<PAGE> 1
As filed with the Securities and Exchange Commission on February 25, 1999
1933 Act Registration No. 2-76909
1940 Act Registration No. 811-3443
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-1A
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
Pre-Effective Amendment No.
---
Post-Effective Amendment No. 23 X
--- ---
and/or
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940
Amendment No. 24 X
--- ---
(Check appropriate box or boxes)
AIM SUMMIT FUND, INC.
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(formerly Summit Investors Fund, Inc.)
(Exact Name of Registrant as Specified in Charter)
11 Greenway Plaza, Suite 100, Houston, Texas 77046-1173
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(Address of Principal Executive Offices) (Zip Code)
Registrant's Telephone Number, including Area Code (713) 626-1919
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Charles T. Bauer
11 Greenway Plaza, Suite 100, Houston, Texas 77046-1173
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(Name and Address of Agent for Service)
Copy to:
Stephen I. Winer, Esquire Martha J. Hays, Esquire
A I M Advisors, Inc. Ballard Spahr Andrews & Ingersoll, LLP
11 Greenway Plaza, Suite 100 1735 Market Street, 51st Floor
Houston, Texas 77046-1173 Philadelphia, Pennsylvania 19103-7599
Approximate Date of Proposed Public Offering: March 1, 1999
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It is proposed that this filing will become effective:
immediately upon filing pursuant to paragraph (b)
---
X on March 1, 1999 pursuant to paragraph (b)
---
60 days after filing pursuant to paragraph (a)(1)
---
on (date) pursuant to paragraph (a)(1)
---
75 days after filing pursuant to paragraph (a)(2)
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on (date) pursuant to paragraph (a)(2) of rule 485.
---
(Continued on Next Page)
<PAGE> 2
If appropriate, check the following box:
--- this post-effective amendment designates a new effective date for a
previously filed post-effective amendment.
Title of Securities Being Registered: Common Stock
<PAGE> 3
AIM SUMMIT FUND, INC.
------------------------------------------------------------------------
CLASS I SHARES
AIM Summit Fund, Inc. seeks to provide growth of capital.
PROSPECTUS
MARCH 1, 1999
Class I Shares of the fund are
offered to and may be purchased by
the general public only through AIM
Summit Investors Plans I, a unit
investment trust. Details of AIM
Summit Investors Plans I, including
the creation and sales charges and
the custodian charges applicable to
AIM Summit Investors Plans I, are
found in the AIM Summit Investors
Plans I Prospectus. You should read
both this Prospectus and the
Prospectus of AIM Summit Investors
Plans I and keep these Prospectuses
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> 4
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AIM SUMMIT FUND, INC.
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TABLE OF CONTENTS
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<TABLE>
<S> <C>
INVESTMENT OBJECTIVE AND STRATEGIES A-1
- - - - - - - - - - - - - - - - - - - - - - - - -
PRINCIPAL RISKS OF INVESTING IN THE FUND A-1
- - - - - - - - - - - - - - - - - - - - - - - - -
PERFORMANCE INFORMATION A-2
- - - - - - - - - - - - - - - - - - - - - - - - -
Annual Total Returns A-2
Performance Table A-2
FEE TABLE AND EXPENSE EXAMPLE A-3
- - - - - - - - - - - - - - - - - - - - - - - - -
Fee Table A-3
Expense Example A-3
FUND MANAGEMENT A-4
- - - - - - - - - - - - - - - - - - - - - - - - -
The Advisors A-4
Advisor Compensation A-4
Portfolio Managers A-4
OTHER INFORMATION A-4
- - - - - - - - - - - - - - - - - - - - - - - - -
Dividends and Distributions A-4
FINANCIAL HIGHLIGHTS A-5
- - - - - - - - - - - - - - - - - - - - - - - - -
SHAREHOLDER INFORMATION A-6
- - - - - - - - - - - - - - - - - - - - - - - - -
Pricing of Shares A-6
Sales of Shares A-6
Redemption of Shares A-6
Taxes A-7
Open Account A-7
OBTAINING ADDITIONAL INFORMATION Back Cover
- - - - - - - - - - - - - - - - - - - - - - - - -
</TABLE>
The AIM Family of Funds, The AIM Family of Funds and Design (i.e., the AIM
logo), AIM and Design, AIM, AIM LINK, AIM Institutional Funds, aimfunds.com, La
Familia AIM de Fondos, La Familia AIM de Fondos and Design and Invest with
Discipline are registered service marks and AIM Bank Connection is a service
mark of A I M Management Group Inc.
No dealer, salesperson or any other person has been authorized to give any
information or to make any representations other than those contained in this
prospectus, and you should not rely on such other information or
representations.
<PAGE> 5
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AIM SUMMIT FUND, INC.
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INVESTMENT OBJECTIVE AND STRATEGIES
- --------------------------------------------------------------------------------
The fund's investment objective is growth of capital.
The fund seeks to meet this objective by investing primarily in common stocks
of companies that the fund's portfolio managers believe have the potential for
growth in earnings, including small-sized growth companies, and in common stocks
believed to be under-valued relative to other available investments. The fund
may also invest up to 20% of its total assets in foreign securities including
securities of companies located in developing countries, i.e., those that are in
their initial stages of their industrial cycle.
The fund's portfolio managers purchase securities of companies that they
believe have the potential for growth. The fund's portfolio managers consider
whether to sell a particular security when they believe the security no longer
has that potential.
In anticipation of or in response to adverse market conditions or for cash
management purposes, the fund may hold all or a portion of its assets in cash,
money market instruments, bonds or other debt securities. As a result, the fund
may not achieve its investment objective.
PRINCIPAL RISKS OF INVESTING IN THE FUND
- --------------------------------------------------------------------------------
There is a risk that you could lose all or a portion of your investment in the
fund. The value of your investment in the fund will go up and down with the
prices of the securities in which the fund invests. The prices of equity
securities change in response to many factors including the historical and
prospective earnings of the issuer, the value of its assets, general economic
conditions, interest rates, investor perceptions and market liquidity. This is
especially true with respect to equity securities of smaller companies, whose
prices may go up and down more than the prices of equity securities of larger,
more-established companies. Also, since equity securities of smaller companies
may not be traded as often as equity securities of larger, more established
companies, it may be difficult or impossible for the fund to sell securities at
a desirable price.
Foreign securities have additional risks, including exchange rate changes,
political and economic upheaval, relatively low market liquidity, the relative
lack of information about these companies and the potential lack of strict
financial and accounting controls and standards.
The value of your shares could be adversely affected if the computer systems
used by the fund's investment advisor and the fund's other service providers are
unable to distinguish the year 2000 from the year 1900.
The fund's investment advisor and independent technology consultants are
working to avoid year 2000-related problems in its systems and to obtain
assurances that other service providers are taking similar steps. Year 2000
problems may also affect issuers in whose securities the fund invests.
An investment in the fund is not a deposit of a bank and is not insured or
guaranteed by the Federal Deposit Insurance Corporation or any other government
agency.
A-1
<PAGE> 6
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AIM SUMMIT FUND, INC.
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PERFORMANCE INFORMATION
- --------------------------------------------------------------------------------
The bar chart and table shown below provide an indication of the risks of
investing in the fund. The fund's past performance is not necessarily an
indication of its future performance.
ANNUAL TOTAL RETURNS
- --------------------------------------------------------------------------------
The following bar chart shows changes in the performance of the fund's Class I
Shares from year to year.
[GRAPH]
<TABLE>
<CAPTION>
Annual
Year Ended Total
December 31 Return
- ----------- ------
<S> <C>
1989 ....................................... 30.92%
1990 ....................................... 0.93%
1991 ....................................... 43.64%
1992 ....................................... 4.50%
1993 ....................................... 8.28%
1994 ....................................... (2.82)%
1995 ....................................... 35.14%
1996 ....................................... 19.87%
1997 ....................................... 24.22%
1998 ....................................... 34.45%
</TABLE>
During the periods shown in the bar chart, the highest quarterly return was
29.87% (quarter ended December 31, 1998) and the lowest quarterly return was
- -13.37% (quarter ended September 30, 1990).
PERFORMANCE TABLE
The following performance table compares the fund's performance to that of a
broad-based securities market index.
<TABLE>
<CAPTION>
AVERAGE ANNUAL TOTAL RETURNS
- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -
(for the periods ended
December 31, 1998) 1 YEAR 5 YEARS 10 YEARS
- -----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Class I Shares 34.45% 21.33% 18.90%
S & P 500(1) 28.60% 24.08% 19.20%
- -----------------------------------------------------------------------------------------------------------------------
<CAPTION>
AVERAGE ANNUAL TOTAL RETURNS
- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -
(for the periods ended SINCE INCEPTION
December 31, 1998) INCEPTION DATE
- -----------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Class I Shares 15.05% 11/01/82
S & P 500(1) 18.39% 10/31/82
- -----------------------------------------------------------------------------------------------------------------------
</TABLE>
(1) The Standard & Poor's 500 Index is an unmanaged index of common stocks
frequently used as a general measure of U.S. stock market performance.
(2) The average annual total return given is since the date closest to the
inception date of Class I Shares.
A-2
<PAGE> 7
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AIM SUMMIT FUND, INC.
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FEE TABLE AND EXPENSE EXAMPLE
- --------------------------------------------------------------------------------
FEE TABLE
This table describes the fees and expenses that you may pay if you buy and hold
shares of the fund:
<TABLE>
<CAPTION>
ANNUAL FUND OPERATING EXPENSES
- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -
(expenses that are deducted
from fund assets)
- --------------------------------------------------
<S> <C>
Management Fees 0.64%
----
Other Expenses 0.03
----
Total Annual Fund
Operating Expenses 0.67%
====
- --------------------------------------------------
</TABLE>
EXPENSE EXAMPLE
This example is intended to help you compare the costs of investing in the fund
with the cost of investing in other mutual funds.
The example assumes that you invest $10,000 in the fund for the time periods
indicated and then redeem all of your shares at the end of those periods. The
example also assumes that your investment has a 5% return each year and that the
fund's operating expenses remain the same. Although your actual returns and
costs may be higher or lower, based on these assumptions your costs would be:
<TABLE>
<CAPTION>
1 YEAR 3 YEARS 5 YEARS 10 YEARS
- ----------------------------------------------
<S> <C> <C> <C> <C>
Class I
Shares $68 $214 $373 $835
- ----------------------------------------------
</TABLE>
A-3
<PAGE> 8
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AIM SUMMIT FUND, INC.
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FUND MANAGEMENT
- --------------------------------------------------------------------------------
THE ADVISORS
A I M Advisors, Inc. (the advisor), 11 Greenway Plaza, Suite 100, Houston, TX
77046, serves as the fund's investment advisor. TradeStreet Investment
Associates, Inc. (the subadvisor), 101 South Tryon Street, Suite 1000,
Charlotte, North Carolina 28255, a wholly owned subsidiary of NationsBank, N.A.,
is the fund's subadvisor and provides certain investment advisory services to
the fund, subject to the overall supervision by the advisor and the fund's Board
of Directors. The advisors supervise all aspects of the fund's operations and
provide investment advisory services to the fund, including obtaining and
evaluating economic, statistical and financial information to formulate and
implement investment programs for the fund.
The advisor has acted as an investment advisor since its organization in 1976,
and together with its subsidiaries, advises or manages over 110 investment
portfolios, including the fund, encompassing a broad range of investment
objectives. The subadvisor has acted as an investment advisor since 1996.
ADVISOR COMPENSATION
During the fiscal year ended October 31, 1998, the advisor received compensation
of 0.64% of average daily net assets.
PORTFOLIO MANAGERS
The advisors uses a team approach to investment management. The individual
members of the team who are primarily responsible for the day-to-day management
of the fund's portfolio, the first four of whom are officers of A I M Capital
Management, Inc., a wholly owned subsidiary of the advisor, are
- - David P. Barnard, Senior Portfolio Manager, who has been responsible for the
fund since 1995 and has been associated with the advisor and/or its affiliates
since 1982.
- - Jonathan C. Schoolar, Senior Portfolio Manager, who has been responsible for
the fund since 1995 and has been associated with the advisor and/or its
affiliates since 1986.
- - Charles D. Scavone, Senior Portfolio Manager, who has been responsible for the
fund since 1999 and has been associated with the advisor and/or its affiliates
since 1996. From 1994 to 1996, he was Associate Portfolio Manager for Van
Kampen American Capital Asset Management, Inc.
- - Kenneth A. Zschappel, Senior Portfolio Manager, who has been responsible for
the fund since 1999 and has been associated with the advisor and/or its
affiliates since 1990.
- - Jeffrey C. Moser, Senior Product Manager with the subadvisor, who has been
responsible for the fund since 1995 and has been associated with NationsBank
Texas since 1990, and the subadvisor since 1996.
OTHER INFORMATION
- --------------------------------------------------------------------------------
DIVIDENDS AND DISTRIBUTIONS
DIVIDENDS
The fund generally declares and pays dividends, if any, annually.
CAPITAL GAINS DISTRIBUTIONS
The fund generally distributes long-term and short-term capital gains (including
any net gains from foreign currency transactions), if any, annually.
A-4
<PAGE> 9
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AIM SUMMIT FUND, INC.
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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 KPMG LLP, whose report, along with the
fund's financial statements, is included in the fund's annual report, which is
available upon request.
<TABLE>
<CAPTION>
CLASS I SHARES
<S> <C> <C> <C> <C> <C> <C>
- ---------------------------------------------------------------------------------------------------------------------------------
<CAPTION>
YEAR ENDED OCTOBER 31,
1998 1997 1996 1995 1994
- -------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of period $ 15.15 $ 12.99 $ 12.14 $ 9.78 $ 10.46
Income from investment operations:
Net investment income 0.03 0.02 0.04 0.04 0.10
Net gains (losses) on securities (both
realized and unrealized) 1.23 3.34 1.69 2.81 (0.04)
Total from investment operations 1.26 3.36 1.73 2.85 0.06
Less distributions:
Dividends from net investment income (0.02) (0.03) (0.03) (0.10) (0.10)
Distributions from net realized gains (1.43) (1.17) (0.85) (0.39) (0.64)
Total distributions (1.45) (1.20) (0.88) (0.49) (0.74)
Net asset value, end of period $ 14.96 $ 15.15 $ 12.99 $ 12.14 $ 9.78
Total return(a) 9.49% 28.53% 15.61% 31.03% 0.61%
- -------------------------------------------------------------------------------------------------------------------------
Ratios/supplemental data:
- -------------------------------------------------------------------------------------------------------------------------
Net assets, end of period (000s omitted) $1,830,032 $1,650,234 $1,261,008 $1,050,011 $765,073
Ratio of expenses to average net assets 0.67%(b) 0.68% 0.70% 0.71% 0.72%
Ratio of net investment income to average net
assets 0.23%(b) 0.11% 0.29% 0.33% 1.04%
Portfolio turnover rate 83% 88% 118% 126% 122%
- -------------------------------------------------------------------------------------------------------------------------
</TABLE>
(a) Does not deduct sales charges.
(b) Ratios are based on average net assets of $1,785,555,221.
A-5
<PAGE> 10
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AIM SUMMIT FUND, INC.
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SHAREHOLDER INFORMATION
- --------------------------------------------------------------------------------
PRICING OF SHARES
The fund prices its shares based on its net asset value. The fund values
portfolio securities for which market quotations are readily available at market
value. The fund values short-term investments maturing within 60 days at
amortized cost, which approximates market value. The fund values all other
securities and assets at their fair value. Securities and other assets quoted in
foreign currencies are valued in U.S. dollars based on the prevailing exchange
rates on that day. In addition, if between the time trading ends on a particular
security and the close of the New York Stock Exchange (NYSE), events occur that
materially affect the value of the security, the fund may value the security at
its fair value as determined in good faith by or under the supervision of the
fund's Board of Directors. The effect of using fair value pricing is that the
fund's net asset value will be subject to the judgment of the Board of Directors
or its designee instead of being determined by the market. Because the fund may
invest in securities that are primarily listed on foreign exchanges, the value
of the fund's shares may change on days when you will not be able to purchase or
redeem shares.
The 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. The fund prices purchase,
exchange and redemption orders at the net asset value calculated after the
transfer agent receives an order in good form.
SALES OF SHARES
The fund will not offer its shares to the general public except through AIM
Summit Investors Plans I. However, the following persons may purchase shares of
the fund directly through A I M Distributors, Inc. (the distributor) at net
asset value: (a) any current or retired officer, trustee, director, or employee,
or any member of the immediate family (spouse, children, parents and parents of
spouse) of any such person, of A I M Management Group Inc. (AIM Management)
or its affiliates, or of any investment company managed or advised by the
advisor; or (b) any employee benefit plan established for employees of AIM
Management or its affiliates. The fund reserves the right to reject any purchase
order. The terms of offering of AIM Summit Investors Plans I are contained in
the Prospectus of AIM Summit Investors Plans I.
