Authority
that questions the validity or legality of this Agreement or of the actions
contemplated hereby or that seeks to prevent the consummation of the
transactions contemplated hereby, including the Reorganization.
(b) There are no judicial, administrative or arbitration actions,
suits, or proceedings instituted or pending or, to the knowledge of AAF,
threatened in writing or, if probable of assertion, orally, against AAF
affecting any property, asset, interest or right of the Acquired Fund, that
could reasonably be expected to have, individually or in the aggregate, a
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Material Adverse Effect with respect to the Acquired Fund. There are not in
existence on the date hereof any plea agreements, judgments, injunctions,
consents, decrees, exceptions or orders that were entered by, filed with or
issued by Governmental Authority relating to AAF's conduct of the business of
the Acquired Fund affecting in any significant respect the conduct of such
business. AAF is not, and has not been to its knowledge, the target of any
investigation by the SEC or any state securities administrator with respect to
its conduct of the business of the Acquired Fund.
Section 3.12 Contracts. AAF is not in default under any contract,
agreement, commitment, arrangement, lease, insurance policy or other instrument
to which it is a party and that involves or affects the Assets, by which the
assets, business, or operations of the Acquired Fund may be bound or affected,
or under which it or the assets, business or operations of the Acquired Fund
receives benefits, and which default could reasonably be expected, individually
or in the aggregate, to have a Material Adverse Effect, and, to the knowledge of
AAF there has not occurred any event that, with the lapse of time or the giving
of notice or both, would constitute such a default.
Section 3.13 Properties and Assets. AAF, on behalf of the Acquired
Fund, has good and marketable title to all properties and assets reflected in
the Acquired Fund Financial Statements as owned by it, free and clear of all
Liens, except as described in the Acquired Fund Financial Statements.
Section 3.14 Taxes.
(a) The Acquired Fund is a "fund" as defined in Section 851(g)(2) of
the Code and has elected to be a regulated investment company under Subchapter M
of the Code. The Acquired Fund has qualified for treatment as such for each
taxable year since inception that has ended prior to the Closing Date and will
continue to satisfy the requirements of Subchapter M of the Code to maintain
such qualification for the period beginning on the first day of its current
taxable year and ending on the Closing Date. The Acquired Fund has no earnings
and profits accumulated in any taxable year in which the provisions of
Subchapter M of the Code did not apply to it. In order to (i) insure continued
qualification of the Acquired Fund for treatment as a regulated investment
company for tax purposes and (ii) eliminate any tax liability of the Acquired
Fund arising by reason of undistributed investment company taxable income or net
capital gain, AAF will declare on or prior to the Closing Date to the
shareholders of the Acquired Fund a dividend or dividends that, together with
all previous dividends, shall have the effect of distributing (A) all of the
Acquired Fund's investment company taxable income (determined without regard to
any deductions for dividends paid) for the taxable year ended December 31, 1999,
and for the short taxable year beginning on January 1, 2000, and ending on the
Closing Date and (B) all of the Acquired Fund's net capital gain recognized in
its taxable year ended December 31, 1999, and in such short taxable year (after
reduction for any capital loss carryover).
(b) The Acquired Fund has timely filed all Returns required to be filed
by it, and all Taxes with respect thereto have been paid, except where the
failure so to file or so to pay would not reasonably be expected, individually
or in the aggregate, to have a Material Adverse
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Effect. Adequate provision has been made in the Acquired Fund Financial
Statements for all Taxes in respect of all periods ended on or before the date
of such financial statements, except where the failure to make such provisions
would not reasonably be expected, individually or in the aggregate, to have a
Material Adverse Effect. No deficiency for any Taxes has been proposed, assessed
or asserted in writing by any taxing authority against the Acquired Fund, where
such deficiency would reasonably be expected, individually or in the aggregate,
to have a Material Adverse Effect. No waivers of the time to assess any such
Taxes are outstanding nor are any written requests for such waivers pending, and
no Returns of the Acquired Fund are currently being or have been audited with
respect to income taxes or other Taxes by any Federal, state, local or foreign
Tax authority.
(c) To the best knowledge of AAF, the fiscal year of the Acquired Fund
has not been changed for tax purposes since the date on which it commenced
operations.
Section 3.15 Benefit and Employment Obligations. On or prior to the
Closing Date, the Acquired Fund will have no obligation to provide any
post-retirement or post-employment benefit to any Person, including under any
Benefit Plan, and will have no obligation to provide unfunded deferred
compensation or other unfunded or self-funded benefits to any Person.
Section 3.16 Brokers. No broker, finder or similar intermediary has
acted for or on behalf of AAF in connection with this Agreement or the
transactions contemplated hereby, and no broker, finder, agent or similar
intermediary is entitled to any broker's, finder's or similar fee or other
commission in connection therewith based on any agreement, arrangement or
understanding with AAF or any action taken by it.
Section 3.17 Voting Requirements. The vote of a majority of the
outstanding Acquired Fund Shares entitled to vote cast at a meeting at which a
quorum is present (the "Required Shareholder Vote") is the only vote of Acquired
Fund Shareholders necessary to approve this Agreement and the Reorganization
contemplated by this Agreement.
Section 3.18 State Takeover Statutes. No state takeover statute or
similar statute or regulation applies to the Reorganization, this Agreement or
any of the transactions contemplated by this Agreement.
Section 3.19 Books and Records. The books and records of AAF relating
to the Acquired Fund, reflecting, among other things, the purchase and sale of
Acquired Fund Shares, the number of issued and outstanding shares owned by the
Acquired Fund's shareholders and the states or other jurisdictions in which such
shares were offered and sold, are complete and accurate in all material
respects.
Section 3.20 Prospectus and Statement of Additional Information. The
current prospectus and statement of additional information for the Acquired Fund
as of the date on which they were issued did not contain, and as supplemented by
any supplement thereto dated prior to or on the Closing Date do not contain, any
untrue statement of a material fact or omit to state a
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material fact required to be stated therein or necessary to make the statements
therein not misleading.
Section 3.21 No Distribution. The Acquiring Fund Shares are not being
acquired for the purpose of any distribution thereof, other than in accordance
with the terms of this Agreement.
Section 3.22 Liabilities. The Liabilities were incurred by the Acquired
Fund in the ordinary course of its business and are associated with the Assets.
The fair market value of the Assets on a going concern basis will equal or
exceed the sum of the Liabilities to be assumed by the Acquiring Fund plus the
amount of Liabilities, if any, to which the Assets will be subject.
Section 3.23 Value of Shares. The fair market value of the Acquiring
Fund Shares received by each Acquired Fund Shareholder in the Reorganization
will be approximately equal to the fair market value of its Acquired Fund Shares
constructively surrendered in exchange therefor.
Section 3.24 Shareholder Expenses. The Acquired Fund Shareholders will
pay their own expenses, if any, incurred in connection with the Reorganization.
Section 3.25 Intercompany Indebtedness. There is no intercompany
indebtedness between the Funds that was issued or acquired, or will be settled,
at a discount.
Section 3.26 Diversification of Assets. Not more than 25% of the value
of the Acquired Fund's total assets (excluding cash, cash items and U.S.
government securities) is invested in the stock and securities of any one
issuer, and not more than 50% of the value of such assets is invested in the
stock and securities of five or fewer issuers.
ARTICLE 4
REPRESENTATIONS AND WARRANTIES OF AGS
AGS, on behalf of the Acquiring Fund, represents and warrants to AAF as
follows:
Section 4.1 Organization; Authority. AGS is duly organized, validly
existing and in good standing under the Delaware Business Trust Act, with all
requisite trust power and authority to enter into this Agreement and perform its
obligations hereunder.
Section 4.2 Registration and Regulation of AGS. AGS is duly registered
with the SEC as an investment company under the Investment Company Act, and the
Acquiring Fund is a duly established and designated series thereof. The
Acquiring Fund is in compliance in all material respects with all applicable
laws, rules and regulations, including, without limitation, the Investment
Company Act, the Securities Act, the Exchange Act and all applicable state
securities laws. The Acquiring Fund is in compliance in all material respects
with the applicable investment policies and restrictions set forth in the AGS
Registration Statement. The value of the net assets of the Acquiring Fund is
determined using portfolio valuation methods that comply in all material
respects with the requirements of the Investment Company Act and the policies of
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the Acquired Fund and all purchases and redemptions of Acquired Fund Shares have
been effected at the net asset value per share calculated in such manner.
Section 4.3 Financial Statements. The books of account and related
records of the Acquiring Fund fairly reflect in reasonable detail its assets,
liabilities and transactions in accordance with generally accepted accounting
principles applied on a consistent basis. The audited financial statements for
the fiscal year ended December 31, 1999, of the Acquiring Fund previously
delivered to AAF (the "Acquiring Fund Financial Statements") present fairly in
all material respects the financial position of the Acquiring Fund as at the
dates indicated and the results of operations and changes in net assets for the
periods then ended in accordance with generally accepted accounting principles
applied on a consistent basis for the periods then ended.
Section 4.4 No Material Adverse Changes; Contingent Liabilities. Since
December 31, 1999, no material adverse change has occurred in the financial
condition, results of operations, business, assets or liabilities of the
Acquiring Fund or the status of the Acquiring Fund as a regulated investment
company under the Code, other than changes resulting from any change in general
conditions in the financial or securities markets or the performance of any
investments made by the Acquiring Fund or occurring in the ordinary course of
business of the Acquiring Fund or AGS. There are no contingent liabilities of an
Acquiring Fund not disclosed in the Acquiring Fund Financial Statements which
are required to be disclosed in accordance with generally accepted accounting
principles.
Section 4.5 Registration of Acquiring Fund Shares.
(a) The shares of beneficial interest in AGS are divided into six
portfolios, including the Acquiring Fund. The Acquiring Fund currently has three
classes of shares, Class A shares, Class B shares and Class C shares. Under its
Agreement and Declaration of Trust, AGS is authorized to issue an unlimited
number of shares of the Acquiring Fund.
(b) The Acquiring Fund Shares to be issued pursuant to Section 2.6
shall on the Closing Date be duly registered under the Securities Act by a
Registration Statement on Form N-14 of AGS then in effect.
(c) The Acquiring Fund Shares to be issued pursuant to Section 2.6 are
duly authorized and on the Closing Date will be validly issued and fully paid
and non-assessable and will conform to the description thereof contained in the
Registration Statement on Form N-14 then in effect. At the time of its
Reorganization, the Acquiring Fund shall not have outstanding any warrants,
options, convertible securities or any other type of right pursuant to which any
Person could acquire Acquiring Fund Class A Shares, Acquiring Fund Class B
Shares, or Acquiring Fund Class C Shares, except for the right of investors to
acquire Acquiring Fund Class A Shares, Acquiring Fund Class B Shares, or
Acquiring Fund Class C Shares at net asset value in the normal course of its
business as a series of an open-end management investment company operating
under the Investment Company Act.
(d) The combined proxy statement/prospectus (the "Combined Proxy
Statement/Prospectus") which forms a part of AGS's Registration Statement on
Form N-14 shall
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be furnished to AAF and the Acquired Fund Shareholders entitled to vote at the
Acquired Fund Shareholders Meeting. The Combined Proxy Statement/Prospectus and
related Statement of Additional Information of the Acquiring Fund, when they
become effective, shall conform to the applicable requirements of the Securities
Act and the Investment Company Act and shall not include any untrue statement of
a material fact or omit to state any material fact required to be stated therein
or necessary to make the statements therein, in light of the circumstances under
which they were made, not materially misleading, provided, however, that no
representation or warranty is made with respect to written information provided
by AAF for inclusion in the Combined Proxy Statement/Prospectus.
(e) The shares of the Acquiring Fund which have been or are being
offered for sale (other than the Acquiring Fund Shares to be issued in
connection with the Reorganization) have been duly registered under the
Securities Act by the AGS Registration Statement and have been duly registered,
qualified or are exempt from registration or qualification under the securities
laws of each state or other jurisdiction in which such shares have been or are
being offered for sale, and no action has been taken by AGS to revoke or rescind
any such registration or qualification.
Section 4.6 Accountants. PricewaterhouseCoopers LLP, which has
reported upon the Acquiring Fund Financial Statements for the period ended
December 31, 1999, are independent public accountants as required by the
Securities Act and the Exchange Act.
Section 4.7 Binding Obligation. This Agreement has been duly
authorized, executed and delivered by AGS on behalf of the Acquiring Fund and,
assuming this Agreement has been duly executed and delivered by AAF, constitutes
the legal, valid and binding obligation of AGS, enforceable against AGS in
accordance with its terms from and with respect to the revenues and assets of
the Acquiring Fund, except as the enforceability hereof may be limited by
bankruptcy, insolvency, reorganization or similar laws relating to or affecting
creditors' rights generally, or by general equity principles (whether applied in
a court of law or a court of equity and including limitations on the
availability of specific performance or other equitable remedies).
Section 4.8 No Breaches or Defaults. The execution and delivery of
this Agreement by AGS on behalf of the Acquiring Fund and performance by AGS of
its obligations hereunder have been duly authorized by all necessary corporate
action on the part of AGS and (i) do not, and on the Closing Date will not,
result in any violation of the Agreement and Declaration of Trust or by-laws of
AGS and (ii) do not, and on the Closing Date will not, result in a breach of any
of the terms or provisions of, or constitute (with or without the giving of
notice or the lapse of time or both) a default under, or give rise to a right of
termination, cancellation or acceleration of any obligation or to the loss of a
material benefit under, or result in the creation or imposition of any Lien upon
any property or assets of the Acquiring Fund (except for such breaches or
defaults or Liens that would not reasonably be expected, individually or in the
aggregate, to have a Material Adverse Effect) under (A) any indenture, mortgage
or loan agreement or any other material agreement or instrument to which AGS is
a party or by which it may be bound and which relates to the assets of the
Acquiring Fund or to which any properties of the Acquiring Fund may be subject;
(B) any Permit; or (C) any existing applicable law, rule, regulation, judgment,
order or decree of any Governmental Authority having jurisdiction over
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AGS or any property of the Acquiring Fund. AGS is not under the jurisdiction of
a court in a proceeding under Title 11 of the United States Code or similar case
within the meaning of Section 368(a)(3)(A) of the Code.
Section 4.9 Authorizations or Consents. Other than those which shall
have been obtained or made on or prior to the Closing Date, no authorization or
approval or other action by, and no notice to or filing with, any Governmental
Authority will be required to be obtained or made by AGS in connection with the
due execution and delivery by AGS of this Agreement and the consummation by AGS
of the transactions contemplated hereby.
Section 4.10 Permits. AGS has in full force and effect all Permits
necessary for it to conduct its business as presently conducted as it relates to
the Acquiring Fund, and there has occurred no default under any Permit, except
for the absence of Permits and for defaults under Permits the absence or default
of which would not reasonably be expected to have, individually or in the
aggregate, a Material Adverse Effect. To the knowledge of AGS there are no
proceedings relating to the suspension, revocation or modification of any
Permit, except for such that would not reasonably be expected, individually or
in the aggregate, to have a Material Adverse Effect.
Section 4.11 No Actions, Suits or Proceedings.
(a) There is no pending action, suit or proceeding, nor, to the
knowledge of AGS, has any litigation been overtly threatened in writing or, if
probable of assertion, orally, against AGS before any Governmental Authority
which questions the validity or legality of this Agreement or of the
transactions contemplated hereby, or which seeks to prevent the consummation of
the transactions contemplated hereby, including the Reorganization.
(b) There are no judicial, administrative or arbitration actions,
suits, or proceedings instituted or pending or, to the knowledge of AGS,
threatened in writing or, if probable of assertion, orally, against AGS,
affecting any property, asset, interest or right of the Acquiring Fund, that
could reasonably be expected to have, individually or in the aggregate, a
Material Adverse Effect with respect to the Acquiring Fund. There are not in
existence on the date hereof any plea agreements, judgments, injunctions,
consents, decrees, exceptions or orders that were entered by, filed with or
issued by Governmental Authority relating to AGS's conduct of the business of
the Acquiring Fund affecting in any significant respect the conduct of such
business. AGS is not, and has not been, to the knowledge of AGS, the target of
any investigation by the SEC or any state securities administrator with respect
to its conduct of the business of the Acquiring Fund.
Section 4.12 Taxes.
(a) The Acquiring Fund is a "fund" as defined in Section 851(g)(2) of
the Code and has elected to be treated as a regulated investment company under
Subchapter M of the Code. The Acquiring Fund has qualified for treatment as such
for each taxable year since inception that has ended prior to the Closing Date
and will continue to satisfy the requirements of Part I of Subchapter M of the
Code to maintain such qualification for its current taxable year.
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The Acquired Fund has no earnings or profits accumulated in any taxable year in
which the provisions of Subchapter M of the Code did not apply to it.
(b) The Acquiring Fund has timely filed all Returns required to be
filed by it and all Taxes with respect thereto have been paid, except where the
failure so to file or so to pay, would not reasonably be expected, individually
or in the aggregate, to have a Material Adverse Effect. Adequate provision has
been made in the Acquiring Fund Financial Statements for all Taxes in respect of
all periods ending on or before the date of such financial statements, except
where the failure to make such provisions would not reasonably be expected,
individually or in the aggregate, to have a Material Adverse Effect. No
deficiencies for any Taxes have been proposed, assessed or asserted in writing
by any taxing authority against the Acquiring Fund, and no deficiency has been
proposed, assessed or asserted, in writing, where such deficiency would
reasonably be expected, individually or in the aggregate, to have a Material
Adverse Effect. No waivers of the time to assess any such Taxes are outstanding
nor are any written requests for such waivers pending and no Return of the
Acquiring Fund is currently being or has been audited with respect to income
taxes or other Taxes by any Federal, state, local or foreign Tax authority.
(c) The fiscal year of the Acquiring Fund has not been changed for tax
purposes since the date on which it commenced operations.
Section 4.13 Brokers. No broker, finder or similar intermediary has
acted for or on behalf of AGS in connection with this Agreement or the
transactions contemplated hereby, and no broker, finder, agent or similar
intermediary is entitled to any broker's, finder's or similar fee or other
commission in connection therewith based on any agreement, arrangement or
understanding with AGS or any action taken by it.
Section 4.14 Representations Concerning the Reorganization.
(a) The Acquiring Fund does not directly or indirectly own, nor at the
Effective Time will it directly or indirectly own, nor has it at any time during
the five-year period ending on the Closing Date directly or indirectly owned,
any shares of the Acquired Fund.
(b) AGS has no plan or intention to issue additional Acquiring Fund
Shares following the Reorganization except for shares issued in the ordinary
course of Acquiring Fund's business as a series of an open-end investment
company; nor does AGS have any plan or intention to redeem or otherwise
reacquire any of the Acquiring Fund Shares issued in the Reorganization, except
to the extent that the Acquiring Fund is required by the Investment Company Act
to redeem any of its shares presented for redemption at net asset value in the
ordinary course of its business as a series of an open-end, management
investment company.
(c) The Acquiring Fund has no plan or intention to sell or otherwise
dispose of any of the Assets other than in the ordinary course of its business
and to the extent necessary to maintain its status as a "regulated investment
company" under the Code.
(d) Following the Reorganization, the Acquiring Fund will continue the
"historic business" (within the meaning of Section 1.368-1(d)(2) of the Income
Tax Regulations
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under the Code) of the Acquired Fund and will use a significant portion of the
Acquired Fund's "historic business assets" (within the meaning of Section
1.368-1(d)(3) of those regulations) in a business.
(e) There is no plan or intention for the Acquiring Fund to be
dissolved or merged into another business trust or a corporation or any "fund"
thereof (within the meaning of Section 851(g)(2) of the Code) following the
Reorganization.
Section 4.15 Prospectus and Statement of Additional Information. The
current prospectus and statement of additional information for the Acquiring
Fund as of the date on which they were issued did not contain, and as
supplemented by any supplement thereto dated prior to or on the Closing Date do
not contain, any untrue statement of a material fact or omit to state a material
fact required to be stated therein or necessary to make the statements therein
not misleading.
Section 4.16 Value of Shares. The fair market value of the Acquiring
Fund Shares received by each Acquired Fund Shareholder in the Reorganization
will be approximately equal to the fair market value of its Acquired Fund Shares
constructively surrendered in exchange therefor.
Section 4.17 Intercompany Indebtedness; Consideration. There is no
intercompany indebtedness between the Funds that was issued or acquired, or will
be settled, at a discount. No consideration other than the Acquiring Fund Shares
(and the Acquiring Fund's assumption of the Liabilities, including for this
purpose all Liabilities to which the Assets are subject) will be issued in
exchange for the Assets in connection with the Reorganization. The fair market
value of the Assets on a going concern basis will equal or exceed the sum of the
Liabilities to be assumed by the Acquiring Fund plus the amount of Liabilities,
if any, to which the Assets will be subject.
ARTICLE 5
COVENANTS
Section 5.1 Conduct of Business.
(a) From the date of this Agreement up to and including the Closing
Date (or, if earlier, the date upon which this Agreement is terminated pursuant
to Article 7), AAF shall conduct the business of the Acquired Fund only in the
ordinary course and substantially in accordance with past practices, shall use
its reasonable best efforts to preserve intact its business organization and
material assets and to maintain the rights, franchises and business and customer
relations necessary to conduct the business of the Acquired Fund in the ordinary
course in all material respects and shall invest the Assets in a manner that
ensures compliance with Section 3.14(a) of this Agreement. Without limiting the
generality of the foregoing, AAF shall not do any of the following with respect
to the Acquired Fund without the prior written consent of AGS, which consent
shall not be unreasonably withheld:
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(i) split, combine or reclassify any of its capital stock or
issue or authorize the issuance of any other securities in respect of, in
lieu of or in substitution for its capital stock;
(ii) amend its Articles of Incorporation or by-laws;
(iii) acquire or agree to acquire by merging or consolidating
with, or by purchasing a substantial portion of the assets of, or by any
other manner, any business or any corporation, partnership, joint venture,
association or other business organization or series or division thereof
or any assets that are material, individually or in the aggregate, to the
Acquired Fund taken as a whole, except purchases of assets in the ordinary
course of business consistent with past practice;
(iv) sell, lease or otherwise dispose of any of its material
properties or assets, or mortgage or otherwise encumber or subject to any
Lien any of its material properties or assets, other than in the ordinary
course of business;
(v) incur any indebtedness for borrowed money or guarantee any
indebtedness of another Person, issue or sell any debt securities or
warrants or other rights to acquire any debt securities of the Acquired
Fund, guarantee any debt securities of another Person, enter into any
"keep well" or other agreement to maintain any financial statement
condition of another Person, or enter into any arrangement having the
economic effect of any of the foregoing;
(vi) settle or compromise any material income tax liability or
make any material tax election;
(vii) pay, discharge or satisfy any material claims,
liabilities or obligations (absolute, accrued, asserted or unasserted,
contingent or otherwise), other than in the ordinary course of business;
(viii) change its method of accounting, except as required by
changes in generally accepted accounting principles as concurred in by its
independent auditors, or change its fiscal year;
(ix) make or agree to make any material severance,
termination, indemnification or similar payments except pursuant to
existing agreements; or
(x) adopt any Benefit Plan.
(b) From the date of this Agreement up to and including the Closing
Date (or, if earlier, the date upon which this Agreement is terminated pursuant
to Article 7), AGS shall conduct the business of the Acquiring Fund only in the
ordinary course and substantially in accordance with past practices, and shall
use its reasonable best efforts to preserve intact its business organization and
material assets and maintain the rights, franchises and business relations
necessary to conduct the business operations of the Acquiring Fund in the
ordinary course in all material respects.
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Section 5.2 Announcements. AAF and AGS shall consult with each other
before issuing any press release or otherwise making any public statements with
respect to this Agreement and the transactions contemplated by this Agreement,
and neither AAF nor AGS shall issue any such press release or make any public
statement without the prior written approval of the other party to this
Agreement, such approval not to be unreasonably withheld, except as may be
required by law.
Section 5.3 Expenses. The Acquired Fund and the Acquiring Fund shall
each bear the expenses it incurs in connection with this Agreement and the
Reorganization and other transactions contemplated hereby.
Section 5.4 Further Assurances. Each of the parties hereto shall
execute such documents and other papers and perform such further acts as may be
reasonably required to carry out the provisions hereof and the transactions
contemplated hereby. Each such party shall, on or prior to the Closing Date, use
its reasonable best efforts to fulfill or obtain the fulfillment of the
conditions precedent to the consummation of the Reorganization, including the
execution and delivery of any documents, certificates, instruments or other
papers that are reasonably required for the consummation of the Reorganization.
Section 5.5 Notice of Events. AGS shall give prompt notice to AAF, and
AAF shall give prompt notice to AGS, of (a) the occurrence or nonoccurrence of
any event which to the knowledge of AGS or to the knowledge of AAF, the
occurrence or non-occurrence of which would be likely to result in any of the
conditions specified in (i) in the case of AAF, Sections 6.1 and 6.2 or (ii) in
the case of AGS, Sections 6.2 and 6.3, not being satisfied so as to permit the
consummation of the Reorganization and (b) any material failure on its part, or
on the part of the other party hereto of which it has knowledge, to comply with
or satisfy any covenant, condition or agreement to be complied with or satisfied
by it hereunder; provided, however, that the delivery of any notice pursuant to
this Section 5.5 shall not limit or otherwise affect the remedies available
hereunder to any party.
Section 5.6 Access to Information.
(a) AAF will, during regular business hours and on reasonable prior
notice, allow AGS and its authorized representatives reasonable access to the
books and records of AAF pertaining to the Assets and to officers of AAF
knowledgeable thereof; provided, however, that any such access shall not
significantly interfere with the business or operations of AAF.
(b) AGS will, during regular business hours and on reasonable prior
notice, allow AAF and its authorized representatives reasonable access to the
books and records of AGS pertaining to the assets of the Acquiring Fund and to
officers of AGS knowledgeable thereof; provided, however, that any such access
shall not significantly interfere with the business or operations of AGS.
Section 5.7 Consents, Approvals and Filings. Each of AAF and AGS shall
make all necessary filings, as soon as reasonably practicable, including,
without limitation, those required under the Securities Act, the Exchange Act,
the Investment Company Act and the
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Advisers Act, in order to facilitate prompt consummation of the Reorganization
and the other transactions contemplated by this Agreement. In addition, each of
AAF and AGS shall use its reasonable best efforts, and shall cooperate fully
with each other (i) to comply as promptly as reasonably practicable with all
requirements of Governmental Authorities applicable to the Reorganization and
the other transactions contemplated herein and (ii) to obtain as promptly as
reasonably practicable all necessary permits, orders or other consents of
Governmental Authorities and consents of all third parties necessary for the
consummation of the Reorganization and the other transactions contemplated
herein. Each of AAF and AGS shall use reasonable efforts to provide such
information and communications to Governmental Authorities as such Governmental
Authorities may request.
Section 5.8 Submission of Agreement to Shareholders. AAF shall take all
action necessary in accordance with applicable law and its Articles of
Incorporation and by-laws to convene the Acquired Fund Shareholders Meeting. AAF
shall, through its Board of Directors, recommend to the Acquired Fund
Shareholders approval of this Agreement and the transactions contemplated by
this Agreement. AAF shall use its reasonable best efforts to hold the Acquired
Fund Shareholders Meeting as soon as practicable after the date hereof.
ARTICLE 6
CONDITIONS PRECEDENT TO THE REORGANIZATION
Section 6.1 Conditions Precedent of AGS. The obligation of AGS to
consummate the Reorganization is subject to the satisfaction, at or prior to the
Closing Date, of all of the following conditions, any one or more of which may
be waived in writing by AGS.
(a) The representations and warranties of AAF on behalf of the Acquired
Fund set forth in this Agreement shall be true and correct in all material
respects as of the date of this Agreement and as of the Closing Date with the
same effect as though all such representations and warranties had been made as
of the Closing Date.
(b) AAF shall have complied with and satisfied in all material respects
all agreements and conditions relating to the Acquired Fund set forth herein on
its part to be performed or satisfied at or prior to the Closing Date.
(c) AGS shall have received at the Closing Date (i) a certificate,
dated as of the Closing Date, from an officer of AAF, in such individual's
capacity as an officer of AAF and not as an individual, to the effect that the
conditions specified in Section 6.1(a) and (b) have been satisfied and (ii) a
certificate, dated as of the Closing Date, from the Secretary or Assistant
Secretary of AAF certifying as to the accuracy and completeness of the attached
Articles of Incorporation and by-laws of AAF, and resolutions, consents and
authorizations of or regarding AAF with respect to the execution and delivery of
this Agreement and the transactions contemplated hereby.
(d) AGS shall have received the signed opinion of Ballard Spahr Andrews
& Ingersoll, LLP, counsel to AAF, or other counsel reasonably acceptable to AGS,
in form and
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substance reasonably acceptable to counsel for AGS, as to the matters set forth
in Schedule 6.1(d).
(e) The dividend or dividends described in the last sentence of Section
3.14(a) shall have been declared.
Section 6.2 Mutual Conditions. The obligations of AAF and AGS to
consummate the Reorganization is subject to the satisfaction, at or prior to the
Closing Date, of all of the following further conditions, any one or more (other
than that is paragraph (d)) may be waived in writing by AAF and AGS, but only if
and to the extent that such waiver is mutual.
(a) All filings required to be made prior to the Closing Date with, and
all consents, approvals, permits and authorizations required to be obtained on
or prior to the Closing Date from Governmental Authorities in connection with
the execution and delivery of this Agreement and the consummation of the
transactions contemplated herein by AAF and AGS shall have been made or
obtained, as the case may be; provided, however, that such consents, approvals,
permits and authorizations may be subject to conditions that would not
reasonably be expected, individually or in the aggregate, to have a Material
Adverse Effect.