REDEMPTION OF SHARES
The following discussion relates only to those investors who hold shares of the
fund directly. Planholders should consult their AIM Summit Investors Plans I
Prospectus for the requirements for redemption of fund shares held in an AIM
Summit Investors Plans I.
You may redeem your shares of the fund at any time without charge, either by a
written request to Boston Financial Data Services, Inc. (BFDS), or by calling
BFDS at (617) 483-5000, subject to the restrictions specified below. Upon
receipt by BFDS of a proper request, the fund will redeem shares in cash at the
next determined net asset value. All written redemption requests must be
directed to BFDS, P.O. Box 8300, Boston, Massachusetts 02266-8300, Attention:
AIM Summit Fund, Inc. Any written request sent to the fund will be forwarded to
BFDS and the effective date of the redemption request will be when the request
is received by the distributor or BFDS.
Written requests for redemption must include the following: (a) signatures of
each registered owner exactly as the shares are registered; (b) the account
number and number of shares or dollar amount to be redeemed; (c) stock
certificates, either properly endorsed or accompanied by a duly executed stock
power, for the shares to be redeemed if such certificates have been issued and
the shares are not in the custody of State Street Bank; (d) signature
guarantees, as described below; and (e) any additional documents required for
redemption by corporations, partnerships, trusts or other fiduciaries.
To assure proper redemption, and to protect you, the fund, the distributor and
State Street Bank and Trust Company (State Street Bank or the custodian), the
fund requires that the signature of each registered shareholder be guaranteed.
Acceptable guarantors are banks, broker-dealers, savings and loan associations,
credit unions, national securities exchanges and any other "eligible guarantor
institution" as defined in rules adopted by the SEC. A notary public is not an
acceptable guarantor. The signature guarantee(s) must appear either: (a) on the
written request for redemption, which must clearly identify the exact name(s) in
which the account is registered, the account number and the number of shares or
the dollar amount to be redeemed; (b) on a stock power, which may be obtained
from the distributor, State Street Bank or from most banks and stockbrokers; or
(c) on all share certificates tendered for redemption, in which case the
signature guarantee(s) must also appear on the written request or a stock power
if shares held by State Street Bank are also being redeemed. The fund's present
policy is not to require signature guarantees for redemption requests of $50,000
or less unless the proceeds are to be paid to a person other than the record
owner or are to be sent to an address other than the one of record. Currently,
in addition to these requirements, if you have invested in the fund to establish
an IRA, you should include the following information along with your written
request for either partial or full liquidation of fund shares: (a) a statement
as to whether or not you have attained age 59 1/2; (b) a statement as to whether
or not you are legally disabled; (c) a statement as to whether or not you elect
to have federal income tax withheld from the proceeds of your redemption, and
(d) your Social Security number along with the following statement: "I certify
under penalties of perjury that the Social Security number provided is correct
and that I am not subject to backup withholding either because I am exempt from
backup withholding, I have not been notified by the Internal Revenue Service
that I am subject to backup withholding, or the Internal Revenue Service has
notified me that I am no longer subject to backup withholding." If you have
A-6
<PAGE> 11
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AIM SUMMIT FUND, INC.
---------------------
been notified by the Internal Revenue Service that you are currently subject to
backup withholding, then the preceding statement should be modified accordingly.
Even if you elect not to have federal income tax withheld, you are liable for
federal income tax on the taxable portion of your redemption proceeds. You may
also be subject to tax penalties under the estimated tax payment rules if your
payments of estimated tax and withholding, if any, are not adequate.
You may also request redemptions by telephone by calling BFDS at (617)
483-5000. If you do not wish to allow redemptions by telephone by any person in
your account, you should decline that option on the account application. The
telephone redemption feature can be used only if: (a) the proceeds are made
payable to the shareholder of record and mailed to the address of record; (b)
there has been no change of address of record on the account within the
preceding 30 days; (c) the shares to be redeemed are not in certificate form;
(d) the person requesting withdrawal can provide proper identification
information; and (e) the proceeds of the withdrawal do not exceed $50,000. The
fund, the distributor, the custodian, and BFDS will not be liable for any loss,
expense or cost arising out of any telephone redemption request 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 if they do not
follow reasonable procedures for verification of telephone transactions. Such
reasonable procedures may include recording of telephone transactions, requests
for confirmation of your Social Security Number and current address, and
mailings of confirmations promptly after the transaction.
Shares held in retirement plans (such as IRA and IRA/SEP) or 403(b) plans may
not be redeemed by telephone. The distributor has made arrangements with certain
dealers to accept telephone instructions for the redemption of shares. The
distributor reserves the right to impose conditions on these dealers, including
the condition that they enter into agreements (which contain additional
conditions with respect to the redemption of shares) with the distributor.
Shares redeemed by telephone are redeemed at their net asset value next
determined after a request for redemption in proper form is received by BFDS.
Orders for the redemption of shares received in proper form prior to the NYSE
close on any business day of the fund will be confirmed at the price determined
as of the close of that day. Any resulting loss from the dealer's failure to
submit a request for redemption within the prescribed time frame will be borne
by that dealer. Telephone redemption requests must be made by NYSE close on any
business day of the fund and will be confirmed at the price determined as of the
close of that day. No telephone redemption request will be accepted which
specifies a particular date for redemption or which specify any special
conditions.
Upon receipt of a proper request for redemption, payment is made as soon as
practicable, but in any event within seven days after presentation of all
required redemption documents in good order. However, in the event of a
redemption of shares purchased by check, redemption proceeds will not be mailed
until the check has cleared. The 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. Every year, an account statement showing the amount of
dividends and distributions you received from the fund during the prior year
will be sent to you. Any long-term or short-term capital gains realized from
redemptions of shares of the fund will be subject to federal income tax.
The foreign, state and local tax consequences of investing in shares of the
fund may differ materially from the federal income tax consequences described
above. You should consult your tax advisor before investing.
OPEN ACCOUNT
The following discussion of an open account is applicable only to those
shareholders who hold shares of the fund directly.
The fund maintains an open account for each shareholder, under which
additional fund shares acquired through reinvestment of dividends and capital
gains distributions are held by State Street Bank for the shareholder's account
unless the shareholder elects to receive stock certificates or to obtain
dividends and distributions in cash. Stock certificates (in full shares only)
are issued without charge (but only on written request) and may be redeposited
at any time. It is anticipated that as a matter of convenience most shareholders
will not request certificates. A shareholder receives a statement from BFDS
after each acquisition or redemption of fund shares, and after each dividend or
capital gains distribution.
A-7
<PAGE> 12
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AIM SUMMIT FUND, INC.
---------------------
OBTAINING ADDITIONAL INFORMATION
- --------------------------------------------------------------------------------
More information may be obtained free of charge upon request. The Statement of
Additional Information (SAI), a current version of which is on file with the
Securities and Exchange Commission (SEC), contains more details about the fund
and is incorporated by reference into the prospectus (is legally a part of this
prospectus). Annual and semiannual reports to shareholders contain additional
information about the fund's investments. The fund's annual report also
discusses the market conditions and investment strategies that significantly
affected the fund's performance during its last fiscal year.
If you have questions about this fund, another fund in The AIM Family of
Funds--Registered Trademark-- or your account, or wish to obtain free copies of
the fund's current SAI or annual or semiannual reports, please contact us
- ---------------------------------------------------------
<TABLE>
<S> <C>
BY MAIL: A I M Distributors, Inc.
11 Greenway Plaza, Suite
100
Houston, TX 77046-1173
BY TELEPHONE: (800) 995-4246
</TABLE>
- ---------------------------------------------------------
You also can obtain copies of the fund's SAI and other information at the SEC's
Public Reference Room in Washington, DC, on the SEC's website
(http://www.sec.gov), or by sending a letter, including a duplicating fee, to
the SEC's Public Reference Section, Washington, DC 20549-6009. Please call the
SEC at 1-800-SEC-0330 for information about the Public Reference Room.
AIM Summit Fund, Inc.
SEC 1940 Act file number: 811-3443
[AIM LOGO APPEARS HERE] www.aimfunds.com SUM-PRO-1 INVEST WITH DISCIPLINE
--Registered Trademark--
<PAGE> 13
STATEMENT OF ADDITIONAL INFORMATION
AIM SUMMIT FUND, INC.
CLASS I SHARES
11 Greenway Plaza
Suite 100
Houston, Texas 77046-1173
(713) 626-1919
THIS STATEMENT OF ADDITIONAL INFORMATION IS NOT
A PROSPECTUS, AND IT SHOULD BE READ IN CONJUNCTION
WITH A PROSPECTUS OF THE ABOVE-NAMED FUND,
A COPY OF WHICH MAY BE OBTAINED FREE OF CHARGE FROM
AUTHORIZED DEALERS OR BY WRITING
A I M DISTRIBUTORS, INC., P.O. BOX 4264,
HOUSTON, TEXAS 77210-4264.
--------------------
STATEMENT OF ADDITIONAL INFORMATION DATED MARCH 1, 1999
RELATING TO THE CLASS I SHARES PROSPECTUS DATED MARCH 1, 1999
<PAGE> 14
TABLE OF CONTENTS
<TABLE>
<S> <C>
INTRODUCTION................................................................... 1
PERFORMANCE INFORMATION........................................................ 1
Total Return Quotations............................................... 3
GENERAL INFORMATION ABOUT THE FUND............................................. 4
The Fund and its Capital Stock........................................ 4
MANAGEMENT OF THE FUND......................................................... 4
Directors and Officers................................................ 4
The Investment Advisor................................................ 10
The Sub-Advisor....................................................... 12
Expenses ............................................................. 13
Transfer Agent and Custodian.......................................... 13
Reports ............................................................. 13
DIVIDENDS, DISTRIBUTIONS AND TAX MATTERS....................................... 13
Reinvestment of Dividends and Distributions........................... 13
Qualification as a Regulated Investment Company....................... 14
Determination of Taxable Income of a Regulated Investment Company..... 15
Excise Tax on Regulated Investment Companies.......................... 16
Fund Distributions.................................................... 16
Sale or Redemption of Fund Shares..................................... 18
Foreign Shareholders.................................................. 18
Effect of Future Legislation; Local Tax Considerations................ 19
SHARE PURCHASES, REDEMPTIONS AND REPURCHASES................................... 19
Purchases and Redemptions............................................. 19
Suspension of Right of Redemption..................................... 19
Valuation of Shares................................................... 19
The Distribution Agreement............................................ 20
INVESTMENT STRATEGIES AND RISKS................................................ 21
Investment Program.................................................... 22
Common Stocks......................................................... 22
Preferred Stocks...................................................... 22
Convertible Securities................................................ 22
Corporate Debt Securities............................................. 22
U.S. Government Securities............................................ 23
Real Estate Investment Trusts ("REITs")............................... 23
Warrants ............................................................. 23
Foreign Securities.................................................... 24
Foreign Exchange Transactions......................................... 25
Repurchase Agreements................................................. 25
Rule 144A Securities.................................................. 25
Illiquid Securities................................................... 26
Lending of Fund Securities............................................ 26
Futures Contracts..................................................... 26
Risks as to Futures Contracts and Related Call Options................ 27
Portfolio Turnover.................................................... 28
</TABLE>
<PAGE> 15
<TABLE>
<S> <C>
PORTFOLIO TRANSACTIONS AND BROKERAGE........................................... 28
INVESTMENT RESTRICTIONS........................................................ 31
MISCELLANEOUS INFORMATION...................................................... 32
Shareholder Inquiries................................................. 32
Legal Matters......................................................... 32
FINANCIAL STATEMENTS........................................................... FS
</TABLE>
<PAGE> 16
INTRODUCTION
AIM Summit Fund, Inc. (the "Fund") is a 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. The information for the
Class I Shares (the "Class") of the Fund is included in a Prospectus dated March
1, 1999 which may be obtained without charge by written request to A I M
Distributors, Inc. ("AIM Distributors"). Investors may also call AIM
Distributors at (800) 995-4246 or dealers authorized by AIM Distributors to
distribute the Fund's shares. Investors must receive a Prospectus before they
invest.
This Statement of Additional Information is intended to furnish
prospective investors with additional information concerning the Class. Some of
the information required to be in this Statement of Additional Information is
also included in the Class' current prospectus and, in order to avoid
repetition, reference will be made to sections of the Prospectus. Additionally,
the Prospectus and this Statement of Additional Information omit certain
information contained in the registration statement filed with the SEC. Copies
of the registration statement, including items omitted from the Prospectus and
this Statement of Additional Information, may be obtained from the SEC by paying
the charges prescribed under its rules and regulations.
PERFORMANCE INFORMATION
All advertisements of the Fund will disclose the maximum creation and
sales charges, imposed by AIM Summit Investors Plans I (the "Plan") and other
fees (collectively, the "Sales Charges") on purchases of shares of the Class. If
any advertised performance data does not reflect the maximum Sales Charges, such
advertisement will disclose that the Sales Charges have not been deducted in
computing the performance data, and that, if reflected, the maximum Sales
Charges would reduce the performance quoted. Further information regarding the
Class' performance is contained in the Fund's annual report to shareholders,
which is available upon request and without charge.
From time to time and in its discretion, A I M Advisors, Inc. ("AIM")
or its affiliates may waive all or a portion of their fees and/or assume certain
expenses of any Class. 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 the Prospectus may not
be terminated without the approval of the Board of Directors. Such a practice
will have the effect of increasing that Class' yield and total return. The
performance of each Fund will vary from time to time and past results are not
necessarily indicative of future results. A Fund's performance is a function of
its portfolio management in selecting the type and quality of portfolio
securities and is affected by operating expenses of the Fund and market
conditions. A shareholder's investment in a Class is not insured or guaranteed.
These factors should be carefully considered by the investor before making an
investment in any Class.
Total return is calculated in accordance with a standardized formula
for computation of annualized total return. Standardized total return for the
shares of the Class reflects the deduction of the Class' maximum Sales Charges
at the time of purchase.
The Class' total return shows its overall change in value, including
changes in share price and assuming all dividends and capital gain distributions
are reinvested. A cumulative total return reflects the Class' 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 Class' performance had been constant over the entire period.
BECAUSE AVERAGE ANNUAL RETURNS TEND TO EVEN OUT VARIATIONS IN THE CLASS' 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
Class may separate its cumulative and average annual returns into income results
and capital gains or losses.
1
<PAGE> 17
Total return figures for the Class are neither fixed nor guaranteed,
and no principal is insured. The Class may provide performance information in
reports, sales literature and advertisements. The Class may also, from time to
time, quote information published or aired by publications or other media
entities which contain articles or segments relating to investment results or
other data. The following is a list of such publications or media entities:
<TABLE>
<S> <C> <C>
Barron's Fortune USA Today
Bloomberg Investor's Business Daily U.S. News & World Report
Business Week Money Wall Street Journal
Economist Mutual Fund Forecaster Washington Post
Financial World Mutual Fund Magazine CNN
Forbes New York Times CNBC
</TABLE>
The Class may also compare its performance to performance data of
similar mutual funds as published by the following services:
Bank Rate Monitor Mutual Fund Values (Morningstar)
CDA Weisenberger Ibbotson Associates
Donoghue's Lipper, Inc.
The Class' performance may also be compared in advertising to the
performance of comparative benchmarks such as the following:
Standard & Poor's 400 Index Consumer Price Index
Standard & Poor's 500 Stock Index Russell Midcap
Dow Jones Industrial Average NASDAQ
The Class 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
90 day Treasury Bills
Advertising for the Class may from time to time include discussions of
general economic conditions and interest rates, and may also include references
to the use of the Class as part of an individual's overall retirement investment
program. From time to time, sales literature and/or advertisements may disclose
(i) the largest holdings in the Class' portfolio, (ii) certain selling group
members and/or (iii) certain institutional shareholders.
From time to time, the Class' 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, or inflation.
Although performance data may be useful to prospective investors when
comparing the Class' 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 the Class.
Additional performance information is contained in the Fund's Annual
Report to Shareholders, which is available upon request without charge.
2
<PAGE> 18
TOTAL RETURN QUOTATIONS
The standard formula for calculating total return, as described in the
Prospectus, is as follows:
n
P(1+T) =ERV
Where P = a hypothetical initial payment of $1,000.
T = average annual total return (assuming the applicable
maximum sales load is deducted at the beginning of the
1, 5, or 10 year periods).
n = number of years.
ERV = ending redeemable value of a hypothetical $1,000
payment at the end of the 1, 5, or 10 year periods
(or fractional portion of such period).
The average annual total return for the Class, for the one, five and ten
year periods ended October 31, 1998, was 9.00%, 15.91% and 16.53%, respectively.
These average annual total returns do not include the reinvestment of dividends
and capital gains, and the effect of paying the separate Creation and Sales
Charges and Custodian Fees associated with the purchase of the Class through the
Plan. Total returns would be lower if Creation and Sales Charges and Custodian
Fees were taken into account. Shares of the Class may be acquired by the general
public only through the Plan. Investors should consult the Prospectus of the
Plan for complete information regarding Creation and Sales Charges and Custodian
Fees.
The average annual total return for the Class, for the one, five and ten
year periods ended October 31, 1998, was 0.18%, 14.44% and 15.46%, respectively.
These average annual total returns include the reinvestment of dividends and
capital gains, and the effects of the separate Creation and Sales Charges and
Custodian Fees assessed through the Plan. The average annual total returns
assume an initial $1,000 lump sum investment at the beginning of each period
shown with no subsequent Plan investments. Because the illustrations assume lump
sum investments, they do not reflect what investors would have earned only had
they made regular monthly investments over the period. Consult the Plan's
Prospectus for more complete information on applicable charges and fees.
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:
P(1+U)n=ERV
Where P = a hypothetical initial payment of $1,000.
U = average annual total return assuming payment of only
a stated portion of, or none of, the applicable maximum
sales load at the beginning of the stated period.
n = number of years.
ERV = ending redeemable value of a hypothetical $1,000
payment at the end of the stated period.
Cumulative total return across a stated period may be calculated as
follows:
P(1+V)n=ERV
Where P = a hypothetical initial payment of $1,000.
V = cumulative total return assuming payment of all of, a
stated portion of, or none of, the applicable maximum
sales load at the beginning of the stated period.
n = number of years.
ERV = ending redeemable value of a hypothetical $1,000
payment at the end of the stated period.
3
<PAGE> 19
GENERAL INFORMATION ABOUT THE FUND
THE FUND AND ITS CAPITAL STOCK
The Fund is an open-end, diversified management investment company
organized as a corporation under the laws of the State of Maryland on February
17, 1982 and has an authorized capital of 1,000,000,000 shares of common stock,
par value $.01 per share. The Class and Class II Shares of the 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 Fund's
Board of Directors with respect to that class and, upon liquidation or
dissolution 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. Fractional shares have the same
rights as full shares to the extent of their proportionate interest.
Shareholders of the Fund do not have cumulative voting rights. There are no
preemptive or conversion rights applicable to any of the Fund's shares. The
Fund's shares, when issued, are fully paid and non-assessable. Shares of the
Fund are redeemable at the net asset value thereof at the option of the holders
thereof.
The term "majority vote" means the affirmative vote of the Fund or of a
particular class of the Fund (a) more than 50% of the outstanding shares of the
Fund or class (b) 67% or more of the shares of the Fund or such class present at
a meeting if more than 50% of the outstanding shares of the Fund or class are
represented at the meeting in person or by proxy, whichever is less.
The Board of Directors of the Fund may classify or reclassify any
unissued shares into shares of any class or classes in addition to that already
authorized by setting or changing in any one or more respects, from time to
time, prior to the issuance of such shares, the preference, conversion or other
rights, voting powers, restrictions, limitations as to dividends, qualification,
or terms or conditions of redemption, of such shares. Any such classification or
reclassification will comply with the provisions of the laws of the State of
Maryland and the Investment Company Act of 1940, as amended (the "1940 Act").
MANAGEMENT OF THE FUND
The overall management of the business and affairs of the Fund is vested
with the Board of Directors. The Board of Directors approves all significant
agreements between the Fund and persons or companies furnishing services to the
Fund, including the Fund's agreements with the Fund's advisor, sub-advisor,
distributor, custodian and transfer agent. The day-to-day operations of the Fund
are delegated to the Fund's officers and to AIM, subject always to the
investment objective and policies of the Fund and to the general supervision of
the Fund's Board of Directors.
DIRECTORS AND OFFICERS
The directors and officers of the Fund and their principal occupations
during the last five years are set forth below. All of the Fund's executive
officers hold similar offices with some or all of the other investment companies
advised by A I M Advisors, Inc. (the "AIM Funds"). Unless otherwise indicated,
the address of each director and officer is 11 Greenway Plaza, Suite 100,
Houston, Texas 77046-1173.
4
<PAGE> 20
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------
Position(s) Held Principal Occupation(s) During,
Name, Address and Age with Registrant At Least, the Past 5 years
- ----------------------------------------------------------------------------------------------------------
<S> <C> <C>
*Charles T. Bauer (79) Chairman and Chairman of the Board of Directors, A I M
Director Management Group Inc., A I M Advisors, Inc., A I M
Capital Management, Inc., A I M Distributors, Inc.,
A I M Fund Services, Inc. and Fund Management
Company; and Director and Vice Chairman of
AMVESCAP PLC.
- ----------------------------------------------------------------------------------------------------------
Bruce L. Crockett, (54) Director Director, ACE Limited (insurance company).
906 Frome Lane Formerly Director, President and Chief Executive
McLean, VA 22102 Officer, COMSAT Corporation; and Chairman,
Board of Governors of INTELSAT (international
communications company).
- ----------------------------------------------------------------------------------------------------------
Owen Daly II (74) Director Director, Cortland Trust Inc. (investment company).
Six Blythewood Road Formerly, Director, CF & I Steel Corp., Monumental
Baltimore, MD 21210 Life Insurance Company and Monumental General
Insurance Company; and Chairman of the Board of
Equitable Bancorporation
- ----------------------------------------------------------------------------------------------------------
Edward K. Dunn, Jr. (63) Director Chairman of the Board of Directors, Mercantile
2 Hopkins Plaza, 20th Floor Mortgage Corp. Formerly, Vice Chairman of the
Baltimore, MD 21201 Board of Directors and President, Mercantile - Safe
Deposit & Trust Co.; and President, Mercantile
Bankshares.
- ----------------------------------------------------------------------------------------------------------
Jack Fields (47) Director Chief Executive Officer, Texana Global, Inc. (foreign
Jetero Plaza, Suite E trading company) and Twenty-First Century Group,
8810 Will Clayton Parkway Inc. (governmental affairs company). Formerly,
Humble, TX 77338 Member of the U.S. House of Representatives.
- ----------------------------------------------------------------------------------------------------------
**Carl Frischling (62) Director Partner, Kramer, Levin, Naftalis & Frankel LLP (law
919 Third Avenue firm). Formerly, Partner, Reid & Priest (law firm).
New York, NY 10022
- ----------------------------------------------------------------------------------------------------------
</TABLE>
- --------
* A director who is an "interested person" of the Fund and A I M
Advisors, Inc. as defined in the 1940 Act.
** A director who is an "interested person" of the Fund as defined in the
1940 Act.
5
<PAGE> 21
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------
Position(s) Held Principal Occupation(s) During,
Name, Address and Age with Registrant At Least, the Past 5 years
- ----------------------------------------------------------------------------------------------------------
<S> <C> <C>
***Robert H. Graham (52) Director and Director, President and Chief Executive Officer,
President A I M Management Group Inc.; Director and
President, A I M Advisors, Inc.; Director and Senior
Vice President, A I M Capital Management, Inc.,
A I M Distributors, Inc., A I M Fund Services, Inc.
and Fund Management Company; and Director,
AMVESCAP PLC.
- ----------------------------------------------------------------------------------------------------------
Prema Mathai-Davis (48) Director Chief Executive Officer YWCA of the U.S.A.;
350 Fifth Avenue, Suite 301 Commissioner, New York City Department for the
New York, NY 10118 Aging; and Member of the Board of Directors,
Metropolitan Transportation Authority of New York
State.
- ----------------------------------------------------------------------------------------------------------
Lewis F. Pennock (56) Director Attorney, private practice in Houston, Texas.
6363 Woodway, Suite 825
Houston, Texas 77057
- ----------------------------------------------------------------------------------------------------------
Ian W. Robinson (75) Director Formerly, Executive Vice President and Chief
183 River Drive Financial Officer, Bell Atlantic Management
Tequesta, Florida 33469 Services, Inc. (provider of centralized management
services to telephone companies); Executive
Vice President, Bell Atlantic Corporation
(parent of seven telephone companies);
and Vice President and Chief Financial
Officer, Bell Telephone Company of
Pennsylvania and Diamond State Telephone Company.
- ----------------------------------------------------------------------------------------------------------
Louis S. Sklar (59) Director Executive Vice President, Development and
Transco Tower, 50th Floor Operations, Hines Interests Limited Partnership
2800 Post Oak Blvd. (real estate development).
Houston, Texas 77056
- ----------------------------------------------------------------------------------------------------------
***John J. Arthur (54) Senior Vice Director and Senior Vice President, A I M Advisors,
President and Inc.; and Vice President and Treasurer,
Treasurer A I M Management Group Inc.
- ----------------------------------------------------------------------------------------------------------
Gary T. Crum (51) Senior Vice Director and President, A I M Capital Management,
President 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.
- ----------------------------------------------------------------------------------------------------------
</TABLE>
- --------
* A director who is an "interested person" of the Fund and A I M
Advisors, Inc. as defined in the 1940 Act.
*** Mr. Arthur and Ms. Relihan are married to each other.
6
<PAGE> 22
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------
Position(s) Held Principal Occupation(s) During,
Name, Address and Age with Registrant At Least, the Past 5 years
- ----------------------------------------------------------------------------------------------------------
<S> <C> <C>
***Carol F. Relihan (44) Senior Vice Director, Senior Vice President, General Counsel
President and and Secretary, A I M Advisors, Inc.; Senior Vice
Secretary President, General Counsel and Secretary,
A I M Management Group Inc.; Director, Vice President
and General Counsel, Fund Management Company;
General Counsel and Vice President, A I M Fund
Services, Inc.; and Vice President A I M Capital
Management, Inc. and A I M Distributors, Inc.
- ----------------------------------------------------------------------------------------------------------
Dana R. Sutton (40) Vice President Vice President and Fund Controller, A I M Advisors,
and Assistant Inc.; and Assistant Vice President and Assistant
Treasurer Treasurer, Fund Management Company.
- ----------------------------------------------------------------------------------------------------------
Melville B. Cox (55) Vice President Vice President and Chief Compliance Officer, A I M
Advisors, Inc., A I M Capital Management, Inc.,
A I M Distributors, Inc., A I M Fund Services, Inc.
and Fund Management Company.
- ----------------------------------------------------------------------------------------------------------
Jonathan C. Schoolar (37) Vice President Senior Vice President, A I M Capital Management,
Inc.; and Vice President, A I M Advisors, Inc.
- ----------------------------------------------------------------------------------------------------------
</TABLE>
*** Mr. Arthur and Ms. Relihan are married to each other.
The Board of Directors has an Audit Committee, an Investments
Committee, and a Nominating and Compensation Committee.
The members of the Audit Committee are Messrs. Crockett, Daly, Dunn,
Fields, Frischling, Pennock, Robinson (Chairman), Sklar and Ms. Mathai-Davis.
The Audit Committee is responsible for meeting with the Fund's auditors to
review audit procedures and results and to consider any matters arising from an
audit to be brought to the attention of the directors as a whole with respect to
the Fund's fund accounting or its internal accounting controls, or for
considering such matters as may from time to time be set forth in a charter
adopted by the Board of Directors and such committee.
The members of the Investments Committee are Messrs. Bauer, Crockett,
Daly, Dunn, Fields, Frischling, Pennock, Robinson, Sklar (Chairman) and Ms.
Mathai-Davis. The Investments Committee is responsible for reviewing portfolio
compliance, brokerage allocation, portfolio investment pricing issues, interim
dividend and distribution issues, or considering such matters as may from time
to time be set forth in a charter adopted by the Board of Directors and such
committee.
The members of the Nominating and Compensation Committee are Messrs.
Crockett (Chairman), Daly, Dunn, Fields, Pennock, Robinson, Sklar and Ms.
Mathai-Davis. The Nominating and Compensation Committee is responsible for
considering and nominating individuals to stand for election as directors who
are not interested persons, reviewing from time to time the compensation payable
to the disinterested directors, or considering such matters as may from time to
time be set forth in a charter adopted by the board and such committee.
7
<PAGE> 23
Remuneration of Directors
Each director is reimbursed for expenses incurred in connection with
each meeting of the Board of Directors or any Committee attended. Each director
of the Fund is compensated for his or her services according to a fee schedule
which recognizes the fact that such director also serves as a director or
trustee of certain other AIM Funds. Each such director receives a fee, allocated
among the AIM Funds for which he or she serves as a director or trustee, which
consists of an annual retainer component and a meeting fee component.
Set forth below is information regarding compensation paid or accrued
for each director of the Fund:
<TABLE>
<CAPTION>
========================================================================================
DIRECTOR ESTIMATED RETIREMENT TOTAL
COMPENSATION BENEFITS COMPENSATION
FROM FUND(1) ACCRUED FROM ALL AIM
BY ALL AIM FUNDS(3)
FUNDS(2)
<S> <C> <C> <C>
- ---------------------------------------------------------------------------------------
Charles T. Bauer $ 0 $ 0 $ 0
- ---------------------------------------------------------------------------------------
Bruce L. Crockett 1,913 37,485 96,000
- ---------------------------------------------------------------------------------------
Owen Daly II 1,913 122,898 96,000
- ---------------------------------------------------------------------------------------
Edward K. Dunn 1,231 0 78,889
- ---------------------------------------------------------------------------------------
Jack Fields 1,903 15,826 95,500
- ---------------------------------------------------------------------------------------
Carl Frischling(4) 1,913 97,791 95,500
- ---------------------------------------------------------------------------------------
Robert H. Graham 0 0 0
- ---------------------------------------------------------------------------------------
John F. Kroeger (5) 1,818 107,896 91,654
- ---------------------------------------------------------------------------------------
Prema Mathai-Davis 177 0 32,636
- ---------------------------------------------------------------------------------------
Lewis F. Pennock 1,913 45,766 95,500
- ---------------------------------------------------------------------------------------
Ian Robinson 1,882 94,442 94,500
- ---------------------------------------------------------------------------------------
Louis S. Sklar 1,892 90,232 95,500
========================================================================================
</TABLE>
(1) The total amount of compensation deferred by all Directors of the Fund
during the fiscal year ended October 31, 1998, including interest earned
thereon, was $9,860.
(2) During the fiscal year ended October 31, 1998, the total amount of expenses
allocated to the Fund in respect of such retirement benefits was $12,272. Data
reflects compensation for the calendar year ended December 31, 1998.
(3) Each Director serves as director or trustee of a total of 12 registered
investment companies advised by AIM (comprised of over 50 portfolios). Data
reflects compensation earned during the calendar year ended December 31, 1998.
(4) During the fiscal year ended October 31, 1998, the Fund paid $6,861 in legal
fees for services rendered by Kramer, Levin, Naftalis & Frankel LLP. Mr.
Frischling is a partner in such firm.
8
<PAGE> 24
(5) Mr. Kroeger was a director until June 11, 1998, when he resigned. On that
date he became a consultant to the Fund. Of the amount listed above, $1,060 was
compensation for services as a director and the remainder as a consultant. Mr.
Kroeger passed away on November 26, 1998, Mr. Kroeger's widow will receive his
pension as described below under "AIM Fund Retirement Plan for Eligible
Directors/Trustees."
AIM Funds Retirement Plan for Eligible Directors/Trustees
Under the terms of the AIM Funds Retirement Plan for Eligible
Directors/Trustees (the "Plan"), each director (who is not an employee of any of
the AIM Funds, A I M Management Group Inc., or any of its subsidiaries) may be
entitled to certain benefits upon retirement from the Board of Directors.
Pursuant to the Plan, the normal retirement date is the date on which the
eligible director has attained age 65 and has completed at least five years of
continuous service with one or more of the regulated investment companies
managed, administered or distributed by AIM or its subsidiaries (the "Applicable
AIM Funds"). Each eligible director is entitled to receive an annual benefit
from the Applicable AIM Funds commencing on the first day of the calendar
quarter coincident with or following his date of retirement equal to 75% of the
retainer paid or accrued by the Applicable AIM Funds for such director during
the twelve-month period immediately preceding the director's retirement
(including amounts deferred under a separate agreement between the AIM Funds and
the director) for the number of such Director's years of service (not in excess
of 10 years of service) completed with respect to any of the Applicable AIM
Funds. Such benefit is payable to each eligible director in quarterly
installments. If an eligible director dies after attaining the normal retirement
date but before receipt of any benefits under the Plan commences, the director's
surviving spouse (if any) shall receive a quarterly survivor's benefit equal to
50% of the amount payable to the deceased director, for no more than ten years
beginning the first day of the calendar quarter following the date of the
director's death. Payments under the Plan are not secured or funded by any AIM
Fund.
Set forth below is a table that shows the estimated annual benefits
payable to an eligible director upon retirement assuming the retainer amount
reflected below and various years of service. The estimated credited years of
service for Messrs. Crockett, Daly, Dunn, Fields, Frischling, Kroeger, Pennock,
Robinson, Sklar and Ms. Mathai-Davis are 11, 11, 0,1, 21, 20, 17, 11, 9 and 0
years, respectively.