(b) This Agreement, the Reorganization of the Acquired Fund and related
matters shall have been approved and adopted at the Acquired Fund Shareholders
Meeting by the shareholders of the Acquired Fund on the record date by the
Required Shareholder Vote.
(c) The Assets to be acquired by the Acquiring Fund shall constitute at
least 90% of the fair market value of the net assets, and at least 70% of the
fair market value of the gross assets, held by the Acquired Fund immediately
prior to the Reorganization. For purposes of this Section 6.2(c), assets used by
the Acquired Fund to pay the expenses it incurs in connection with this
Agreement and the Reorganization and to effect all shareholder redemptions and
distributions -- except (i) redemptions pursuant to the Investment Company Act
not made as part of the Reorganization and (ii) distributions made to conform to
its policy of distributing all or substantially all of its income and gains to
avoid the obligation to pay federal income tax and/or the excise tax under
section 4982 of the Code -- after the date of this Agreement shall be included
as assets held by the Acquired Fund immediately prior to the Reorganization.
(d) No temporary restraining order, preliminary or permanent injunction
or other order issued by any Governmental Authority preventing the consummation
of the Reorganization on the Closing Date shall be in effect; provided, however,
that the party or parties invoking this condition shall use reasonable efforts
to have any such order or injunction vacated.
(e) The Registration Statement on Form N-14 filed by AGS with respect
to the Acquiring Fund Shares to be issued to Acquired Fund Shareholders in
connection with the Reorganization shall have become effective under the
Securities Act and no stop order suspending the effectiveness thereof shall have
been issued and, to the best knowledge of the parties hereto, no investigation
or proceeding for that purpose shall have been instituted or be pending,
threatened or contemplated under the Securities Act.
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(f) AAF and AGS shall have received on or before the Closing Date an
opinion of Kirkpatrick & Lockhart LLP in form and substance reasonably
acceptable to AAF and AGS, as to the matters set forth on Schedule 6.2(f). In
rendering such opinion, such counsel may rely as to factual matters, exclusively
and without independent verification, on the representations made in this
Agreement, which such counsel may treat as representations made to it, or in
separate letters addressed to such counsel and any certificates delivered
pursuant to this Agreement. Such opinion may state that no opinion is expressed
as to the effect of the Reorganization on either Fund or any Acquired Fund
Shareholder with respect to any Asset as to which any unrealized gain or loss is
required to be recognized for federal income tax purposes at the end of a
taxable year (or on the termination or transfer thereof) under a mark-to-market
system of accounting.
(g) The dividend or dividends described in the last sentence of Section
3.14(a) shall have been declared.
Section 6.3 Conditions Precedent of AAF. The obligation of AAF to
consummate the Reorganization is subject to the satisfaction, at or prior to the
Closing Date, of all of the following conditions, any one or more of which may
be waived in writing by AAF.
(a) The representations and warranties of AGS on behalf of the
Acquiring Fund participating in the Reorganization set forth in this Agreement
shall be true and correct in all material respects as of the date of this
Agreement and as of the Closing Date with the same effect as though all such
representations and warranties had been made as of the Closing Date.
(b) AGS shall have complied with and satisfied in all material respects
all agreements and conditions relating to the Acquiring Fund participating in
the Reorganization set forth herein on its part to be performed or satisfied at
or prior to the Closing Date.
(c) AAF shall have received on the Closing Date (i) a certificate,
dated as of the Closing Date, from an officer of AGS, in such individual's
capacity as an officer of AGS and not as an individual, to the effect that the
conditions specified in Sections 6.3(a) and (b) have been satisfied and (ii) a
certificate, dated as of the Closing Date, from the Secretary or Assistant
Secretary of AGS certifying as to the accuracy and completeness of the attached
Agreement and Declaration of Trust and by-laws, as amended, of AGS and
resolutions, consents and authorizations of or regarding AGS with respect to the
execution and delivery of this Agreement and the transactions contemplated
hereby.
(d) AAF shall have received the signed opinion of Kirkpatrick &
Lockhart LLP, counsel to AGS, or other counsel reasonably acceptable to AAF, in
form and substance reasonably acceptable to counsel for AGS, as to the matters
set forth on Schedule 6.3(d).
ARTICLE 7
TERMINATION OF AGREEMENT
Section 7.1 Termination.
(a) This Agreement may be terminated in whole or with respect to the
Reorganization described herein on or prior to the Closing Date as follows:
I-23
<PAGE> 56
(i) by mutual written consent of AAF and AGS; or
(ii) at the election of AAF or AGS:
(A) if the Closing Date shall not be on or before
November 30, 2000, or such later date as the parties hereto
may agree upon, unless the failure to consummate the
Reorganization is the result of a willful and material breach
of this Agreement by the party seeking to terminate this
Agreement;
(B) if, upon a vote at the Acquired Fund Shareholders
Meeting or any adjournment thereof, the Required Shareholder
Vote shall not have been obtained as contemplated by Section
5.8; or
(C) if any Governmental Authority shall have issued an
order, decree or ruling or taken any other action permanently
enjoining, restraining or otherwise prohibiting the
Reorganization and such order, decree, ruling or other action
shall have become final and nonappealable.
(b) The termination of this Agreement shall be effectuated by the
delivery by the terminating party to the other party of a written notice of such
termination.
Section 7.2 Survival After Termination. If this Agreement is terminated
in accordance with Section 7.1 hereof and the Reorganization of the Acquired
Fund is not consummated, this Agreement shall become void and of no further
force and effect with respect to the Reorganization and the Acquired Fund,
except for the provisions of Section 5.3.
ARTICLE 8
MISCELLANEOUS
Section 8.1 Survival of Representations and Warranties. The
representations, warranties and covenants in this Agreement or in any
certificate or instrument delivered pursuant to this Agreement shall survive the
consummation of the transactions contemplated hereunder for a period of one (1)
year following the Closing Date.
Section 8.2 Governing Law. This Agreement shall be construed and
interpreted according to the laws of the State of Delaware applicable to
contracts made and to be performed wholly within such state.
Section 8.3 Binding Effect, Persons Benefiting, No Assignment. This
Agreement shall inure to the benefit of and be binding upon the parties hereto
and the respective successors and assigns of the parties and such Persons.
Nothing in this Agreement is intended or shall be construed to confer upon any
entity or Person other than the parties hereto and their respective successors
and permitted assigns any right, remedy or claim under or by reason of this
Agreement or any part hereof. Without the prior written consent of the parties
hereto, this Agreement may not be assigned by any of the parties hereto.
I-24
<PAGE> 57
Section 8.4 Obligations of AGS and AAF.
(a) AAF and AGS hereby acknowledge and agree that the Acquiring Fund is
a separate investment portfolio of AGS, that AGS is executing this Agreement on
behalf of the Acquiring Fund, and that any amounts payable by AGS under or in
connection with this Agreement shall be payable solely from the revenues and
assets of the Acquiring Fund. AAF further acknowledges and agrees that this
Agreement has been executed by a duly authorized officer of AGS in his or her
capacity as an officer of AGS intending to bind AGS as provided herein, and that
no officer, director or shareholder of AGS shall be personally liable for the
liabilities or obligations of AGS incurred hereunder.
(b) AAF and AGS hereby acknowledge and agree that the Acquired Fund is
a separate investment portfolio of AAF, that AAF is executing this Agreement on
behalf of the Acquired Fund and that any amounts payable by AAF under or in
connection with this Agreement shall be payable solely from the revenues of the
Acquired Fund and the Assets. AGS further acknowledges and agrees that this
Agreement has been executed by a duly authorized officer of AAF in his or her
capacity as an officer of AAF intending to bind AAF as provided herein, and that
no officer, trustee or shareholder of AAF shall be personally liable for the
liabilities of AAF incurred hereunder.
Section 8.5 Amendments. This Agreement may be amended, modified, or
supplemented at any time, notwithstanding approval thereof by the Acquired Fund
Shareholders, in any manner mutually agreed upon in writing by the parties;
provided that following such approval no such amendment shall have a material
adverse effect on the Acquired Fund Shareholders' interests.
Section 8.6 Enforcement. The parties agree irreparable damage would
occur in the event that any of the provisions of this Agreement were not
performed in accordance with their specific terms or were otherwise breached. It
is accordingly agreed that the parties shall be entitled to an injunction or
injunctions to prevent breaches of this Agreement and to enforce specifically
the terms and provisions of this Agreement in any court of the United States or
any state having jurisdiction, in addition to any other remedy to which they are
entitled at law or in equity.
Section 8.7 Interpretation. When a reference is made in this Agreement
to a Section or Schedule, such reference shall be to a Section of, or a Schedule
to, this Agreement unless otherwise indicated. The table of contents and
headings contained in this Agreement are for reference purposes only and shall
not affect in any way the meaning or interpretation of this Agreement. Whenever
the words "include", "includes" or "including" are used in this Agreement, they
shall be deemed to be followed by the words "without limitation". Each
representation and warranty contained in Article 3 or 4 that relates to a
general category of a subject matter shall be deemed superseded by a specific
representation and warranty relating to a subcategory thereof to the extent of
such specific representation or warranty.
I-25
<PAGE> 58
Section 8.8 Counterparts. This Agreement may be executed in
counterparts, each of which shall be deemed an original and each of which shall
constitute one and the same instrument.
Section 8.9 Entire Agreement; Schedules. This Agreement, including the
Schedules, certificates and lists referred to herein, and any documents executed
by the parties simultaneously herewith or pursuant thereto, constitute the
entire understanding and agreement of the parties hereto with respect to the
subject matter hereof and supersedes all other prior agreements and
understandings, written or oral, between the parties with respect to such
subject matter.
Section 8.10 Notices. All notices, requests, demands and other
communications hereunder shall be in writing and shall be deemed to have been
duly given when delivered by hand or by overnight courier, two days after being
sent by registered mail, return receipt requested, or when sent by telecopier
(with receipt confirmed), provided, in the case of a telecopied notice, a copy
is also sent by registered mail, return receipt requested, or by courier,
addressed as follows (or to such other address as a party may designate by
notice to the other):
(a) If to AAF: with a copy to:
AIM Advisor Funds, Inc. Ballard Spahr Andrews & Ingersoll,
11 Greenway Plaza, Suite 100 LLP
Houston, Texas 77046-1173 1735 Market Street, 51st Floor
Attn: Carol F. Relihan, Esq. Philadelphia, Pennsylvania
Fax: (713) 993-9185 19103-7599
Attn: William H. Rheiner, Esq.
Fax: (215) 864-8999
(b) If to AGS: with a copy to:
AIM Growth Series Kirkpatrick & Lockhart LLP
11 Greenway Plaza, Suite 100 1800 Massachusetts Avenue, N.W.
Houston, Texas 77046-1173 Washington, D.C. 20036-1800
Attn: Carol F. Relihan, Esq. Attn: Arthur J. Brown, Esq.
Fax: (713) 993-9185 Fax: (202) 778-9100
Section 8.11 Representations by AIM Advisors. In its capacity as
investment adviser to the Acquired Fund, AIM Advisors represents to AGS that to
the best of its knowledge the representations and warranties of AAF and the
Acquired Fund contained in this Agreement are true and correct as of the date of
this Agreement. In its capacity as investment adviser to the Acquiring Fund, AIM
Advisors represents to AAF that to the best of its knowledge the representations
and warranties of AGS and the Acquiring Fund contained in this Agreement are
true and correct as of the date of this Agreement. For purposes of this Section
8.11, the best knowledge standard shall be deemed to mean that the officers of
AIM Advisors who have substantive responsibility for the provision of investment
advisory services to AAF and AGS do not have actual knowledge to the contrary
after due inquiry.
I-26
<PAGE> 59
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed as of the day and year first above written.
AIM Advisor Funds, Inc., acting on
behalf of AIM Advisor Large Cap Value Fund
By: /s/ Robert H. Graham
---------------------------------------
AIM Growth Series, acting
on behalf of AIM Basic Value Fund
By: /s/ Robert H. Graham
---------------------------------------
A I M Advisors, Inc.
By: /s/ Robert H. Graham
---------------------------------------
I-27
<PAGE> 60
Schedule 6.1(d)
Opinion of Counsel to AAF
1. AAF is a corporation validly existing and in good standing
under the Maryland General Corporation Law.
2. AAF is an open-end, management investment company registered
under the Investment Company Act of 1940.
3. The execution, delivery and performance of the Agreement by
AAF have been duly authorized and approved by all requisite
corporate action on the part of AAF. The Agreement has been
duly executed and delivered by AAF and constitutes the valid
and binding obligation of AAF.
4. The Acquired Fund Shares outstanding on the date hereof have
been duly authorized and validly issued, are fully paid and
are non-assessable.
5. To the best of our knowledge, AAF is not required to submit
any notice, report or other filing with or obtain any
authorization, consent or approval from any governmental
authority or self regulatory organization prior to the
consummation of the transactions contemplated by the
Agreement.
We confirm to you that to our knowledge after inquiry of each lawyer
who is the current primary contact for AAF or who has devoted substantive
attention on behalf of AAF during the preceding twelve months and who is still
currently employed by or is currently a member of this firm, no litigation or
governmental proceeding is pending or threatened in writing against the
Acquiring Fund (i) with respect to the Agreement or (ii) which involves in
excess of $500,000 in damages.
I-28
<PAGE> 61
Schedule 6.2(f)
Tax Opinion
(i) The acquisition of the Assets by the Acquiring Fund in exchange
solely for the Acquiring Fund Shares and the Acquiring Fund's assumption of the
Liabilities, followed by the distribution of those Shares pro rata to the
Acquired Fund Shareholders constructively in exchange for their Acquired Fund
Shares, as provided in the Agreement, will qualify as a "reorganization" within
the meaning of section 368(a) of the Code, and each Fund will be a "party to a
reorganization" within the meaning of 368(b) of the Code.
(ii) The Acquired Fund will recognize no gain or loss on the transfer
of the Assets to the Acquiring Fund in exchange solely for Acquiring Fund Shares
and the Acquiring Fund's assumption of the Liabilities or on the distribution of
those shares to the Acquired Fund Shareholders.
(iii) The Acquiring Fund will recognize no gain or loss on its receipt
of the Assets in exchange solely for Acquiring Fund Shares and its assumption of
the Liabilities.
(iv) The Acquiring Fund's basis for the Assets will be the same as the
Acquired Fund's basis therefor immediately before the Reorganization, and the
Acquiring Fund's holding period for the Assets will include the Acquired Fund's
holding period therefor.
(v) An Acquired Fund Shareholder will recognize no gain or loss on the
receipt of Acquiring Fund Shares in constructive exchange for all its Acquired
Fund Shares pursuant to the Reorganization.
(vi) An Acquired Fund Shareholder's aggregate basis for the Acquiring
Fund Shares received thereby in the Reorganization will be the same as the
aggregate basis for its Acquired Fund Shares to be constructively surrendered in
exchange therefor, and its holding period for those Acquiring Fund Shares will
included its holding period for those Acquired Fund Shares, provided the
Acquired Fund Shareholder held the Acquired Fund Shares as capital assets at the
Effective Time.
I-29
<PAGE> 62
Schedule 6.3(d)
Opinion of Counsel to AGS
1. AGS is duly organized and validly existing as a business trust
under the Delaware Business Trust Act.
2. AGS is an open-end, management investment company registered
under the Investment Company Act of 1940.
3. The execution, delivery and performance of the Agreement by
AGS have been duly authorized and approved by all requisite
trust action on the part of AGS. The Agreement has been duly
executed and delivered by AGS and constitutes the valid and
binding obligation of AGS.
4. The Acquired Fund Shares outstanding on the date hereof have
been duly authorized and validly issued, are fully paid and
are non-assessable.
5. To the best of our knowledge, AGS is not required to submit
any notice, report or other filing with or obtain any
authorization, consent or approval from any governmental
authority or self regulatory organization prior to the
consummation of the transactions contemplated by the
Agreement.
We confirm to you that to our knowledge after inquiry of each lawyer
who is the current primary contact for AGS or who has devoted substantive
attention on behalf of AGS during the preceding twelve months and who is still
currently employed by or is currently a member of this firm, no litigation or
governmental proceeding is pending or threatened in writing against the Acquired
Fund (i) with respect to the Agreement or (ii) which involves in excess of
$500,000 in damages.
I-30
<PAGE> 63
Appendix II
CLASS A, CLASS B AND CLASS C SHARES OF
AIM BASIC VALUE FUND
Supplement dated March 22, 2000
to the Prospectus dated May 3, 1999
as revised October 25, 1999 and supplemented February 11, 2000
and February 25, 2000
At a meeting held on March 14, 2000, the Board of Trustees of AIM Growth
Series (the "Trust"), on behalf of AIM Basic Value Fund (the "Fund"), voted
to request shareholders to approve certain proposals relating to the
restructuring of the Fund.
The Fund currently invests all of its investable assets in the Value
Portfolio (the "Portfolio"). The Board approved a restructuring of the Fund
which will eliminate the Fund's current master-feeder structure and cause
the Fund to redeem its interest in the Portfolio. The Portfolio will then
be terminated. The Fund's investment strategies will be the same as the
Portfolio's current investment strategies. The Fund's portfolio managers
will be the current portfolio mangers of the Portfolio. The Board is
requesting shareholder approval of the following items related to the
restructuring:
- A new advisory agreement between the Trust and A I M
Advisors, Inc. ("AIM"). The Board has concluded that
the terms of the new advisory agreement are
substantially the same as the advisory portion of the
current advisory agreement with the Portfolio, except:
(1) AIM would directly manage the Fund's investments
and would receive an annual fee for the investment
advisory services that it provides to the Fund at a
rate equal to the combined rate of the fee charged to
the Portfolio and the fee charged to the Fund for
administrative services; (2) the proposed advisory
agreement adds provisions relating to certain
functions that would be performed by AIM in connection
with the Fund's securities lending program and for
which AIM would receive compensation; and (3) the
proposed advisory agreement clarifies non-exclusivity
provisions that are set forth in the current advisory
agreement;
- Changing the Fund's fundamental investment
restrictions. The proposed revisions to the Fund's
fundamental investment restrictions are described in a
supplement to the Fund's statement of additional
information;
- Making the Fund's investment objective
non-fundamental. The investment objective would not be
changed. If the investment objective of the Fund
becomes non-fundamental, it can be changed in the
future by the Board of Trustees of the Trust without
further approval by shareholders.
The Board of Trustees of the Trust has called a meeting of the Fund's
shareholders to be held in May 2000 to vote on these and other proposals.
Only shareholders of record as of April 3, 2000 will be entitled to vote at
the meeting. Proposals that are approved are expected to become effective
on or about June 5, 2000.
The Board has also approved a new administrative services agreement between
AIM and the Fund. The administrative and accounting services to be provided
to the Fund are substantially the same services that AIM provides to the
Portfolio and the Fund under the current agreements.
<PAGE> 64
AIM BASIC VALUE FUND
CLASS A, B AND C SHARES
Supplement dated February 25, 2000
to the Prospectus dated May 3, 1999,
as revised October 25, 1999 and as supplemented February 11, 2000
This supplement supersedes and replaces in its entirety the supplement dated
February 11, 2000.
Advisor Class shares of AIM Basic Value Fund converted to Class A shares of the
fund effective the close of business on February 11, 2000. Advisor Class shares
of the fund are no longer offered for sale or exchange.
The following replaces in its entirety the information appearing under the
heading "FUND MANAGEMENT - PORTFOLIO MANAGERS" on page 4 of the prospectus:
"The advisor uses a team approach to investment management. The
individual members of the team who are primarily responsible for the
day-to-day management of the portfolio, all of whom are officers of
A I M Capital Management, Inc., a wholly owned subsidiary of the
advisor, are
o 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.
o Matthew W. Seinsheimer, Portfolio Manager, who has been
responsible for the fund since 2000 and has been associated with
the advisor and/or its affiliates since 1998. From 1995 to 1998,
he was Portfolio Manager for American Indemnity Company.
o Bret W. Stanley, Senior Portfolio Manager, who has been
responsible for the fund since 1998 and has been associated with
the advisor and/or its affiliates since 1998. From 1994 to 1998,
he was Vice President and portfolio manager with Van Kampen
American Capital Asset Management, Inc."
<PAGE> 65
AIM BASIC VALUE FUND
------------------------------------------------------------------------
AIM Basic Value Fund seeks to provide long-term growth of capital.
--Registered Trademark--
PROSPECTUS
MAY 3, 1999
AS REVISED OCTOBER 25, 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> 66
--------------------
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-3
Redeeming Shares A-4
Exchanging Shares A-6
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, AIM Funds, AIM
Funds and Design, AIM Internet Connect and AIM Investor are service marks of
A I M Management Group Inc.
No dealer, salesperson or any other person has been authorized to give any
information or to make any representations other than those contained in this
prospectus, and you should not rely on such other information or
representations.
<PAGE> 67
--------------------
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, for cash
management purposes, or for defensive purposes, the portfolio may temporarily
hold all or a portion of its assets in cash, money market instruments, shares of
affiliated money market funds, 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 fund currently participates in the initial public offering (IPO) market,
and a significant portion of the fund's returns currently are attributable to
its investment in IPOs, which have a magnified impact due to the fund's small
asset base. As the fund's assets grow, it is probable that the effect of the
fund's investment in IPOs on its total returns will decline, which may reduce
the fund's total returns.
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> 68
--------------------
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. Total return information in the bar chart
and table below may be affected by special market factors, including the fund's
investments in initial public offerings, which may have a magnified impact on
the fund due to its small asset base. There is no guarantee that, as the fund's
assets grow, it will continue to experience substantially similar performance.
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--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 classes with the longest performance history.
2
<PAGE> 69
--------------------
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, reflect 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> 70
--------------------
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 125
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 0.76% 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 portfolio, all of whom are officers of A I M Capital Management, Inc., a
wholly owned subsidiary of the advisor, are
- - 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.
- - 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.
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> 71
--------------------
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.
Total return information in this table may be affected by special market
factors, including the fund's investments in initial public offerings, which may
have a magnified impact on the fund due to its small asset base. There is no
guarantee that, as the fund's assets grow, it will continue to experience
substantially similar performance.
<TABLE>
<CAPTION>
CLASS A
-------------------------------------------
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 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 Portfolio as a whole without
distinguishing between the classes of shares issued.
5
<PAGE> 72
--------------------
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> 73
-------------
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 six charge on redemptions within
years one year
- - Lower distribution and service - 12b-1 fee of 1.00% - 12b-1 fee of 1.00%
(12b-1) fee than Class B or
Class C shares (See "Fee Table
and Expense Example")
- Converts to Class A shares - Does not convert to Class A
after eight years along with a shares
pro rata portion of its
reinvested dividends and
distributions(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.
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
- ----------------------------------------------------------
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>
A-1 MCF--10/99
<PAGE> 74
-------------
THE AIM FUNDS
-------------
<TABLE>
<CAPTION>
CATEGORY II INITIAL SALES CHARGES
- ----------------------------------------------------------
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
- ----------------------------------------------------------
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 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.
MCF--10/99 A-2
<PAGE> 75
-------------
THE AIM FUNDS
-------------
PURCHASING SHARES
MINIMUM INVESTMENTS PER AIM FUND ACCOUNT
The minimum investments for AIM Fund accounts (except for investments in AIM Mid
Cap Opportunities Fund and AIM Small Cap Opportunities Fund) are as follows:
<TABLE>
<CAPTION>
INITIAL ADDITIONAL
TYPE OF ACCOUNT INVESTMENTS INVESTMENTS
- ----------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Savings Plans (money-purchase/profit sharing $ 0 ($25 per AIM Fund investment for $25
plans, 401(k) plans, Simplified Employee Pension salary deferrals from Savings Plans)
(SEP) accounts, Salary Reduction (SARSEP)
accounts, Savings Incentive Match Plans for
Employee IRA (Simple IRA) accounts, 403(b) or
457 plans)
Automatic Investment Plans 50 50
IRA, Education IRA or Roth IRA 250 50
All other accounts 500 50
- ----------------------------------------------------------------------------------------------------------------
</TABLE>
HOW TO PURCHASE SHARES
You may purchase shares using one of the options below.
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 form to the transfer
agent. Once the transfer agent has
received the form, call the
transfer agent to place your
purchase order.
By AIM Internet Connect(SM) Open your account using one of the Select the AIM Internet Connect option
methods described above. on your completed account application
or complete an AIM Internet
Connect Authorization Form. Mail the
application or form to the transfer
agent. Once your request for this option
has been processed (which may take up
to 10 days), you may place your purchase
order at www.aimfunds.com. The
maximum purchase amount per
transaction is $100,000. You may
not purchase shares in AIM
prototype retirement accounts on
the internet.
- ----------------------------------------------------------------------------------------------------------
</TABLE>
A-3 MCF--10/99
<PAGE> 76
-------------
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. You may realize taxable gains from these
exchanges. We may modify, suspend or terminate the Program at any time on 60
days' prior written notice.
RETIREMENT PLANS
Shares of most of the AIM Funds can be purchased through tax-sheltered
retirement plans made available to corporations, individuals and employees of
non-profit organizations and public schools. A plan document must be adopted
to establish a retirement plan. You may use AIM Funds-sponsored retirement
plans, which include IRAs, Education IRAs, Roth IRAs, 403(b) plans, 401(k)
plans, SIMPLE IRA plans, SEP/SARSEP plans and Money Purchase/Profit Sharing
plans, or another sponsor's retirement plan. The plan custodian of the AIM
Funds-sponsored retirement plan assesses an annual maintenance fee of $10.
Contact your financial consultant for details.
REDEEMING SHARES
REDEMPTION FEES
Generally, we will not charge you any fees to redeem your shares. However, if
you acquired Class A shares of AIM Developing Markets Fund in connection with
the reorganization of AIM Eastern Europe Fund, you will be charged a redemption
fee of 2% of the net asset value of those shares, which will be paid to AIM
Developing Markets Fund, if you redeem your shares within the first year after
the reorganization. Your broker or financial consultant may charge service fees
for handling redemption transactions. Your shares also may be subject to a
contingent deferred sales charge (CDSC).
REDEMPTION OF 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 OR CLASS C
SHARES ACQUIRED BY EXCHANGE FROM AIM CASH
RESERVE SHARES OF AIM MONEY MARKET FUND
We will begin the holding period for purposes of calculating the CDSC on Class B
shares or Class C shares acquired by exchange from AIM Cash Reserve Shares of
AIM Money Market Fund at the time of the exchange into Class B shares or Class C
shares.
REDEMPTION OF CLASS B SHARES ACQUIRED BY
EXCHANGE FROM AIM FLOATING RATE FUND
If you redeem Class B shares you acquired by exchange via a tender offer by AIM
Floating Rate Fund, the early withdrawal charge applicable to shares of AIM
Floating Rate Fund will be applied instead of the CDSC normally applicable to
Class B shares.
MCF--10/99 A-4
<PAGE> 77
-------------
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 (if there has been no change communicated
to us within the last 30 days) or transferred electronically
to a pre-authorized checking account; (2) you do not hold
physical share certificates; (3) you can provide proper
identification information; (4) the proceeds of the
redemption do not exceed $50,000; and (5) you have not
previously declined the telephone redemption privilege.
Certain accounts, including retirement accounts and 403(b)
plans, may not be redeemed by telephone. The transfer agent
must receive your call during the hours the New York Stock
Exchange (NYSE) is open for business in order to effect the
redemption at that day's closing price.
By AIM Internet Connect Place your redemption request at www.aimfunds.com. You will
be allowed to redeem by internet if (1) you do not hold
physical share certificates; (2) you can provide proper
identification information; (3) the proceeds of the
redemption do not exceed $50,000; and (4) you have
established the internet trading option. AIM prototype
retirement accounts may not be redeemed on the internet. The
transfer agent must confirm your transaction during the
hours 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.
REDEMPTION BY INTERNET
If you redeem by internet, we will transmit your redemption proceeds
electronically to your pre-authorized bank account. We use reasonable procedures
to confirm that instructions communicated by internet are genuine and are not
liable for internet instructions that are reasonably believed to be genuine.
PAYMENT FOR SYSTEMATIC WITHDRAWALS
You may arrange for regular monthly or quarterly withdrawals from your account
of at least $50. You also may make annual withdrawals if you own Class A shares.
We will redeem enough shares from your account to cover the amount withdrawn.
You must have an account balance of at least $5,000 to establish a Systematic
Withdrawal Plan. You can stop this plan at any time by giving ten days prior
notice to the transfer agent.
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 NYSE, we generally will transmit payment on the next business day.
A-5 MCF--10/99
<PAGE> 78
-------------
THE AIM FUNDS
-------------
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.
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 may exchange AIM Cash Reserve Shares of AIM
Money Market Fund for Class A shares of another AIM Fund, or vice versa. You
also may exchange AIM Cash Reserve Shares of AIM Money Market Fund for Class B
shares or Class C shares of another AIM Fund, but only if the AIM Cash Reserve
Shares were purchased directly and not acquired by exchange. 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
MCF--10/99 A-6
<PAGE> 79
-------------
THE AIM FUNDS
-------------
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.
(5) AIM Cash Reserve Shares of AIM Money Market Fund for Class B shares and
Class C shares.
EXCHANGES NOT PERMITTED
You may not exchange Class A shares subject to contingent deferred sales charges
for Class A shares of AIM Limited Maturity Treasury Fund, AIM Tax-Free
Intermediate Fund or AIM Tax-Exempt Cash Fund.
EXCHANGE CONDITIONS
The following conditions apply to all exchanges:
- - You must meet the minimum purchase requirements for the AIM Fund into which
you are exchanging;
- - Shares of the AIM Fund you wish to acquire must be available for sale in your
state of residence;
- - Exchanges must be made between accounts with identical registration
information;
- - The account you wish to exchange from must have a certified tax identification
number (or the Fund has received an appropriate Form W-8 or W-9);
- - Shares must have been held for at least one day prior to the exchange;
- - If you have physical share certificates, you must return them to the transfer
agent prior to the exchange; and
- - You are limited to a maximum of 10 exchanges per calendar year, because
excessive short-term trading or market-timing activity can hurt fund
performance. If you exceed that limit, or if an AIM Fund or the distributor
determines, in its sole discretion, that your short-term trading is excessive
or that you are engaging in market-timing activity, it may reject any
additional exchange orders. An exchange is the movement out of (redemption)
one AIM Fund and into (purchase) another AIM Fund.