ESTIMATED ANNUAL BENEFITS UPON RETIREMENT
<TABLE>
<CAPTION>
================================================================================
Number of Years of Annual Compensation
Service With the Paid By All AIM Funds
Applicable AIM Funds
================================================================================
<S> <C>
$90,000
================================================================================
10 $67,500
- --------------------------------------------------------------------------------
9 $60,750
- --------------------------------------------------------------------------------
8 $54,000
- --------------------------------------------------------------------------------
7 $47,250
- --------------------------------------------------------------------------------
6 $40,500
- --------------------------------------------------------------------------------
5 $33,750
================================================================================
</TABLE>
9
<PAGE> 25
Deferred Compensation Agreements
Messrs. Daly, Dunn, Fields, Frischling, Robinson and Sklar (for purposes
of this paragraph only, the "deferring directors") have each executed a Deferred
Compensation Agreement (collectively, the "Agreements"). Pursuant to the
Agreements, the deferring directors may elect to defer receipt of up to 100% of
their compensation payable by the Fund, and such amounts are placed into a
deferral account. Currently, the deferring directors may select various AIM
Funds in which all or part of his deferral account shall be deemed to be
invested. Distributions from the deferring directors' deferral accounts will be
paid in cash, in generally equal quarterly installments over a period of five
(5) or ten (10) years (depending on the Agreement) beginning on the date the
deferring director's retirement benefits commence under the Plan. The Fund's
Board of Directors, in its sole discretion, may accelerate or extend the
distribution of such deferral accounts after the deferring director's
termination of service as a director of the Fund. If a deferring director dies
prior to the distribution of amounts in his deferral account, the balance of the
deferral account will be distributed to his designated beneficiary in a single
lump sum payment as soon as practicable after such deferring director's death.
The Agreements are not funded and, with respect to the payments of amounts held
in the deferral accounts, the deferring directors have the status of unsecured
creditors of the Fund and of each other AIM Fund from which they are deferring
compensation.
THE INVESTMENT ADVISOR
The Fund has entered into an Investment Advisory Agreement, (the
"Advisory Agreement") with AIM. AIM is a wholly owned subsidiary of A I M
Management Group Inc. ("AIM Management"), 11 Greenway Plaza, Suite 100, Houston,
Texas 77046-1173. AIM was organized in 1976, and, together with its
subsidiaries, advises or manages over 110 investment company portfolios
encompassing a broad range of investment objectives. AIM Management is an
indirect wholly owned subsidiary of AMVESCAP PLC, 11 Devonshire Square, London
EC2M 4YR, United Kingdom. AMVESCAP PLC and its subsidiaries are an independent
investment management group engaged in institutional investment management and
retail mutual fund businesses in the United States, Europe and the Pacific
Region. Certain of the directors and officers of AIM are also executive officers
of the Fund and their affiliations are shown under "Directors and Officers."
AIM and the Fund have adopted a Code of Ethics which requires investment
personnel and certain other employees (a) to pre-clear all personal securities
transactions subject to the Code of Ethics; (b) to file reports or duplicate
confirmations regarding such transactions; (c) to refrain from personally
engaging in (i) short-term trading of a security, (ii) transactions involving a
security within seven days of an AIM Fund transaction involving the same
security, and (iii) transactions involving securities being considered for
investment by an AIM Fund; and (d) to abide by certain other provisions under
the Code of Ethics. The Code of Ethics also prohibits investment personnel and
all other AIM employees from purchasing securities in an initial public
offering. Personal trading reports are reviewed periodically by AIM, and the
Board of Directors reviews quarterly and annual reports (including information
on any substantial violations of the Code of Ethics). Sanctions for violations
of the Code of Ethics may include censure, monetary penalties, suspension or
termination of employment.
A I M Capital Management, Inc., ("AIM Capital") a wholly owned
subsidiary of AIM, is engaged in the business of providing investment advisory
services to investment companies, corporations, institutions and other accounts.
AIM Distributors, a registered broker-dealer and a wholly owned subsidiary of
AIM, acts as principal underwriter of other registered investment companies
advised or managed by AIM.
Pursuant to the terms of the Advisory Agreement, AIM: (a) supervises all
aspects of the operations of the Fund; (b) obtains and evaluates pertinent
information about significant developments and economic, statistical and
financial data, domestic, foreign or otherwise, whether affecting the economy
generally or the Fund, and whether concerning the individual issuers whose
securities are included in the Fund or the activities in which such issuers
engage, or with respect to securities which AIM considers desirable for
inclusion in the Fund; (c) determines which issuers and securities shall be
represented in the Fund's investment portfolio and
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<PAGE> 26
regularly reports thereon to the Fund's Board of Directors; and (d) formulates
and implements continuing programs for the purchases and sales of the securities
of such issuers and regularly reports thereon to the Fund's Board of Directors;
and takes, on behalf of the Fund, all actions which appear to the Fund necessary
to carry into effect such purchase and sale programs and supervisory functions
as aforesaid, including but not limited to the placing of orders for the
purchase and sale of securities for the Fund. Subject to the approval of the
Board of Directors and the shareholders of the Fund, AIM may delegate to a
sub-advisor certain of its duties, provided that AIM shall continue to supervise
the performance of any such sub-advisor. AIM entered into a sub-advisory
agreement with TradeStreet as described below. AIM maintains a trading desk and
selects the core stocks which generally comprise approximately 50% of the Fund's
portfolio and the emerging growth stocks which generally comprise 35% of the
Fund's portfolio. The remainder of the Fund's portfolio is invested in
value-oriented stock selected by the sub-advisor.
As compensation for its services, AIM receives an annual fee, calculated
daily and paid monthly, at the annual rate of 1.00% of the first $10 million of
the Fund's average daily net assets, 0.75% of the next $140 million of the
Fund's average daily net assets and 0.625% of the Fund's average daily net
assets in excess of $150 million. Although the advisory fee rate paid by the
Fund is higher than that paid by other investment companies, many of those
investment companies are a different size or have different objectives than the
Fund. The effective rate of fees and expenses paid by the Fund at its current
size is lower than that for other funds with similar investment objectives.
The portion of the Fund's portfolio invested in core stocks and in
emerging growth and value oriented stocks is determined by AIM.
AIM may from 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 the
Prospectus may not be terminated without the approval of the Board of Directors.
The Advisory Agreement will continue from year to year, provided that it
is specifically approved at least annually by (i) the Fund's Board of Directors
or the vote of a "majority of the outstanding voting securities" of the Fund (as
defined in the 1940 Act) and (ii) the affirmative vote of a majority of the
directors who are not parties to the agreement or "interested persons" of any
such party (the "Non-Interested Directors") by votes cast in person at a meeting
called for such purpose. The Fund or AIM may terminate the Advisory Agreement on
60 days' written notice without penalty. The Advisory Agreement terminates
automatically in the event of assignment, as defined in the 1940 Act.
The Advisory Agreement provides that upon the request of the Fund's
Board of Directors, AIM may perform, or arrange for the performance of, certain
accounting, shareholder servicing and other administrative services to the Fund
that are not required to be performed by AIM under the Advisory Agreement. For
such services, AIM is entitled to receive from the Fund reimbursement of its
costs or such reasonable compensation as may be agreed upon by AIM and the
Fund's Board of Directors upon a finding by the Board of Directors that the
provision of such services is in the best interests of the Fund and its
shareholders.
The Board of Directors has made such a finding and, accordingly, has
entered into an Administrative Services Agreement, with AIM (the "Administrative
Services Agreement"). Under the Administrative Services Agreement, AIM currently
provides the services of a principal financial officer and his staff, who
maintain the financial accounts and books and records of the Fund, including the
calculation of the daily net asset value of the Fund, and prepare tax returns
and financial statements for the Fund and also is reimbursed for any expenses
related to providing such services, as well as the services of staff responding
to various shareholder inquiries. The Administrative Services Agreement will
continue year to year, provided that it is specifically approved at least
annually by (i) the Fund's Board of Directors or the vote of a "majority of the
outstanding voting securities" of the Fund (as defined in the 1940 Act) and (ii)
the affirmative vote of a majority of the Non-Interested Directors by votes cast
in person at a meeting called for such purpose. In addition, a sub-contract
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<PAGE> 27
between AIM and A I M Fund Services, Inc. ("AFS"), a registered transfer agent
and wholly owned subsidiary of AIM, provides that AFS may perform certain
shareholders services for the Fund which are not required to be performed by AIM
under the Advisory Agreement. Currently, AFS provides certain shareholders
services for the Fund. For such services, while AFS is entitled to receive from
AIM such reimbursement of its costs associated with providing those services as
may be approved by the Board of Directors, AFS does not presently receive any
such reimbursement.
During the fiscal years ended October 31, 1998, 1997 and 1996, AIM
received management and advisory fees from the Fund of $11,372,220, $9,353,715
and $7,360,028, respectively. See "Expenses."
For the fiscal years ended October 31, 1998, 1997 and 1996, AIM was
reimbursed $72,766, $67,450 and $63,439, respectively, for costs associated with
performing administrative services.
THE SUB-ADVISOR
NationsBank of Texas, N.A. ("NationsBank Texas"), served as the Fund's
sub-advisor, prior to April 1, 1996 pursuant to a sub-advisory agreement (the
"Sub-Advisory Agreement"). NationsBank, N.A., a bank holding company, indirectly
holds 100% of the voting stock of NationsBank Texas. Since April 1, 1996,
TradeStreet Investment Associates, Inc. ("TradeStreet"), 101 South Tryon Street,
Suite 1000, Charlotte, North Carolina 28255, has served as Sub-Advisor.
TradeStreet is a wholly owned subsidiary of NationsBank, N.A.
and a registered investment advisor.
Pursuant to the terms of the Sub-Advisory Agreement, AIM has appointed
TradeStreet to provide certain investment advisory services to the Fund, subject
to the overall supervision by AIM and the Fund's Board of Directors. As
Sub-Advisor, TradeStreet shall: (a) obtain and evaluate pertinent information
about significant developments and economic, statistical and financial data,
domestic, foreign or otherwise, whether affecting the economy generally or the
Fund, and whether concerning the individual issuers whose securities are
included in the Fund or the activities in which such issuers engage, or with
respect to securities which it or AIM considers desirable for inclusion in the
Fund's investment portfolio; and (b) to the extent requested by AIM, determine
which issues and securities shall be represented in the Fund's investment
portfolio, formulate programs for the purchases and sales of such securities and
regularly report thereon to AIM. In performing these services, TradeStreet, is
required to comply with all applicable provisions of federal or state law,
including the applicable provisions of the 1940 Act and the Investment Advisers
Act of 1940, as amended (the "Advisers Act"). Pursuant to the terms of the
Sub-Advisory Agreement, TradeStreet, under AIM's supervision, will determine the
value-oriented stocks to be purchased or sold by the Fund. It is anticipated
that approximately 25% of the Fund's portfolio will be invested in
value-oriented stocks, although that percentage may change from time to time as
deemed advisable by AIM based upon current market conditions.
As compensation for its services, AIM pays TradeStreet an annual fee,
calculated daily and paid monthly, at an annual rate of 0.50% of the first $10
million of the Fund's average daily net assets, 0.35% of the next $140 million
of the Fund's average daily net assets, 0.225% of the Fund's average daily net
assets in excess of $150 million and less than $700 million and 0.15% of the
Fund's average daily net assets in excess of $700 million. The sub-advisor's fee
is paid to TradeStreet by AIM from the advisory fee which AIM receives from the
Fund.
The Sub-Advisory Agreement will continue year to year, provided that it
is specifically approved at least annually by (i) the Fund's Board of Directors
or a vote of "a majority of the outstanding voting securities" of the Fund (as
defined by the 1940 Act), and (ii) by the affirmative vote of a majority of the
Non-Interested Directors by votes cast in person at a meeting called for such
purpose.
For the period November 1, 1995 through March 31, 1996, NationsBank
Texas received fees from AIM of $958,342. For the fiscal year ended October 31,
1998 and 1997 and for the period April 1, 1996 through the fiscal year ended
October 31, 1996, TradeStreet received fees from AIM of $3,405,833, $2,921,391
and $1,454,982, respectively. See "Expenses."
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<PAGE> 28
EXPENSES
All of the ordinary business expenses incurred in the operations of the
Fund and the offering of its shares shall be borne by the Fund unless
specifically provided otherwise in the Advisory Agreement. These expenses borne
by the Fund include but are not limited to brokerage commissions, taxes, legal,
auditing, or governmental fees, the cost of preparing share certificates,
custodian, transfer and shareholder service agent costs, expenses of issue,
sale, redemption and repurchase of shares, expenses of registering and
qualifying shares for sale, expenses relating to directors' and shareholders'
meetings, the cost of preparing and distributing reports and notices to
shareholders, the fees and other expenses incurred by the Fund in reports and
notices to shareholders, the fees and other expenses incurred by the Fund in
connection with membership in investment company organizations and the cost of
pricing copies of prospectuses and statements of additional information
distributed to the Fund's shareholders.
TRANSFER AGENT AND CUSTODIAN
State Street Bank and Trust Company ("State Street Bank") acts as a
transfer agent for the Class. The transfer agent's administrative duties have
been delegated by State Street Bank to its partially-owned affiliate, Boston
Financial Data Services, Inc. ("BFDS"). State Street Bank and BFDS receive such
compensation from the Class for their services in such capacities as are agreed
to from time to time by State Street Bank and the Fund on behalf of the Class.
The address of State Street Bank and of BFDS is P.O. Box 8300, Boston,
Massachusetts 02266-8300. These services do not include any supervisory function
over management or provide any protection against any possible depreciation of
assets.
State Street Bank acts as custodian for the Class' portfolio securities
and cash. The Fund pays State Street Bank and BFDS such compensation as may be
agree upon from time to time.
REPORTS
The Fund will furnish shareholders semi-annually with a list of the
investments held in the Class' portfolio and its financial statements. The
annual financial statements will be audited by the Fund's independent certified
public accountants. The Board of Directors has selected KPMG LLP, 700 Louisiana,
Houston, Texas 77002, as the Fund's independent certified public accountants to
audit the Fund's books and review the Fund's tax returns.
DIVIDENDS, DISTRIBUTIONS AND TAX MATTERS
REINVESTMENT OF DIVIDENDS AND DISTRIBUTIONS
It is the present policy of the Fund to declare and pay annually net
investment income dividends and capital gains distributions. It is the Fund's
intention to distribute substantially all of its net investment income and
capital gains by the end of the calendar year. In determining the amount of
capital gains, if any, available for distribution, net capital gains will be
offset against available net capital losses, if any, carried forward from
previous fiscal periods. All dividends and distributions will be automatically
reinvested at the net asset value determined on the record date in full and
fractional shares of the Class unless the shareholder has elected prior to the
record date, by written notice to Boston Financial Data Services, Inc. ("BFDS"),
P.O. Box 8300, Boston, Massachusetts 02266-8300, Attention: AIM Summit Fund,
Inc., to receive all such payments in cash. Such reinvestments will not be
subject to sales charges and shares so purchased will be automatically credited
to the account of the shareholder.
Changes in the form of dividend and distribution payments may be made by
the shareholder at any time and will be effective as to any subsequent payment
if such notice is received by BFDS prior to the applicable record date. Any
dividend and distribution election will remain in effect until BFDS receives a
revised written election by the shareholder.
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<PAGE> 29
No attempt is made to present a detailed explanation of the tax
treatment of the Fund or its shareholders, and the discussion here is not
intended as a substitute for careful tax planning. Because shares of the Fund
may be purchased by individual investors the Plan, the following discussion is
addressed only to individual (rather than corporate) investors.
QUALIFICATION AS A REGULATED INVESTMENT COMPANY
The Fund has elected to be taxed as a regulated investment company under
Subchapter M of the Internal Revenue Code of 1986, as amended (the "Code"). As a
regulated investment company, the Fund is not subject to federal income tax on
the portion of its net investment income (i.e., taxable interest, dividends and
other taxable ordinary income, net of expenses) and capital gain net income
(i.e., the excess of capital gains over capital losses) that it distributes to
shareholders, provided that it distributes at least 90% of its investment
company taxable income (i.e., net investment income and the excess of net
short-term capital gain over net long-term capital loss) for the taxable year
(the "Distribution Requirement"), and satisfies certain other requirements of
the Code that are described below. Distributions by the Fund made during the
taxable year or, under specified circumstances, within twelve months after the
close of the taxable year, will be considered distributions of income and gains
of the taxable year and can therefore satisfy the Distribution Requirement.
In addition to satisfying the Distribution Requirement, a regulated
investment company must derive at least 90% of its gross income from dividends,
interest, certain payments with respect to securities loans, gains from the sale
or other disposition of stock or securities or foreign currencies (to the extent
such currency gains are directly related to the regulated investment company's
principal business of investing in stock or securities) and other income
(including but not limited to gains from options, futures or forward contracts)
derived with respect to its business of investing in such stock, securities or
currencies (the "Income Requirement").
The Fund may use "equalization accounting" in determining the portion of
its net investment income and capital gain net income that has been distributed.
If the Fund that elects to use equalization accounting, it will allocate a
portion of its realized investment income and capital gains to redemptions of
Fund shares and will correspondingly reduce the amount of such income and gains
that it distributes in cash. However, the Fund intends to make cash
distributions for each taxable year in an aggregate amount that is sufficient to
satisfy the Distribution Requirement without taking into account its use of
equalization accounting. The Internal Revenue Service has not published any
guidance concerning the methods to be used in allocating investment income and
capital gains to redemptions of shares. In the event that the Internal Revenue
Service determines that the Fund is using an improper method of allocation and
has underdistributed its net investment income and capital gain net income for
any taxable year, the Fund may be liable for additional federal income tax.
In addition to satisfying the requirements described above, the Fund
must satisfy an asset diversification test in order to qualify as a regulated
investment company. Under this test, at the close of each quarter of the Fund's
taxable year, at least 50% of the value of the Fund's assets must consist of
cash and cash items, U.S. Government securities, securities of other regulated
investment companies, and securities of other issuers (as to which the Fund has
not invested more than 5% of the value of the Fund's total assets in securities
of such issuer and as to which the Fund does not hold more than 10% of the
outstanding voting securities of such issuer), and no more than 25% of the value
of its total assets may be invested in the securities of any one issuer (other
than U.S. Government securities and securities of other regulated investment
companies), or in two or more issuers which the Fund controls and which are
engaged in the same or similar trades or businesses.
If for any taxable year the Fund does not qualify as a regulated
investment company, all of its taxable income (including its net capital gain)
will be subject to tax at regular corporate rates without any deduction for
distributions to shareholders, and such distributions will be taxable as
ordinary dividends to the extent of the Fund's current and accumulated earnings
and profits.
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<PAGE> 30
DETERMINATION OF TAXABLE INCOME OF A REGULATED INVESTMENT COMPANY
In general, gain or loss recognized by the Fund on the disposition of an
asset will be a capital gain or loss. However, gain recognized on the
disposition of a debt obligation purchased by the Fund at a market discount
(generally, at a price less than its principal amount) will be treated as
ordinary income to the extent of the portion of the market discount which
accrued during the period of time the Fund held the debt obligation unless the
Fund made an election to accrue market discount into income. In addition, under
the rules of Code Section 988, gain or loss recognized on the disposition of a
debt obligation denominated in a foreign currency or an option with respect
thereto (but only to the extent attributable to changes in foreign currency
exchange rates), and gain or loss recognized on the disposition of a foreign
currency forward contract or of foreign currency itself, will generally be
treated as ordinary income or loss.
In general, for purposes of determining whether capital gain or loss
recognized by the Fund on the disposition of an asset is long-term or
short-term, the holding period of the asset may be affected if (a) the asset is
used to close a "short sale" (which includes for certain purposes the
acquisition of a put option) or is substantially identical to another asset so
used, (b) the asset is otherwise held by the Fund as part of a "straddle", or
(c) the asset is stock and the Fund grants certain call options with respect
thereto. In addition, a Fund may be required to defer the recognition of a loss
on the disposition of an asset held as part of a straddle to the extent of any
unrecognized gain on the offsetting position. Any gain recognized by a Fund on
the lapse of, or any gain or loss recognized by a Fund from a closing
transaction with respect to, an option written by the Fund will generally be
treated as a short-term capital gain or loss. In the case of covered options,
gain or loss may be long-term.
Some of the forward foreign currency exchange contracts, options and
futures contracts that the Fund may enter into will be subject to special tax
treatment as "Section 1256 contracts." Section 1256 contracts are treated as if
they are sold for their fair market value on the last business day of the
taxable year, regardless of whether a taxpayer's obligations (or rights) under
such contracts have terminated (by delivery, exercise, entering into a closing
transaction or otherwise) as of such date. Any gain or loss recognized as a
consequence of the year-end deemed disposition of Section 1256 contracts is
combined with any other gain or loss that was previously recognized upon the
termination of Section 1256 contracts during that taxable year. The net amount
of such gain or loss for the entire taxable year (including gain or loss arising
as a consequence of the year-end deemed sale of such contracts) is deemed to be
60% long-term (taxable at a maximum rate of 20% for non-corporate shareholders)
and 40% short-term gain or loss. However, in the case of Section 1256 contracts
that are forward foreign currency exchange contracts, the net gain or loss is
separately determined and (as discussed above) generally treated as ordinary
income or loss.
Other hedging transactions that may be engaged in by the Fund (such as
short sales "against the box") may be subject to special tax treatment as
"constructive sales" under section 1259 of the Code if a Fund holds certain
"appreciated financial positions" (defined generally as any interest (including
a futures or forward contract, short sale or option) with respect to stock,
certain debt instruments, or partnership interests if there would be a gain were
such interest sold, assigned, or otherwise terminated at its fair market value).
Upon entering into a constructive sales transaction with respect to an
appreciated financial position, a Fund will be deemed to have constructively
sold such appreciated financial position and will recognize gain as if such
position were sold, assigned, or otherwise terminated at its fair market value
on the date of such constructive sale (and will take into account any gain for
the taxable year which includes such date) unless the closed transaction
exception applies.
Because application of the rules governing Section 1256 contracts and
constructive sales may affect the character of gains or losses and/or accelerate
the recognition of gains or losses from the affected investment positions, the
amount which must be distributed to shareholders and which will be taxed to
shareholders as ordinary income or long-term capital gain may be increased as
compared to a fund that did not engage in transactions involving Section 1256
contracts or constructive sales.
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<PAGE> 31
EXCISE TAX ON REGULATED INVESTMENT COMPANIES
A 4% non-deductible excise tax is imposed on regulated investment
companies that fail to distribute in each calendar year an amount equal to 98%
of ordinary taxable income for the calendar year and 98% of capital gain net
income for the one-year period ended on October 31 of such calendar year (or, at
the election of a regulated investment company having a taxable year ending
November 30 or December 31, for its taxable year (a "taxable year election")).
The balance of such income must be distributed during the next calendar year.
For the foregoing purposes, a regulated investment company is treated as having
distributed any amount on which it is subject to income tax for any taxable year
ending in such calendar year.
For purposes of the excise tax, a regulated investment company must (1)
reduce its capital gain net income (but not below its net capital gain) by the
amount of any net ordinary loss for any calendar year and (2) unless it has made
a taxable year election, exclude foreign currency gains and losses incurred
after October 31 of any year in determining the amount of ordinary taxable
income for the current calendar year (and, instead, include such gains and
losses in determining ordinary taxable income for the succeeding calendar year).
The Fund intends to make sufficient distributions or deemed
distributions of its ordinary taxable income and capital gain net income prior
to the end of each calendar year to avoid liability for the excise tax. However,
in the event that the Internal Revenue Service determines that the Fund is using
an improper method of allocation for purposes of equalization accounting (as
discussed above), such Fund may be liable for excise tax. Moreover, investors
should note that the Fund may in certain circumstances be required to liquidate
portfolio investments to make sufficient distributions to avoid excise tax
liability.
FUND DISTRIBUTIONS
The Fund anticipates distributing substantially all of its investment
company taxable income for each taxable year. Such distributions will be taxable
to shareholders as ordinary income and treated as dividends for federal income
tax purposes, but they will qualify for the 70% dividends received deduction for
corporations only to the extent discussed below.
The Fund may either retain or distribute to shareholders its net capital
gain for each taxable year. The Fund currently intends to distribute any such
amounts. If net capital gain is distributed and designated as a capital gain
dividend, it will be taxable to shareholders as long-term capital gain (taxable
at a maximum rate of 20%), regardless of the length of time the shareholder has
held his shares or whether such gain was recognized by the Fund prior to the
date on which the shareholder acquired his shares. If the Fund elects to use
equalization accounting, however, a shareholder will be less likely to be taxed
on gain recognized prior to the date the shareholder acquires his shares since
such gain will in many cases have been allocated to shares of the Fund that have
previously been redeemed. Conversely, if the Fund elects to retain its net
capital gain, the Fund will be taxed thereon (except to the extent of any
available capital loss carryovers) at the 35% corporate tax rate. If the Fund
elects to retain its net capital gain, it is expected that the Fund also will
elect to have shareholders treated as if each received a distribution of its pro
rata share of such gain, with the result that each shareholder will be required
to report its pro rata share of such gain on its tax return as long-term capital
gain, will receive a refundable tax credit for its pro rata share of tax paid by
the Fund on the gain, and will increase the tax basis for its shares by an
amount equal to the deemed distribution less the tax credit.
Ordinary income dividends paid by the Fund with respect to a taxable
year will qualify for the 70% dividends received deduction generally available
to corporations (other than corporations, such as "S" corporations, which are
not eligible for the deduction because of their special characteristics and
other than for purposes of special taxes such as the accumulated earnings tax
and the personal holding company tax) to the extent of the amount of qualifying
dividends received by the Fund from domestic corporations for the taxable year.
A dividend received by the Fund will not be treated as a qualifying dividend (a)
if it has been received with respect to any share of stock that the Fund has
held for less than 46 days (91 days in the case of certain preferred stock),
excluding for this purpose under the rules of Code Section 246(c)(3)and(4) (i)
any day more than 45 days (or 90 days in the case of certain preferred stock)
after the date on which the stock
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<PAGE> 32
becomes ex-dividend, and (ii) any period during which the Fund has an option to
sell, is under a contractual obligation to sell, has made and not closed a short
sale of, has granted certain options to buy or has otherwise diminished its risk
of loss by holding other positions with respect to, such (or substantially
identical) stock; (b) to the extent that the Fund is under an obligation
(pursuant to a short sale or otherwise) to make related payments with respect to
positions in substantially similar or related property; or (c) to the extent the
stock on which the dividend is paid is treated as debt-financed under the rules
of Code Section 246A. Moreover, the dividends received deduction for a corporate
shareholder may be disallowed or reduced (a) if the corporate shareholder fails
to satisfy the foregoing requirements with respect to its shares of the Fund, or
(b) by application of Code Section 246(b) which in general limits the dividends
received deduction to 70% of the shareholder's taxable income (determined
without regard to the dividends received deduction and certain other items).
Alternative minimum tax ("AMT") is imposed in addition to, but only to
the extent it exceeds, the regular tax and is computed at a maximum rate of 28%
for non-corporate taxpayers and 20% for corporate taxpayers on the excess of the
taxpayer's alternative minimum taxable income ("AMTI") over an exemption amount.
The corporate dividends received deduction is not itself an item of tax
preference that must be added back to taxable income or is otherwise disallowed
in determining a corporation's AMTI. However, corporate shareholders will
generally be required to take the full amount of any dividend received from the
Fund into account (without a dividend received deduction) in determining their
adjusted current earnings, which are used in computing an additional corporate
preference item (i.e., 75% of the excess of a corporate taxpayer's adjusted
current earnings over its AMTI (determined without regard to this item and the
AMTI net operating loss deduction)) that is includable in AMTI. For taxable
years beginning after 1997, however, certain small corporations are wholly
exempt from the AMT.
Investment income that may be received by certain of the Funds from
sources within foreign countries may be subject to foreign taxes withheld at the
source. The United States has entered into tax treaties with many foreign
countries which entitle any such Funds to a reduced rate of, or exemption from,
taxes on such income. It is impossible to determine the effective rate of
foreign tax in advance since the amount of any such Fund's assets to be invested
in various countries is not known.
Distributions by the Fund that do not constitute ordinary income
dividends or capital gain dividends will be treated as a return of capital to
the extent of (and in reduction of) the shareholder's tax basis in his shares;
any excess will be treated as gain from the sale of his shares, as discussed
below.
Distributions by the Fund will be treated in the manner described above
regardless of whether such distributions are paid in cash or reinvested in
additional shares of the Fund. Shareholders receiving a distribution in the form
of additional shares will be treated as receiving a distribution in an amount
equal to the fair market value of the shares received, determined as of the
reinvestment date.
In addition, if the net asset value at the time a shareholder purchases
shares of the Fund reflects undistributed net investment income or recognized
capital gain net income, or unrealized appreciation in the value of the assets
of the Fund, distributions of such amounts will be taxable to the shareholder in
the manner described above, although such distributions economically constitute
a return of capital to the shareholder.
Ordinarily, shareholders are required to take distributions by the Fund
into account in the year in which the distributions are made. However, dividends
declared in October, November or December of any year and payable to
shareholders of record on a specified date in such a month will be deemed to
have been received by the shareholders (and made by the Fund) on December 31 of
such calendar year if such dividends are actually paid in January of the
following year. Shareholders will be advised annually as to the U.S. federal
income tax consequences of distributions made (or deemed made) during the year
in accordance with the guidance that has been provided by the Internal Revenue
Service ("IRS").
The Fund will be required in certain cases to withhold and remit to the
U.S. Treasury 31% of ordinary income dividends and capital gain dividends, and
the proceeds of redemption of shares, paid to any
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<PAGE> 33
shareholder (1) who has provided either an incorrect tax identification number
or no number at all, (2) who is subject to backup withholding by the Internal
Revenue Service for failure to report the receipt of interest or dividend income
properly, or (3) who has failed to certify to the Fund that he is not subject to
backup withholding or that it is an "exempt recipient."
SALE OR REDEMPTION OF FUND SHARES
A shareholder will recognize gain or loss on the sale or redemption of
shares of the Fund in an amount equal to the difference between the proceeds of
the sale or redemption and the shareholder's adjusted tax basis in the shares.
All or a portion of any loss so recognized may be disallowed if the shareholder
purchases other shares of the Fund within 30 days before or after the sale or
redemption. In general, any gain or loss arising from (or treated as arising
from) the sale or redemption of shares of the Fund will be considered capital
gain or loss and will be long-term capital gain or loss if the shares were held
for longer than one year. Except to the extent otherwise provided in future
Treasury regulations, any long-term capital gain recognized by a non-corporate
shareholder will be subject to tax at a maximum rate of 20%. However, any
capital loss arising from the sale or redemption of shares held for six months
or less will be treated as a long-term capital loss to the extent of the amount
of capital gain dividends received on such shares. For this purpose, the special
holding period rules of Code Section 246(c)(3) and (4) generally will apply in
determining the holding period of shares. Long-term capital gains of
noncorporate taxpayers are currently taxed at a maximum rate that in some cases
may be 19.6% lower than the maximum rate applicable to ordinary income. Capital
losses in any year are deductible only to the extent of capital gains plus, in
the case of a noncorporate taxpayer, $3,000 of ordinary income.
If a shareholder (i) incurs a sales load in acquiring shares of the
Fund, (ii) disposes of such shares less than 91 days after they are acquired and
(iii) subsequently acquires shares of the same or another Fund at a reduced
sales load pursuant to a right to reinvest at such reduced sales load acquired
in connection with the acquisition of the shares disposed of, then the sales
load on the shares disposed of (to the extent of the reduction in the sales load
on the shares subsequently acquired) shall not be taken into account in
determining gain or loss on the shares disposed of but shall be treated as
incurred on the acquisition of the shares subsequently acquired.
FOREIGN SHAREHOLDERS
Taxation of a shareholder who, as to the United States, is a nonresident
alien individual, foreign trust or estate ("foreign shareholder"), depends on
whether the income from the Fund is "effectively connected" with a U.S. trade or
business carried on by such shareholder. If the income from the Fund is not
effectively connected with a U.S. trade or business carried on by a foreign
shareholder, ordinary income dividends will be subject to U.S. withholding tax
at the rate of 30% (or lower treaty rate) upon the gross amount of the dividend.
Such a foreign shareholder would generally be exempt from U.S. federal income
tax on gains realized on the sale of shares of the Fund, capital gain dividends
and amounts retained by the Fund that are designated as undistributed capital
gains.
If the income from the Fund is effectively connected with a U.S. trade
or business carried on by a foreign shareholder, then ordinary income dividends,
capital gain dividends and any gains realized upon the sale of shares of the
Fund will be subject to U.S. federal income tax at the rates applicable to U.S.
citizens or domestic corporations.
In the case of foreign shareholders, the Fund may be required to
withhold U.S. federal income tax at a rate of 31% on distributions that are
otherwise exempt from withholding tax (or taxable at a reduced treaty rate)
unless such shareholders furnish the Fund with proper notification of their
foreign status.
Foreign persons who file a United States tax return after December 31,
1996, for a U.S. Tax refund and who are not eligible to obtain a social security
number must apply to the IRS for an individual taxpayer
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<PAGE> 34
identification number, using IRS Form W-7. For a copy of the IRS Form W-7 and
accompanying instructions, please contact your tax advisor.