TERMS OF EXCHANGE
Under unusual market conditions, an AIM Fund may delay the purchase of shares
being acquired in an exchange for up to five business days if it determines that
it would be materially disadvantaged by the immediate transfer of exchange
proceeds. There is no fee for exchanges. The exchange privilege is not an option
or right to purchase shares. Any of the participating AIM Funds or the
distributor may modify or discontinue this privilege at any time.
BY MAIL
If you wish to make an exchange by mail, you must include original signatures of
each registered owner exactly as the shares are registered, the account
registration and account number, the dollar amount or number of shares to be
exchanged and the names of the AIM Funds from which and into which the exchange
is to be made.
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.
BY INTERNET
You will be allowed to exchange by internet if (1) you do not hold physical
share certificates; (2) you can provide proper identification information; and
(3) you have established the internet trading option.
EXCHANGING CLASS B AND CLASS C SHARES
If you make an exchange involving Class B or Class C shares, the amount of time
you held the original shares will be added to the holding period of the Class B
or Class C shares, respectively, into which you exchanged for the purpose of
calculating contingent deferred sales charges (CDSC) if you later redeem the
exchanged shares. If you redeem Class B shares acquired by exchange via a tender
offer by AIM Floating Rate Fund, you will be credited with the time period you
held the shares of AIM Floating Rate Fund for the purpose of computing the early
withdrawal charge applicable to those shares.
EACH AIM FUND AND ITS AGENTS RESERVE THE RIGHT AT ANY TIME TO:
- REJECT OR CANCEL ANY PART OF ANY PURCHASE OR EXCHANGE ORDER;
- MODIFY ANY TERMS OR CONDITIONS OF PURCHASE OF SHARES OF ANY AIM FUND;
- REJECT OR CANCEL ANY REQUEST TO ESTABLISH THE AUTOMATIC INVESTMENT PLAN AND
SYSTEMATIC WITHDRAWAL PLAN OPTIONS ON THE SAME ACCOUNT; OR
- WITHDRAW ALL OR ANY PART OF THE OFFERING MADE BY THIS PROSPECTUS.
A-7 MCF--10/99
<PAGE> 80
-------------
THE AIM FUNDS
-------------
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
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.
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.
INVESTORS IN TAX-EXEMPT FUNDS SHOULD READ THE INFORMATION UNDER THE HEADING
"OTHER INFORMATION -- SPECIAL TAX INFORMATION REGARDING THE FUND" IN THIS
PROSPECTUS.
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--10/99 A-8
<PAGE> 81
--------------------
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 Fund Services, Inc.
P.O. Box 4739
Houston, TX 77210-4739
BY TELEPHONE: (800) 347-4246
BY E-MAIL: [email protected]
ON THE INTERNET: http://www.aimfunds.com
(prospectuses and annual
and semiannual reports only)
</TABLE>
- --------------------------------------------------------------------------------
You also can review and obtain copies of the fund's SAI, reports and other
information at the SEC's Public Reference Room in Washington, DC; on the EDGAR
database on the SEC's Internet website (http://www.sec.gov); or, after paying a
duplication fee, by sending a letter to the SEC's Public Reference Section,
Washington, DC 20549-0102 or by sending an electronic mail request to
[email protected]. Please call the SEC at 1-202-942-8090 for information about
the Public Reference Room.
- ----------------------------------
AIM Basic Value Fund
SEC 1940 Act file number: 811-2699
- ----------------------------------
[AIM LOGO APPEARS HERE] www.aimfunds.com BVA-PRO-1 INVEST WITH DISCIPLINE
--Registered Trademark--
<PAGE> 82
APPENDIX III
ANNUAL REPORT / MANAGERS' OVERVIEW
FUND ENJOYS STELLAR YEAR
DESPITE SHIFTING MARKETS
HOW DID AIM BASIC VALUE FUND PERFORM DURING THE FISCAL YEAR?
For the fiscal year ended December 31, 1999, the fund had total returns of
32.04% for Class A shares, 31.13% for Class B shares and 32.45% for Advisor
Class shares. (These returns are at net asset value, which does not include
sales charges.) The fund finished the reporting period well ahead of both the
Russell 1000 Index and the Lipper Multi-Cap Value Fund Index, which had total
returns of 20.91% and 5.94%, respectively. The fund's performance is
particularly noteworthy given that growth outperformed value on the whole for
1999.
The fund's Class C shares, which commenced sales on May 3, 1999, had a
cumulative total return of 10.72% through December 31, excluding sales charges.
Total net assets in the fund shot up from $27.5 million a year ago to $136.2
million at the end of the reporting period.
GIVEN THAT GROWTH OUTPERFORMED VALUE DURING 1999, TO WHAT DO YOU ATTRIBUTE THE
FUND'S EXCELLENT PERFORMANCE?
The primary drivers of the fund's performance were technology and energy. Many
investment opportunities during 1999 were created by 1998's financial crisis,
when recession fears drove investors to dump such economically sensitive stocks
as semiconductors and oil services. We took advantage of this situation and
overweighted the fund in both sectors because the stocks were selling at a
significant discount to their intrinsic value and had an attractive long-term
outlook. Value investors who missed these opportunities were left with another
year of underperformance.
For the second year in a row, value funds as a group underperformed growth
funds by a wide margin. According to Morningstar Inc., a company that tracks
mutual fund performance, the average large growth fund was up 39% for the year,
compared to the average large value fund's return of 7% for the year. This
situation was also reflected in the performance of the Russell 1000 Value Index
vs. the S&P 500 Index, with returns of 7.35% and 21.03%, respectively, for the
year. However, AIM Basic Value Fund bucked this trend, as evidenced by its
performance.
WHAT ELSE HAPPENED IN THE MARKETS DURING THE YEAR?
With the worst of the global financial crisis past, the question throughout much
of 1999 was whether or not the Federal Reserve Board (the Fed) would need to
raise interest rates to forestall inflation. Inflation fears spawned volatility
in the markets, curbing high-flying technology, communications and financial
stocks in the spring and bringing on a resurgence of more cyclical stocks, like
energy and commodities. This environment was quite favorable for the fund.
By midsummer, major stock indexes reached new record highs, lifted by solid
corporate earnings, continued tame inflation and renewed vitality among tech
stocks. But investors' fears again dampened stocks in general as key economic
indicators showed the economy blazing ahead relentlessly. Consequently, a modest
correction in the third quarter caused the average domestic mutual fund to
decline by about 5.3%. The fund also felt the effects of the correction.
Ultimately, in three separate moves, the Fed raised the key federal funds rate
from 4.75% to 5.50%.
Despite persistent inflation fears, the U.S. economy continued to experience
a near-record level of consumer confidence. Markets reached a fever pitch by the
end of 1999, with indexes again reaching new highs by the close of the year.
However, these record-breaking performances masked a rather narrow
market--although the S&P 500 returned 14.9% for the fourth quarter, the average
stock in the index was up only 8.2% for the same period.
HOW WAS THE FUND POSITIONED AT THE END OF THE REPORTING PERIOD?
Top sector weightings for the fund at the end of the fiscal year were as
follows: financials, 16.77%; health care, 13.50%; technology, 12.96%; and
energy, 9.21%.
-------------------------------------
THE PRIMARY DRIVERS OF THE FUND'S PER-
FORMANCE WERE TECHNOLOGY AND ENERGY.
-------------------------------------
FUND BEATS INDEXES
One-year total returns as of 12/31/99,
excluding sales charges
================================================================================
Class A shares 32.04%
Class B shares 31.13%
Advisor Class shares 32.45%
Russell 1000 Index 20.91%
Lipper Multi-Cap 5.94%
Value Index
================================================================================
GROWTH OF NET ASSETS
================================================================================
12/31/98 $27.5 million
12/31/99 $136.2 million
================================================================================
See important fund and index disclosures inside front cover.
AIM BASIC VALUE FUND
2
<PAGE> 83
ANNUAL REPORT / MANAGERS' OVERVIEW
Our 49 holdings were nearly equally weighted between mid- and large/mega-cap
companies.
We have been reducing the fund's technology exposure because of excessive
valuations. We think the fundamental outlook for technology is exciting, but
this is against a backdrop of unrealistic expectations, decelerating earnings
growth and accelerating global economic growth. We still believe technology is a
good investment for the long term, but today the best valuation opportunities
are outside technology.
We continue to find exciting values in the health-care services industry
following the aftermath of the Medicare cuts to balance the federal budget.
Another area of opportunity for the fund is in failed mergers and acquisitions.
In many cases, investors have overreacted to short-term integration problems,
which creates an opportunity for patient investors.
WHAT WERE SOME STANDOUT HOLDINGS FOR THE FUND?
Holdings from several different sectors enhanced the fund's performance.
Citigroup, one of the world's largest financial-services companies, has bounced
back substantially since 1998's global financial crisis eroded its stock along
with those of many other financial companies. Even though health-care stocks
have been in a slump in recent months, top fund holding Health Management
Associates has continued to grow by acquiring and operating hospitals in rural
areas of the southern United States.
In technology, the fund benefited from owning Computer Associates
International, an independent software company that likens its products to the
plumbing under a sink rather than the fancy faucet on top, and Philips
Electronics, maker of such well-known brands as Magnavox and Norelco and of
everything from televisions to light bulbs to semiconductors.
One new addition to our list of top holdings since our last report is
Transocean Sedco Forex, an offshore drilling contractor. The company, which
specializes in deepwater drilling, was formed in 1999 when Transocean Offshore
merged with Sedco Forex, a former division of oil giant Schlumberger (also a
fund holding).
WHAT IS YOUR NEAR-TERM OUTLOOK?
Many analysts expect the fast pace of U.S. economic growth to continue through
at least the first half of 2000. This has led to the belief that the Fed will
need to raise interest rates at least once--if not more--to slow economic growth
to a more sustainable pace. It seems that the same story that dogged markets in
1999 is so far continuing, with persistent upward pressure on interest rates.
We expect accelerating global economic growth to bring with it broader
earnings growth. With earnings growth spread more evenly across the U.S.
economy, a broader stock market should follow. If this happens, we believe value
investing will once again prove to be a market-beating investment strategy. We
continue to find attractive valuation opportunities, and we feel the portfolio
is well positioned going forward.
PORTFOLIO COMPOSITION
As of 12/31/99, based on total net assets
<TABLE>
<CAPTION>
========================================================================================================================
TOP 10 HOLDINGS TOP 10 INDUSTRIES
- ------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
1. Health Management Associates, Inc. 5.05% 1. Oil & Gas (Drilling & Equipment) 6.98%
2. Novellus Systems Inc. 3.13 2. Electric Companies 6.73
3. Koninklijke (Royal) Philips Electronics N.V. 3.11 3. Computers (Software & Services) 5.57
4. United HealthCare Corp. 2.85 4. Insurance (Property-Casualty) 5.56
5. Computer Associates International Inc. 2.82 5. Health Care (Hospital Management) 5.05
6. McKesson HBOC Inc. 2.73 6. Manufacturing (Specialized) 4.47
7. Bank of America Corp. 2.63 7. Financial (Diversified) 4.18
8. Beckman Coulter Inc. 2.58 8. Electrical Equipment 3.74
9. First Data Corp. 2.57 9. Paper & Forest Products 3.69
10. Transocean Sedco Forex Inc. 2.49 10. Retail (Food Chains) 3.40
The fund's portfolio is subject to change, and there is no assurance that the
fund will continue to hold any particular security.
========================================================================================================================
</TABLE>
See important fund and index disclosures inside front cover.
AIM BASIC VALUE FUND
3
<PAGE> 84
ANNUAL REPORT / PERFORMANCE HISTORY
YOUR FUND'S LONG-TERM PERFORMANCE
RESULTS OF A $10,000 INVESTMENT
AIM BASIC VALUE FUND VS. BENCHMARK INDEXES
10/18/95-12/31/99
In thousands
<TABLE>
<CAPTION>
======================================================================================================
Lipper
AIM Basic AIM Basic AIM Basic Multi-Cap Russell
Value Fund, Value Fund, Value Fund, Value Russell 1000
Class A Class B Advisor Class Fund 1000 Value
Shares Shares Shares Index Index Index
- ------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
10/18/95 9446 10000 10000
10/31/95 10425 10446 10000
12/31/95 10545 11155 11172.4 10589.6 10605.2 10770.5
12/31/96 12140 12756 12913 12812.4 12985.8 13101.5
12/31/97 15446 16128 16500.1 16260.1 17251.7 17710.9
12/31/98 16530 17150 17725.5 17321.1 21913.6 20479.1
12/31/99 $21,826 $22,290 $23,478 $18,350 $26,496 $21,984
Source: Lipper, Inc.
Past performance cannot guarantee comparable future results.
======================================================================================================
</TABLE>
ABOUT THIS CHART
The chart compares your fund's Class A, Class B and Advisor Class shares to
benchmark indexes. It is intended to give you an idea of how your fund performed
compared to these indexes over the period 10/18/95-12/31/99. (Data for these
indexes are for the period 10/31/95-12/31/99.) It is important to understand the
differences between your fund and an index. An index measures the performance of
a hypothetical portfolio. Your fund's total return is shown with the applicable
sales charge, and it includes fund expenses and management fees. A market index
such as the Russell 1000 Index is not managed, incurring no sales charges,
expenses or fees. If you could buy all the securities that make up a market
index, you would incur expenses that would affect your investment's return. An
index of funds such as the Lipper Multi-Cap Value Fund Index includes a number
of mutual funds grouped by investment objective. Each of those funds interprets
that objective differently, and each employs a different management style and
investment strategy.
Since our last report, AIM Basic Value Fund has elected to use the Russell
1000 Index as its primary benchmark. The fund will no longer measure its
performance against the Russell 1000 Value Index because this index does not
meet SEC guidelines as a broad market index. Because this is the first reporting
period since we have adopted the new index, SEC guidelines require that we
include the old index in the performance comparison above.
AVERAGE ANNUAL TOTAL RETURNS
As of 12/31/99, including sales charges
================================================================================
ADVISOR CLASS SHARES*
Inception (10/18/95) 22.52%
1 year 32.45
*Sales charges do not apply.
CLASS B SHARES
Inception (10/18/95) 21.01%
1 year 26.13*
*31.13%, excluding CDSC
CLASS A SHARES
Inception (10/18/95) 20.41%
1 year 24.75*
*32.04%, excluding sales charges
CLASS C SHARES
Inception (5/3/99) 9.72%*
*10.72%, excluding CDSC. Total return provided is cumulative total return that
has not yet been annualized.
================================================================================
Your fund's total return includes sales charges, expenses and management fees.
The performance of the fund's Class A, Class B, Class C and Advisor Class shares
will differ due to differing fees and expenses. For fund performance
calculations and descriptions of the indexes cited on this page, please see the
inside front cover.
MARKET VOLATILITY CAN SIGNIFICANTLY IMPACT SHORT-TERM PERFORMANCE. RESULTS
OF AN INVESTMENT MADE TODAY MAY DIFFER SUBSTANTIALLY FROM THE HISTORICAL
PERFORMANCE SHOWN.
AIM BASIC VALUE FUND
4
<PAGE> 85
WHY GOOD ECONOMIC NEWS SOMETIMES
RATTLES MARKETS
You turn on your television and learn the nation's unemployment rate has dropped
to its lowest level in decades. This latest tidbit of information enhances an
already rosy economic picture. The economy is growing at a brisk pace, wages are
rising and consumer spending is on the upswing.
Later in the day, you hear that financial markets plummeted in reaction to
the positive report on unemployment. Why in the world, you wonder, do markets
act that way?
Market observers often comment that "good news on Main Street is bad news on
Wall Street." And on the surface, it would appear to be that way at times.
RAPID GROWTH CAN SPUR INFLATION
It's not because the markets are opposed to good economic news. It's because a
major school of economic theory holds that when the economy grows too rapidly,
it can lead to runaway inflation. For example, if unemployment is extremely low
and wages are rising, companies have to pay more to hire and retain employees.
To cover increases in labor costs, companies may have to raise the prices of
their goods and services. If prices are rising faster than wages, consumers are
actually losing ground, even if their salaries are increasing.
FED MORE LIKELY TO RAISE INTEREST RATES
Moreover, when inflation looms as a threat, the Federal Reserve Board (the Fed)
is more likely to raise interest rates to keep it in check. And when rumors
abound that the central bank is about to tighten monetary policy, it can have a
disquieting effect on financial markets.
But if the Fed does raise interest rates slightly as a pre-emptive move
against inflation, it's not necessarily a bad thing, even if it causes a
short-term drop in markets. One well-known market analyst likened a modest
interest-rate hike to a flu shot: while it can cause some temporary discomfort,
it can prevent more serious malaise later. As Fed Chairman Alan Greenspan
observed, "Modest pre-emptive actions can obviate the need for more drastic
actions at a later date."
In three seperate moves in 1999, the central bank raised the federal funds
rate--the rate banks charge each other for borrowing surplus reserves--from
4.75% to 5.50%. These moves were a bid to head off inflation, which has been
very low in recent years, but threatened to re-emerge because of torrid economic
growth.
Stocks generally react negatively to a Fed interest-rate hike because it
means higher borrowing costs for corporations, which can affect their
profitability. Bonds also tend to decline in value when their coupons fall below
prevailing interest rates.
RESPONSES OF MARKETS CAN BE A LITTLE SURPRISING
Sometimes the markets will greet a Fed rate increase with a collective
yawn--that is, the actual announcement of a tightening in monetary policy has
very little impact on stocks and bonds. Generally, in such cases, the markets
have anticipated a Fed move in the preceding weeks and have adjusted stock and
bond prices accordingly.
Other times markets will actually rally after the Fed announces a rate
increase, especially if it is more modest than expected. Such a phenomenon is
often referred to as a "relief rally." The Standard & Poor's Composite Index of
500 Stocks (S&P 500) rose 1.57% on June 30, 1999, after the Fed raised rates.
While past performance cannot guarantee comparable future results, in recent
years, Fed rate hikes have only had a transitory impact on the markets. In such
scenarios, it is advisable to remain focused on your long-term financial goals
and not get too concerned about temporary dips in stock and bond prices.
[PHOTO]
AIM BASIC VALUE FUND
5
<PAGE> 86
AIM BASIC VALUE FUND
A PORTFOLIO OF AIM GROWTH SERIES
11 Greenway Plaza, Suite 100
Houston, Texas 77046-1173
Toll Free: (800) 347-4246
and
AIM LARGE CAP VALUE FUND
A PORTFOLIO OF AIM ADVISOR FUNDS, INC.
11 Greenway Plaza, Suite 100
Houston, Texas 77046-1173
Toll Free: (800) 347-4246
STATEMENT OF ADDITIONAL INFORMATION
(May 31, 2000 Special Meeting of Shareholders of AIM Large Cap Value Fund)
This Statement of Additional Information is not a prospectus, but should be
read in conjunction with the Combined Proxy Statement and Prospectus dated
April , 2000, of AIM Growth Series (the "Trust") for use in connection with the
Special Meeting of Shareholders of AIM Large Cap Value Fund, a portfolio of
AIM Advisor Funds, Inc., to be held May 31, 2000. Copies of the Combined Proxy
Statement and Prospectus may be obtained at no charge by writing the Trust at
the address shown above or by calling 1-800-347-4246.
Unless otherwise indicated, capitalized terms used herein and not otherwise
defined have the same meanings as are given to them in the Combined Proxy
Statement and Prospectus.
A Statement of Additional Information for the Trust dated May 3, 1999, as
supplemented on September 13, 1999, October 6, 1999, February 11, 2000 and
March 22, 2000, has been filed with the Securities and Exchange Commission and
is attached hereto as Appendix I which is incorporated herein by this
reference.
The date of this Statement of Additional Information is April , 2000.
TABLE OF CONTENTS
Appendix I - AIM Growth Series Statement of Additional Information
Appendix II - Annual Report for AIM Large Cap Value Fund
Appendix III - Pro Forma Financial Statements
<PAGE> 87
APPENDIX I
CLASS A, CLASS B AND CLASS C SHARES OF
AIM BASIC VALUE FUND
AIM SMALL CAP GROWTH FUND
(SERIES PORTFOLIOS OF AIM GROWTH SERIES)
Supplement dated March 22, 2000
to the Statement of Additional Information dated May 3, 1999,
as supplemented September 13, 1999, October 6, 1999 and February 11, 2000
At a meeting held on March 14, 2000, the Board of Trustees of AIM Growth
Series (the "Trust") voted to request shareholder approval to amend the
fundamental investment restrictions of AIM Basic Value Fund (the "Fund"), a
series of the Trust. The Board of Trustees has called a meeting of the
Fund's shareholders to be held on or about May 31, 2000 to vote on these
and other proposals. Only shareholders of record as of April 3, 2000 will
be entitled to vote at the meeting. Proposals that are approved are
expected to become effective on or about June 5, 2000.
If shareholders approve the proposal to amend the Fund's fundamental
investment restrictions, the Fund will operate under the following
fundamental investment restrictions:
(a) The Fund is a "diversified company" as defined in the 1940
Act. The Fund will not purchase the securities of any
issuer if, as a result, the Fund would fail to be a
diversified company within the meaning of the 1940 Act,
and the rules and regulations promulgated thereunder, as
such statute, rules, and regulations are amended from
time to time or are interpreted from time to time by the
SEC staff (collectively, the 1940 Act laws and
interpretations) or except to the extent that the Fund
may be permitted to do so by exemptive order or similar
relief (collectively, with the 1940 Act laws and
interpretations, the 1940 Act laws, interpretations and
exemptions). In complying with this restriction, however,
the Fund may purchase securities of other investment
companies to the extent permitted by the 1940 Act laws,
interpretations and exemptions.
(b) The Fund may not borrow money or issue senior
securities, except as permitted by the 1940 Act laws,
interpretations and exemptions.
(c) The Fund may not underwrite the securities of other
issuers. This restriction does not prevent the Fund
from engaging in transactions involving the
acquisition, disposition or resale of its portfolio
securities, regardless of whether the Fund may be
considered to be an underwriter under the Securities
Act of 1933.
(d) The Fund will not make investments that will result in
the concentration (as that term may be defined or
interpreted by the 1940 Act laws, interpretations and
exemptions) of its investments in the securities of
issuers primarily engaged in the same industry. This
restriction does not limit the Fund's investment in
(i) obligations issued or guaranteed by the U.S.
Government, its agencies or instrumentalities or (ii)
tax-exempt obligations issued by government or
political subdivisions of governments. In complying
with this restriction, the Fund will not consider a
bank-issued guaranty or financial guaranty insurance
as a separate security.
<PAGE> 88
(e) The Fund may not purchase real estate or sell real
estate unless acquired as a result of ownership of
securities or other instruments. This restriction does
not prevent the Fund from investing in issuers that
invest, deal, or otherwise engage in transactions in
real estate or interests therein, or investing in
securities that are secured by real estate or
interests therein.
(f) The Fund may not purchase physical commodities or sell
physical commodities unless acquired as a result of
ownership of securities or other instruments. This
restriction does not prevent the Fund from engaging in
transactions involving futures contracts and options
thereon or investing in securities that are secured by
physical commodities.
(g) The Fund may not make personal loans or loans of its
assets to persons who control or are under the common
control with the Fund, except to the extent permitted
by 1940 Act laws, interpretations and exemptions. This
restriction does not prevent the Fund from, among
other things, purchasing debt obligations, entering
into repurchase agreements, loaning its assets to
broker-dealers or institutional investors, or
investing in loans, including assignments and
participation interests.
(h) The Fund may, notwithstanding any other fundamental
investment policy or limitation, invest all of its
assets in the securities of a single open-end
management investment company with substantially the
same fundamental investment objectives, policies and
restrictions as the Fund.
The investment restrictions set forth above provide the Funds with the
ability to operate under new interpretations of the 1940 Act or pursuant to
exemptive relief from the SEC without receiving prior shareholder approval
of the change. Even though the Funds have this flexibility, the Board of
Trustees has adopted internal guidelines for each Fund relating to certain
of these restrictions which the advisor must follow in managing the Funds.
Any changes to these guidelines, which are set forth below, require the
approval of the Board of Trustees.
If the shareholders approve the proposal to amend the Fund's
non-fundamental investment restrictions, the Fund will operate under the
following non-fundamental investment restrictions:
1. In complying with the fundamental restriction regarding
issuer diversification, the Fund will not, with respect
to 75% of its total assets, purchase the securities of
any issuer (other than securities issued or guaranteed by
the U.S. Government or any of its agencies or
instrumentalities), if, as a result, (i) more than 5% of
the Fund's total assets would be invested in the
securities of that issuer, or (ii) the Fund would hold more
than 10% of the outstanding voting securities of that
issuer. The Fund may (i) purchase securities of other
investment companies as permitted by Section 12(d)(1) of
the 1940 Act and (ii) invest its assets in securities of
other money market funds and lend money to other
investment companies and their series portfolios that
have AIM or an affiliate of AIM as an investment advisor
(an AIM Fund), subject to the terms and conditions of any
exemptive orders issued by the SEC.
2. In complying with the fundamental restriction
regarding borrowing money and issuing senior
securities, the Fund may borrow money in an amount not
exceeding 33 1/3% of its total assets (including the
amount borrowed) less liabilities (other than
borrowings). The Fund may borrow from banks,
broker-dealers or an AIM Fund. The Fund may not borrow
for leveraging, but may borrow for temporary or
emergency purposes, in anticipation of or in response
to adverse market conditions, or for cash management
purposes. The Fund may
<PAGE> 89
not purchase additional securities when any borrowings
from banks exceed 5% of the Fund's total assets.
3. In complying with the fundamental restriction
regarding industry concentration, the Fund may invest
up to 25% of its total assets in the securities of
issuers whose principal business activities are in the
same industry.
4. In complying with the fundamental restriction with
regard to making loans, the Fund may lend up to 33
1/3% of its total assets and may lend money to another
AIM Fund, on such terms and conditions as the SEC may
require in an exemptive order.
5. Notwithstanding the fundamental restriction with
regard to investing all assets in an open-end fund,
the Fund may not invest all of its assets in the
securities of a single open-end management investment
company with the same fundamental investment
objectives, policies and restrictions as the Fund.
If a percentage restriction is adhered to at the time of investment, a
later change in percentage resulting from changes in values of assets will
not be considered a violation of the restriction.
<PAGE> 90
CLASS A, CLASS B AND CLASS C SHARES OF
AIM BASIC VALUE FUND
AIM SMALL CAP GROWTH FUND
(SERIES PORTFOLIOS OF AIM GROWTH SERIES)
Supplement dated February 11, 2000
to the Statement of Additional Information dated May 3, 1999
as supplemented September 13, 1999 and October 6, 1999
This supplement supersedes and replaces in its entirety the
supplements dated October 6, 1999 and September 13, 1999.
Advisor Class shares of the Funds converted to Class A shares of the
Funds effective the close of business on February 11, 2000. Advisor Class
shares of the Funds are no longer offered for sale or exchange.
The following is added as a new section after the information appearing
under the heading "INVESTMENT POLICIES- SELECTION OF INVESTMENTS" on page 6 of
the Statement of Additional Information:
"EQUITY-LINKED DERIVATIVES
The Portfolios may invest in equity-linked derivative products
designed to replicate the composition and performance of particular
indices. Examples of such products include S&P Depositary Receipts
("SPDRs"), World Equity Benchmark Series ("WEBs"), NASDAQ 100 tracking
shares ("QQQs"), Dow Jones Industrial Average Instruments ("DIAMONDS") and
Optomised Portfolios as Listed Securities ("OPALS"). Investments in
equity-linked derivatives involve the same risks associated with a direct
investment in the types of securities included in the indices such
products are designed to track. There can be no assurance that the trading
price of the equity-linked derivatives will equal the underlying value of
the basket of securities purchased to replicate a particular index or that
such basket will replicate the index. Investments in equity-linked
derivatives may constitute investment in other investment companies. See
"INVESTMENTS IN OTHER INVESTMENT COMPANIES."
The following paragraph replaces in its entirety the paragraph
appearing under the heading "INVESTMENT POLICIES- INVESTMENTS IN OTHER
INVESTMENT COMPANIES" on page 6 of the Statement of Additional Information:
"Each Portfolio may invest in other investment companies to the
extent permitted by the 1940 Act, and the rules and regulations
thereunder, and if applicable, exemptive orders granted by the SEC. The
following restrictions apply to investments in other investment companies
other than Affiliated Money Market Funds (defined below): (i) a Portfolio
may not purchase more than 3% of the total outstanding voting stock of
another investment company; (ii) a Portfolio may not invest more than 5%
of its total assets in securities issued by another investment company;
and (iii) a Portfolio may not invest more than 10% of its total assets in
securities issued by other investment companies other than Affiliated
Money Market Funds. With respect to a Portfolio's purchase of shares of
another investment company, including Affiliated Money Market Funds, the
Portfolio will indirectly bear its proportionate share of the advisory
fees and other operating expenses of such investment company. The
Portfolios have obtained an exemptive order from the SEC allowing them to
invest in money market funds that have AIM or an affiliate of AIM as an
investment adviser (the "Affiliated Money Market Funds"), provided that
investments in Affiliated Money Market Funds do not exceed 25% of the
total assets of such Portfolio."