The tax consequences to a foreign shareholder entitled to claim the
benefits of an applicable tax treaty may be different from those described
herein. Foreign shareholders are urged to consult their own tax advisers with
respect to the particular tax consequences to them of an investment in the Fund,
including the applicability of foreign taxes.
EFFECT OF FUTURE LEGISLATION; LOCAL TAX CONSIDERATIONS
The foregoing general discussion of U.S. federal income tax consequences
is based on the Code and the regulations issued thereunder as in effect on the
date of this Statement of Additional Information. Future legislative or
administrative changes or court decisions may significantly change the
conclusions expressed herein, and any such changes or decisions may have a
retroactive effect with respect to the transactions contemplated herein.
Rules of state and local taxation of ordinary income dividends and
capital gain dividends from regulated investment companies often differ from the
rules for U.S. federal income taxation described above. Shareholders are urged
to consult their tax advisers as to the consequences of these and other state
and local tax rules affecting investment in the Fund.
SHARE PURCHASES, REDEMPTIONS AND REPURCHASES
PURCHASES AND REDEMPTIONS
The terms of offering of shares of the Class and the methods of
accomplishing redemption are set forth in full in the Class' Prospectus and in
the Plan's Prospectus.
SUSPENSION OF RIGHT OF REDEMPTION
The right of redemption may be suspended or the date of payment
postponed when (a) trading on the New York Stock Exchange (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 disposal of portfolio securities or the
valuation of the net assets of the Fund not reasonably practicable.
VALUATION OF SHARES
In accordance with the current rules and regulations of the SEC, the net
asset value of a Fund share is determined as of the close of trading of the NYSE
(generally 4:00 p.m. Eastern Time) on each day in which the NYSE is open for
trading. Net asset value is determined by dividing the value of the Fund's
securities, cash and other assets (including accrued expenses but excluding
capital and surplus), by the number of shares outstanding. 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 share is determined as of the close of the NYSE on such
day. Determination of the Fund's net asset value per share is made in accordance
with generally accepted accounting principles. Portfolio securities are valued
using market values, if available. For purposes of determining net asset value
per share, futures and options contract closing prices which are available 15
minutes after the close of trading of the NYSE are generally used. The net asset
values per share of the Class and Class II Shares of the Fund will differ from
each other because different expenses are attributable to each class. The income
or loss and the expenses (except those listed below) of the Fund are allocated
to each class on the basis of the net assets of the Fund allocable to each such
class, calculated as of the close of business on the previous business day, as
adjusted for the current day's shareholder activity of each class. Distribution,
service fees and transfer agency fees (to the extent different rates are charged
to different classes) and certain other fees are allocated
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<PAGE> 35
only to the class to which such expenses relate. The net asset value per share
of the Class is determined by subtracting the liabilities (e.g., the expenses)
of the Fund allocated to the Class from the assets of the Fund allocated to the
Class and dividing the result by the total number of shares outstanding of the
Class. Determination of the Fund's net asset value per share is made in
accordance with generally accepted accounting principles.
A security listed or traded on an exchange (except convertible bonds) is
valued at its last sale price on the exchange where the security is principally
traded, or lacking any sales on a particular day, the security is valued at the
closing bid price on that day. Each security traded in the over-the-counter
market (but not including securities reported on the NASDAQ National Market
System) is valued on the basis of prices provided by independent pricing
services. Each security reported on the NASDAQ National Market System is valued
at the last sale price on the valuation date, or absent a last sales price, at
the closing bid price on that day, option contracts are valued at the mean
between the closing bid and asked prices on the exchange where the contracts are
principally traded; and futures contracts are valued at final settlement price
quotations from the primary exchange on which they are traded. Debt obligations
(including convertible bonds) are valued on the basis of prices provided by an
independent pricing service. Prices provided by the independent pricing service
may be determined without exclusive reliance on quoted prices, and may reflect
appropriate factors such as dividend rate, yield, type of issue, coupon rate and
maturity. Securities for which market quotations are not readily available or
for which market quotations are not reflective of fair market value are valued
at fair value as determined in good faith by or under the supervision of the
Fund's officers in a manner specifically authorized by the Board of Directors of
the Fund. Notwithstanding the above, short-term obligations with maturities of
60 days or less are valued at amortized cost which approximates market value.
Generally, trading in foreign securities, as well as 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 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
will 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.
THE DISTRIBUTION AGREEMENT
The Fund has entered into a Distribution Agreement (the "Distribution
Agreement") with AIM Distributors, a registered broker-dealer and a wholly owned
subsidiary of AIM, which in turn is a wholly owned subsidiary of AIM Management,
under which the Fund will issue shares at net asset value primarily to State
Street Bank and Trust Company, as custodian for the Plan ("State Street Bank" or
the "Custodian"). The address of AIM Distributors is P.O. Box 4264, Houston,
Texas 77210-4264. AIM Distributors acts as sponsor and principal underwriter of
the Plan. AIM Distributors does not receive any fee from the Fund pursuant to
the Distribution Agreement. The Distribution Agreement provides that AIM
Distributors will pay promotional expenses, including the incremental costs of
printing prospectuses, statements of additional information, annual reports and
other periodic reports for distribution to persons who are not shareholders of
the Fund and the costs of preparing and distributing any other supplemental
sales literature. AIM Distributors has not undertaken to sell any specified
number of shares of the Fund. The Fund or AIM Distributors may terminate the
Distribution Agreement on 60 days' written notice without penalty. The
Distribution Agreement will terminate automatically in the event of assignment.
Certain directors and officers of the Fund are affiliated with AIM Distributors
and AIM Management.
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<PAGE> 36
INVESTMENT STRATEGIES AND RISKS
Consistent with the Fund's objective of capital growth, the Fund's
assets will tend to be fully invested in:
1. Core Stocks -- These are securities issued by companies which
have established a long-term record of earnings growth and which are
believed by AIM, as the Fund's advisor, to be capable of sustaining such
growth in the future. Generally (but not always) the common stocks of
these companies will be listed on a national securities exchange.
2. Emerging Growth Stocks -- These securities are issued by
smaller growth-oriented companies. The securities of a number of such
companies are traded only in the over-the-counter market. Such
securities may not have widespread interest among institutional
investors. Accordingly, such securities may present increased
opportunity for gain if significant institutional investor interest
subsequently develops, but may also involve additional risk of loss in
the event of adverse developments because of the limited market for such
securities. The business prospects and earnings of emerging growth
companies may be subject to more rapid or unanticipated changes than in
the case of larger, better established concerns.
3. Value-Oriented Stocks -- These are stocks which are believed
to be currently undervalued relative to other available investments.
Since this belief may be based upon projections made by the Fund's
advisor or sub-advisor of earnings, dividends or price-earnings ratios
(which projections may differ significantly from similar projections
made by other investors), the Fund's ability to realize capital
appreciation on value-oriented stocks may be more dependent upon the
advisor's and sub-advisor's capabilities than is the case with other
types of securities in which the Fund may invest.
In anticipation of or in response to adverse market conditions or for
cash management purposes, the Fund may hold all or a portion of its assets in
cash, money market securities, bond or other debt securities. As a result, the
Fund may not achieve its investment objective. Such money market instruments
will consist of obligations of, or guaranteed by, the United States Government
or its agencies or instrumentalities; certificates of deposit, bankers'
acceptances, time deposits, master notes and other obligations of domestic banks
having total assets of at least $500 million; and commercial paper rated in the
highest category by a nationally recognized statistical rating organization.
The Fund may make short sales or maintain a short position in securities
if at all times when such a short position is open the Fund owns at least an
equal amount of such securities or securities convertible into or exchangeable
at no added cost for at least an equal amount of such securities.
The receipt by the Fund of new money primarily through the medium of
continuing investments under systematic investment plans may tend to produce a
more even rate of influx than is the case with other funds. This may furnish a
base for a gradual and planned accumulation of positions in individual portfolio
securities when such a program is deemed to be appropriate. One example of how
this concept could be employed is through a program of "dollar-cost averaging"
in the purchase of securities for the Class. "Dollar-cost averaging" involves
the purchase of a fixed dollar amount of stock of a company at regular
intervals. The number of shares of stock obtained upon each purchase will
therefore vary with the price of the stock, with more shares being obtained as
the price to the stock declines and fewer shares being obtained as the price of
the stock increases. Such a program could be hampered by increased redemptions
of the Fund's shares which would reduce amounts available for investment by the
Fund.
As of February 1, 1998, no person owned of record or is known by the
Fund to own of record or beneficially 5% or more of the Class' outstanding
equity securities. As of February 1, 1999, the directors and officers of the
Fund as a group owned beneficially less than 1% of each Class of the Fund's
outstanding shares.
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<PAGE> 37
INVESTMENT PROGRAM
The Fund's investment objective and the methods by which the Fund seeks
to achieve that objective is set forth in the Prospectus under the caption
"Investment Objective and Strategies" and "Principal Risks of Investing in the
Fund." It is the current policy of the Fund not to purchase or own the common
stock of any company which, in the opinion of AIM, derives a substantial portion
of its revenues from the manufacture of alcoholic beverages or tobacco products
or the operation of gambling establishments. In the opinion of management based
upon current conditions, such policy will not have a significant effect on the
investment performance of the Fund. This policy may be modified or rescinded by
the Fund's Board of Directors without shareholder approval.
COMMON STOCKS
The Fund may invest in common stocks. Common stocks represent the
residual ownership interest in the issuer and are entitled to the income and
increase in the value of the assets and business of the entity after all of its
obligations and preferred stocks are satisfied. Common stocks generally have
voting rights. Common stocks fluctuate in price in response to many factors
including historical and prospective earnings of the issuer, the value of its
assets, general economic conditions, interest rates, investor perceptions and
market liquidity.
PREFERRED STOCKS
The Fund may invest in preferred stocks. Preferred stock has a
preference over common stock in liquidation (and generally dividends as well)
but is subordinated to the liabilities of the issuer in all respects. As a
general rule the market value of preferred stock with a fixed dividend rate and
no conversion element varies inversely with interest rates and perceived credit
risk, while the market price of convertible preferred stock generally also
reflects some element of conversion value. Because preferred stock is junior to
debt securities and other obligations of the issuer, deterioration in the credit
quality of the issuer will cause greater changes in the value of a preferred
stock than in a more senior debt security with similar stated yield
characteristics. Unlike interest payments on debt securities, preferred stock
dividends are payable only if declared by the issuer's board of directors.
Preferred stock also may be subject to optional or mandatory redemption
provisions.
CONVERTIBLE SECURITIES
The Fund may invest in convertible securities. A convertible security is
a bond, debenture, note, preferred stock or other security that may be converted
into or exchanged for a prescribed amount of common stock or other equity
security of the same or a different issuer within a particular period of time at
a specified price or formula. A convertible security entitles the holder to
receive interest paid or accrued on debt or the dividend paid on preferred stock
until the convertible security matures or is redeemed, converted or exchanged.
Before conversion, convertible securities have characteristics similar to
nonconvertible income securities in that they ordinarily provide a stable stream
of income with generally higher yields than those of common stocks of the same
or similar issuers. Convertible securities rank senior to common stock in a
corporation's capital structure but are usually subordinated to comparable
nonconvertible securities. Convertible securities may be subject to redemption
at the option of the issuer at a price established in the convertible
security's governing instrument. Although the Fund will only purchase
convertible securities that AIM considers to have adequate protection
parameters, including an adequate capacity to pay interest and repay principal
in a timely manner, it invests without regard to corporate bond ratings.
CORPORATE DEBT SECURITIES
The Fund may invest in corporate debt securities. Corporations issue
debt securities of various types, including bonds and debentures (which are
long-term), notes (which may be short- or long-term), bankers acceptances
(indirectly secured borrowings to facilitate commercial transactions) and
commercial paper (short-term unsecured notes). These securities typically
provide for periodic payments of interest, at a rate which may be fixed or
adjustable, with payment of principal upon maturity and are generally not
secured by
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<PAGE> 38
assets of the issuer or otherwise guaranteed. The values of fixed rate income
securities tend to vary inversely with changes in interest rates, with
longer-term securities generally being more volatile than shorter-term
securities. Corporate securities frequently are subject to call provisions that
entitle the issuer to repurchase such securities at a predetermined price prior
to their stated maturity. In the event that a security is called during a period
of declining interest rates, the Fund may be required to reinvest the proceeds
in securities having a lower yield. In addition, in the event that a security
was purchased at a premium over the call price, the Fund will experience a
capital loss if the security is called. Adjustable rate corporate debt
securities may have interest rate caps and floors.
U.S. GOVERNMENT SECURITIES
The Fund may invest in securities issued or guaranteed by the United
States government or its agencies or instrumentalities. These include Treasury
securities (bills, notes, bonds and other debt securities) which differ only in
their interest rates, maturities and times of issuance. U.S. Government agency
and instrumentality securities include securities which are supported by the
full faith and credit of the U.S., securities that are supported by the right of
the agency to borrow from the U.S. Treasury, securities that are supported by
the discretionary authority of the U.S. Government to purchase certain
obligations of the agency or instrumentality and securities that are supported
only by the credit of such agencies. While the U.S. Government may provide
financial support to such U.S. government-sponsored agencies or
instrumentalities, no assurance can be given that it always will do so. The U.S.
government, its' agencies and instrumentalities do not guarantee the market
value of their securities and consequently the values of such securities
fluctuate.
REAL ESTATE INVESTMENT TRUSTS ("REITS")
The Fund may invest in equity and/or debt securities issued by REITs.
Such investments will not exceed 10% of the total assets of the Fund.
REITs are trusts which sell equity or debt securities to investors and
use the proceeds to invests in real estate or interests therein. A REIT may
focus on particular projects, such as apartment complexes, or geographic
regions, such as the Southeastern United States, or both.
To the extent that the Fund has the ability to invest in REITs, the Fund
could conceivably own real estate directly as a result of a default on the
securities it owns. The Fund, therefore, may be subject to certain risks
associated with the direct ownership of real estate including difficulties in
valuing and trading real estate, declines in the value of real estate, risks
related to general and local economic condition, adverse change in the climate
for real estate, environmental liability risks, increases in property taxes and
operating expense, changes in zoning laws, casualty or condemnation losses,
limitations on rents, changes in neighborhood values, the appeal of properties
to tenants, and increases in interest rates.
In addition to the risks described above, equity REITs may be affected
by and changes in the value of the underlying property owned by the trusts,
while mortgage REITs may be affected by the quality of any credit extended.
Equity and mortgage REITs are dependent upon management skill, are not
diversified, and are therefore subject to the risk of financing single or a
limited number of projects. Such trusts are also subject to heavy cash flow
dependency, defaults by borrowers, self-liquidation, and the possibility of
failing to maintain exemption from the 1940 Act. Changes in interest rates may
also affect the value of debt securities held by the Fund. By investing in REITs
indirectly through the Fund, a shareholder will bear not only his/her
proportionate share of the expenses of the Fund, but also, indirectly, similar
expenses of the REITs.
WARRANTS
The Fund may, from time to time, invest in warrants. Warrants are, in
effect, longer-term call options. They give the holder the right to purchase a
given number of shares of a particular company at specified prices within
certain periods of time. The purchaser of a warrant expects that the market
price of the security will exceed the purchase price of the warrant plus the
exercise price of the warrant, thus giving him a profit. Of
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<PAGE> 39
course, since the market price may never exceed the exercise price before the
expiration date of the warrant, the purchaser of the warrant risks the loss of
the entire purchase price of the warrant. Warrants generally trade in the open
market and may be sold rather than exercised. Warrants are sometimes sold in
unit form with other securities of an issuer. Units of warrants and common stock
may be employed in financing young, unseasoned companies. The purchase price of
a warrant varies with the exercise price of a warrant, the current market value
of the underlying security, the life of the warrant and various other investment
factors.
FOREIGN SECURITIES
The Fund has reserved the investment flexibility to invest up to 20% of
its total assets in foreign securities. 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. The Fund 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. The Fund may also
purchase securities of foreign issuers which are in the form of American
Depository Receipts ("ADRs"), European Depository receipts ("EDRs"), or other
securities representing underlying securities of foreign issuers. ADRs, EDRs,
and other securities representing underlying securities of foreign issuers are
included in the percentage limitations applicable to the Fund's investments in
foreign securities. To the extent it invests in securities denominated in
foreign currencies, the Fund bears the risks of changes in the exchange rates
between U.S. currency and the foreign currency, as well as the availability and
status of foreign securities markets.
Investments by the Fund in foreign securities, whether denominated in
U.S. dollars or foreign currencies including Eurodollar, Yankee dollar and other
foreign obligations, may entail some or all of the risks set forth below.
Investments by the Fund in ADRs and EDRs may entail certain political and
economic risks and regulatory risks described below.
Currency Risk. The value of the Fund'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.
Political and Economic Risk. The economies of many of the countries in
which the Fund may invest are not as developed as the United States economy and
may be subject to significantly different economic and political forces.
Political or social instability, expropriation or confiscatory taxation, and
limitations on the removal of funds or other assets could also adversely affect
the value of the Fund'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. In addition, income from foreign
securities owned by the Fund may be reduced by a withholding tax at the source,
which tax would reduce dividend income payable to the Fund's shareholders.
Market Risk. The securities markets in many of the countries in which
the Fund may 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
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<PAGE> 40
be associated with the maintenance of assets in foreign jurisdictions. There is
generally less government regulation and supervision of foreign stock exchanges,
brokers and issuers which may make it difficult to enforce contractual
obligations. In addition, transaction costs in foreign securities markets are
likely to be higher, since brokerage commission rates in foreign countries are
likely to be higher than in the United States.
On January 1, 1999, certain members of the European Economic and
Monetary Union ("EMU"), namely Austria, Belgium, Finland, France, Germany,
Ireland, Italy, Luxembourg, the Netherlands, Portugal, and Spain established a
common European currency known as the "euro" and each member's local currency
became a denomination of the euro. It is anticipated that each participating
country will replace its local currency with the euro on July 1, 2002. Any other
European country that is a member of the European Union and satisfies the
criteria for participation in the EMU may elect to participate in the EMU and
may supplement its existing currency with the euro. The anticipated replacement
of existing currencies with the euro on July 1, 2002 could cause market
disruptions before or after July 1, 2002 and could adversely affect the value of
securities held by the Fund.
FOREIGN EXCHANGE TRANSACTIONS
Purchases and sales of foreign securities are usually made with foreign
currencies, and consequently the Fund may from time to time hold cash balances
in the form of foreign currencies and multinational currency units. Such foreign
currencies and multinational currency units will usually be acquired on a spot
(i.e. cash) basis at the spot rate prevailing in foreign exchange markets and
will result in currency conversion costs to the Fund. The Fund attempts to
purchase and sell foreign currencies on as favorable a basis as practicable;
however, some price spread on foreign exchange transactions (to cover service
charges) may be incurred, particularly when the Fund changes investments from
one country to another, or when U.S. dollars are used to purchase foreign
securities. Certain countries could adopt policies which would prevent the Fund
from transferring cash out of such countries, and the Fund may be affected
either favorably or unfavorably by fluctuations in relative exchange rates while
the Fund holds foreign currencies.
REPURCHASE AGREEMENTS
The Fund may enter into repurchase agreements. A repurchase agreement is
an instrument under which the Fund acquires ownership of a debt security and the
seller (usually a broker or a bank) agrees, at the time of the sale, to
repurchase the obligation at a mutually agreed upon time and price, thereby
determining the yield during the Fund's holding period. In the event of
bankruptcy or other default of a seller of a repurchase agreement, the Fund may
experience both delays in liquidating the underlying securities and losses,
including: (a) a possible decline in the value of the underlying security during
the period in which the Fund seeks to enforce its rights thereto; (b) a possible
subnormal level of income and lack of access to income during this period; and
(c) expenses of enforcing its rights. A repurchase agreement is collateralized
by the security acquired by the Fund and its value is marked to market daily in
order to minimize the Fund's risk. Repurchase agreements usually are for short
periods, such as one or two days, but may be entered into for longer periods of
time. Repurchase agreements are not included in the Fund's restrictions on
lending. Repurchase agreements are considered to be loans by the Fund under the
1940 Act.
RULE 144A SECURITIES
The Fund may purchase securities which, while privately placed, are
eligible for purchase and sale pursuant to Rule 144A under the Securities Act of
1933 (the "1933 Act"). This Rule permits certain qualified institutional buyers,
such as the Fund, to trade in privately placed securities even though such
securities are not registered under the 1933 Act. AIM, under the supervision of
the Fund's Board of Directors, will consider whether securities purchased under
Rule 144A are illiquid and thus subject to the Fund's restriction of investing
no more than 15% of its assets in illiquid securities. Determination of whether
a Rule 144A security is liquid or not is a question of fact. In making this
determination AIM will consider the trading markets for the specific security
taking into account the unregistered nature of a Rule 144A security. In
addition, AIM could consider the (i) frequency of trades and quotes, (ii) number
of dealers and potential purchasers, (iii) dealer undertakings
25
<PAGE> 41
to make a market, and (iv) nature of the security and of market place trades
(for example, the time needed to dispose of the security, the method of
soliciting offers and the mechanics of transfer). The liquidity of Rule 144A
securities will also be monitored by AIM and, if as a result of changed
conditions, it is determined that a Rule 144A security is no longer liquid, the
Fund's holdings of illiquid securities will be reviewed to determine what, if
any, action is required to assure that the Fund does not invest more than 15% of
its assets in illiquid securities. Investing in Rule 144A securities could have
the effect of increasing the amount of the Fund's investments in illiquid
securities if qualified institutional buyers are unwilling to purchase such
securities.
ILLIQUID SECURITIES
The Fund may invest up to 15% of its net assets in securities that are
illiquid. Illiquid securities include securities that have no readily available
market quotations and cannot be disposed of promptly (within seven days) in the
normal course of business at a price at which they are valued. Illiquid
securities may include securities that are subject to restrictions on resale
because they have not been registered under the Securities Act of 1933.
Restricted securities may, in certain circumstances, be resold pursuant to Rule
144A, and thus may or may not constitute illiquid securities. The Fund's Board
of Directors is responsible for developing and establishing guidelines and
procedures for determining the liquidity of Rule 144A restricted securities on
behalf of the Fund and monitoring AIM's implementation of the guidelines and
procedures. Limitations on the resale of restricted securities may have an
adverse effect on their marketability, which may prevent the Fund from disposing
of them promptly at reasonable prices. The Fund may have to bear the expense of
registering such securities for resale, and the risk of substantial delays in
effecting such registrations.
LENDING OF FUND SECURITIES
The Fund may also lend its portfolio securities in amounts up to 33 1/3%
of its total assets to financial institutions in accordance with the investment
restrictions of the Fund. Such loans would involve risks of delay in receiving
additional collateral in the event the value of the collateral decreased below
the value of the securities loaned or of delay in recovering the securities
loaned or even loss of rights in the collateral should the borrower of the
securities fail financially. However, loans will be made only when, in AIM's
judgment, the income to be earned from the loans justifies the attendant risks.
FUTURES CONTRACTS
The Fund may purchase and sell stock index futures contracts in order to
hedge the value of its portfolio against changes in market conditions. In cases
of purchases of stock index futures contracts, an amount of liquid assets, equal
to the cost of the stock index futures contracts (less any related margin
deposits), will be segregated to collateralize the position and ensure that the
use of such stock index futures contracts is unleveraged. Unlike when the Fund
purchases or sells a security, no price is paid or received by the Fund upon the
purchase or sale of a stock index futures contract. Initially, the Fund will be
required to deposit with its custodian for the account of the broker a stated
amount, as called for by the particular contract, of cash or U.S. Treasury
bills. This amount is known as "initial margin." The nature of initial margin in
futures transactions is different from that of margin in securities transactions
in that stock index futures contract margin does not involve the borrowing of
funds by the customer to finance the transactions. Rather, the initial margin is
in the nature of a performance bond or good faith deposit on the contract which
is returned to the Fund upon termination of the futures contract assuming all
contractual obligations have been satisfied. Subsequent payments, called
"variation margin," to and from the broker will be made on a daily basis as the
price of the stock index futures contract fluctuates making the long and short
positions in the futures contract more or less valuable, a process known as
"marking-to-market." For example, when the Fund has purchased a stock index
futures contract and the price of the underlying stock index has risen, that
position will have increased in value and the Fund will receive from the broker
a variation margin payment with respect to that increase in value. Conversely,
where the Fund has purchased a stock index futures contract and the price of the
underlying stock index has declined, that position would be less valuable and
the Fund would be required to make a variation margin payment to the broker. At
any time prior to expiration of the stock index futures contract, the Fund may
elect to close the position by taking an opposite position which will operate to
terminate the Fund's position in
26
<PAGE> 42
the stock index futures contract. A final determination of variation margin is
then made, additional cash is required to be paid by or released to the Fund and
the Fund realizes a loss or gain.
Stock Index Futures Contracts
A stock index assigns relative values to the common stocks included in
the index and the index fluctuates with changes in the market values of the
common stocks so included. A stock index futures contract is an agreement
pursuant to which two parties agree to take or make delivery of an amount of
cash equal to a specified dollar amount times the difference between the stock
index value at the close of the last trading day of the contract and the price
at which the futures contract is originally struck. No physical delivery of the
underlying stocks in the index is made. The Fund will only enter into domestic
stock index futures. Currently, stock index futures contracts can be purchased
or sold primarily with respect to broad based stock indices such as the S&P's
500 Stock Index, the NYSE Composite Index, the American Stock Exchange Major
Market Index, the NASDAQ - 100 Stock Index and the Value Line Stock Index. The
stock indices listed above consist of a spectrum of stocks not limited to any
one industry such as utility stocks. Utility stocks, at most, would be expected
to comprise a minority of the stocks comprising the portfolio of the index. The
Fund will only enter into stock index futures contracts as a hedge against
changes resulting from market conditions in the values of the securities held or
which it intends to purchase. When the Fund anticipates a significant market or
market sector advance, the purchase of a stock index futures contract affords a
hedge against not participating in such advance. Conversely, in anticipation of
or in a general market or market sector decline that adversely affects the
market values of the Fund's portfolio of securities, the Fund may sell stock
index futures contracts. Generally, the Fund may elect to close a position in a
futures contract by taking an opposite position which will operate to terminate
the Fund's position in the futures contract. The Fund may also write call
options with respect to such futures contracts. As the writer of a call option
on a futures contract, the Fund would be required to assume a short position in
a futures contract at a specified exercise price if the option is exercised
during the option period. If the option is exercised on the last trading date
prior to the expiration date of the option, the settlement of the option will be
made entirely in cash equal to the difference between the exercise price of the
option and the closing price of the underlying futures contract on the
expiration date. The Fund may purchase or sell futures contracts if, immediately
thereafter, the sum of the amount of initial margin deposits and premiums on
open positions with respect to futures contracts and related call options would
not exceed 5% of the market value of the Fund's total assets.
RISKS AS TO FUTURES CONTRACTS AND RELATED CALL OPTIONS
There are several risks in connection with the use of stock index
futures contracts and related call options as hedging devices. One risk arises
because of the imperfect correlation between movements in the price of hedging
instruments and movements in the price of the stocks, which are the subject of
the hedge. If the price of a hedging instrument moves less than the price of the
stocks, which are the subject of the hedge, the hedge will not be fully
effective. If the price of a hedging instrument moves more than the price of the
stocks, the Fund will experience either a loss or gain on the hedging instrument
which will not be completely offset by movements in the price of the stocks,
which are the subject of the hedge. The use of call options on futures contracts
involves the additional risk that changes in the value of the underlying futures
contract will not be fully reflected in the value of the call option.
Successful use of hedging instruments by the Fund is also subject to
AIM's ability to predict correctly movements in the direction of the stock
market, of interest rates or of particular stock indices. Because of possible
price distortions in the futures and options markets and because of the
imperfect correlation between movements in the prices of hedging instruments and
the investments being hedged, even a correct forecast by AIM of general market
trends may not result in a completely successful hedging transaction. AIM does
not intend to use hedging investments if the cost of these instruments exceed
their expected benefits to the Fund.
27
<PAGE> 43
It is also possible that where the Fund has sold stock index futures
contracts to hedge its portfolio against a decline in the market, the market may
advance and the value of stocks or debt securities held in its portfolio may
decline. If this occurred, the Fund would lose money on the stock index futures
contracts and also experience a decline in the value of its portfolio
securities.
Positions in futures contracts or options may be closed out only on an
exchange on which such contracts are traded. Although the Fund intends to
purchase or sell stock index futures contracts only on exchanges or boards of
trade where there appears to be an active market, there is no assurance that a
liquid market on an exchange or a board of trade will exist for any particular
contract at any particular time. If there is not a liquid market, it may not be
possible to close a stock index futures or option position at such time. In the
event of adverse price movements under those circumstances, the Fund would
continue to be required to make daily cash payments of maintenance margin on its
futures positions. The extent to which the Fund may engage in stock index
futures contracts will be limited by Internal Revenue Code requirements for
qualification as a regulated investment company and the Fund's intent to
continue to qualify as such. The result of a hedging program cannot be foreseen
and may cause the Fund to suffer losses which it would not otherwise sustain.
PORTFOLIO TURNOVER
Consistent with its objective of capital growth, the Fund does not
intend to engage in substantial short-term trading. However, the Fund reserves
the right to dispose of any security without regard to the period of time it has
been held and to take short-term or long-term profits when such action is
consistent with its investment program. The Fund's historical portfolio turnover
rates are included in the Financial Highlights table in the Prospectus. A higher
rate of portfolio turnover may result in higher transaction costs, including
brokerage commissions. The Fund's turnover may vary greatly from year to year
and may exceed 100% during years when the Fund has taken a significant defensive
position or otherwise makes changes in the investment strategies which it
pursues consistent with its overall investment objective. Also, to the extent
that higher portfolio turnover results in a higher rate of net realized capital
gains to the Fund, the portion of the Fund's distributions constituting taxable
capital gains may increase.
PORTFOLIO TRANSACTIONS AND BROKERAGE
General Brokerage Policy
AIM makes decisions to buy and sell securities for the Fund, selects
broker-dealers, effects the Fund's investment portfolio transactions, allocates
brokerage fees in such transactions, and where applicable, negotiates
commissions and spreads on transactions. AIM's primary consideration in
effecting a security transaction is to obtain the most favorable execution of
the order, which includes the best price on the security and a low commission
rate. While AIM seeks reasonably competitive commission rates, the Fund may not
pay the lowest commission or spread available. See "Section 28(e) Standards"
below.
Some of the securities in which the Fund invests are traded in
over-the-counter markets. In such transactions, the Fund deals directly with
dealers who make markets in the securities involved, except when better prices
are available elsewhere. Portfolio transactions placed through dealers who are
primary market makers are effected at net prices without commissions, but which
include compensation in the form of a mark up or mark down.
Traditionally, commission rates have not been negotiated on stock
markets outside the United States. Although in recent years many overseas stock
markets have adopted a system of negotiated rates, a number of markets maintain
an established schedule of minimum commission rates.
28
<PAGE> 44
AIM may determine target levels of commission business with various
brokers on behalf of its clients (including the Fund) over a certain time
period. The target levels will be based upon the following factors, among
others: (1) the execution services provided by the broker; (2) the research
services provided by the broker; and (3) the broker's interest in mutual funds
in general and in the Fund and other mutual funds advised by AIM or AIM Capital
(collectively, the "AIM Funds") in particular, including sales of the Fund and
of the other AIM Funds. In connection with (3) above, the Fund's trades may be
executed directly by dealers that sell shares of the AIM Funds or by other
broker-dealers with which such dealers have clearing arrangements. AIM will not
use a specific formula in connection with any of these considerations to
determine the target levels.
AIM will seek, whenever possible, to recapture for the benefit of the
Fund any commissions, fees, brokerage or similar payments paid by the Fund on
portfolio transactions. Normally, the only fees which AIM can recapture are the
soliciting dealer fees on the tender of a Fund's portfolio securities in a
tender or exchange offer.
The Fund may engage in certain principal and agency transactions with
banks and their affiliates that own 5% or more of the outstanding voting
securities of the Fund, provided the conditions of an exemptive order received
by the Fund from the SEC are met. In addition, the Fund may purchase or sell a
security from or to another AIM Fund provided the Fund follows procedures
adopted by the Boards of Directors/Trustees of the various AIM Funds, including
the Fund. These inter-fund transactions do not generate brokerage commissions
but may result in custodial fees or taxes or other related expenses.
Allocation of Portfolio Transactions
AIM and its affiliates manage several other investment accounts. Some of
these accounts may have investment objectives similar to the Fund. Occasionally,
identical securities will be appropriate for investment by the Fund and by
another AIM Fund or one or more of these investment accounts. However, the
position of each account in the same securities and the length of time that each
account may hold its investment in the same securities may vary. The timing and
amount of purchase by each account will also be determined by its cash position.
If the purchase or sale of securities is consistent with the investment policies
of the Fund(s) and one or more of these accounts, and is considered at or about
the same time, AIM will fairly allocate transactions in such securities among
the Fund(s) and these accounts. AIM may combine such transactions, in accordance
with applicable laws and regulations, to obtain the most favorable execution.
Simultaneous transactions could, however, adversely affect a Fund's ability to
obtain or dispose of the full amount of a security which it seeks to purchase or
sell.
Sometimes the procedure for allocating portfolio transactions among the
various investment accounts advised by AIM could have an adverse effect on the
price or amount of securities available to a Fund. In making such allocations,
AIM considers the investment objectives and policies of its advisory clients,
the relative size of portfolio holdings of the same or comparable securities,
the availability of cash for investment, the size of investment commitments
generally held, and the judgments of the persons responsible for recommending
the investment.