The following replaces in its entirety the section "INVESTMENT POLICIES -
DEPOSITARY RECEIPTS" on page 6 of the Statement of Additional Information:
<PAGE> 91
"FOREIGN SECURITIES
To the extent consistent with their respective investment
objectives, each of the Portfolios may invest up to 25% of its total assets
in foreign securities. For purposes of computing such limitation American
Depositary Receipts ("ADRs"), European Depositary Receipts ("EDRs") and
other securities representing underlying securities of foreign issuers are
treated as foreign securities. These securities may not necessarily be
denominated in the same currency as the securities into which they may be
converted. ADRs are receipts typically issued by a United States bank or
trust company which evidence ownership of underlying securities issued by a
foreign corporation. EDRs are receipts issued in Europe which evidence a
similar ownership arrangement. Generally, ADRs, in registered form, are
designed for use in the United States securities markets, and EDRs, in
bearer form, are designed for use in European securities markets. ADRs and
EDRs may be listed on stock exchanges, or traded in OTC markets in the
United States or Europe, as the case may be. ADRs, like other securities
traded in the United States, will be subject to negotiated commission
rates.
To the extent a Portfolio invests in securities denominated in
foreign currencies, each Portfolio bears the risk of changes in the
exchange rates between U.S. currency and the foreign currency, as well as
the availability and status of foreign securities markets. These securities
will be marketable equity securities (including common and preferred stock,
depositary receipts for stock and fixed income or equity securities
exchangeable for or convertible into stock) of foreign companies which
generally are listed on a recognized foreign securities exchange or traded
in a foreign over-the-counter market. Each of the Portfolios may also
invest in foreign securities listed on recognized U.S. securities exchanges
or traded in the U.S. over-the-counter market. Such foreign securities may
be issued by foreign companies located in developing countries in various
regions of the world. A "developing country" is a country in the initial
stages of its industrial cycle. As compared to investment in the securities
markets of developed countries, investment in the securities markets of
developing countries involves exposure to markets that may have
substantially less trading volume and greater price volatility, economic
structures that are less diverse and mature, and political systems that may
be less stable.
Investments by a Portfolio in foreign securities, whether
denominated in U.S. currencies or foreign currencies, may entail all of the
risks set forth below. Investments by a Portfolio in ADRs, EDRs or similar
securities also may entail some or all of the risks as set forth below.
Currency Risk. The value of each Portfolio's foreign investments
will be affected by changes in currency exchange rates. The U.S. dollar
value of a foreign security decreases when the value of the U.S. dollar
rises against the foreign currency in which the security is denominated
and increases when the value of the U.S. dollar falls against such currency.
On January 1, 1999, certain members of the European Economic and
Monetary Union ("EMU"), namely Austria, Belgium, Finland, France, Germany,
Ireland, Italy, Luxembourg, the Netherlands, Portugal, and Spain
established a common European currency known as the "euro" and each
member's local currency became a denomination of the euro. It is
anticipated that each participating country will replace its local currency
with the euro on July 1, 2002. Any other European country that is a member
of the European Union and satisfies the criteria for participation in the
EMU may elect to participate in the EMU and may supplement its existing
currency with euro. The anticipated replacement of existing currencies with
the euro on July 1, 2002 could cause market disruptions before or after
July 1, 2002 and could adversely affect the value of securities held by a
Portfolio.
Political and Economic Risk. The economies of many of the countries
in which the Portfolios may invest are not as developed as the United
States economy and may be subject to significantly different forces.
Political or social instability, expropriation or confiscatory taxation,
and limitations on the removal of funds or other assets could also
adversely affect the value of each Portfolio's investments.
Regulatory Risk. Foreign companies are not registered with the SEC
and are generally not subject to the regulatory controls imposed on United
States issuers and, as a consequence, there is generally less publicly
available information about foreign securities than is available about
domestic securities. Foreign companies are not subject to uniform
accounting, auditing and financial reporting standards, practices and
requirements comparable to those applicable to domestic companies. Income
from foreign securities owned by the Portfolios
2
<PAGE> 92
may be reduced by a withholding tax at the source, which tax would reduce
dividend income payable to the Portfolios' shareholders.
Market Risk. The securities markets in many of the countries in
which the Portfolios invest will have substantially less trading volume
than the major United States markets. As a result, the securities of some
foreign companies may be less liquid and experience more price volatility
than comparable domestic securities. Increased custodian costs as well as
administrative costs (such as the need to use foreign custodians) may be
associated with the maintenance of assets in foreign jurisdictions. There
is generally less government regulation and supervision of foreign stock
exchanges, brokers and issuers which may make it difficult to enforce
contractual obligations. In addition, transaction costs in foreign
securities markets are likely to be higher, since brokerage commission
rates in foreign countries are likely to be higher than in the United
States."
The following replaces in its entirety the first paragraph under the
heading "heading "INVESTMENT POLICIES- BORROWING, REVERSE REPURCHASE AGREEMENTS
AND "ROLL" TRANSACTIONS" on page 8 of the Statement of Additional Information:
"Each Portfolio's borrowings will not exceed 33 1/3% of its total
assets, i.e., each Portfolio's total assets will equal at least 300% of the
amount of outstanding borrowings. If market fluctuations in the value of a
Portfolio's holdings or other factors cause the ratio of the Portfolio's
total assets to outstanding borrowings to fall below 300%, within three
days (excluding Sundays and holidays) of such event the Portfolio may be
required to sell portfolio securities to restore the 300% asset coverage,
even though from an investment standpoint such sales might be
disadvantageous. Each Portfolio also may borrow up to 5% of its total
assets for temporary or emergency purposes other than to meet redemptions.
Each Portfolio may not make additional investments if borrowings exceed 5%
of its total assets. A Portfolio may borrow in connection with meeting
requests for the redemption of a Portfolio's shares. Any borrowing by a
Portfolio may cause greater fluctuation in the value of its shares than
would be the case if the Portfolio did not borrow."
The following replaces in its entirety the information appearing
under the heading "INVESTMENT POLICIES - TEMPORARY DEFENSIVE STRATEGIES" on
page 9 of the Statement of Additional Information.
"In anticipation of or in response to adverse market conditions, for
cash management purposes, or for defensive purposes, each of the
Portfolios may temporarily hold all or a portion of its assets in cash
(U.S. dollars, foreign currencies or multinational currency units), money
market instruments, or high-quality debt securities. Each of the
Portfolios may also invest up to 25% of its total assets in Affiliated
Money Market Funds for these purposes. To the extent a Portfolio employs a
temporary defensive strategy, it will not be invested so as to achieve
directly its investment objectives.
Money market instruments in which the Portfolios may invest include
the following: government securities; high grade commercial paper; bank
certificates of deposit; bankers' acceptances; and repurchase agreements
related to any of the foregoing. High grade commercial paper refers to
commercial paper rated P-1 by Moody's or A-1 by S&P, at the time of
investment or, if unrated, deemed by AIM to be of comparable quality."
The following new section is added after the seventh paragraph
appearing under the heading "EXECUTION OF PORTFOLIO TRANSACTIONS" on page 20 of
the Statement of Additional Information:
"ALLOCATION OF INITIAL PUBLIC OFFERING ("IPO") SECURITIES TRANSACTIONS
From time to time, certain of the mutual funds managed by AIM or
A I M Capital Management, Inc. (collectively, the "AIM Funds") may become
interested in participating in security distributions that are available
in an IPO, and occasions may arise when purchases of such securities by
one AIM Fund may also be considered for purchase by one or more other AIM
Funds. In such cases, it shall be AIM's practice to specifically combine
or otherwise bunch indications of interest for IPO securities for all AIM
Funds participating in purchase transactions for that security, and to
allocate such transactions in accordance with the following procedures:
3
<PAGE> 93
AIM will determine the eligibility of each AIM Fund that seeks to
participate in a particular IPO by reviewing a number of factors,
including suitability of the investment with the AIM Fund's investment
objective, policies and strategies, the liquidity of the AIM Fund if such
investment is purchased, and whether the portfolio manager intends to hold
the security as a long-term investment. The allocation of limited supply
securities issued in IPOs will be made to eligible AIM Funds in a manner
designed to be fair and equitable for the eligible AIM Funds, and so that
there is equal allocation of IPOs over the longer term. Where multiple
funds are eligible, rotational participation may occur, based on the
extent to which an AIM Fund has participated in previous IPOs as well as
the size of the AIM Fund. Each eligible AIM Fund with an asset level of
less than $500 million, will be placed in one of three tiers, depending
upon its asset level. The AIM Funds in the tier containing funds with the
smallest asset levels will participate first, each receiving a 40 basis
point allocation (rounded to the nearest share round lot that approximates
40 basis points) (the "Allocation"), based on that AIM Fund's net assets.
This process continues until all of the AIM Funds in the three tiers
receive their Allocations, or until the shares are all allocated. Should
securities remain after this process, eligible AIM Funds will receive
their Allocations on a straight pro rata basis. For the tier of AIM Funds
not receiving a full Allocation, the Allocation may be made only to
certain AIM Funds so that each may receive close to or exactly 40 basis
points.
Any AIM Funds with substantially identical investment objectives and
policies will participate in syndicates in amounts that are substantially
proportionate to each other. In these cases, the net assets of the largest
AIM Fund will be used to determine in which tier, as described in the
paragraph above, such group of AIM Funds will be placed. The price per
share of securities purchased in such syndicate transactions will be the
same for each AIM Fund."
The following is added as a new category of purchaser who will not pay
initial sales charges on purchases of Class A shares, under the heading "THE
DISTRIBUTOR - PURCHASES AT NET ASSET VALUE" on page 33 of the Statement of
Additional Information:
"o Shareholders of record of Advisor Class shares of an AIM Fund on
February 11, 2000 who have continuously owned shares of that AIM Fund,
and who purchase additional shares of that AIM Fund."
The following new paragraph is added after the fifth paragraph
appearing under the heading "INVESTMENT RESULTS- PERFORMANCE INFORMATION" on
page 46 of the Statement of Additional Information:
"Each of the Portfolios may participate in the IPO market, and a
significant portion of those Portfolios' returns may be attributable to
their investment in IPOs, which have a magnified impact due to the
Portfolios' small asset bases. There is no guarantee that as the
Portfolios' assets grow, they will continue to invest to the same degree
in IPOs or that they will experience substantially similar performance."
The following replaces in its entirety the table appearing under the
heading "MANAGEMENT-TRUSTEES AND EXECUTIVE OFFICERS" on page 21 of the
Statement of Additional Information:
4
<PAGE> 94
<TABLE>
<CAPTION>
========================== ======================== ===========================================================
POSITIONS HELD PRINCIPAL OCCUPATION DURING AT LEAST THE
"NAME, ADDRESS AND AGE WITH REGISTRANT PAST 5 YEARS
========================== ======================== ===========================================================
<S> <C> <C>
*ROBERT H. GRAHAM (53) Trustee, Chairman and Director, President and Chief Executive Officer, A I M
President Management Group Inc.; Director and President, A I M
Advisors, Inc.; Director and Senior Vice President, A I M
Capital Management, Inc., A I M Distributors, Inc., A I M
Fund Services, Inc. and Fund Management Company; and
Director and Chief Executive Officer, Managed Products,
AMVESCAP PLC.
- -------------------------- ------------------------ -----------------------------------------------------------
C. DEREK ANDERSON (58) Trustee Senior Managing Partner, Plantagenet Capital Management,
220 Sansome Street LLC (an investment partnership); Chief Executive Officer,
Suite 400 Plantagenet Holdings, Ltd. (an investment banking firm);
San Francisco, CA 94104 and Director, Premium Wear, Inc. (formerly Munsingwear,
Inc.) (a casual apparel company), 'R' Homes, Inc., Big
Online, Inc., Champagne Albert Le Brun and various other
privately owned companies.
- -------------------------- ------------------------ -----------------------------------------------------------
FRANK S. BAYLEY (60) Trustee Partner, law firm of Baker & McKenzie; Trustee, The
Two Embarcadero Center Badgley Funds; and Director and Chairman, C. D. Stimson
Suite 2400 Company (a private investment company) and Stimson Marina,
San Francisco, CA 94111 Inc. (a subsidiary of C. D. Stimson Co.).
- -------------------------- ------------------------ -----------------------------------------------------------
RUTH H. QUIGLEY (64) Trustee Private investor; and President, Quigley Friedlander &
1055 California Street Co., Inc.(a financial advisory services firm) from 1984
San Francisco, CA 94108 to 1986.
- -------------------------- ------------------------ -----------------------------------------------------------
MELVILLE B. COX (56) 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 (52) Vice President Director and President, A I M Capital Management, Inc.;
Director and Executive Vice President, A I M Management
Group Inc.; Director and Senior Vice President, A I M
Advisors, Inc.; and Director, A I M Distributors, Inc.
and AMVESCAP PLC.
========================== ======================== ===========================================================
</TABLE>
- --------
* A trustee who is an "interested person" of the Trust and AIM as defined in
the 1940 Act.
5
<PAGE> 95
<TABLE>
<CAPTION>
========================== ======================== ===========================================================
POSITIONS HELD PRINCIPAL OCCUPATION DURING AT LEAST THE
NAME, ADDRESS AND AGE WITH REGISTRANT PAST 5 YEARS
========================== ======================== ===========================================================
<S> <C> <C>
CAROL F. RELIHAN (45) Vice President Director, Senior Vice President, General Counsel and
Secretary, A I M Advisors, Inc.; Senior Vice President,
General Counsel and Secretary, A I M Management Group
Inc.; Director, Vice President and General Counsel, Fund
Management Company; Vice President and General Counsel,
A I M Fund Services, Inc.; and Vice President, A I M
Capital Management, Inc. and A I M Distributors, Inc.
- -------------------------- ------------------------ -----------------------------------------------------------
SAMUEL D. SIRKO (40) Vice President and Assistant General Counsel and Assistant Secretary of
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; and Vice President, Assistant
General Counsel and Assistant Secretary of A I M
Advisors, Inc.
- -------------------------- ------------------------ -----------------------------------------------------------
DANA R. SUTTON (41) Vice President and Vice President and Fund Controller, A I M Advisors, Inc.;
Treasurer and Assistant Vice President and Assistant Treasurer,
Fund Management Company."
========================== ======================== ===========================================================
</TABLE>
6
<PAGE> 96
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> 97
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>
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<TABLE>
<CAPTION>
PAGE NO.
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<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>
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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
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<PAGE> 100
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.
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<PAGE> 101
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
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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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<PAGE> 103
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
16
<PAGE> 112
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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<PAGE> 113
(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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<PAGE> 114
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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<PAGE> 115
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>
- ----------------------------------------------------------------------------------------------------
NAME, ADDRESS AND AGE POSITIONS HELD WITH REGISTRANT PRINCIPAL OCCUPATION WITH REGISTRANT
--------------------- ------------------------------ ------------------------------------
- ----------------------------------------------------------------------------------------------------
<S> <C> <C>
*ROBERT H. GRAHAM (52) Trustee, Chairman of the Board Director, President and Chief Executive
and President Officer, A I M Management Group Inc.;
Director and President, A I M Advisors,
Inc.; Director and Senior Vice
President, A I M Capital Management,
Inc., A I M Distributors, Inc., A I M
Fund Services, Inc. and Fund Management
Company; Director, AMVESCAP PLC.
- ----------------------------------------------------------------------------------------------------
C. DEREK ANDERSON (57) Trustee President, Plantagenet Capital
220 Sansome Street Management, LLC (an investment
Suite 400 partnership); Chief Executive Officer,
San Francisco, CA 94104 Plantagenet Holdings, Ltd. (an
investment banking firm); Director,
Anderson Capital Management, Inc. since
1988; Director, PremiumWear, Inc.
(formerly Munsingwear, Inc.) (a casual
apparel company); Director, "R" Homes,
Inc. and various other companies; and
Trustee, each of the other investment
companies registered under the 1940 Act
that is sub-advised or sub-administered
by the Sub-advisor.
- ----------------------------------------------------------------------------------------------------
FRANK S. BAYLEY (59) Trustee Partner, law firm of Baker & McKenzie;
Two Embarcadero Center Director and Chairman, C.D. Stimson
Suite 2400 Company (a private investment company);
San Francisco, CA 94111 and Trustee, each of the other
investment companies registered under
the 1940 Act that is sub-advised or
sub-administered by the Sub-advisor.
- ----------------------------------------------------------------------------------------------------
ARTHUR C. PATTERSON (55) Trustee Managing Partner, Accel Partners (a
428 University Avenue venture capital firm); Director,
Palo Alto, CA 94301 Viasoft and PageMart, Inc. (both public
software companies) and several other
privately held software and
communications companies; and Trustee,
each of the other investment companies
registered under the 1940 Act that is
sub-advised or sub-administered by the
Sub-advisor.
- ----------------------------------------------------------------------------------------------------
RUTH H. QUIGLEY (64) Trustee Private investor; President, Quigley
1055 California Street Friedlander & Co., Inc. (a financial
San Francisco, CA 94108 advisory services firm) from 1984 to
1986; and Director, each of the other
investment companies registered under
the 1940 Act that is sub-advised or
sub-administered by the Sub-advisor.
- ----------------------------------------------------------------------------------------------------
</TABLE>
- ---------------
<TABLE>
<S> <C> <C>
* A trustee who is an "interested person" of the Trust and AIM Advisors, Inc. as defined in the 1940
Act.
</TABLE>
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<PAGE> 117
<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.
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<PAGE> 118
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> 119
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> 120
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> 121
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> 122
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> 123
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.
28
<PAGE> 124
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
29
<PAGE> 125
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
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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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- 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
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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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- 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.
37
<PAGE> 133
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.
38
<PAGE> 134
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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<PAGE> 135
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
40
<PAGE> 136
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> 137
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> 138
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.
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
</TABLE>
43
<PAGE> 139
<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 -- 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> 140
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>
45
<PAGE> 141
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> 142
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> 143
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> 144
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.
49
<PAGE> 145
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> 146
FINANCIAL STATEMENTS
FS
<PAGE> 147
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.
PRICEWATERHOUSECOOPERS LLP
Boston, Massachusetts
February 19, 1999
FS-1
<PAGE> 148
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> 149
<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> 150
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> 151
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> 152
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> 153
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> 154
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> 155
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> 156
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> 157
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> 158
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.
PRICEWATERHOUSECOOPERS LLP
Boston, Massachusetts
February 19, 1999
FS-12
<PAGE> 159
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> 160
<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> 161
<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> 162
<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> 163
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> 164
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> 165
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> 166
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> 167
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> 168
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> 169
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> 170
APPENDIX II
ANNUAL REPORT / DECEMBER 31 1999
AIM ADVISOR LARGE CAP VALUE FUND
[COVER IMAGE]
[AIM LOGO APPEARS HERE]
<PAGE> 171
[COVER IMAGE]
-------------------------------------
WALL STREET TO TRINITY CHURCH (1993, SERIES)
BY BEAU REDMOND, LIVING AMERICAN
WHILE VISITING NEW YORK IN 1980, THE ARTIST WANTED TO SKETCH
A WALL STREET SCENE BUT DID NOT HAVE ANY DRAWING PAPER, SO HE
USED WHAT HE DID HAVE, A PAGE FROM THE WALL STREET JOURNAL.
THEN, INSTEAD OF TRANSFERRING THE SKETCH TO CANVAS, HE PAINTED
ON THE NEWSPAPER PAGE, CREATING AN EVOCATIVE MEDIUM THAT
WOULD LEAD TO PAINTINGS SUCH AS THIS ONE. THIS PIECE CALLS TO
MIND THE INDELIBLE LINK BETWEEN WALL STREET AND THE STOCK
MARKET, WHERE LARGE-CAP COMPANIES ARE A MAJOR DRIVING FORCE.
-------------------------------------
AIM Advisor Large Cap Value Fund is for shareholders who seek a high total
return on investment through growth of capital and current income, without
regard to federal income tax considerations.
ABOUT FUND PERFORMANCE AND PORTFOLIO DATA THROUGHOUT THIS REPORT:
o AIM Advisor Large Cap Value Fund's performance figures are historical, and
they reflect changes in net asset value and the reinvestment of
distributions.
o When sales charges are included in performance figures, Class A share
performance reflects the maximum 5.50% sales charge, and Class B and Class C
share performance reflects the applicable contingent deferred sales charge
(CDSC) for the period involved. The CDSC on Class B shares declines from 5%
beginning at the time of purchase to 0% at the beginning of the seventh
year. The CDSC on Class C shares is 1% for the first year after purchase.
The performance of the fund's Class B and Class C shares will differ from
that of Class A shares due to different sales-charge structure and expenses.
o During the fiscal year ended 12/31/99, the fund paid distributions of
$3.2380 per share for Class A shares and $3.0645 per share for Class B and
Class C shares.
o The fund's investment return and principal value will fluctuate, so an
investor's shares, when redeemed, may be worth more or less than their
original cost.
ABOUT INDEXES AND OTHER PERFORMANCE BENCHMARKS CITED IN THIS REPORT:
o The Russell 1000 Growth Index measures the performance of those Russell 1000
companies with higher price-to-book ratios and higher forecasted growth
values.
o The Russell 1000 Value Index measures the performance of those Russell 1000
companies with lower price-to-book ratios and lower forecasted growth
values.
o The unmanaged Standard & Poor's Composite Index of 500 Stocks (the S&P 500)
is generally considered representative of the stock market in general.
o An investment cannot be made in an index. Unless otherwise indicated, index
results include reinvested dividends and do not reflect sales charges.
AN INVESTMENT IN THE FUND IS NOT A DEPOSIT OF A BANK AND IS NOT INSURED OR
GUARANTEED BY THE FEDERAL DEPOSIT INSURANCE CORPORATION OR ANY OTHER
GOVERNMENT AGENCY. THERE IS A RISK THAT YOU COULD LOSE SOME OR ALL OF
YOUR MONEY.
This report may be distributed only to current shareholders or to persons
who have received a current prospectus of the fund.
AIM ADVISOR LARGE CAP VALUE FUND
<PAGE> 172
ANNUAL REPORT / CHAIRMAN'S LETTER
Dear Fellow Shareholder:
The fiscal year discussed in this report has reconfirmed our
[PHOTO OF faith in two long-established principles of investing:
Charles T. portfolio diversification and long-term thinking. We could
Bauer, title this report "What a Difference a Year Makes."
Chairman of An investor surveying conditions when the fiscal year
the Board of opened on January 1, 1999, would have seen a market
THE FUND dominated by large-capitalization stocks and high-quality
APPEARS HERE] bonds, especially U.S. Treasuries. During 1998, two
well-known indexes of large-capitalization U.S. companies,
the S&P 500 and the Dow Jones Industrial Average, were up
28.60% and 18.15%, respectively. By contrast,
smaller-company stocks in the Russell 2000 had lost 2.55%.
Overseas, many markets were languishing, especially in Asia,
where so many financial difficulties had originated in 1997.
In bond markets as well, name-brand quality was the
place to be. The Lehman Government/Corporate Bond Index,
which follows sovereign issues and investment-grade debt, was up 9.47%, while
the Lehman High Yield Index, which tracks riskier "junk bonds," had risen only
1.60%.
It would be easy for an investor to conclude that blue-chip issues, whether
equity or fixed-income, were the place to be, that it was time to divest himself
of everything else and put all his eggs in the blue-chip basket. The investor,
of course, would be wrong.
MARKETS TURN
While large-capitalization stocks continued to do very well, during 1999 markets
broadened dramatically with many investment sectors performing a complete
turnaround. For example, the small-cap stocks in the Russell 2000 were up 21.26%
for calendar year 1999, and many Asian markets, particularly Japan, had staged a
comeback.
The same holds true of bonds. The higher-quality Lehman index was down 2.15%
during 1999 while the Lehman High Yield index was up 2.39%.
The point, at the risk of sounding repetitive to those of you who have
invested with us for a long time, is that this is why diversification is a
fundamental investing principle. Market sectors and asset classes go in and out
of favor, but over the long run--and the long run is several years--the markets'
overall trend has been upward. Selecting an asset class or a market sector on
the basis of a short-term snapshot of conditions is usually unwise, as is
concentrating your portfolio in one asset class. Staying fully invested in a
diversified portfolio remains a compelling strategy and one of your best
prospects for long-term gain. We also continue to remind you that the past few
years have seen extraordinary gains in some markets, and there is no assurance
that this trend will continue.
LOOKING AHEAD
As we look about at the close of this fiscal year, we are encouraged by multiple
signs of economic health in Europe and Asia, not to mention the prolonged U.S.
economic expansion. However, we are aware of how easily an investor could have
been misled by conditions just 12 months ago. For our shareholders, we therefore
reiterate our commitment to investing through a financial advisor. In addition
to helping you select investments appropriate to your time horizon and risk
tolerance, a financial advisor can keep you informed about how changing market
conditions affect you and your portfolio--and help ensure that when you do alter
your investments, there's a logical reason for doing so. AIM believes every
investor should be guided by a financial professional.
FUND MANAGERS COMMENT
In the pages that follow, your fund's portfolio managers discuss how they
managed your fund during the year ended December 31, how the markets behaved and
what they foresee for the near future. We trust you will find their discussion
informative. If you have any questions or comments, we invite you to contact us,
either at our Web site, aimfunds.com, or through our Client Services department
at 800-959-4246. Information about your account is also available through our
automated AIM Investor Line, 800-246-5463.
Thank you for your continued participation in The AIM Family of
Funds--Registered Trademark--.
Sincerely,
/s/ CHARLES T. BAUER
Charles T. Bauer
Chairman, A I M Advisors, Inc.
-------------------------------------
STAYING FULLY
INVESTED IN A DIVERSIFIED
PORTFOLIO REMAINS
A COMPELLING STRATEGY
AND ONE OF YOUR
BEST PROSPECTS FOR
LONG-TERM GAIN.
-------------------------------------
AIM ADVISOR LARGE CAP VALUE FUND
<PAGE> 173
ANNUAL REPORT / MANAGERS' OVERVIEW
RESURGENT MARKET TIDE DOESN'T LIFT
ALL BOATS
HOW DID AIM ADVISOR LARGE CAP VALUE FUND PERFORM DURING THE REPORTING PERIOD?
The narrowness of equity markets coupled with the pullback of value-type stocks
led to rather lackluster performance for AIM Advisor Large Cap Value Fund.
For the fiscal year ended December 31, 1999, the fund had total returns of
- -0.01% for Class A shares, -0.75% for Class B shares and -0.71% for Class C
shares. (These returns are at net asset value, which does not include sales
charges.) Comparatively, the S&P 500 Index had a return of 21.03% for the
reporting period, while the Russell 1000 Value Index finished the year with a
return of 7.35%.
WHAT WAS THE MARKET ENVIRONMENT LIKE DURING 1999?
With the worst of the global financial crisis past, the question throughout
much of 1999 was whether or not the Federal Reserve Board (the Fed) would need
to raise interest rates to forestall inflation. Inflation fears spawned
volatility in the markets, curbing high-flying technology, communications and
financial stocks in the spring and bringing on a resurgence of more cyclical
stocks, like energy and commodities.
By midsummer, major stock indexes reached record highs, lifted by solid
corporate earnings, continued tame inflation and renewed vitality among tech
stocks. But investors' fears again dampened stocks as key economic indicators
showed that the economy blazed ahead relentlessly. Ultimately, in three separate
moves, the Fed raised the key federal funds rate from 4.75% to 5.50%.
Despite persistent inflation fears, the U.S. economy continued to experience
a near-record level of consumer confidence. Markets reached a fever pitch by the
end of 1999, with some indexes again reaching new highs by the close of the
year. How-ever, these record-breaking performances masked a rather narrow
market--although the S&P 500 returned 14.9% for the fourth quarter, the average
stock in the index was up only 8.2% for the same period.
HOW DID THE MARKET ENVIRONMENT AFFECT THE FUND'S PERFORMANCE?
The shift to cyclical stocks during the second quarter of the year boosted the
fund's performance. But the narrowing of the market as the year went on proved
unfavorable for the fund because much of the market's run-up occurred in the
technology sector, in which the fund was underweight relative to the S&P 500
(17.14% vs. 28.4%). The fund also had a higher weighting in financials than the
index (18.32% vs. 13.2%), and many of these stocks were negatively affected by
persistent inflation fears in the market.
Further, even though value staged a comeback early in 1999, growth again
widely outperformed value for the year, with the Russell 1000 Growth Index up
33.16%, compared to the Russell 1000 Value Index's 7.35% return for the 12-month
period. The fund's value orienta-
PORTFOLIO COMPOSITION
As of 12/31/99, based on total net assets
<TABLE>
<CAPTION>
==========================================================================================================
TOP 10 HOLDINGS TOP 10 INDUSTRIES
- ----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
1. General Electric Co. 2.99% 1. Computers (Software & Services) 7.76%
2. Bell Atlantic Corp. 2.68 2. Financial (Diversified) 6.76
3. Exxon-Mobil Corp. 2.55 3. Telephone 6.20
4. Lowe's Companies, Inc. 2.44 4. Computers (Hardware) 5.64
5. Computer Associates International, Inc. 2.43 5. Oil (International Integrated) 5.64
6. MCI WorldCom, Inc. 2.34 6. Manufacturing (Diversified) 5.29
7. American General Corp. 2.29 7. Banks (Money Center) 4.30
8. Intel Corp. 2.02 8. Health Care (Diversified) 3.93
9. Schering-Plough Corp. 1.87 9. Electrical Equipment 3.75
10. Citigroup Inc. 1.86 10. Health Care (Drugs-Major Pharmaceuticals) 3.53
The fund's portfolio is subject to change, and there is no assurance that the
fund will continue to hold any particular security.
==========================================================================================================
</TABLE>
[ARTWORK] -------------------------------------
GROWTH AGAIN WIDELY OUTPERFORMED
VALUE FOR THE YEAR.
-------------------------------------
See important fund and index disclosures inside front cover.
AIM ADVISOR LARGE CAP VALUE FUND
2
<PAGE> 174
ANNUAL REPORT / MANAGERS' OVERVIEW
tion naturally made it susceptible to the effects of this outperformance;
according to Morningstar Inc., a company that tracks mutual fund performance,
the average large growth fund was up 39% for the year, compared to the average
large value fund's return of 6% for the year.
WHY WAS THE FUND UNDERWEIGHT IN TECHNOLOGY?
Our investment discipline dictates that we evaluate each company's historical
profitability relative to its current price, regardless of market sector.
Technology now accounts for nearly 30% of the stocks in the S&P 500, making the
index less diversified than in the past. Many technology stocks spiked during
the fourth quarter of the year, generally appearing very overvalued, which means
they did not fit in with the fund's high-quality, value bias.
While the fund does have a heavier technology weighting than it did a year
ago (17.14% vs. 12.2%), we have been reducing positions in some of our tech
holdings to keep the fund within its value-oriented parameters. One tech holding
that has benefited the fund is Computer Associates International, an independent
software company that likens its products to the plumbing under a sink rather
than the fancy faucet on top.
WHY DID FINANCIAL STOCKS HAVE SUCH A DIFFICULT YEAR?
Financial stocks tend to be more sensitive to interest rates than other stocks
do, so when investors' inflation fears were at their peak, financial stocks bore
the brunt of the market decline. The financials component of the S&P 500
finished with a return of only 3.97% for the year, which means that the fund's
overweighting in financials did not bode well for its performance. However, we
believe there is reason to be optimistic about financial stocks in the coming
year. (See sidebar.)
Even with the downturn in financial stocks, Citigroup, one of the world's
largest financial-services companies and a fund holding, has bounced back
substantially since 1998's global financial crisis eroded its stock along with
that of many other financial companies.
HOW DID YOUR HEALTH-CARE HOLDINGS PERFORM?
In the current market, any hint that revenues will be light or that earnings
will miss the consensus number is extremely detrimental to the stock price.
Several of our health-care stocks, including American Home Products (AHP),
experienced earnings disappointments this year and thus were punished quite
severely. While we have trimmed our position in AHP, it is still a fund holding
because the company has a good drug pipeline and strong performance from
several new drugs, among them the estrogen-replacement drug Premarin.
WHAT IS YOUR OUTLOOK FOR THE NEAR TERM?
The fundamentals for a continued favorable equity environment--solid economic
growth and low inflation--appear to be in place for the coming year. That said,
many analysts believe that the Fed will need to raise interest rates at least
once--if not more--to slow economic growth to a more sustainable pace. It seems
the same story that dogged markets in 1999 is so far continuing, with persistent
upward pressure on interest rates.
The good news is that the divergence in both performance and valuation in
stocks has created an opportunity to add quality names to the portfolio at
cheaper prices. We will continue to focus on high- quality value stocks for the
portfolio regardless of market trends.
THE BENEFITS OF FINANCIAL REFORM
Congress voted on November 4, 1999 to reform the Glass-Steagall Act, created
during the Great Depression to separate commercial and investment banking. Some
analysts believe this reform could set off a flurry of merger-and-acquisition
(M&A) activity among U.S. banks, insurance companies, investment managers and
brokers.
If structural deregulation does prompt M&A activity, less efficient firms
could be seized by larger companies and streamlined by cutting costs. More M&A
activity could also mean more competition among financial companies as they
delve into previously untried areas. Banks may be particularly well poised
because so many of them are diversifying into fee-based money management and
services, areas that are far less sensitive to interest rates than traditional
lending.
Increased competition may also mean savings for consumers who tend to shop
product by product rather than sticking with a single brand. With broader
product lines, financial companies will be competing for many of the same
customers; they will need to find ways to draw customers in, which can mean more
efficient service and lower prices.
See important fund and index disclosures inside front cover.
AIM ADVISOR LARGE CAP VALUE FUND
3
<PAGE> 175
ANNUAL REPORT / PERFORMANCE HISTORY
YOUR FUND'S LONG-TERM PERFORMANCE
RESULTS OF A $10,000 INVESTMENT
AIM ADVISOR LARGE CAP VALUE FUND VS. BENCHMARK INDEXES
12/31/89-12/31/99
in thousands
================================================================================
AIM Advisor Large
Cap Value Fund, Class Russell 1000
C Shares Value Index S&P 500 Index
- --------------------------------------------------------------------------------
12/89 10,000 10,307
12/90 9,625 9,191 11,067
12/91 12,857 11,453 12,549
12/92 13,479 13,035 14,257
12/93 14,713 15,397 14,456
12/94 15,109 15,091 18,219
12/95 19,684 20,878 22,953
12/96 23,065 25,396 30,913
12/97 30,137 34,332 40,240
12/98 34,099 39,698 49,400
12/99 33,854 42,614 53,204
Source: Lipper, Inc.
Past performance cannot guarantee comparable future results.
================================================================================
MARKET VOLATILITY CAN SIGNIFICANTLY IMPACT SHORT-TERM PERFORMANCE. RESULTS OF AN
INVESTMENT MADE TODAY MAY DIFFER SUBSTANTIALLY FROM THE HISTORICAL PERFORMANCE
SHOWN.
AVERAGE ANNUAL TOTAL RETURNS
As of 12/31/99, including sales charges
================================================================================
CLASS A SHARES
Inception (12/31/96) 12.37%
1 year -5.52*
*-0.01%, excluding sales charges
CLASS B SHARES
Inception (3/3/98) 1.26%
1 year -5.08*
*-0.75%, excluding CDSC
CLASS C SHARES
Inception (2/15/84) 13.59%
10 years 12.97
5 years 17.51
1 year -1.58*
*-0.71%, excluding CDSC
================================================================================
Your fund's total return includes sales charges, expenses and management fees.
The performance of the fund's Class B and Class C shares will differ from that
of Class A shares due to differing fees and expenses. For fund performance
calculations and descriptions of the indexes cited on this page, please see the
inside front cover.
ABOUT THIS CHART
The chart compares your fund's Class C shares to benchmark indexes. It is
intended to give you an idea of how your fund performed compared to the indexes
over the period 12/31/89-12/31/99. It is important to understand the differences
between your fund and an index. An index measures the performance of a
hypothetical portfolio. A market index such as the S&P 500 Index or the Russell
1000 Value Index is not managed, incurring no sales charges, expenses or fees.
If you could buy all the securities that make up a market index, you would incur
expenses that would affect your investment's return.
AIM ADVISOR LARGE CAP VALUE FUND
4
<PAGE> 176
SCHEDULE OF INVESTMENTS
DECEMBER 31, 1999
<TABLE>
<CAPTION>
MARKET
SHARES VALUE
<S> <C> <C>
COMMON STOCKS & OTHER EQUITY
INTERESTS-97.68%
AUTOMOBILES-1.36%
Ford Motor Co. 41,000 $ 2,190,937
- --------------------------------------------------------------
BANKS (MAJOR REGIONAL)-2.39%
FleetBoston Financial Corp. 60,000 2,088,750
- --------------------------------------------------------------
National City Corp. 33,500 793,531
- --------------------------------------------------------------
State Street Corp. 13,200 964,425
- --------------------------------------------------------------
3,846,706
- --------------------------------------------------------------
BANKS (MONEY CENTER)-4.30%
Bank of America Corp. 45,674 2,292,264
- --------------------------------------------------------------
Chase Manhattan Corp. (The) 34,500 2,680,219
- --------------------------------------------------------------
First Union Corp. 60,000 1,968,750
- --------------------------------------------------------------
6,941,233
- --------------------------------------------------------------
BEVERAGES (ALCOHOLIC)-1.46%
Anheuser-Busch Cos, Inc. 33,200 2,353,050
- --------------------------------------------------------------
BROADCASTING (TELEVISION, RADIO &
CABLE)-1.24%
MediaOne Group, Inc. 26,000 1,997,125
- --------------------------------------------------------------
CHEMICALS-1.82%
Dow Chemical Co. (The) 13,200 1,763,850
- --------------------------------------------------------------
Praxair, Inc. 23,300 1,172,281
- --------------------------------------------------------------
2,936,131
- --------------------------------------------------------------
COMMUNICATIONS EQUIPMENT-0.99%
ADC Telecommunications, Inc.(a) 22,000 1,596,375
- --------------------------------------------------------------
COMPUTERS (HARDWARE)-5.64%
Compaq Computer Corp. 36,200 979,662
- --------------------------------------------------------------
Hewlett-Packard Co. 26,200 2,985,162
- --------------------------------------------------------------
International Business Machines
Corp. 25,700 2,775,600
- --------------------------------------------------------------
Sun Microsystems, Inc.(a) 30,500 2,361,844
- --------------------------------------------------------------
9,102,268
- --------------------------------------------------------------
COMPUTERS (SOFTWARE &
SERVICES)-7.76%
Cadence Design Systems, Inc.(a) 65,200 1,564,800
- --------------------------------------------------------------
Computer Associates International,
Inc. 56,000 3,916,500
- --------------------------------------------------------------
Compuware Corp.(a) 54,100 2,015,225
- --------------------------------------------------------------
Microsoft Corp.(a) 17,400 2,031,450
- --------------------------------------------------------------
Oracle Corp.(a) 26,650 2,986,466
- --------------------------------------------------------------
12,514,441
- --------------------------------------------------------------
CONSTRUCTION (CEMENT & AGGREGATES)-1.07%
Vulcan Materials Co. 43,300 1,729,294
- --------------------------------------------------------------
CONSUMER FINANCE-0.98%
Household International, Inc. 42,300 1,575,675
- --------------------------------------------------------------
DISTRIBUTORS (FOOD & HEALTH)-0.51%
SUPERVALU, INC 41,200 824,000
- --------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
MARKET
SHARES VALUE
<S> <C> <C>
ELECTRIC COMPANIES-2.71%
DTE Energy Co. 35,000 $ 1,098,125
- --------------------------------------------------------------
GPU, Inc. 35,000 1,047,812
- --------------------------------------------------------------
Southern Co. (The) 33,200 780,200
- --------------------------------------------------------------
Teco Energy, Inc. 78,000 1,447,875
- --------------------------------------------------------------
4,374,012
- --------------------------------------------------------------
ELECTRICAL EQUIPMENT-3.75%
Emerson Electric Co. 21,200 1,216,350
- --------------------------------------------------------------
General Electric Co. 31,200 4,828,200
- --------------------------------------------------------------
6,044,550
- --------------------------------------------------------------
ELECTRONICS (SEMICONDUCTORS)-2.02%
Intel Corp. 39,600 3,259,575
- --------------------------------------------------------------
FINANCIAL (DIVERSIFIED)-6.76%
American General Corp. 48,600 3,687,525
- --------------------------------------------------------------
Citigroup Inc. 54,000 3,000,375
- --------------------------------------------------------------
Fannie Mae 25,000 1,560,937
- --------------------------------------------------------------
MGIC Investment Corp. 44,000 2,648,250
- --------------------------------------------------------------
10,897,087
- --------------------------------------------------------------
FOODS-0.37%
H.J. Heinz Co. 15,000 597,187
- --------------------------------------------------------------
HEALTH CARE (DIVERSIFIED)-3.93%
Abbott Laboratories 24,500 889,656
- --------------------------------------------------------------
American Home Products Corp. 35,900 1,415,806
- --------------------------------------------------------------
Bristol-Myers Squibb Co. 25,700 1,649,619
- --------------------------------------------------------------
Johnson & Johnson 25,500 2,374,687
- --------------------------------------------------------------
6,329,768
- --------------------------------------------------------------
HEALTH CARE (DRUGS-MAJOR
PHARMACEUTICALS)-3.53%
Merck & Co., Inc. 40,000 2,682,500
- --------------------------------------------------------------
Schering-Plough Corp. 71,400 3,012,187
- --------------------------------------------------------------
5,694,687
- --------------------------------------------------------------
HEALTH CARE (MEDICAL PRODUCTS &
SUPPLIES)-0.58%
Biomet, Inc. 23,500 940,000
- --------------------------------------------------------------
HEALTH CARE (SPECIALIZED
SERVICES)-0.51%
Quintiles Transnational Corp.(a) 44,400 829,725
- --------------------------------------------------------------
HOUSEHOLD FURNISHING &
APPLIANCES-0.65%
Whirlpool Corp. 16,100 1,047,506
- --------------------------------------------------------------
HOUSEHOLD PRODUCTS (NON-DURABLES)-3.02%
Kimberly-Clark Corp. 37,900 2,472,975
- --------------------------------------------------------------
Procter & Gamble, Co. (The) 21,900 2,399,419
- --------------------------------------------------------------
4,872,394
- --------------------------------------------------------------
INSURANCE (LIFE/HEALTH)-1.44%
Jefferson-Pilot Corp. 22,700 1,549,275
- --------------------------------------------------------------
</TABLE>
5
<PAGE> 177
<TABLE>
<CAPTION>
MARKET
SHARES VALUE
<S> <C> <C>
INSURANCE (LIFE/HEALTH)-(CONTINUED)
Torchmark Corp. 26,700 $ 775,969
- --------------------------------------------------------------
2,325,244
- --------------------------------------------------------------
INSURANCE (MULTI-LINE)-0.67%
American International Group, Inc. 10,000 1,081,250
- --------------------------------------------------------------
INVESTMENT BANKING/BROKERAGE-1.78%
Morgan Stanley Dean Witter & Co. 20,150 2,876,413
- --------------------------------------------------------------
IRON & STEEL-0.67%
Nucor Corp. 19,600 1,074,325
- --------------------------------------------------------------
LEISURE TIME (PRODUCTS)-0.46%
Mattel, Inc. 56,700 744,188
- --------------------------------------------------------------
MANUFACTURING (DIVERSIFIED)-5.29%
Illinois Tool Works, Inc. 32,677 2,207,740
- --------------------------------------------------------------
Minnesota Mining and Manufacturing
Co. 16,500 1,614,938
- --------------------------------------------------------------
Textron, Inc. 22,400 1,717,800
- --------------------------------------------------------------
Tyco International Ltd. 32,600 1,267,325
- --------------------------------------------------------------
United Technologies Corp. 26,500 1,722,500
- --------------------------------------------------------------
8,530,303
- --------------------------------------------------------------
MANUFACTURING (SPECIALIZED)-0.53%
York International Corp. 30,900 847,819
- --------------------------------------------------------------
OIL (INTERNATIONAL
INTEGRATED)-5.64%
Chevron Corp. 18,100 1,567,913
- --------------------------------------------------------------
Exxon Mobil Corp. 51,000 4,108,688
- --------------------------------------------------------------
Repsol S.A.-ADR (Spain) 41,900 974,175
- --------------------------------------------------------------
Royal Dutch Petroleum Co.-New York
Shares-ADR (Netherlands) 40,400 2,441,675
- --------------------------------------------------------------
9,092,451
- --------------------------------------------------------------
PAPER & FOREST PRODUCTS-1.07%
International Paper Co. 30,700 1,732,631
- --------------------------------------------------------------
PHOTOGRAPHY/IMAGING-0.73%
Xerox Corp. 52,000 1,179,750
- --------------------------------------------------------------
PUBLISHING (NEWSPAPERS)-1.86%
Gannett Co., Inc. 36,700 2,993,344
- --------------------------------------------------------------
RESTAURANTS-1.00%
McDonald's Corp. 40,100 1,616,531
- --------------------------------------------------------------
RETAIL (BUILDING SUPPLIES)-3.29%
Lowe's Cos., Inc. 66,000 3,943,500
- --------------------------------------------------------------
Sherwin-Williams Co. 64,700 1,358,700
- --------------------------------------------------------------
5,302,200
- --------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
MARKET
SHARES VALUE
<S> <C> <C>
RETAIL (DEPARTMENT STORES)-0.56%
Dillards, Inc.-Class A 44,400 $ 896,325
- --------------------------------------------------------------
RETAIL (FOOD CHAINS)-0.81%
Albertson's, Inc. 40,400 1,302,900
- --------------------------------------------------------------
RETAIL (GENERAL MERCHANDISE)-0.74%
Costco Wholesale Corp.(a) 13,000 1,186,250
- --------------------------------------------------------------
RETAIL (SPECIALTY)-0.64%
Office Depot, Inc.(a) 93,700 1,024,844
- --------------------------------------------------------------
SERVICES (DATA PROCESSING)-1.66%
First Data Corp. 54,300 2,677,669
- --------------------------------------------------------------
SPECIALTY PRINTING-0.90%
Deluxe Corp. 53,100 1,456,931
- --------------------------------------------------------------
TELECOMMUNICATIONS (LONG DISTANCE)-3.26%
AT&T Corp. 29,100 1,476,825
- --------------------------------------------------------------
MCI WorldCom, Inc.(a) 71,250 3,780,703
- --------------------------------------------------------------
5,257,528
- --------------------------------------------------------------
TELEPHONE-6.20%
ALLTEL Corp. 10,800 893,025
- --------------------------------------------------------------
Bell Atlantic Corp. 70,100 4,315,531
- --------------------------------------------------------------
SBC Communications, Inc. 54,087 2,636,741
- --------------------------------------------------------------
US West, Inc. 30,000 2,160,000
- --------------------------------------------------------------
10,005,297
- --------------------------------------------------------------
TEXTILES (APPAREL)-0.43%
Liz Claiborne, Inc. 18,300 688,538
- --------------------------------------------------------------
TOBACCO-0.70%
Philip Morris Cos. Inc. 48,500 1,124,594
- --------------------------------------------------------------
Total Common Stocks & Other
Equity Interests (Cost
$113,888,199) 157,511,051
- --------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT
<S> <C> <C>
U.S. GOVERNMENT AGENCY
SECURITIES-2.72%
FEDERAL HOME LOAN BANK-2.72%
Disc. Notes,(b)
1.50%, 01/03/00 (Cost $4,385,635) $4,386,000 4,385,635
- --------------------------------------------------------------
TOTAL INVESTMENTS-100.40% (Cost
$118,273,834) 161,896,686
- --------------------------------------------------------------
LIABILITIES LESS OTHER
ASSETS-(0.40%) (640,236)
- --------------------------------------------------------------
NET ASSETS-100.00% $161,256,450
==============================================================
</TABLE>
Investment Abbreviations:
ADR - American Depositary Receipt
Disc. - Discounted
Notes to Schedule of Investments:
(a) Non-income producing security.
(b) Interest rate shown represents the rate of discount paid or received at the
time of purchase by the Fund.
See Notes to Financial Statements.
6
<PAGE> 178
STATEMENT OF ASSETS AND LIABILITIES
DECEMBER 31, 1999
<TABLE>
<S> <C>
ASSETS:
Investments, at market value (cost
$118,273,834) $161,896,686
- ---------------------------------------------------------
Receivables for:
Capital stock sold 128,484
- ---------------------------------------------------------
Interest and dividends 215,784
- ---------------------------------------------------------
Investment for deferred compensation plan 12,597
- ---------------------------------------------------------
Other assets 14,320
- ---------------------------------------------------------
Total assets 162,267,871
- ---------------------------------------------------------
LIABILITIES:
Payables for:
Capital stock reacquired 452,661
- ---------------------------------------------------------
Deferred compensation plan 12,597
- ---------------------------------------------------------
Accrued advisory fees 102,022
- ---------------------------------------------------------
Administrative services fees 4,247
- ---------------------------------------------------------
Accrued distribution fees 372,598
- ---------------------------------------------------------
Accrued transfer agent fees 9,918
- ---------------------------------------------------------
Accrued operating expenses 57,378
- ---------------------------------------------------------
Total liabilities 1,011,421
- ---------------------------------------------------------
NET ASSETS APPLICABLE TO SHARES OUTSTANDING $161,256,450
=========================================================
NET ASSETS:
Class A $ 12,011,184
=========================================================
Class B $ 6,572,901
=========================================================
Class C $142,672,365
=========================================================
CAPITAL STOCK, $0.001 PAR VALUE PER SHARE:
Class A:
Authorized 100,000,000
- ---------------------------------------------------------
Outstanding 549,760
=========================================================
Class B:
Authorized 100,000,000
- ---------------------------------------------------------
Outstanding 302,862
=========================================================
Class C:
Authorized 100,000,000
- ---------------------------------------------------------
Outstanding 6,575,037
=========================================================
Class A:
Net asset value and redemption price per
share $ 21.85
- ---------------------------------------------------------
Offering price per share:
(Net asset value of $21.85 divided by
94.50%) $ 23.12
=========================================================
Class B:
Net asset value and offering price per
share $ 21.70
=========================================================
Class C:
Net asset value and offering price per
share $ 21.70
=========================================================
</TABLE>
See Notes to Financial Statements.
STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1999
<TABLE>
<S> <C>
INVESTMENT INCOME:
Dividends (net of $53,387 foreign
withholding tax) $ 3,415,803
- ---------------------------------------------------------
Interest 202,066
- ---------------------------------------------------------
Total investment income 3,617,869
- ---------------------------------------------------------
EXPENSES:
Advisory fees 1,382,625
- ---------------------------------------------------------
Administrative services fees 25,205
- ---------------------------------------------------------
Custodian fees 24,305
- ---------------------------------------------------------
Operating services fees 434,220
- ---------------------------------------------------------
Directors' fees and expenses 4,977
- ---------------------------------------------------------
Distribution fees-Class A 45,980
- ---------------------------------------------------------
Distribution fees-Class B 56,134
- ---------------------------------------------------------
Distribution fees-Class C 1,655,995
- ---------------------------------------------------------
Transfer Agent Fees-Class A 12,763
- ---------------------------------------------------------
Transfer Agent Fees-Class B 1,909
- ---------------------------------------------------------
Transfer Agent Fees-Class C 56,313
- ---------------------------------------------------------
Other 46,418
- ---------------------------------------------------------
Total expenses 3,746,844
- ---------------------------------------------------------
Less: Fees waived (264,083)
- ---------------------------------------------------------
Expenses paid indirectly (1,655)
- ---------------------------------------------------------
Net expenses 3,481,106
- ---------------------------------------------------------
Net investment income 136,763
- ---------------------------------------------------------
REALIZED AND UNREALIZED GAIN (LOSS) FROM
INVESTMENT SECURITIES:
Net realized gain from investment
securities 31,241,883
- ---------------------------------------------------------
Change in net unrealized appreciation
(depreciation) of investment securities (33,428,078)
- ---------------------------------------------------------
Net gain (loss) on investment
securities (2,186,195)
- ---------------------------------------------------------
Net increase (decrease) in net assets
resulting from operations $ (2,049,432)
=========================================================
</TABLE>
7
<PAGE> 179
STATEMENT OF CHANGES IN NET ASSETS
FOR THE YEARS ENDED DECEMBER 31, 1999 AND 1998
<TABLE>
<CAPTION>
1999 1998
------------ -------------
<S> <C> <C>
OPERATIONS:
Net investment income $ 136,763 $ 383,276
- ------------------------------------------------------------------------------------------
Net realized gain from investment securities 31,241,883 13,666,132
- ------------------------------------------------------------------------------------------
Change in net unrealized appreciation (depreciation) of
investment securities (33,428,078) 9,514,639
- ------------------------------------------------------------------------------------------
Net increase (decrease) in net assets resulting from
operations (2,049,432) 23,564,047
- ------------------------------------------------------------------------------------------
Distributions to shareholders from net investment income:
Class A (103,102) (63,186)
- ------------------------------------------------------------------------------------------
Class B (9,281) (4,659)
- ------------------------------------------------------------------------------------------
Class C (252,383) (130,140)
- ------------------------------------------------------------------------------------------
Distributions to shareholders from net realized gains on
investment securities:
Class A (1,495,160) (1,168,568)
- ------------------------------------------------------------------------------------------
Class B (840,484) (558,881)
- ------------------------------------------------------------------------------------------
Class C (17,808,848) (14,182,679)
- ------------------------------------------------------------------------------------------
Share transactions-net:
Class A (2,025,526) 10,506,884
- ------------------------------------------------------------------------------------------
Class B 152,238 7,500,215
- ------------------------------------------------------------------------------------------
Class C (19,999,780) 2,997,348
- ------------------------------------------------------------------------------------------
Net increase (decrease) in net assets (44,431,758) 28,460,381
- ------------------------------------------------------------------------------------------
NET ASSETS:
Beginning of period 205,688,208 177,227,827
- ------------------------------------------------------------------------------------------
End of period $161,256,450 $ 205,688,208
==========================================================================================
NET ASSETS CONSIST OF:
Capital (par value and additional paid-in) $107,291,948 $ 127,632,168
- ------------------------------------------------------------------------------------------
Undistributed net investment income (loss) (19,552) 210,789
- ------------------------------------------------------------------------------------------
Undistributed net realized gain from investment securities 10,361,202 794,321
- ------------------------------------------------------------------------------------------
Unrealized appreciation of investment securities 43,622,852 77,050,930
- ------------------------------------------------------------------------------------------
$161,256,450 $ 205,688,208
==========================================================================================
</TABLE>
NOTES TO FINANCIAL STATEMENTS
December 31, 1999
NOTE 1-SIGNIFICANT ACCOUNTING POLICIES
AIM Advisor Large Cap Value Fund (the "Fund") is a series portfolio of AIM
Advisor Funds, Inc. (the "Company"). The Company is a Maryland corporation
registered under the Investment Company Act of 1940, as amended (the "1940
Act"), as an open-end series management investment company consisting of four
separate portfolios. The Fund currently offers three different classes of
shares: Class A shares, Class B shares and Class C shares. Class A shares are
sold with a front-end sales charge. Class B shares and Class C shares are sold
with a contingent deferred sales charge. Matters affecting each portfolio or
class will be voted on exclusively by the shareholders of such portfolio or
class. The assets, liabilities and operations of each portfolio are accounted
for separately. Information presented in these financial statements pertains
only to the Fund. The Fund's investment objective is to achieve a high total
return on investment through growth of capital and current income, without
regard to federal income tax considerations.
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities at the date of the
financial statements and the reported amounts of revenues and expenses during
the reporting period. Actual results could differ from those estimates. The
following is a summary of the significant accounting policies followed by the
Fund in the preparation of its financial statements.
A. Security Valuations -- A security listed or traded on an exchange (except
convertible bonds) is valued at its last sales price on the exchange where
the security is principally traded,
8
<PAGE> 180
or lacking any sales on a particular day, the security is valued at the
closing bid price on that day. Each security reported on the NASDAQ National
Market System is valued at the last sales price on the valuation date or
absent a last sales price, at the closing bid price. Debt obligations
(including convertible bonds) are valued on the basis of prices provided by
an independent pricing service. Prices provided by the pricing service may be
determined without exclusive reliance on quoted prices, and may reflect
appropriate factors such as yield, type of issue, coupon rate and maturity
date. Securities for which market prices are not provided by any of the above
methods are valued based upon quotes furnished by independent sources and are
valued at the last bid price in the case of equity securities and in the case
of debt obligations, the mean between the last bid and asked prices.
Securities for which market quotations are not readily available or are
questionable are valued at fair value as determined in good faith by or under
the supervision of the Company's officers in a manner specifically authorized
by the Board of Directors of the Company. Short-term obligations having 60
days or less to maturity are valued at amortized cost which approximates
market value. For purposes of determining net asset value per share, futures
and option contracts generally will be valued 15 minutes after the close of
trading of the New York Stock Exchange ("NYSE").
Generally, trading in foreign securities is substantially completed each
day at various times prior to the close of the NYSE. The values of such
securities used in computing the net asset value of the Fund's shares are
determined as of such times. Foreign currency exchange rates are also
generally determined prior to the close of the NYSE. Occasionally, events
affecting the values of such securities and such exchange rates may occur
between the times at which they are determined and the close of the NYSE
which would not be reflected in the computation of the Fund's net asset
value. If events materially affecting the value of such securities occur
during such period, then these securities will be valued at their fair value
as determined in good faith by or under the supervision of the Board of
Directors.
B. Securities Transactions and Investment Income -- Securities transactions are
accounted for on a trade date basis. Realized gains or losses on sales are
computed on the basis of specific identification of the securities sold.
Interest income is recorded as earned from settlement date and is recorded on
the accrual basis. Dividend income is recorded on the ex-dividend date. On
December 31, 1999, undistributed net investment income was decreased by
$2,338, undistributed net realized gains decreased by $1,530,510 and paid-in
capital increased by $1,532,848 as a result of differing book/tax treatment
of equalization credits. Net assets of the Fund were unaffected by the
reclassifications.
C. Distributions -- Distributions from income and net realized capital gains, if
any, are generally paid annually and recorded on ex-dividend date. The Fund
may elect to use a portion of the proceeds of capital stock redemptions as
distributions for federal income tax purposes.
D. Federal Income Taxes -- The Fund intends to comply with the requirements of
the Internal Revenue Code necessary to qualify as a regulated investment
company and, as such, will not be subject to federal income taxes on
otherwise taxable income (including net realized capital gains) which is
distributed to shareholders. Therefore, no provision for federal income taxes
is recorded in the financial statements.
E. Expenses -- Distribution expenses directly attributable to a class of shares
are charged to that class' operations. All other expenses which are
attributable to more than one class are allocated among the classes.
NOTE 2-ADVISORY FEES AND OTHER TRANSACTIONS WITH AFFILIATES
The Company has entered into a master investment advisory agreement with A I M
Advisors, Inc. ("AIM"). Under the terms of the master investment advisory
agreement, the Fund pays an advisory fee to AIM at the annual rate of 0.75% of
the Fund's average daily net assets. AIM has entered into a sub-advisory
agreement with INVESCO Capital Management, Inc. ("ICM") whereby AIM pays ICM an
annual rate of 0.20% of the Fund's average daily net assets.
The Company, pursuant to an operating services agreement with AIM, agreed to
pay AIM an annual rate of 0.45% of the Fund's average daily net assets for
providing or arranging to provide accounting, legal (except litigation),
dividend disbursing, transfer agency, registrar, custodial, shareholder
reporting, sub-accounting and recordkeeping services and functions. The
agreement provided that AIM pay all fees and expenses associated with these and
other functions, including, but not limited to, registration fees, shareholder
meeting fees, and proxy statement and shareholder report expenses. During the
year ended December 31, 1999, AIM was paid $183,274 under the agreement. As of
June 1, 1998, AIM voluntarily agreed to limit the operating services fees to an
annual rate of 0.45% of the first $50 million of the Fund's average daily net
assets and 0.10% of the Fund's average daily net assets in excess of $50
million. During the year ended December 31, 1999, AIM voluntarily waived
operating services fees in the amount of $250,946.
Pursuant to an amended operating services agreement effective July 1, 1999,
the Fund shall pay costs incurred for providing operating services, such as
accounting, legal (except litigation), dividend disbursing, transfer agency,
registrar, custodial, shareholder reporting, sub-accounting and recordkeeping
services and functions, including, but not limited to, registration fees,
shareholder meeting fees, and proxy statement and shareholder report expenses.
Further, the Fund's operating expenses are limited to 0.45% of the Fund's
average daily net assets.
Following the amendment to the operating services agreement effective July 1,
1999, the Fund entered into a master administrative services agreement with AIM.
Pursuant to a master administrative services agreement, the Fund has agreed to
pay AIM for certain administrative costs incurred in providing accounting
services to the Fund. For the period July 1, 1999 though December 31, 1999, AIM
was paid $25,205 for such services.
Following the amendment to the operating services agreement effective July 1,
1999, the Fund entered into a transfer agency and
9
<PAGE> 181
service agreement with A I M Fund Services, Inc. ("AFS"). Pursuant to a transfer
agency and service agreement, the Fund agreed to pay AFS a fee for providing
transfer agency and shareholder services to the Fund. For the period July 1,
1999 through December 31, 1999, AFS was paid $49,423 for such services.
The Company has entered into master distribution agreements with A I M
Distributors, Inc. ("AIM Distributors") to serve as the distributor for the
shares of the Fund. The Company has adopted plans pursuant to Rule 12b-1 under
the 1940 Act with respect to the Fund's Class A shares, Class B shares and Class
C shares (collectively, the "Plans"). The Fund, pursuant to the Plans, pays AIM
Distributors compensation at the annual rate of 0.35% of the Fund's average
daily net assets of Class A shares and 1.00% of the average daily net assets of
Class B and C shares. AIM Distributors has contractually agreed to limit the
Class A shares plan payments to 0.25% for three years beginning August 4, 1997.
Of these amounts, the Fund may pay a service fee of 0.25% of the average daily
net assets of the Class A, Class B or Class C shares to selected dealers and
financial institutions who furnish continuing personal shareholder services to
their customers who purchase and own the appropriate class of shares of the
Fund. Any amounts not paid as a service fee under the Plans would constitute an
asset-based sales charge. The Plans also impose a cap on the total sales
charges, including asset-based sales charges that may be paid by the respective
classes. During the year ended December 31, 1999, the Class A, Class B and Class
C shares paid AIM Distributors $32,843, $56,134 and $1,655,995, respectively, as
compensation under the Plans. During the year ended December 31, 1999, AIM
Distributors waived fees of $13,137 for Class A shares.
AIM Distributors received commissions of $20,196 from sales of the Class A
shares of the Fund during the year ended December 31, 1999. Such commissions are
not an expense of the Fund. They are deducted from, and are not included in, the
proceeds from sales of Class A shares. During the year ended December 31, 1999,
AIM Distributors received $29,018 in contingent deferred sales charges imposed
on redemptions of Fund shares.
Certain officers and directors of the Company are officers and directors of
AIM, AFS and AIM Distributors.
During the period July 1, 1999 through December 31, 1999, the Fund paid legal
fees of $1,113 for services rendered by Kramer, Levin, Naftalis & Frankel LLP as
counsel to the Company's directors. A member of that firm is a director of the
Company.
NOTE 3-INDIRECT EXPENSES
During the year ended December 31, 1999, the Fund received reductions in
transfer agency fees from AFS (an affiliate of AIM) and reductions in custodian
fees of $706 and $949, respectively, under expense offset arrangements. The
effect of the above arrangements resulted in a reduction of the Fund's total
expenses of $1,655 during the year ended December 31, 1999.
NOTE 4-DIRECTORS' FEES
Directors' fees represent remuneration paid to directors who are not an
"interested person" of AIM. The Company invests directors' fees, if so elected
by a director, in mutual fund shares in accordance with a deferred compensation
plan.
NOTE 5-BANK BORROWINGS
The Fund is a participant in a committed line of credit facility with a
syndicate administered by The Chase Manhattan Bank. The Fund may borrow up to
the lesser of (i) $1,000,000,000 or (ii) the limits set by its prospectus for
borrowings. The Fund and other funds advised by AIM which are parties to the
line of credit may borrow on a first come, first served basis. During the year
ended December 31, 1999, the Fund did not borrow under the line of credit
agreement. The funds which are party to the line of credit are charged a
commitment fee of 0.09% on the unused balance of the committed line. Prior to
May 28, 1999, the commitment fee rate was 0.05%. The commitment fee is allocated
among the funds based on their respective average net assets for the period.
NOTE 6-INVESTMENT SECURITIES
The aggregate amount of investment securities (other than short-term securities)
purchased and sold by the Fund during the year ended December 31, 1999 was
$78,092,874 and $118,841,686, respectively.
The amount of unrealized appreciation (depreciation) of investment securities,
for tax purposes, as of December 31, 1999 was as follows:
<TABLE>
<S> <C>
Aggregate unrealized appreciation of
investment securities $50,107,417
- ---------------------------------------------------------
Aggregate unrealized (depreciation) of
investment securities (6,484,595)
- ---------------------------------------------------------
Net unrealized appreciation of investment
securities $43,622,822
=========================================================
</TABLE>
Cost of investments for tax purposes is $118,273,864.
NOTE 7-CAPITAL STOCK
Changes in capital stock outstanding during the years ended December 31, 1999
and 1998 were as follows:
<TABLE>
<CAPTION>
1999 1998
------------------------- -------------------------
SHARES AMOUNT SHARES AMOUNT
---------- ------------ ---------- ------------
<S> <C> <C> <C> <C>
Sold:
Class A 159,413 $ 4,077,027 546,830 $ 13,836,246
- ------------------------------------------------------------------------------
Class B 227,858 5,636,287 312,678 8,015,582
- ------------------------------------------------------------------------------
Class C 440,345 10,891,628 745,155 18,894,552
- ------------------------------------------------------------------------------
Issued as reinvestment
of dividends:
Class A 72,911 1,550,569 48,828 1,187,383
- ------------------------------------------------------------------------------
Class B 37,976 796,679 20,082 485,925
- ------------------------------------------------------------------------------
Class C 787,496 16,527,190 553,152 13,379,377
- ------------------------------------------------------------------------------
Reacquired:
Class A (305,004) (7,653,122) (180,617) (4,516,745)
- ------------------------------------------------------------------------------
Class B (255,300) (6,280,728) (40,432) (1,001,292)
- ------------------------------------------------------------------------------
Class C (1,944,581) (47,418,598) (1,159,833) (29,276,581)
- ------------------------------------------------------------------------------
(778,886) $(21,873,068) 845,843 $ 21,004,447
==============================================================================
</TABLE>
10
<PAGE> 182
NOTE 8-FINANCIAL HIGHLIGHTS
Shown below are the financial highlights for a share of Class A capital stock
outstanding during each of the years in the three-year period ended December 31,
1999, for a share of Class B capital stock outstanding during the year ended
December 31, 1999 and the period March 3, 1998 (date sales commenced) through
December 31, 1998, and for a share of Class C capital stock outstanding during
each of the years in the five-year period ended December 31, 1999.
<TABLE>
<CAPTION>
CLASS A(a) CLASS B
----------------------------- ------------------
1999 1998(b) 1997(b) 1999 1998
------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of period $ 25.20 $ 24.11 $ 20.57 $ 25.06 $ 25.59
- ------------------------------------------------------------ ------- ------- ------- ------- -------
Income from investment operations:
Net investment income 0.19 0.20 0.23 0.01 0.02
- ------------------------------------------------------------ ------- ------- ------- ------- -------
Net gains (losses) on securities (both realized and
unrealized) (0.30) 3.11 6.17 (0.31) 1.57
- ------------------------------------------------------------ ------- ------- ------- ------- -------
Total from investment operations (0.11) 3.31 6.40 (0.30) 1.59
- ------------------------------------------------------------ ------- ------- ------- ------- -------
Less distributions:
Dividends from net investment income (0.22) (0.12) (0.15) (0.04) (0.02)
- ------------------------------------------------------------ ------- ------- ------- ------- -------
Distributions from net realized gains (3.02) (2.10) (2.71) (3.02) (2.10)
- ------------------------------------------------------------ ------- ------- ------- ------- -------
Total distributions (3.24) (2.22) (2.86) (3.06) (2.12)
- ------------------------------------------------------------ ------- ------- ------- ------- -------
Net asset value, end of period $ 21.85 $ 25.20 $ 24.11 $ 21.70 $ 25.06
============================================================ ======= ======= ======= ======= =======
Total return(c) (0.01)% 14.07% 31.66% (0.75)% 6.51%
============================================================ ======= ======= ======= ======= =======
Ratios/supplemental data:
Net assets, end of period (000s omitted) $12,011 $15,684 $ 5,000 $ 6,573 $ 7,325
============================================================ ======= ======= ======= ======= =======
Ratio of expenses to average net assets(d) 1.26%(e) 1.30% 1.46% 1.95%(e) 2.05%(f)
============================================================ ======= ======= ======= ======= =======
Ratio of net investment income to average net assets(g) 0.70%(e) 0.91% 0.77% 0.01%(e) 0.16%(f)
============================================================ ======= ======= ======= ======= =======
Portfolio turnover rate 44% 52% 34% 44% 52%
============================================================ ======= ======= ======= ======= =======
</TABLE>
(a) Per share information and shares have been restated to reflect a 4 for 1
stock split, effected in the form of a 300% stock dividend, on November 7,
1997.
(b) Calculated using average shares outstanding.
(c) Does not deduct sales charges and is not annualized for periods less than
one year.
(d) After fee waivers and/or reimbursements. Ratios of expenses to average net
assets prior to fee waivers and/or reimbursement were 1.50%, 1.55% and 1.56%
for 1999-1997 for Class A and 2.09% and 2.20% (annualized) for 1999-1998 for
Class B.
(e) Ratios are based on average net assets of $13,137,049 and $5,613,443 for
Class A and Class B, respectively.
(f) Annualized.
(g) After fee waivers and/or reimbursements. Ratios of net investment income
(loss) to average net assets prior to fee waivers and/or reimbursement were
0.46%, 0.66% and 0.67% for 1999-1997 for Class A, and (0.13)% and 0.01%
(annualized) for 1999-1998 for Class B.
<TABLE>
<CAPTION>
CLASS C(a)
-----------------------------------------------------------
1999 1998 1997(b) 1996 1995
-------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of period $ 25.05 $ 24.08 $ 20.57 $ 17.60 $ 13.96
- ------------------------------------------------------------ -------- -------- -------- -------- --------
Income from investment operations:
Net investment income 0.01 0.04 0.01 0.05 0.10
- ------------------------------------------------------------ -------- -------- -------- -------- --------
Net gains (losses) on securities (both realized and
unrealized) (0.30) 3.05 6.21 2.97 4.11
- ------------------------------------------------------------ -------- -------- -------- -------- --------
Total from investment operation (0.29) 3.09 6.22 3.02 4.21
- ------------------------------------------------------------ -------- -------- -------- -------- --------
Less distributions:
Dividends from net investment income (0.04) (0.02) -- (0.05) (0.10)
- ------------------------------------------------------------ -------- -------- -------- -------- --------
Distributions from net realized gains (3.02) (2.10) (2.71) -- (0.47)
- ------------------------------------------------------------ -------- -------- -------- -------- --------
Total distributions (3.06) (2.12) (2.71) (0.05) (0.57)
- ------------------------------------------------------------ -------- -------- -------- -------- --------
Net asset value, end of period $ 21.70 $ 25.05 $ 24.08 $ 20.57 $ 17.60
============================================================ ======== ======== ======== ======== ========
Total return(c) (0.71)% 13.15% 30.66% 17.17% 30.28%
============================================================ ======== ======== ======== ======== ========
Ratios/supplemental data:
Net assets, end of period (000s omitted) $142,672 $182,679 $172,228 $137,416 $113,573
============================================================ ======== ======== ======== ======== ========
Ratio of expenses to average net assets(d) 1.95%(e) 2.05% 2.21% 2.26% 2.28%
============================================================ ======== ======== ======== ======== ========
Ratio of net investment income to average net assets(f) 0.01%(e) 0.16% 0.02% 0.24% 0.64%
============================================================ ======== ======== ======== ======== ========
Portfolio turnover rate 44% 52% 34% 19% 17%
============================================================ ======== ======== ======== ======== ========
</TABLE>
(a) Per share information and shares have been restated to reflect a 4 for 1
stock split, effected in the form of a 300% stock dividend, on November 7,
1997.
(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) After fee waivers and/or reimbursements. Ratios of expenses to average net
assets prior to fee waivers and/or reimbursement were 2.09% and 2.20% for
1999-1998.
(e) Ratios are based on average net assets of $165,599,460.
(f) After fee waivers and/or reimbursements. Ratios of net investment income
(loss) to average net assets prior to fee waivers and/or reimbursement were
(0.13)% and 0.01% for 1999-1998.
11
<PAGE> 183
INDEPENDENT AUDITORS' REPORT
The Board of Directors and Shareholders of
AIM Advisor Large Cap Value Fund:
We have audited the accompanying statement of assets and
liabilities of AIM Advisor Large Cap Fund (a portfolio of
AIM Advisor Funds, Inc.), including the schedule of
investments, as of December 31, 1999, and the related
statement of operations for the year then ended, the
statement of changes in net assets and the financial
highlights for each of the years in the two-year period
then ended. These financial statements and financial
highlights are the responsibility of the Fund's
management. Our responsibility is to express an opinion
on these financial statements and the financial
highlights based on our audits.
We conducted our audits in accordance with generally
accepted auditing standards. Those standards require that
we plan and perform the audit to obtain reasonable
assurance about whether the financial statements and
financial highlights are free of material misstatement.
An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial
statements. Our procedures included confirmation of
securities owned as of December 31, 1999, by
correspondence with the custodian. An audit also includes
assessing the accounting principles used and significant
estimates made by management, as well as evaluating the
overall financial statement presentation. We believe that
our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements and financial
highlights referred to above present fairly, in all
material respects, the financial position of AIM Advisor
Large Cap Value Fund as of December 31, 1999, the results
of its operations for the year then ended, the changes in
its net assets and the financial highlights for each of
the years in the two-year period then ended, in
conformity with generally accepted accounting principles.
KPMG LLP
February 4, 2000
Houston, Texas
12
<PAGE> 184
<TABLE>
<CAPTION>
BOARD OF DIRECTORS OFFICERS OFFICE OF THE FUND
<S> <C> <C>
Charles T. Bauer Charles T. Bauer 11 Greenway Plaza
Chairman Chairman Suite 100
A I M Management Group Inc. Houston, TX 77046
Robert H. Graham
Bruce L. Crockett President INVESTMENT ADVISOR
Director
ACE Limited; Carol F. Relihan A I M Advisors, Inc.
Formerly Director, President, and Senior Vice President and Secretary 11 Greenway Plaza
Chief Executive Officer Suite 100
COMSAT Corporation Gary T. Crum Houston, TX 77046
Senior Vice President
Owen Daly II SUB-ADVISOR
Director Dana R. Sutton
Cortland Trust Inc. Vice President and Treasurer INVESCO Capital Management, Inc.
1315 Peachtree Street, N.E.
Edward K. Dunn Jr. Robert G. Alley Atlanta, GA 30309
Chairman, Mercantile Mortgage Corp.; Vice President
Formerly Vice Chairman, President TRANSFER AGENT
and Chief Operating Officer, Stuart W. Coco
Mercantile-Safe Deposit & Trust Co.; and Vice President A I M Fund Services, Inc.
President, Mercantile Bankshares P.O. Box 4739
Melville B. Cox Houston, TX 77210-4739
Jack Fields Vice President
Chief Executive Officer CUSTODIAN
Texana Global, Inc.; Karen Dunn Kelley
Formerly Member Vice President State Street Bank and Trust Company
of the U.S. House of Representatives 225 Franklin Street
Edgar M. Larsen Boston, MA 02110
Carl Frischling Vice President
Partner COUNSEL TO THE FUND
Kramer, Levin, Naftalis & Frankel LLP Mary J. Benson
Assistant Vice President and Ballard Spahr
Robert H. Graham Assistant Treasurer Andrews & Ingersoll, LLP
President and Chief Executive Officer 1735 Market Street
A I M Management Group Inc. Sheri Morris Philadelphia, PA 19103
Assistant Vice President and
Prema Mathai-Davis Assistant Treasurer COUNSEL TO THE DIRECTORS
Chief Executive Officer, YWCA of the U.S.A.
Renee A. Friedli Kramer, Levin, Naftalis & Frankel LLP
Lewis F. Pennock Assistant Secretary 919 Third Avenue
Attorney New York, NY 10022
P. Michelle Grace
Louis S. Sklar Assistant Secretary DISTRIBUTOR
Executive Vice President
Hines Interests Nancy L. Martin A I M Distributors, Inc.
Limited Partnership Assistant Secretary 11 Greenway Plaza
Suite 100
Ofelia M. Mayo Houston, TX 77046
Assistant Secretary
AUDITORS
Lisa A. Moss
Assistant Secretary KPMG LLP
700 Louisiana
Kathleen J. Pflueger Houston, TX 77002
Assistant Secretary
Samuel D. Sirko
Assistant Secretary
Stephen I. Winer
Assistant Secretary
</TABLE>
REQUIRED FEDERAL INCOME TAX INFORMATION (UNAUDITED)
AIM Advisor Large Cap Value Fund Class A, Class B, and Class C shares paid
ordinary dividends in the amount of $0.401, $0.2275, and $0.2275 per share,
respectively, to shareholders during its tax year ended December 31, 1999. Of
these amounts, 100% is eligible for the dividends received deduction for
corporations.
The Fund also distributed long-term capital gains of $20,386,010 for the Fund's
tax year ended December 31, 1999. Of long-term capital gains distributed, 100%
is 20% rate gain.
<PAGE> 185
THE AIM FAMILY OF FUNDS--Registered Trademark--
<TABLE>
<S> <C> <C>
GROWTH FUNDS MONEY MARKET FUNDS A I M Management Group Inc. has provided leadership
AIM Aggressive Growth Fund AIM Money Market Fund in the mutual fund industry since 1976 and managed
AIM Blue Chip Fund AIM Tax-Exempt Cash Fund approximately $160 billion in assets for more than
AIM Capital Development Fund 6.6 million shareholders, including individual
AIM Constellation Fund(1) INTERNATIONAL GROWTH FUNDS investors, corporate clients and financial
AIM Dent Demographic Trends Fund AIM Advisor International Value Fund institutions, as of December 31, 1999.
AIM Large Cap Growth Fund AIM Asian Growth Fund The AIM Family of Funds--Registered Trademark--
AIM Mid Cap Equity Fund AIM Developing Markets Fund is distributed nationwide, and AIM today is the
AIM Mid Cap Growth Fund AIM Euroland Growth Fund(4) eighth-largest mutual fund complex in the United
AIM Mid Cap Opportunities Fund AIM European Development Fund States in assets under management, according to
AIM Select Growth Fund AIM International Equity Fund Strategic Insight, an independent mutual fund
AIM Small Cap Growth Fund(2) AIM Japan Growth Fund monitor.
AIM Small Cap Opportunities Fund(3) AIM Latin American Growth Fund
AIM Value Fund AIM New Pacific Growth Fund
AIM Weingarten Fund
GLOBAL GROWTH FUNDS
GROWTH & INCOME FUNDS AIM Global Aggressive Growth Fund
AIM Advisor Flex Fund AIM Global Growth Fund
AIM Advisor Large Cap Value Fund
AIM Advisor Real Estate Fund GLOBAL GROWTH & INCOME FUNDS
AIM Balanced Fund AIM Global Growth & Income Fund
AIM Basic Value Fund AIM Global Utilities Fund
AIM Charter Fund
GLOBAL INCOME FUNDS
INCOME FUNDS AIM Emerging Markets Debt Fund
AIM Floating Rate Fund AIM Global Government Income Fund
AIM High Yield Fund AIM Global Income Fund
AIM High Yield Fund II AIM Strategic Income Fund
AIM Income Fund
AIM Intermediate Government Fund THEME FUNDS
AIM Limited Maturity Treasury Fund AIM Global Consumer Products and Services Fund
AIM Global Financial Services Fund
TAX-FREE INCOME FUNDS AIM Global Health Care Fund
AIM High Income Municipal Fund AIM Global Infrastructure Fund
AIM Municipal Bond Fund AIM Global Resources Fund
AIM Tax-Exempt Bond Fund of Connecticut AIM Global Telecommunications and Technology Fund(5)
AIM Tax-Free Intermediate Fund AIM Global Trends Fund(6)
</TABLE>
(1) Effective December 1, 1999, AIM Constellation Fund's investment strategy
broadened to allow investments across all market capitalizations. (2) AIM Small
Cap Growth Fund closed to new investors on November 8, 1999. (3) AIM Small Cap
Opportunities Fund closed to new investors on November 4, 1999. (4) On September
1, 1999, AIM Europe Growth Fund was renamed AIM Euroland Growth Fund. Previously
the fund invested in all size companies in most areas of Europe. The fund now
seeks to invest at least 65% of its assets in large-cap companies within
countries using the euro as their currency (EMU-member countries). (5) On June
1, 1999, AIM Global Telecommunications Fund was renamed AIM Global
Telecommunications and Technology Fund. (6) Effective August 27, 1999, AIM
Global Trends Fund was restructured to operate as a traditional mutual fund.
Before that date, the fund operated as a fund of funds. For more complete
information about any AIM fund(s), including sales charges and expenses, ask
your financial advisor or securities dealer for a free prospectus(es). Please
read the prospectus(es) carefully before you invest or send money. If used as
sales material after April 20, 2000, this report must be accompanied by a
current Quarterly Review of Performance for AIM Funds.
[AIM LOGO APPEARS HERE]
INVEST WITH DISCIPLINE
--Registered Trademark--
LCV-AR-1
AIM Distributions, Inc.
<PAGE> 186
Appendix III
AIM BASIC VALUE FUND
AIM ADVISOR LARGE CAP VALUE FUND
PRO FORMA COMBINING SCHEDULE OF INVESTMENTS
DECEMBER 31, 1999
(UNAUDITED)
<TABLE>
<CAPTION>
SHARES MARKET VALUE
- ------------------------------------- ---------------------------------------
AIM ADVISOR AIM ADVISOR
LARGE CAP AIM BASIC PRO FORMA LARGE CAP AIM BASIC PRO FORMA
VALUE FUND VALUE FUND COMBINING VALUE FUND VALUE FUND COMBINING
<S> <C> <C> <C> <C> <C> <C>
COMMON STOCKS & OTHER EQUITY
INTERESTS -- 94.57%
AUTOMOBILES--0.74%
41,000 -- 41,000 Ford Motor Co. $ 2,190,937 $ -- $ 2,190,937
========== =========== =========== =========== =========== ===========
BANKS (MAJOR REGIONAL)--1.90%
60,000 51,800 111,800 FleetBoston Financial Corp. 2,088,750 1,803,287 3,892,037
- ---------- ----------- ----------- ----------- ----------- -----------
33,500 -- 33,500 National City Corp. 793,531 -- 793,531
- ---------- ----------- ----------- ----------- ----------- -----------
13,200 -- 13,200 State Street Corp. 964,425 -- 964,425
========== =========== =========== =========== =========== ===========
5,649,993
========== =========== =========== =========== =========== ===========
BANKS (MONEY CENTER)--3.54%
45,674 71,425 117,099 Bank of America Corp. 2,292,264 3,584,642 5,876,906
- ---------- ----------- ----------- ----------- ----------- -----------
34,500 -- 34,500 Chase Manhattan Corp. (The) 2,680,219 -- 2,680,219
- ---------- ----------- ----------- ----------- ----------- -----------
60,000 -- 60,000 First Union Corp. 1,968,750 -- 1,968,750
========== =========== =========== =========== =========== ===========
10,525,875
========== =========== =========== =========== =========== ===========
BEVERAGES (ALCOHOLIC)--0.79%
33,200 -- 33,200 Anheuser-Busch Cos, Inc. 2,353,050 -- 2,353,050
========== =========== =========== =========== =========== ===========
BROADCASTING (TELEVISION, RADIO & CABLE)
0.67%
26,000 -- 26,000 MediaOne Group, Inc. 1,997,125 -- 1,997,125
========== =========== =========== =========== =========== ===========
CHEMICALS--0.99%
13,200 -- 13,200 Dow Chemical Co. (The) 1,763,850 -- 1,763,850
- ---------- ----------- ----------- ----------- ----------- -----------
23,300 23,300 Praxair, Inc. 1,172,281 -- 1,172,281
========== =========== =========== =========== =========== ===========
2,936,131
========== =========== =========== =========== =========== ===========
CHEMICALS (SPECIALTY)--0.34%
-- 33,300 33,300 Sigma-Aldrich Corp. -- 1,001,081 1,001,081
========== =========== =========== =========== =========== ===========
COMMUNICATIONS EQUIPMENT--0.54%
22,000 -- 22,000 ADC Telecommunications, Inc. (a) 1,596,375 -- 1,596,375
========== =========== =========== =========== =========== ===========
COMPUTERS (HARDWARE)--3.06%
36,200 -- 36,200 Compaq Computer Corp. 979,662 -- 979,662
- ---------- ----------- ----------- ----------- ----------- -----------
26,200 -- 26,200 Hewlett-Packard Co. 2,985,162 -- 2,985,162
- ---------- ----------- ----------- ----------- ----------- -----------
25,700 -- 25,700 International Business Machines Corp. 2,775,600 -- 2,775,600
- ---------- ----------- ----------- ----------- ----------- -----------
30,500 -- 30,500 Sun Microsystems, Inc. (a) 2,361,844 -- 2,361,844
========== =========== =========== =========== =========== ===========
9,102,268
========== =========== =========== =========== =========== ===========
COMPUTERS (PERIPHERALS)--0.34%
-- 20,200 20,200 Adaptec, Inc. (a) -- 1,007,475 1,007,475
========== =========== =========== =========== =========== ===========
COMPUTERS (SOFTWARE & SERVICES)--6.76%
65,200 -- 65,200 Cadence Design Systems, Inc. (a) 1,564,800 -- 1,564,800
- ---------- ----------- ----------- ----------- ----------- -----------
56,000 54,900 110,900 Computer Associates International, Inc. 3,916,500 3,839,569 7,756,069
- ---------- ----------- ----------- ----------- ----------- -----------
54,100 -- 54,100 Compuware Corp. (a) 2,015,225 -- 2,015,225
- ---------- ----------- ----------- ----------- ----------- -----------
17,400 -- 17,400 Microsoft Corp. (a) 2,031,450 -- 2,031,450
- ---------- ----------- ----------- ----------- ----------- -----------
26,650 -- 26,650 Oracle Corp. (a) 2,986,466 -- 2,986,466
- ---------- ----------- ----------- ----------- ----------- -----------
-- 21,500 21,500 Synopsys, Inc. (a) -- 1,435,125 1,435,125
- ---------- ----------- ----------- ----------- ----------- -----------
-- 72,400 72,400 Unisys Corp. (a) -- 2,312,275 2,312,275
========== =========== =========== =========== =========== ===========
20,101,410
========== =========== =========== =========== =========== ===========
CONSTRUCTION (CEMENT & AGGREGATES)--0.58%
43,300 -- 43,300 Vulcan Materials Co. 1,729,294 -- 1,729,294
========== =========== =========== =========== =========== ===========
CONSUMER FINANCE--0.53%
42,300 -- 42,300 Household International, Inc. 1,575,675 -- 1,575,675
========== =========== =========== =========== =========== ===========
DISTRIBUTORS (FOOD & HEALTH)--1.53%
-- 165,000 165,000 McKesson HBOC, Inc. -- 3,722,812 3,722,812
- ---------- ----------- ----------- ----------- ----------- -----------
41,200 -- 41,200 SUPERVALU, INC. 824,000 -- 824,000
========== =========== =========== =========== =========== ===========
4,546,812
========== =========== =========== =========== =========== ===========
</TABLE>
<PAGE> 187
AIM BASIC VALUE FUND
AIM ADVISOR LARGE CAP VALUE FUND
PRO FORMA COMBINING SCHEDULE OF INVESTMENTS
DECEMBER 31, 1999
(UNAUDITED)
<TABLE>
<CAPTION>
SHARES MARKET VALUE
- --------------------------------------- ----------------------------------------
AIM ADVISOR AIM ADVISOR
LARGE CAP AIM BASIC PRO FORMA LARGE CAP AIM BASIC PRO FORMA
VALUE FUND VALUE FUND COMBINING VALUE FUND VALUE FUND COMBINING
<S> <C> <C> <C> <C> <C> <C>
ELECTRIC COMPANIES--4.55%
35,000 -- 35,000 DTE Energy Co. $ 1,098,125 $ -- $ 1,098,125
- ---------- ----------- ----------- ------------ ----------- -----------
35,000 -- 35,000 GPU, Inc. 1,047,812 -- 1,047,812
- ---------- ----------- ----------- ------------ ----------- -----------
33,200 -- 33,200 Southern Co. (The) 780,200 -- 780,200
- ---------- ----------- ----------- ------------ ----------- -----------
78,000 -- 78,000 Teco Energy, Inc. 1,447,875 -- 1,447,875
- ---------- ----------- ----------- ------------ ----------- -----------
-- 82,900 82,900 Illinova Corp. -- 2,880,775 2,880,775
- ---------- ----------- ----------- ------------ ----------- -----------
-- 172,000 172,000 Niagara Mohawk Holdings Inc. (a) -- 2,397,250 2,397,250
- ---------- ----------- ----------- ------------ ----------- -----------
-- 90,300 90,300 Northeast Utilities -- 1,856,794 1,856,794
- ---------- ----------- ----------- ------------ ----------- -----------
-- 57,400 57,400 Texas Utilities Co. -- 2,041,287 2,041,287
========== =========== =========== ============ =========== ===========
13,550,118
========== =========== =========== ============ =========== ===========
ELECTRICAL EQUIPMENT--3.74%
21,200 -- 21,200 Emerson Electric Co. 1,216,350 -- 1,216,350
- ---------- ----------- ----------- ------------ ----------- -----------
31,200 -- 31,200 General Electric Co. 4,828,200 -- 4,828,200
- ---------- ----------- ----------- ------------ ----------- -----------
Koninklijke (Royal) Philips Electronics N.V.-
-- 31,404 31,404 ADR (Netherlands) -- 4,239,540 4,239,540
- ---------- ----------- ----------- ------------ ----------- -----------
-- 3,000 3,000 Sony Corp.-ADR (Japan) -- 854,250 854,250
========== =========== =========== ============ =========== ===========
11,138,340
========== =========== =========== ============ =========== ===========
ELECTRONICS (COMPONENT DISTRIBUTORS)--0.73%
-- 17,000 17,000 Agilent Technologies, Inc. (a) -- 1,314,312 1,314,312
- ---------- ----------- ----------- ------------ ----------- -----------
-- 3,300 3,300 Kyocera Corp.-ADR (Japan) -- 864,600 864,600
========== =========== =========== ============ =========== ===========
2,178,912
========== =========== =========== ============ =========== ===========
ELECTRONICS (SEMICONDUCTORS)--1.87%
-- 24,700 24,700 Analog Devices, Inc. (a) -- 2,297,100 2,297,100
- ---------- ----------- ----------- ------------ ----------- -----------
39,600 -- 39,600 Intel Corp. 3,259,575 -- 3,259,575
========== =========== =========== ============ =========== ===========
5,556,675
========== =========== =========== ============ =========== ===========
EQUIPMENT (SEMICONDUCTOR)--1.43%
-- 34,800 34,800 Novellus Systems, Inc. (a) -- 4,264,087 4,264,087
========== =========== =========== ============ =========== ===========
FINANCIAL (DIVERSIFIED)--5.57%
48,600 -- 48,600 American General Corp. 3,687,525 -- 3,687,525
- ---------- ----------- ----------- ------------ ----------- -----------
54,000 57,600 111,600 Citigroup Inc. 3,000,375 3,200,400 6,200,775
- ---------- ----------- ----------- ------------ ----------- -----------
25,000 -- 25,000 Fannie Mae 1,560,937 -- 1,560,937
- ---------- ----------- ----------- ------------ ----------- -----------
44,000 41,400 85,400 MGIC Investment Corp. 2,648,250 2,491,762 5,140,012
========== =========== =========== ============ =========== ===========
16,589,249
========== =========== =========== ============ =========== ===========
FOODS--0.20%
15,000 -- 15,000 H.J. Heinz Co. 597,187 -- 597,187
========== =========== =========== ============ =========== ===========
HEALTH CARE (DIVERSIFIED)--2.13%
24,500 -- 24,500 Abbott Laboratories 889,656 -- 889,656
- ---------- ----------- ----------- ------------ ----------- -----------
35,900 -- 35,900 American Home Products Corp. 1,415,806 -- 1,415,806
- ---------- ----------- ----------- ------------ ----------- -----------
25,700 -- 25,700 Bristol-Myers Squibb Co. 1,649,619 -- 1,649,619
- ---------- ----------- ----------- ------------ ----------- -----------
25,500 -- 25,500 Johnson & Johnson 2,374,687 -- 2,374,687
========== =========== =========== ============ =========== ===========
6,329,768
========== =========== =========== ============ =========== ===========
HEALTH CARE (DRUGS-MAJOR PHARMACEUTICALS)--
2.25%
40,000 -- 40,000 Merck & Co., Inc. 2,682,500 -- 2,682,500
- ---------- ----------- ----------- ------------ ----------- -----------
71,400 -- 71,400 Schering-Plough Corp. 3,012,187 -- 3,012,187
- ---------- ----------- ----------- ------------ ----------- -----------
-- 22,000 22,000 Pharmacia & Upjohn, Inc. -- 990,000 990,000
========== =========== =========== ============ =========== ===========
6,684,687
========== =========== =========== ============ =========== ===========
HEALTH CARE (HOSPITAL MANAGEMENT)--2.31%
Health Management Associates, Inc.-
-- 514,800 514,800 Class A (a) -- 6,885,450 6,885,450
========== =========== =========== ============ =========== ===========
HEALTH CARE (LONG TERM CARE)--0.94%
-- 174,100 174,100 Manor Care, Inc. (a) -- 2,785,600 2,785,600
========== =========== =========== ============ =========== ===========
HEALTH CARE (MANAGED CARE)--1.30%
-- 73,000 73,000 United Healthcare Corp. -- 3,878,125 3,878,125
========== =========== =========== ============ =========== ===========
HEALTH CARE (MEDICAL PRODUCTS & SUPPLIES)--
1.50%
-- 69,200 69,200 Beckman Coulter, Inc. -- 3,520,550 3,520,550
- ---------- ----------- ----------- ------------ ----------- -----------
23,500 -- 23,500 Biomet, Inc. 940,000 -- 940,000
========== =========== =========== ============ =========== ===========
4,460,550
========== =========== =========== ============ =========== ===========
</TABLE>
<PAGE> 188
AIM BASIC VALUE FUND
AIM ADVISOR LARGE CAP VALUE FUND
PRO FORMA COMBINING SCHEDULES OF INVESTMENTS
DECEMBER 31, 1999
(UNAUDITED)
<TABLE>
<CAPTION>
SHARES MARKET VALUE
- ------------------------------------- ---------------------------------------
AIM ADVISOR AIM ADVISOR
LARGE CAP AIM BASIC PRO FORMA LARGE CAP AIM BASIC PRO FORMA
VALUE FUND VALUE FUND COMBINING VALUE FUND VALUE FUND COMBINING
<S> <C> <C> <C> <C> <C> <C>
HEALTH CARE (SPECIALIZED SERVICES)--0.28%
44,400 -- 44,400 Quintiles Transnational Corp. (a) $ 829,725 $ -- $ 829,725
========== =========== =========== ============ =========== ============
HOUSEHOLD FURNISHING & APPLIANCES--0.35%
16,100 -- 16,100 Whirlpool Corp. 1,047,506.00 -- 1,047,506.00
========== =========== =========== ============ =========== ============
HOUSEHOLD PRODUCTS (NON-DURABLES)--1.64%
37,900 -- 37,900 Kimberly-Clark Corp. 2,472,975 -- 2,472,975
- ---------- ----------- ----------- ------------ ----------- ------------
21,900 -- 21,900 Procter & Gamble, Co. (The) 2,399,419 -- 2,399,419
========== =========== =========== ============ =========== ===========
4,872,394
========== =========== =========== ============ =========== ===========
INSURANCE (LIFE/HEALTH)--1.56%
22,700 -- 22,700 Jefferson-Pilot Corp. 1,549,275 -- 1,549,275
- ---------- ----------- ----------- ------------ ----------- ------------
26,700 -- 26,700 Torchmark Corp. 775,969 -- 775,969
- ---------- ----------- ----------- ------------ ----------- ------------
-- 72,400 72,400 UnumProvident Corp. -- 2,321,325 2,321,325
========== =========== =========== ============ =========== ===========
4,646,569
========== =========== =========== ============ =========== ===========
INSURANCE (MULTI-LINE)--0.36%
10,000 -- 10,000 American International Group, Inc. 1,081,250 -- 1,081,250
========== =========== =========== ============ =========== ===========
INSURANCE (PROPERTY-CASUALTY)--2.55%
-- 64,298 64,298 Radian Group Inc. -- 3,070,229 3,070,229
- ---------- ----------- ----------- ------------ ----------- ------------
-- 53,800 53,800 Travelers Property Casualty Corp.-Class A -- 1,842,650 1,842,650
- ---------- ----------- ----------- ------------ ----------- ------------
-- 51,400 51,400 XL Capital Ltd.-Class A -- 2,666,375 2,666,375
========== =========== =========== ============ =========== ===========
7,579,254
========== =========== =========== ============ =========== ===========
INVESTMENT BANKING/BROKERAGE--0.97%
20,150 -- 20,150 Morgan Stanley Dean Witter & Co. 2,876,413 -- 2,876,413
========== =========== =========== ============ =========== ===========
IRON & STEEL--0.36%
19,600 -- 19,600 Nucor Corp. 1,074,325 -- 1,074,325
========== =========== =========== ============ =========== ===========
LEISURE TIME (PRODUCTS)--1.30%
56,700 238,660 295,360 Mattel, Inc. 744,188 3,132,412 3,876,600
========== =========== =========== ============ =========== ===========
MANUFACTURING (DIVERSIFIED)--2.87%
32,677 -- 32,677 Illinois Tool Works, Inc. 2,207,740 -- 2,207,740
- ---------- ----------- ----------- ------------ ----------- ------------
16,500 -- 16,500 Minnesota Mining and Manufacturing Co. 1,614,938 -- 1,614,938
- ---------- ----------- ----------- ------------ ----------- ------------
22,400 -- 22,400 Textron, Inc. 1,717,800 -- 1,717,800
- ---------- ----------- ----------- ------------ ----------- ------------
32,600 -- 32,600 Tyco International Ltd. 1,267,325 -- 1,267,325
- ---------- ----------- ----------- ------------ ----------- ------------
26,500 -- 26,500 United Technologies Corp. 1,722,500 -- 1,722,500
========== =========== =========== ============ =========== ===========
8,530,303
========== =========== =========== ============ =========== ===========
MANUFACTURING (SPECIALIZED)--2.33%
-- 73,400 73,400 Millipore Corp. -- 2,835,075 2,835,075
- ---------- ----------- ----------- ------------ ----------- ------------
-- 63,400 63,400 Parker Hannifin Corp. -- 3,253,213 3,253,213
- ---------- ----------- ----------- ------------ ----------- ------------
30,900 -- 30,900 York International Corp. 847,819 -- 847,819
========== =========== =========== ============ =========== ===========
6,936,107
========== =========== =========== ============ =========== ===========
METAL FABRICATORS--0.87%
-- 77,300 77,300 Kennametal Inc. -- 2,599,213 2,599,213
========== =========== =========== ============ =========== ===========
OIL (DOMESTIC INTEGRATED)--0.50%
-- 17,100 17,100 Atlantic Richfield Co. -- 1,479,150 1,479,150
========== =========== =========== ============ =========== ===========
OIL (INTERNATIONAL INTEGRATED)--3.50%
18,100 -- 18,100 Chevron Corp. 1,567,913 -- 1,567,913
- ---------- ----------- ----------- ------------ ----------- ------------
51,000 16,353 67,353 Exxon Mobil Corp. 4,108,688 1,317,439 5,426,127
- ---------- ----------- ----------- ------------ ----------- ------------
41,900 -- 41,900 Repsol S.A.-ADR (Spain) 974,175 -- 974,175
- ---------- ----------- ----------- ------------ ----------- ------------
40,400 -- 40,400 Royal Dutch Petroleum Co.-New York Shares-
ADR (Net 2,441,675 -- 2,441,675
========== =========== =========== ============ =========== ===========
10,409,890
========== =========== =========== ============ =========== ===========
OIL & GAS (DRILLING & EQUIPMENT)--3.19%
-- 49,800 49,800 Diamond Offshore Drilling, Inc. -- 1,522,013 1,522,013
- ---------- ----------- ----------- ------------ ----------- ------------
-- 108,000 108,000 ENSCO International Inc. -- 2,470,500 2,470,500
- ---------- ----------- ----------- ------------ ----------- ------------
-- 37,700 37,700 Schlumberger Ltd. -- 2,120,625 2,120,625
- ---------- ----------- ----------- ------------ ----------- ------------
-- 100,714 100,714 Transocean Sedco Forex Inc. -- 3,392,796 3,392,796
========== =========== =========== ============ =========== ===========
9,505,934
========== =========== =========== ============ =========== ===========
</TABLE>
<PAGE> 189
AIM BASIC VALUE FUND
AIM ADVISOR LARGE CAP VALUE FUND
PRO FORMA COMBINING SCHEDULES OF INVESTMENTS
DECEMBER 31, 1999
(UNAUDITED)
<TABLE>
<CAPTION>
SHARES MARKET VALUE
- ------------------------------------- ---------------------------------------
<S> <C> <C> <C> <C> <C> <C>
AIM ADVISOR AIM ADVISOR
LARGE CAP AIM BASIC PRO FORMA LARGE CAP AIM BASIC PRO FORMA
VALUE FUND VALUE FUND COMBINING VALUE FUND VALUE FUND COMBINING
</TABLE>
<PAGE> 190
AIM BASIC VALUE FUND
AIM ADVISOR LARGE CAP VALUE FUND
PRO FORMA COMBINING SCHEDULES OF INVESTMENTS
DECEMBER 31, 1999
(UNAUDITED)
<TABLE>
<CAPTION>
SHARES MARKET VALUE
- ------------------------------------- ---------------------------------------
AIM ADVISOR AIM ADVISOR
LARGE CAP AIM BASIC PRO FORMA LARGE CAP AIM BASIC PRO FORMA
VALUE FUND VALUE FUND COMBINING VALUE FUND VALUE FUND COMBINING
<S> <C> <C> <C> <C> <C> <C>
PAPER & FOREST PRODUCTS--2.27%
-- 44,700 44,700 Georgia-Pacific Group $ -- $ 2,268,525 $ 2,268,525
- ---------- ----------- ----------- ------------ ----------- ------------
30,700 49,000 79,700 International Paper Co. 1,732,631 2,765,438 4,498,069
========== =========== =========== ============ =========== ===========
6,766,594
========== =========== =========== ============ =========== ===========
PHOTOGRAPHY/IMAGING--0.40%
52,000 -- 52,000 Xerox Corp. 1,179,750 -- 1,179,750
========== =========== =========== ============ =========== ===========
PUBLISHING (NEWSPAPERS)--1.00%
36,700 -- 36,700 Gannett Co., Inc. 2,993,344 -- 2,993,344
========== =========== =========== ============ =========== ===========
REAL ESTATE INVESTMENT TRUSTS--0.48%
-- 60,683 60,683 Starwood Hotels & Resorts Worldwide, Inc. -- 1,426,051 1,426,051
========== =========== =========== ============ =========== ===========
RESTAURANTS--0.54%
40,100 -- 40,100 McDonald's Corp. 1,616,531 -- 1,616,531
========== =========== =========== ============ =========== ===========
RETAIL (BUILDING SUPPLIES)--1.78%
66,000 -- 66,000 Lowe's Cos., Inc. 3,943,500 -- 3,943,500
========== =========== =========== ============ =========== ===========
64,700 -- 64,700 Sherwin-Williams Co. 1,358,700 -- 1,358,700
========== =========== =========== ============ =========== ===========
5,302,200
========== =========== =========== ============ =========== ===========
RETAIL (DEPARTMENT STORES)--1.79%
44,400 -- 44,400 Dillards, Inc.-Class A 896,325 -- 896,325
========== =========== =========== ============ =========== ===========
-- 48,500 48,500 Federated Department Stores, Inc. (a) -- 2,452,281 2,452,281
========== =========== =========== ============ =========== ===========
-- 127,200 127,200 Saks Inc. (a) -- 1,979,550 1,979,550
========== =========== =========== ============ =========== ===========
5,328,156
========== =========== =========== ============ =========== ===========
RETAIL (FOOD CHAINS)--1.99%
40,400 74,500 114,900 Albertson's, Inc. 1,302,900 2,402,625 3,705,525
========== =========== =========== ============ =========== ===========
-- 118,100 118,100 Kroger Co. (The) (a) -- 2,229,138 2,229,138
========== =========== =========== ============ =========== ===========
5,934,663
========== =========== =========== ============ =========== ===========
RETAIL (GENERAL MERCHANDISE)--0.40%
13,000 -- 13,000 Costco Wholesale Corp. (a) 1,186,250 -- 1,186,250
========== =========== =========== ============ =========== ===========
RETAIL (SPECIALTY)--0.34%
93,700 -- 93,700 Office Depot, Inc. (a) 1,024,844 -- 1,024,844
========== =========== =========== ============ =========== ===========
SERVICES (DATA PROCESSING)--2.08%
54,300 71,000 125,300 First Data Corp. 2,677,669 3,501,188 6,178,857
========== =========== =========== ============ =========== ===========
SPECIALTY PRINTING--0.49%
53,100 -- 53,100 Deluxe Corp. 1,456,931 -- 1,456,931
========== =========== =========== ============ =========== ===========
TELECOMMUNICATIONS (LONG DISTANCE)--1.77%
29,100 -- 29,100 AT&T Corp. 1,476,825 -- 1,476,825
========== =========== =========== ============ =========== ===========
71,250 -- 71,250 MCI WorldCom, Inc. (a) 3,780,703 -- 3,780,703
========== =========== =========== ============ =========== ===========
5,257,528
========== =========== =========== ============ =========== ===========
TELEPHONE--4.12%
10,800 -- 10,800 ALLTEL Corp. 893,025 -- 893,025
========== =========== =========== ============ =========== ===========
70,100 36,400 106,500 Bell Atlantic Corp. 4,315,531 2,240,875 6,556,406
========== =========== =========== ============ =========== ===========
54,087 -- 54,087 SBC Communications, Inc. 2,636,741 -- 2,636,741
========== =========== =========== ============ =========== ===========
30,000 -- 30,000 US West, Inc. 2,160,000 -- 2,160,000
========== =========== =========== ============ =========== ===========
12,246,172
========== =========== =========== ============ =========== ===========
TEXTILES (APPAREL)--0.23%
18,300 -- 18,300 Liz Claiborne, Inc. 688,538 -- 688,538
========== =========== =========== ============ =========== ===========
TOBACCO--0.38%
48,500 -- 48,500 Philip Morris Cos. Inc. 1,124,594 -- 1,124,594
========== =========== =========== ============ =========== ===========
WASTE MANAGEMENT--1.05%
-- 181,567 181,567 Waste Management, Inc. -- 3,120,683 3,120,683
========== =========== =========== ============ =========== ===========
Total Common Stocks & Other Equity
Interests (Cost $221,921,280) 281,388,568
========== =========== =========== ============ =========== ===========
</TABLE>
<PAGE> 191
AIM BASIC VALUE FUND
AIM ADVISOR LARGE CAP VALUE FUND
PRO FORMA COMBINING SCHEDULES OF INVESTMENTS
DECEMBER 31, 1999
(UNAUDITED)
<TABLE>
<CAPTION>
SHARES MARKET VALUE
- ------------------------------------- ---------------------------------------
AIM ADVISOR AIM ADVISOR
LARGE CAP AIM BASIC PRO FORMA LARGE CAP AIM BASIC PRO FORMA
VALUE FUND VALUE FUND COMBINING VALUE FUND VALUE FUND COMBINING
<S> <C> <C> <C> <C> <C> <C>
U.S. GOVERNMENT AGENCY SECURITIES
FEDERAL HOME LOAN BANK--1.48%
Disc. Notes, 1.50%, 01/03/00
$4,386,000 $ -- $ 4,386,000 (Cost $4,385,635)(b) $ 4,385,635 -- $ 4,385,635
========== =========== =========== ============ ============ ============
U.S. TREASURY SECURITIES
U.S. TREASURY BILLS--0.10%
-- 301,000 (c) 301,000 5.37%, 03/23/00 (Cost $297,387) (b) -- 297,659 297,659
========== =========== =========== ============ ============ ============
SHARES
MONEY MARKET FUNDS --3.21%
-- 4,776,360 4,776,360 STIC Liquid Assets Portfolio (d) -- 4,776,360 4,776,360
========== =========== =========== ============ ============ ============
-- 4,776,360 4,776,360 STIC Prime Portfolio (d) -- 4,776,360 4,776,360
========== =========== =========== ============ ============ ============
Total Money Market Funds (Cost $9,552,720) 9,552,720
========== =========== =========== ============ ============ ============
TOTAL INVESTMENTS -- 99.36% 161,896,686 133,727,896 295,624,582
========== =========== =========== ============ ============ ============
OTHER ASSETS LESS LIABILITIES -- 0.64% (640,236) 2,548,719 1,908,483
========== =========== =========== ============ ============ ============
NET ASSETS -- 100.00% $161,256,450 $136,276,615 $297,533,065
========== =========== =========== ============ ============ ============
</TABLE>
Investment Abbreviations:
ADR - American Depositary Receipt
Disc. - Discounted
Notes to Schedule of Investments:
(a) Non-income producing security.
(b) 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.
(d) The money market fund has the same investment advisor as the Fund.
SEE ACCOMPANYING NOTES TO PRO FORMA FINANCIAL STATEMENTS.
<PAGE> 192
AIM BASIC VALUE FUND
AIM ADVISOR LARGE CAP VALUE FUND
PRO FORMA COMBINING STATEMENTS OF ASSETS AND LIABILITIES
DECEMBER 31, 1999
(UNAUDITED)
<TABLE>
<CAPTION>
AIM ADVISOR
LARGE CAP AIM BASIC PRO FORMA
VALUE FUND VALUE FUND COMBINING
------------ ------------ ------------
<S> <C> <C> <C>
ASSETS:
Investments, at market value
(cost $118,273,834-AIM Advisor Large Cap Value) $161,896,686 $133,727,896 $295,624,582
------------ ------------ ------------
(cost $117,883,188-AIM Basic Value)
------------ ------------ ------------
(cost $236,157,022-Pro forma combination)
------------ ------------ ------------
Receivables for:
Capital stock/Fund shares sold 128,484 2,841,146 2,969,630
------------ ------------ ------------
Interest and Dividends 215,784 178,266 394,050
------------ ------------ ------------
Variation margin -- 10,200 10,200
------------ ------------ ------------
Due from Advisor -- 11,951 11,951
------------ ------------ ------------
Investment for deferred compensation plan 12,597 -- 12,597
------------ ------------ ------------
Other assets 14,320 57,290 71,610
------------ ------------ ------------
Total assets 162,267,871 136,826,749 299,094,620
============ ============ ============
LIABILITIES:
Payable for:
Capital stock/Fund shares reacquired 452,661 125,549 578,210
------------ ------------ ------------
Deferred compensation plan 12,597 -- 12,597
------------ ------------ ------------
Accrued advisory fees 102,022 142,927 244,949
------------ ------------ ------------
Accrued accounting services fees 4,247 4,247 8,494
------------ ------------ ------------
Accrued distribution fees 372,598 133,065 505,663
------------ ------------ ------------
Accrued transfer agent fees 9,918 25,891 35,809
------------ ------------ ------------
Accrued trustees'/directors fees -- 1,200 1,200
------------ ------------ ------------
Accrued operating expenses 57,378 117,255 174,633
------------ ------------ ------------
Total liabilities 1,011,421 550,134 1,561,555
============ ============ ============
Net assets applicable to shares outstanding $161,256,450 $136,276,615 $297,533,065
============ ============ ============
NET ASSETS:
Class A $ 12,011,184 $ 70,790,769 $ 82,801,953
============ ============ ============
Class B $ 6,572,901 $ 55,784,561 $ 62,357,462
============ ============ ============
Class C $142,672,365 $ 7,669,005 $150,341,370
============ ============ ============
Advisor Class $ -- $ 2,032,280 $ 2,032,280
============ ============ ============
</TABLE>
CAPITAL STOCK, $0.001 PAR VALUE PER SHARE (ADVISOR LARGE CAP VALUE); $0.01 PAR
VALUE PER SHARE (BASIC VALUE):
<TABLE>
<S> <C> <C> <C>
Class A:
Authorized 100,000,000 --
------------ ------------ ------------
Outstanding 549,760 2,969,093 3,472,963
============ ============ ============
Class B:
Authorized 100,000,000 --
------------ ------------ ------------
Outstanding 302,862 2,401,002 2,683,917
============ ============ ============
Class C:
Authorized 100,000,000 --
------------ ------------ ------------
Outstanding 6,575,037 330,070 6,472,055
============ ============ ============
Advisor Class:
Outstanding -- 84,037 84,037
============ ============ ============
Class A:
Net asset value and redemption price per share $ 21.85 $ 23.84 $ 23.84
------------ ------------ ------------
Offering price per share:
(Net asset value of $21.85 / 94.50% - Advisor Large Cap Value)
(Net asset value of $23.84 / 94.50% - Basic Value) -- $ 25.23 $ 25.23
============ ============ ============
Class B:
Net asset value and offering price per share $ 21.70 $ 23.23 $ 23.23
============ ============ ============
Class C:
Net asset value and offering price per share $ 21.70 $ 23.23 $ 23.23
============ ============ ============
Advisor Class:
Net asset value, redemption and offering price per share -- $ 24.18 $ 24.18
============ ============ ============
</TABLE>
SEE ACCOMPANYING NOTES TO PRO FORMA FINANCIAL STATEMENTS.
<PAGE> 193
AIM BASIC VALUE FUND
AIM ADVISOR LARGE CAP VALUE FUND
PRO FORMA COMBINING STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1999
(UNAUDITED)
<TABLE>
<CAPTION>
AIM ADVISOR AIM
LARGE CAP VALUE BASIC VALUE PRO FORMA
FUND FUND ADJUSTMENTS COMBINING
--------------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
INVESTMENT INCOME:
Dividends
(net of $53,387 foreign withholding tax -
AIM Advisor Large Cap Value) $ 3,415,803 $ 932,561 $ 4,348,364
(net of $3,153 foreign withholding tax-
AIM Basic Value)
----------- ----------- ----------- -----------
Interest 202,066 346,034 548,100
----------- ----------- ----------- -----------
Securities lending income -- 3,554 3,554
----------- ----------- ----------- -----------
Total investment income 3,617,869 1,282,149 4,900,018
=========== =========== =========== ===========
EXPENSES:
Advisory and administrative fees 1,382,625 480,576 (42,216) 1,820,985
----------- ----------- ----------- -----------
Accounting services fees 25,205 30,215 55,420
----------- ----------- ----------- -----------
Custodian fees 24,305 19,843 44,148
----------- ----------- ----------- -----------
Operating services fees 434,220 -- (250,946) 183,274
----------- ----------- ----------- -----------
Directors'/Trustees fees and expenses 4,977 1,667 6,644
----------- ----------- ----------- -----------
Distribution fees-Class A 45,980 111,548 157,528
----------- ----------- ----------- -----------
Distribution fees-Class B 56,134 311,507 367,641
----------- ----------- ----------- -----------
Distribution fees-Class C 1,655,995 23,922 1,679,917
----------- ----------- ----------- -----------
Transfer agent fees 70,985 150,366 221,351
----------- ----------- ----------- -----------
Other 46,418 225,457 271,875
----------- ----------- ----------- -----------
Total expenses 3,746,844 1,355,101 (293,162) 4,808,783
=========== =========== =========== ===========
Less: Fees waived/reimbursed (264,083) (11,951) 100,822 (175,212)
----------- ----------- ----------- -----------
Expenses paid indirectly (1,655) (734) -- (2,389)
----------- ----------- ----------- -----------
Net expenses 3,481,106 1,342,416 (192,340) 4,631,182
=========== =========== =========== ===========
Net investment income (loss) 136,763 (60,267) 192,340 268,836
=========== =========== =========== ===========
</TABLE>
<TABLE>
<S> <C> <C> <C> <C>
REALIZED AND UNREALIZED GAIN (LOSS) FROM
INVESTMENT SECURITIES AND FUTURES CONTRACTS:
Net realized gain from:
Investment securities 31,241,883 4,400,124 35,642,007
----------- ----------- ----------- -----------
Futures contracts -- 276,515 276,515
----------- ----------- ----------- -----------
31,241,883 4,676,639 35,918,522
----------- ----------- ----------- -----------
Change in net unrealized appreciation (depreciation) of:
Investment securities (33,428,078) 12,327,004 (21,101,074)
----------- ----------- ----------- -----------
Futures contracts -- 127,522 127,522
----------- ----------- ----------- -----------
Net gain (loss) on investment securities and
futures contracts (2,186,195) 17,131,165 14,944,970
----------- ----------- ----------- -----------
Net increase (decrease) in net assets resulting
from operations $(2,049,432) $17,070,898 $15,213,806
=========== =========== =========== ===========
</TABLE>
SEE ACCOMPANYING NOTES TO PRO FORMA FINANCIAL STATEMENTS.
<PAGE> 194
AIM BASIC VALUE FUND
AIM ADVISOR LARGE CAP VALUE FUND
NOTES TO PRO FORMA COMBINING FINANCIAL STATEMENTS
DECEMBER 31, 1999
(UNAUDITED)
Note 1 - Basis of Pro Forma Presentation
The pro forma financial statements and the accompanying pro forma schedule of
investments give effect to the proposed Agreement and Plan of Reorganization
between AIM Advisor Large Cap Value Fund and AIM Growth Series Funds, Inc. and
the consummation of the transactions contemplated therein to be accounted for as
a tax-free reorganization of investment companies. The Agreement and Plan of
Reorganization would be accomplished by an exchange of shares of AIM Basic Value
Fund for the net assets of AIM Advisor Large Cap Value Fund and the distribution
of AIM Basic Value Fund shares to AIM Advisor Large Cap Value Fund shareholders.
If the Agreement and Plan of Reorganization were to have taken place at December
31, 1999, AIM Advisor Large Cap Value Fund Class A shareholders would have
received 503,870 shares of AIM Basic Value Fund - Class A shares, AIM Advisor
Large Cap Value Fund Class B shareholders would have received 282,915
Note 2 - Pro Forma Adjustments
Pro forma adjustments have been made to reflect the contractual expenses of the
combined entities.
<PAGE> 195
PART C
OTHER INFORMATION
ITEM 15. 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 in any manner against any liability which may be
incurred in such capacity, other than insurance provided by any director,
officer, affiliated person or underwriter for their own protection.
Articles VIII of 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 Bylaws
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 Bylaws and other applicable law.
A I M Advisors, Inc. ("AIM"), the Registrant and other investment
companies managed by AIM and their respective officers, trustees,
directors and employees are insured under a joint Mutual Fund and
Investment Advisory Professional and Directors and Officers Liability
Policy, issued by ICI Mutual Insurance Company, with a $35,000,000
limit of liability.
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
<PAGE> 196
reckless disregard by AIM of its obligations and duties under the
Investment Management and Administration Contract.
ITEM 16. EXHIBITS
Exhibit
Number Description
(1) (a) - Agreement and Declaration of Trust of the 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 of the Registrant,
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 of the Registrant,
dated May 7, 1998, was filed as an Exhibit to
Registrant's Post-Effective Amendment No. 47 to the
Registration Statement on Form N-1A, filed on April
14, 1999, and is hereby incorporated by reference.
(d) - Third Amendment, dated February 16, 1999, to the
Agreement and Declaration of Trust of the Registrant,
dated May 7, 1998, was filed as an Exhibit to
Registrant's Post-Effective Amendment No. 47 to the
Registration Statement on Form N-1A, filed on April
14, 1999, and is hereby incorporated by reference.
(e) - Fourth Amendment, dated February 16, 1999, to the
Agreement and Declaration of Trust of the Registrant,
dated May 7, 1998, was filed as an Exhibit to
Registrant's Post-Effective Amendment No. 47 to the
Registration Statement on Form N-1A, filed on April
14, 1999, and is hereby incorporated by reference.
(f) - Fifth Amendment, dated February 11, 2000, to the
Agreement and Declaration of Trust of the Registrant,
dated May 7, 1998, is filed electronically herewith.
(2) (a) - Bylaws of the Registrant, dated May 7, 1998, were
filed as an exhibit to Post-Effective Amendment No.
43 to the Registration Statement on Form N-1A, filed
June 1, 1998, and is hereby incorporated by
reference.
<PAGE> 197
(b) - Amendment No. 1, dated December 10, 1998, to the
Bylaws of the Registrant, dated May 7, 1998, was
filed as an Exhibit to Registrant's Post-Effective
Amendment No. 47 to the Registration Statement on
Form N-1A, filed on April 14, 1999.
(c) - Amended and Restated By-Laws of Registrant, dated
December 10, 1998, was filed as an Exhibit to
Registrant's Post-Effective Amendment No. 47 to the
Registration Statement on Form N-1A, filed on April
14, 1999, and is hereby incorporated by reference.
(3) - Voting Trust Agreements - None.
(4) - A copy of the form of Agreement and Plan of
Reorganization is attached as Appendix I to the
Prospectus contained in the Registration Statement.
(5) - Provisions of instruments defining the rights of
holders of Registrant's securities are contained in
the 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 were
filed as an Exhibit to Post-Effective Amendment No.
47 to the Registration Statement on Form N-1A, filed
on April 14, 1999, and are hereby incorporated by
reference.
(6) (a) - 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.
(b) - Form of Amended and Restated Investment Management
and Administration Contract between Registrant and A
I M Advisors, Inc. was filed electronically as an
exhibit to Post-Effective Amendment No. 47 on Apr.
14, 1999, and is hereby incorporated by reference.
(c) - 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.
(d) - Sub-Administration Contract, dated May 29, 1998,
between A I M Advisors, Inc. and INVESCO (NY), Inc.
with respect to Registrant,
<PAGE> 198
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) - 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.
(f) - Sub-Advisory Contract, dated December 14, 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. 47 to
the Registration Statement on Form N-1A, filed on
April 14, 1999, and is hereby incorporated by
reference.
(g) - Form of Sub-Advisory Contract, dated December 14,
1998, between A I M Advisors, Inc. and INVESCO Asset
Management Limited, with respect to Registrant, was
filed as an Exhibit to Registrant's Post-Effective
Amendment No. 47 to the Registration Statement on
Form N-1A, filed on April 14, 1999, and is hereby
incorporated by reference.
(h) - 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, was filed as an Exhibit to Registrant's
Post-Effective Amendment No. 47 to the Registration
Statement on Form N-1A, filed on April 14, 1999, and
is hereby incorporated by reference.
(i) - 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, was filed as an Exhibit to Registrant's
Post-Effective Amendment No. 47 to the Registration
Statement on Form N-1A, filed on April 14, 1999, and
is hereby incorporated by reference.
(j) - Form of Sub-Advisory Contract, dated April 1, 1999,
between A I M Advisors, Inc. and INVESCO Asia
Limited, with respect to Registrant, was filed as an
Exhibit to Registrant's Post-Effective Amendment No.
47 to the Registration Statement on Form N-1A, filed
on April 14, 1999, and is hereby incorporated by
reference.
(k) - 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.
<PAGE> 199
(l) - 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.
(7) (a) - 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.
(b) - 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.
(c) - Master Distribution Agreement, dated May 3, 1999,
between Registrant and A I M Distributors, Inc. with
respect to Class A and Class C shares, was filed as
an Exhibit to Post-Effective Amendment No. 47 to the
Registration Statement on Form N-1A, filed on April
14, 1999, and is hereby incorporated by reference.
(d) - Amendment No. 1, dated March 18, 1999, to the
Distribution Agreement between Registrant and A I M
Distributors, Inc. with respect to Class B shares,
dated May 29, 1998, was filed as an exhibit to
Post-Effective Amendment No. 47 to the Registration
Statement on Form N-1A, filed on April 14, 1999, and
is hereby incorporated by reference.
(e) - Form of Selected Dealer Agreement between A I M
Distributors, Inc. and selected dealers was filed as
an exhibit to Post-Effective Amendment No. 46 on Feb.
12, 1999, and is hereby incorporated by reference.
(f) - Form of Bank Selling Group Agreement between A I M
Distributors, Inc. and banks was filed as an exhibit
to Post-Effective Amendment No. 46 on Feb. 12, 1999,
and is hereby incorporated by reference.
(8) - Agreements Concerning Officers and Directors/Trustees
Benefits - None.
(9) (a) - Custodian Contract, dated September 15, 1988, between
Registrant and State Street Bank and Trust Company
was filed as an exhibit to Post-Effective Amendment
No. 46 to the Registration Statement on Form N-1A,
filed on February 12, 1999, and is hereby
incorporated by reference.
<PAGE> 200
(b) - Amendment (1994) to the Custodian Contract, dated
September 15, 1988, between Registrant and State
Street Bank and Trust Company was filed as an Exhibit
to 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
Registrant and State Street Bank and Trust Company
was filed as an Exhibit to 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 was filed as an Exhibit to Registrant's
Post-Effective Amendment No. 47 to the Registration
Statement on Form N-1A, filed on April 14, 1999, and
is hereby incorporated by reference.
(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.
(f) - Amendment, dated January 26, 1999, to the Custodian
Contract, dated September 15, 1988, between
Registrant and State Street Bank and Trust Company
was filed as an Exhibit to 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) - Transfer Agency and Service Agreement between
Registrant and A I M Fund Services, Inc., dated
September 8, 1998, was filed as an Exhibit to
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) - Amendment No. 1, dated May 3, 1999, to the Transfer
Agency and Service Agreement between Registrant and A
I M Fund Services, Inc., dated September 8, 1998, was
filed as an Exhibit to Post-Effective Amendment No.
47 to the Registration Statement on Form N-1A, filed
on April 14, 1999, and is hereby incorporated by
reference.
(i) - Remote Access and Related Services Agreement, dated
as of December 23, 1994, between the Registrant and
First Data Investor Services Group, Inc. (formerly,
The Shareholder Services Group, Inc.) was filed as an
Exhibit to Post-Effective Amendment No. 45 to the
Registration Statement
<PAGE> 201
on Form N-1A, filed on August 26, 1998, and is hereby
incorporated by reference.
(j) - Amendment No. 1, dated October 4, 1995, to the Remote
Access and Related Services Agreement, dated as of
December 23, 1994, between Registrant and First Data
Investor Services Group, Inc. (formerly, The
Shareholder Services Group, Inc.) was filed as an
Exhibit to Post-Effective Amendment No. 45 to the
Registration Statement on Form N-1A, filed on August
26, 1998, and is hereby incorporated by reference.
(k) - Addendum No. 2, dated October 12, 1995, to the Remote
Access and Related Services Agreement, dated as of
December 23, 1994, between Registrant and First Data
Investor Services Group, Inc. (formerly, The
Shareholder Services Group, Inc.) was filed as an
Exhibit to Post-Effective Amendment No. 45 to the
Registration Statement on Form N-1A, filed on August
26, 1998, and is hereby incorporated by reference.
(l) - Amendment No. 3, dated February 1, 1997, to the
Remote Access and Related Services Agreement, dated
as of December 23, 1994, between Registrant and First
Data Investor Services Group, Inc. (formerly, The
Shareholder Services Group, Inc.) was filed as an
Exhibit to Post-Effective Amendment No. 45 to the
Registration Statement on Form N-1A, filed on August
26, 1998, and is hereby incorporated by reference.
(m) - Amendment No. 4, dated June 30, 1998, to the Remote
Access and Related Services Agreement, dated as of
December 23, 1994, between Registrant and First Data
Investor Services Group, Inc. (formerly, The
Shareholder Services Group, Inc.) was filed as an
Exhibit to Post-Effective Amendment No. 46 to the
Registration Statement on Form N-1A, filed on
February 12, 1999, and is hereby incorporated by
reference.
(n) - Amendment No. 5, dated July 1, 1998, to the Remote
Access and Related Services Agreement, dated as of
December 23, 1994, between Registrant and First Data
Investor Services Group, Inc. (formerly, The
Shareholder Services Group, Inc.) was filed as an
Exhibit to Post-Effective Amendment No. 46 to the
Registration Statement on Form N-1A, filed on
February 12, 1999, and is hereby incorporated by
reference.
(o) - Exhibit 1, effective as of August 4, 1997, to the
Remote Access and Related Services Agreement, dated
as of December 23, 1994, between Registrant and First
Data Investor Services Group, Inc. (formerly, The
Shareholder Services Group, Inc.) was filed as an
Exhibit to Post-Effective Amendment No. 45 to the
Registration Statement on Form N-1A, filed on August
26, 1998, and is hereby incorporated by reference.
<PAGE> 202
(p) - Preferred Registration Technology Escrow Agreement,
dated September 10, 1997, between Registrant and
First Data Investor Services Group, Inc. (formerly,
The Shareholder Services Group, Inc.) was filed as an
Exhibit to Post-Effective Amendment No. 45 to the
Registration Statement on Form N-1A, filed on August
26, 1998, and is hereby incorporated by reference.
(10) (a) - 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.
(b) - 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.
(c) - Master Distribution Plan pursuant to Rule 12b-1
with respect to Class A and Class C shares was filed
as an Exhibit to Post-Effective Amendment No. 47 to
the Registration Statement on Form N-1A, dated April
14, 1999, and is hereby incorporated by reference.
(d) - Amendment No. 1, dated March 18, 1999, to the
Distribution Plan adopted pursuant to Rule 12b-1 with
respect to Class B shares was filed as an Exhibit to
Post-Effective Amendment No. 47 to the Registration
Statement on Form N-1A, dated April 14, 1999, and is
hereby incorporated by reference.
(e) - Rule 18f-3 Multiple Class Plan was filed as an
Exhibit to Post-Effective Amendment No. 45 to the
Registration Statement on Form N-1A, dated August 26,
1998, and is hereby incorporated by reference.
(11) (a) - Opinion and Consent of Kirkpatrick & Lockhart LLP as
to the legality of the securities being registered is
filed electronically herewith.
(b) - Opinion and Consent of Delaware Counsel is filed
electronically herewith.
(12) - Opinion and Consent of Kirkpatrick & Lockhart LLP
supporting the tax matters and consequences to
shareholders discussed in the prospectus will be
filed as an amendment to this Registration Statement.
(13) (a) - Form of Fund Accounting and Pricing Agent Agreement
between Registrant and INVESCO (NY), Inc. was filed
electronically as an exhibit to Post-Effective
Amendment No. 45 on Aug. 26,1998.
<PAGE> 203
(b) - Form of Fund Accounting and Pricing Agent between
A I M Advisors, Inc. and Registrant was filed
electronically as an exhibit to Post-Effective
Amendment No. 46 on Feb. 12, 1999, and is hereby
incorporated by reference.
(c) - Form of Shareholder Service Agreement to be used in
connection with Registrant's Distribution Plans was
filed as an exhibit to Post-Effective Amendment No.
46 on Feb. 12, 1999, and is hereby incorporated by
reference.
(d) - Form of Bank Shareholder Service Agreement to be used
in connection with Registrant's Distribution Plans
was filed electronically as an exhibit to
Post-Effective Amendment No. 46 on Feb. 12, 1999, and
is hereby incorporated by reference.
(e) - Form of Agency Pricing Agreement (for Class A shares)
to be used in connection with Registrant's
Distribution Plans was filed electronically as an
exhibit to Post-Effective Amendment No. 46 on Feb.
12, 1999, and is hereby incorporated by reference.
(f) - Form of Service Agreement for Bank Trust Department
and for Broker to be used in connection with
Registrant's Distribution Plans was filed
electronically as an exhibit to Post-Effective
Amendment No. 46 on Feb. 12, 1999, and is hereby
incorporated by reference.
(14) (a) - Regarding opinions, appraisals or rulings and
consents relied on in preparing this Registration
Statement and required by Section 7 of the Securities
Act of 1933, the Consent of PricewaterhouseCoopers
LLP is filed electronically herewith.
(b) Regarding opinions, appraisals or rulings and
consents relied on in preparing this Registration
Statement and required by Section 7 of the Securities
Act of 1933, the Consent of KPMG LLP is filed
electronically herewith.
(15) - Financial Statements - None.
(16) - Powers of Attorney - None.
(17) - Form of Proxy is filed electronically herewith.
ITEM 17. UNDERTAKINGS.
(1) The undersigned registrant agrees that prior to any public
reoffering of the securities registered through the use of a prospectus which
is a part of this registration statement by any person or party who is deemed
to be an underwriter within the meaning of Rule 145(c) of the Securities Act
[17 CRF 203.145c], the reoffering prospectus will contain the information
called for by the applicable registration form for reofferings by persons who
may be deemed underwriters, in addition to the information called for by the
other items of the applicable form.
(2) The undersigned registrant agrees that every prospectus that is
filed under paragraph (1) above will be filed as a part of an amendment to the
registration statement and will not be used until the amendment is effective,
and that, in determining any liability under the 1933 Act, each post-effective
amendment shall be deemed to be a new registration statement for the securities
offered therein, and the offering of the securities at that time shall be
deemed to be the initial bona fide offering of them.
<PAGE> 204
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as amended,
the Registrant has duly caused this Registration Statement on Form N-14 to be
signed on its behalf by the undersigned, thereto duly authorized, in the City of
Houston, and the State of Texas, on the 22nd day of March, 2000.
AIM GROWTH SERIES
Registrant
By: /s/ ROBERT H. GRAHAM
--------------------------------------
Robert H. Graham
President
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement on Form N-14 has been signed below by the following
persons in the capacities indicated on the 22nd day of March, 2000.
/s/ ROBERT H. GRAHAM
- ----------------------------------
Robert H. Graham President, Trustee and
Chairman of the Board
(Principal Executive Officer)
/s/ DANA R. SUTTON
- ----------------------------------
Dana R. Sutton Vice President & Treasurer
(Principal Financial and
Accounting Officer)
/s/ C. DEREK ANDERSON
- ----------------------------------
C. Derek Anderson Trustee
/s/ FRANK S. BAYLEY
- ----------------------------------
Frank S. Bayley Trustee
/s/ RUTH H. QUIGLEY
- ----------------------------------
Ruth H. Quigley Trustee
<PAGE> 205
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as amended,
Growth Portfolio has duly caused this Registration Statement on Form N-14 to be
signed on its behalf by the undersigned, thereto duly authorized, in the City of
Houston, and the State of Texas, on the 22nd day of March, 2000.
GROWTH PORTFOLIO
By: /s/ ROBERT H. GRAHAM
--------------------------
Robert H. Graham
President
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement on Form N-14 has been signed below by the following
persons in the capacities indicated on the 22nd day of March, 2000.
/s/ ROBERT H. GRAHAM
- ----------------------------------
Robert H. Graham President, Trustee and
Chairman of the Board
(Principal Executive Officer)
/s/ DANA R. SUTTON
- ----------------------------------
Dana R. Sutton Vice President & Treasurer
(Principal Financial and Accounting
Officer)
/s/ C. DEREK ANDERSON
- ----------------------------------
C. Derek Anderson Trustee
/s/ FRANK S. BAYLEY
- ----------------------------------
Frank S. Bayley Trustee
/s/ RUTH H. QUIGLEY
- ----------------------------------
Ruth H. Quigley Trustee
<PAGE> 206
INDEX TO EXHIBITS
<TABLE>
<S> <C>
11(a) Opinion and Consent of Kirkpatrick & Lockhart LLP as to the legality of
the securities being registered
11(b) Opinion and Consent of Delaware Counsel
14(a) Consent of PricewaterhouseCoopers LLP
14(b) Consent of KPMG LLP
17 Form of Proxy
</TABLE>
<PAGE> 1
EXHIBIT 11(a)
[KIRKPATRICK & LOCKHART LLP LETTERHEAD]
March 22, 2000
AIM Growth Series
11 Greenway Plaza, Suite 100
Houston, Texas 77046
Ladies and Gentlemen:
You have requested our opinion, as counsel to AIM Growth Series ("Trust"),
as to certain matters regarding the issuance of Shares of AIM Basic Value Fund
(the "Acquiring Portfolio"), a series of AIM Advisor Funds, Inc., in connection
with the reorganization of AIM Advisor Large Cap Value Fund (the "Acquired
Portfolio"), a series of AIM Advisor Funds, Inc., into the Acquiring Portfolio,
as provided for in the Agreement and Plan of Reorganization and Termination,
effective as of March 22, 2000 (the "Plan"). The Plan provides for the
Acquired Portfolio to transfer all of its assets to the Acquiring Portfolio in
exchange solely for the issuance of the Shares and the Acquiring Portfolio's
assumption of all of the liabilities of the Acquired Portfolio. (As used in
this letter, the term "Shares" means the Class A, Class B, and Class C shares
of beneficial interest in the Acquiring Portfolio.)
As such counsel, we have examined certified or other copies, believed by
us to be genuine, of Trust's Agreement and Declaration of Trust dated as of May
7, 1998, as amended ("Agreement"), and Amended and Restated Bylaws, as amended,
and such other documents relating to its organization and operation as we have
deemed relevant to our opinion, as set forth herein. Our opinion is limited to
the laws and facts in existence on the date hereof, and it is further limited
to the laws (other than the conflict of law rules) 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 ("1933
Act"), the Investment Company Act of 1940 ("1940 Act") and the regulations of
the Securities and Exchange Commission ("SEC") thereunder. 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 of Potter Anderson &
Corroon, LLP, Delaware counsel to Trust, an executed copy of which is appended
hereto as Exhibit A.
Based on the foregoing, we are of the opinion that the issuance of the
Shares has been duly authorized by Trust; and that, when sold in accordance
with the terms contemplated by Trust's registration statement on Form N-14
("Registration Statement"), including receipt by the Acquiring Portfolio of
full payment for the Shares and compliance with the 1933 Act and the 1940 Act,
the Shares will have been legally issued, fully paid, and non-assessable.
<PAGE> 2
AIM Growth Series
March 22, 2000
Page 2
We hereby consent to this opinion accompanying the Registration Statement
when it is filed with the SEC and to the reference to our firm in the
Registration Statement.
Very truly yours,
KIRKPATRICK & LOCKHART LLP
By: /s/ ARTHUR J. BROWN
--------------------------------
Arthur J. Brown
<PAGE> 1
EXHIBIT 11(b)
March 22, 2000
AIM Growth Series
11 Greenway Plaza
Suite 100
Houston, Texas 77046
Re: Reorganization of AIM Advisor Large
Cap Value Fund into AIM Basic Value Fund
Ladies and Gentlemen:
We have acted as special Delaware counsel for AIM Growth Series, a
Delaware business trust (the "Trust"), as to certain matters regarding the
shares ("Shares") of AIM Basic Value Fund (the "Acquiring Fund"), a series of
the Trust, in connection with the reorganization of AIM Advisor Large Cap Value
Fund (the "Acquired Fund"), a series of AIM Advisor Funds, Inc., a Maryland
corporation ("AAF"), with and into Acquiring Fund pursuant to an Agreement and
Plan of Reorganization and Termination to be entered into by the Trust, on
behalf of the Acquiring Fund, and by AAF on behalf of the Acquired Fund (the
"Plan of Reorganization"). The Plan of Reorganization provides for the Acquired
Fund to transfer all of its assets to the Acquiring Fund in exchange solely for
the issuance of the Shares and the Acquiring Fund's assumption of all of the
liabilities of the Acquired Fund. Initially capitalized terms used herein and
not otherwise defined are used herein as defined in that certain Agreement and
Declaration of Trust of the 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;
<PAGE> 2
AIM Growth Series
March 22, 2000
Page 2
2. The Original Declaration;
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 the Original Declaration dated as of February
16, 1999 (the "Third Amendment");
6. The Fourth Amendment to the Original Declaration dated as of
September 1, 1999 (the "Fourth Amendment");
7. The Fifth Amendment to the Original Declaration dated as of February
11, 2000 (the "Fifth Amendment", together with the Original Declaration, the
First Amendment, the Second Amendment, the Third Amendment, and the Fourth
Amendment collectively, the "Declaration");
8. Schedule A to the Declaration as in effect on the date hereof;
9. The By-laws of the Trust as in effect on the date hereof;
10. A form of the Plan of Reorganization;
11. Resolutions of the Trustees (the "Resolutions") adopting that
certain plan pursuant to Rule 18f-3 under the Investment Company Act of 1940
(the "18f-3 Plan");
12. A Certificate of Good Standing for the Trust, dated March 22, 2000,
obtained from the Secretary of State; and
13. The registration statement on Form N-14 filed with the Securities
and Exchange Commission on or about March 14, 2000, pursuant to the Securities
Act of 1933, as amended, covering the Shares (the "Registration Statement").
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:
<PAGE> 3
AIM Growth Series
March 22, 2000
Page 3
1. The Trust has been duly created and is validly existing in good
standing as a business trust under the Delaware Act.
2. The Acquiring Fund 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 (including,
without limitation, paragraph 5 below), the Shares have been duly authorized and
when (a) the Plan of Reorganization shall have been approved by the Trustees,
(b) the actions referred to in the Plan of Reorganization shall have occurred
(including the due approval of the Plan of Reorganization by the Shareholders of
the Acquired Fund), and (c) the Shares shall have been otherwise issued in
accordance with the Declaration, the Resolutions, the Plan of Reorganization,
the 18f-3 Plan, and the By-laws, such Shares will be validly issued, fully paid,
and non-assessable undivided beneficial interests in the assets of the Acquiring
Fund.
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 personal liability extended to stockholders of private
corporations for profit organized under the General Corporation Law of the State
of Delaware, except that such holders of Shares shall be obligated to provide
indemnity and/or security in connection with the issuance of replacement
certificates for lost or destroyed certificates, if any, representing such
Shares, if such holders request certificates in accordance with the By-laws and
such certificates are lost.
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 Plan of Reorganization does not
contravene (i) any contractual restriction binding on any party to the Plan of
Reorganization, or (ii) any law, rule or regulation applicable to such parties
(exclusive of the Trust and the Acquiring Fund, but only to the extent 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.
<PAGE> 4
AIM Growth Series
March 22, 2000
Page 4
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, the Plan
of Reorganization, the Resolutions and the 18f-3 Plan, collectively, constitute
the entire agreement with respect to the subject matter thereof, including (i)
with respect to the creation, dissolution and winding up of the Trust and the
Acquiring Fund, (ii) the terms applicable to the Shares, and (iii) the power and
authority of the Trustees.
f. We have assumed that to the extent any additional rights
and/or preferences are stated in the 18f-3 Plan, such additional rights and/or
preferences (x) are enforceable in accordance with their terms, and (y) do not
conflict with the Certificate of Trust, the Declaration, the By-laws, the Plan
of Reorganization, or any statute, rule or regulation applicable to the Trust or
Acquiring Fund.
g. We have assumed that the Plan of Reorganization will be
duly adopted by the Trustees of the Trust and by the Shareholders of the
Acquired Fund and that the transactions contemplated thereby will be enforceable
against the parties thereto in accordance with their terms.
h. 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.
i. 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 the Acquiring Fund, as the case may
be, the Trust or the Acquiring Fund, 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> 5
AIM Growth Series
March 22, 2000
Page 5
j. 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.
k. We have assumed that none of the By-laws, the Resolutions,
the Plan of Reorganization, or the 18f-3 Plan has been amended, modified, or
revoked in any manner from the date of its adoption, and that each of the
By-laws, the Resolutions, the Plan of Reorganization, and the 18f-3 Plan remains
in full force and effect on the date hereof.
l. We have assumed that at all times prior to the consummation
of the transactions contemplated by the Plan of Reorganization the Trust
maintains separate and distinct records for the Acquiring Fund and that the
Trust and the Trustees hold and account for the assets belonging to the
Acquiring Fund separately from the assets of the Trust generally, if any.
m. We note that we do not assume responsibility for the
contents of the Registration Statement.
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 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.
We consent to the filing of this opinion with the Securities and
Exchange Commission as an exhibit to the Registration Statement. In giving the
foregoing consent, we do not thereby admit that we come within the category of
Persons whose consent is required under Section 7 of the Securities Act of 1933,
as amended, or the rules and regulations of the Securities and Exchange
Commission thereunder.
Very truly yours,
/s/ POTTER & ANDERSON
<PAGE> 1
EXHIBIT 14(a)
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the use and incorporation by reference in this Registration
Statement on Form N-14 of our report dated February 16, 2000, relating to the
financial statements and financial highlights which appears in the December 31,
1999 Annual Report to Shareholders of AIM Basic Value Fund, which is also
incorporated by reference and included in the Registration Statement. We also
consent to the references to us under the headings "Financial Highlights",
"Experts" and "Independent Accountants" in such Registration Statement.
PricewaterhouseCoopers LLP
Boston, Massachusetts
March 21, 2000
<PAGE> 1
Exhibit 14(b)
INDEPENDENT AUDITORS' CONSENT
-----------------------------
The Board of Directors and Shareholders
AIM Advisor Large Cap Value Fund:
We consent to the use of our report on the AIM Advisor Large Cap Fund (a
portfolio of AIM Advisor Funds, Inc.) dated February 4, 2000 included herein
and the references to our firm under the heading "Experts" in the Combined
Proxy Statement and Prospectus and "Accountants" in the Agreement and Plan of
Reorganization.
/s/ KPMG LLP
KPMG LLP
Houston, Texas
March 22, 2000
<PAGE> 1
EXHIBIT 17
EVERY SHAREHOLDER'S VOTE IS IMPORTANT!
PLEASE SIGN, DATE AND RETURN YOUR PROXY TODAY!
PROXY CARD PROXY CARD
PROXY SOLICITED BY THE BOARD OF DIRECTORS OF
AIM ADVISOR LARGE CAP VALUE FUND
(A PORTFOLIO OF AIM ADVISOR FUNDS, INC.)
PROXY FOR SPECIAL MEETING OF SHAREHOLDERS TO BE HELD MAY 31, 2000
The undersigned hereby appoints Robert H. Graham and Gary T. Crum, and each of
them separately, proxies with the power of substitution to each, and hereby
authorizes them to represent and to vote, as designated below, at the Special
Meeting of Shareholders on May 31, 2000, at 3:00 p.m., Central time, and at any
adjournment thereof, all of the shares of the fund which the undersigned would
be entitled to vote if personally present. IF THIS PROXY IS SIGNED AND RETURNED
WITH NO CHOICES INDICATED, THE SHARES WILL BE VOTED "FOR" THE APPROVAL OF THE
PROPOSAL.
CONTROL NUMBER:
NOTE: PLEASE SIGN EXACTLY AS YOUR NAME
APPEARS ON THIS PROXY CARD. All joint
owners should sign. When signing as
executor, administrator, attorney,
trustee or guardian or as custodian for a
minor, please give full title as such. If
a corporation, please sign in full
corporate name and indicate the signer's
office. If a partner, sign in the
partnership name.
-----------------------------------------
Signature
-----------------------------------------
Signature (if held jointly)
-----------------------------------------
Dated 10527_02
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS. THE DIRECTORS
RECOMMEND VOTING "FOR" THE PROPOSAL. EXAMPLE [X]
<TABLE>
<S> <C> <C> <C>
FOR AGAINST ABSTAIN
1. To approve an Agreement and Plan of Reorganization among AIM Advisor Funds,
Inc., acting on behalf of AIM Advisor Large Cap Value Fund, AIM Growth Series,
acting on behalf of AIM Basic Value Fund and A I M Advisors, Inc. [ ] [ ] [ ]
2. IN THE DISCRETION OF SUCH PROXIES, UPON SUCH OTHER BUSINESS AS MAY PROPERLY
COME BEFORE THE MEETING OR ANY ADJOURNMENT THEREOF.
</TABLE>