Section 28(e) Standards
Section 28(e) of the Securities Exchange Act of 1934 provides that AIM,
under certain circumstances, lawfully may cause an account to pay a higher
commission than the lowest available. Under Section 28(e), AIM must make a good
faith determination that the commissions paid are "reasonable in relation to the
value of the brokerage and research services provided ... viewed in terms of
either that particular transaction or [AIM's] overall responsibilities with
respect to the accounts as to which it exercises investment discretion." The
services provided by the broker also must lawfully and appropriately assist AIM
in the performance of its investment decision-making responsibilities.
Accordingly, in recognition of research services provided to it, the Fund may
pay a broker higher commissions than those available from another broker.
29
<PAGE> 45
Research services received from broker-dealers supplement AIM's own
research (and the research of its affiliates), and may include the following
types of information: statistical and background information on the U.S. and
foreign economies, industry groups and individual companies; forecasts and
interpretations with respect to the U.S. and foreign economies, securities,
markets, specific industry groups and individual companies; information on
federal, state, local and foreign political developments; portfolio management
strategies; performance information on securities, indexes and investment
accounts; information concerning prices of securities; and information supplied
by specialized services to AIM and to the Fund's directors with respect to the
performance, investment activities, and fees and expenses of other mutual funds.
Broker-dealers may communicate such information electronically, orally or in
written form. Research services may also include the providing of custody
services, as well as the providing of equipment used to communicate research
information, the providing of specialized consultations with AIM personnel with
respect to computerized systems and data furnished to AIM as a component of
other research services, the arranging of meetings with management of companies,
and the providing of access to consultants who supply research information.
The outside research assistance is useful to AIM since the
broker-dealers used by AIM tend to follow a broader universe of securities and
other matters than AIM's staff can follow. In addition, the research provides
AIM with a diverse perspective on financial markets. Research services provided
to AIM by broker-dealers are available for the benefit of all accounts managed
or advised by AIM or by its affiliates. Some broker-dealers may indicate that
the provision of research services is dependent upon the generation of certain
specified levels of commissions and underwriting concessions by AIM's clients,
including the Fund. However, the Fund is not under any obligation to deal with
any broker-dealer in the execution of transactions in portfolio securities.
In some cases, the research services are available only from the
broker-dealer providing them. In other cases, the research services may be
obtainable from alternative sources in return for cash payments. AIM believes
that the research services are beneficial in supplementing AIM's research and
analysis and that they improve the quality of AIM's investment advice. The
advisory fee paid by the Fund is not reduced because AIM receives such services.
However, to the extent that AIM would have purchased research services had they
not been provided by broker-dealers, the expenses to AIM could be considered to
have been reduced accordingly.
Transaction With Regular Brokers
As of October 31, 1998, the Fund held an amount of common stock issued
by Morgan Stanley & Co., Inc. and PaineWebber, Inc. having a market value of
$9,971,500 and $8,927,812, respectively. Both are regular brokers of the Fund,
as that term is defined in Rule 10b-1 under the 1940 Act.
Brokerage Commissions Paid
For the fiscal years ended October 31, 1998, 1997 and 1996, the Fund
paid brokerage commissions of $3,027,892, $2,573,656 and $3,138,280,
respectively. For the fiscal year ended October 31, 1998, AIM allocated certain
of the Fund's brokerage transactions to certain broker-dealers that provided AIM
with certain research, statistical and other information. Such transactions
amounted to $238,490,666 and the related brokerage commissions were $303,996.
No brokerage commissions were paid by the Fund to any broker who is an
affiliated person of the Fund, an affiliated person of such person or an
affiliated person of the Fund, the Fund's principal underwriter, or AIM.
Portfolio Turnover
The decrease in portfolio turnover rate from 1996 to 1997 resulted from
strong corporate earnings and thus a reduced need to restructure the Fund's
portfolio holdings.
30
<PAGE> 46
INVESTMENT RESTRICTIONS
The Fund's investment program is subject to a number of investment
restrictions which reflect self-imposed standards as well as federal and state
regulatory limitations. These restrictions are designed to minimize (but cannot
eliminate) certain risks associated with investing in specified types of
securities or engaging in certain transactions and to limit the amount of the
Fund's assets which may be concentrated in any specific industry or issue. The
most significant of these restrictions provide that the Fund will not purchase a
security if as a result of such purchase:
(1) More than 25% of the value of the Fund's total assets would be
invested in the securities of issuers primarily engaged in the
same industry, except that this restriction does not apply to
obligations issued or guaranteed by the United States Government
or its agencies or instrumentalities;
(2) More than 5% of the value of the Fund's total assets would be
invested in the securities of a single issuer, except that this
restriction does not apply to obligations issued or guaranteed by
the United States Government or its agencies or
instrumentalities, or repurchase agreements pertaining to such
securities, and except that the Fund may purchase securities of
other investment companies to the extent permitted by applicable
law or exemptive order; or
(3) The Fund would own more than 10% of the outstanding voting
securities of any issuer or more than 10% of any class of
securities of an issuer, with the debt and preferred stock of an
issuer each considered to be a separate single class for this
purpose, except that the Fund may purchase securities of other
investment companies to the extent permitted by applicable law or
exemptive order.
Also the Fund will not:
(4) Purchase or hold securities of any issuer if the Fund has
knowledge that the officers and directors of the Fund and its
investment advisor collectively own beneficially more than 5% of
the outstanding securities of such issuer. (Individual holdings
of less than 1/2 of 1% will not be counted for the purpose of
this restriction.)
(5) Borrow money or issue senior securities, except that the Fund may
borrow from banks for temporary or emergency purposes in amounts
up to 10% of the value of its total assets at the time of
borrowing. (This provision is included solely to facilitate the
orderly sale of portfolio securities to accommodate abnormally
heavy redemption requests if they should occur and is not for
leverage purposes. Any borrowings by the Fund will be repaid
prior to the purchase of additional portfolio securities.)
(6) Underwrite securities issued by any other person.
(7) Invest in real estate or purchase oil, gas or mineral interests,
except that this restriction does not apply to marketable
securities secured by real estate or interests therein or issued
by issuers which invest in real estate or interests therein, or
to securities issued by companies engaged in the exploration,
development, production, refining, transporting and marketing of
oil, gas or minerals.
(8) Buy or sell commodities or commodity futures contracts.
(9) Make loans of money or securities other than (a) through the
purchase of securities in accordance with the Fund's investment
program, and (b) by entering into repurchase agreements; provided
that the Fund may lend its portfolio securities so long as the
value of securities loaned by it does not exceed an amount equal
to 33 1/3% of the Fund's total assets.
31
<PAGE> 47
(10) Purchase securities on margin, except to the extent necessary for
the clearance of its securities transactions.
(11) Make short sales of securities or maintain a short position in
securities unless at all times when a short position is open, the
Fund owns at least an equal amount of such securities or owns
securities convertible into or exchangeable for at least an equal
amount of such securities, and unless not more than 10% of the
Fund's total assets (taken at current value) is held as
collateral for such short sales at any one time.
(12) Invest in companies for the purpose of exercising control or
management except that the Fund may purchase securities of other
investment companies to the extent permitted by applicable law or
exemptive order.
(13) Purchase or sell puts or purchase calls.
The foregoing percentage limitations will be calculated by giving effect
to such purchase and will be based upon values at the time of purchase. The Fund
may retain any security purchased by it notwithstanding changes in the value of
its assets occurring subsequent to the time of any such purchase.
The foregoing investment restrictions are matters of fundamental policy
which may not be changed without the vote of a majority of the Fund's
outstanding shares. In addition to the foregoing restrictions and subject to
amendment by the Board of Directors of the Fund, the Fund may not invest more
than 5% of its total assets in financial futures contracts or related call
options.
MISCELLANEOUS INFORMATION
SHAREHOLDER INQUIRIES
Shareholder inquiries concerning the status of an account should be
directed to AIM Distributors by calling (800) 995-4246.
LEGAL MATTERS
The law firm of Ballard Spahr Andrews & Ingersoll, LLP, Philadelphia,
Pennsylvania, serves as counsel to the Fund.
32
<PAGE> 48
FINANCIAL STATEMENTS
FS
<PAGE> 49
INDEPENDENT AUDITORS' REPORT
To the Shareholders and Board of Directors
AIM Summit Fund, Inc:
We have audited the accompanying statement of assets and
liabilities of the AIM Summit Fund, Inc., including the
schedule of investments, as of October 31, 1998, the
related statement of operations for the year then ended,
the statement of changes in net assets for each of the
years in the two-year period then ended, and financial
highlights for each of the years in the five-year period
then ended. These financial statements and financial
highlights are the responsibility of the Fund's
management. Our responsibility is to express an opinion
on these financial statements and financial highlights
based on our audits.
We conducted our audits in accordance with generally
accepted auditing standards. Those standards require that
we plan and perform the audit to obtain reasonable
assurance about whether the financial statements and
financial highlights are free of material misstatement.
An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial
statements. Our procedures included confirmation of
securities owned as of October 31, 1998, by
correspondence with the custodian and brokers. An audit
also includes assessing the accounting principles used
and significant estimates made by management, as well as
evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for
our opinion.
In our opinion, the financial statements and financial
highlights referred to above present fairly, in all
material respects, the financial position of AIM Summit
Fund, Inc. as of October 31, 1998, and the results of its
operations for the year then ended, the changes in its
net assets for each of the years in the two-year period
then ended, and the financial highlights for each of the
years in the five-year period then ended, in conformity
with generally accepted accounting principles.
/s/ KPMG PEAT MARWICK LLP
---------------------------------
KPMG Peat Marwick LLP
Houston, Texas
December 4, 1998
FS-1
<PAGE> 50
SCHEDULE OF INVESTMENTS
October 31, 1998
<TABLE>
<CAPTION>
MARKET
SHARES VALUE
<S> <C> <C>
DOMESTIC COMMON STOCKS-95.13%
AEROSPACE/DEFENSE-1.59%
General Dynamics Corp. 270,000 $ 15,980,625
- ---------------------------------------------------------------
Gulfstream Aerospace Corp.(a) 100,000 4,425,000
- ---------------------------------------------------------------
Sundstrand Corp. 185,000 8,683,438
- ---------------------------------------------------------------
29,089,063
- ---------------------------------------------------------------
AIRLINES-0.68%
Southwest Airlines Co. 60,000 1,271,250
- ---------------------------------------------------------------
UAL Corp. 173,000 11,234,188
- ---------------------------------------------------------------
12,505,438
- ---------------------------------------------------------------
AUTOMOBILES-0.67%
Ford Motor Co. 225,000 12,206,250
- ---------------------------------------------------------------
BANKS (MAJOR REGIONAL)-0.15%
Northern Trust Corp. 36,000 2,655,000
- ---------------------------------------------------------------
BANKS (REGIONAL)-0.51%
AmSouth Bancorporation 52,500 2,103,281
- ---------------------------------------------------------------
First Tennessee National Corp. 29,100 922,106
- ---------------------------------------------------------------
Hibernia Corp.-Class A 85,000 1,418,438
- ---------------------------------------------------------------
North Fork Bancorporation, Inc. 100,000 1,987,500
- ---------------------------------------------------------------
Star Banc Corp. 37,000 2,798,125
- ---------------------------------------------------------------
9,229,450
- ---------------------------------------------------------------
BIOTECHNOLOGY-1.15%
Amgen, Inc.(a) 112,000 8,799,000
- ---------------------------------------------------------------
Biogen, Inc.(a) 175,000 12,162,500
- ---------------------------------------------------------------
20,961,500
- ---------------------------------------------------------------
BROADCASTING (TELEVISION, RADIO & CABLE)-2.90%
Chancellor Media Corp.(a) 300,000 11,512,500
- ---------------------------------------------------------------
Clear Channel Communications,
Inc.(a) 80,000 3,645,000
- ---------------------------------------------------------------
Comcast Corp.-Class A 400,000 19,750,000
- ---------------------------------------------------------------
Liberty Media Group(a) 125,000 4,757,813
- ---------------------------------------------------------------
Tele-Communications, Inc.-Class
A(a) 300,000 12,637,500
- ---------------------------------------------------------------
Univision Communications, Inc.(a) 25,600 755,200
- ---------------------------------------------------------------
53,058,013
- ---------------------------------------------------------------
BUILDING MATERIALS-0.47%
USG Corp. 180,000 8,583,750
- ---------------------------------------------------------------
CHEMICALS-0.43%
Rohm & Haas Co. 231,600 7,816,500
- ---------------------------------------------------------------
COMMUNICATIONS EQUIPMENT-1.49%
Andrew Corp.(a) 19,300 316,037
- ---------------------------------------------------------------
General Instrument Corp.(a) 175,000 4,495,313
- ---------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
MARKET
SHARES VALUE
<S> <C> <C>
COMMUNICATIONS EQUIPMENT-(CONTINUED)
Lucent Technologies, Inc. 280,000 $ 22,452,500
- ---------------------------------------------------------------
27,263,850
- ---------------------------------------------------------------
COMPUTERS (HARDWARE)-5.50%
Apple Computer, Inc.(a) 150,000 5,568,750
- ---------------------------------------------------------------
Comdisco, Inc. 262,600 4,053,887
- ---------------------------------------------------------------
Dell Computer Corp.(a) 840,000 55,125,000
- ---------------------------------------------------------------
Gateway 2000, Inc.(a) 200,000 11,162,500
- ---------------------------------------------------------------
IDX Systems Corp.(a) 150,000 6,356,250
- ---------------------------------------------------------------
International Business Machines
Corp. 123,600 18,346,875
- ---------------------------------------------------------------
100,613,262
- ---------------------------------------------------------------
COMPUTERS (NETWORKING)-4.09%
3Com Corp.(a) 500,000 18,031,250
- ---------------------------------------------------------------
Ascend Communications, Inc.(a) 448,750 21,652,187
- ---------------------------------------------------------------
Broadcom Corp.(a) 140,000 11,611,250
- ---------------------------------------------------------------
Cisco Systems, Inc.(a) 375,000 23,625,000
- ---------------------------------------------------------------
74,919,687
- ---------------------------------------------------------------
COMPUTERS (PERIPHERALS)-2.71%
EMC Corp.(a) 400,000 25,750,000
- ---------------------------------------------------------------
Jabil Circuit, Inc.(a) 200,000 9,262,500
- ---------------------------------------------------------------
Lexmark International Group,
Inc.(a) 160,000 11,190,000
- ---------------------------------------------------------------
Storage Technology Corp.(a) 100,000 3,343,750
- ---------------------------------------------------------------
49,546,250
- ---------------------------------------------------------------
COMPUTERS (SOFTWARE & SERVICES)-13.77%
America Online, Inc. 220,000 27,953,750
- ---------------------------------------------------------------
Aspect Development, Inc.(a) 100,000 3,159,375
- ---------------------------------------------------------------
AT Home Corporation(a) 100,000 4,425,000
- ---------------------------------------------------------------
BMC Software, Inc.(a) 330,000 15,860,625
- ---------------------------------------------------------------
Cadence Design Systems, Inc.(a) 150,000 3,206,250
- ---------------------------------------------------------------
Citrix Systems, Inc.(a) 80,000 5,670,000
- ---------------------------------------------------------------
Computer Sciences Corp.(a) 130,000 6,857,500
- ---------------------------------------------------------------
Compuware Corp.(a) 460,000 24,926,250
- ---------------------------------------------------------------
Concord EFS, Inc.(a) 407,650 11,618,025
- ---------------------------------------------------------------
Electronic Arts, Inc.(a) 50,000 2,056,250
- ---------------------------------------------------------------
Electronics for Imaging, Inc.(a) 200,000 4,812,500
- ---------------------------------------------------------------
Engineering Animation, Inc.(a) 200,000 8,762,500
- ---------------------------------------------------------------
GeoCities(a) 67,800 1,995,862
- ---------------------------------------------------------------
HBO & Co. 300,000 7,875,000
- ---------------------------------------------------------------
Inktomi Corp.(a) 60,000 5,058,750
- ---------------------------------------------------------------
Intuit, Inc.(a) 150,000 7,575,000
- ---------------------------------------------------------------
J.D. Edwards & Co.(a) 60,000 1,965,000
- ---------------------------------------------------------------
Jack Henry & Associates, Inc. 220,000 10,037,500
- ---------------------------------------------------------------
</TABLE>
FS-2
<PAGE> 51
<TABLE>
<CAPTION>
MARKET
SHARES VALUE
<S> <C> <C>
COMPUTERS (SOFTWARE & SERVICES)-(CONTINUED)
Lycos, Inc.(a) 250,000 $ 10,156,250
- ---------------------------------------------------------------
Microsoft Corp.(a) 450,000 47,643,750
- ---------------------------------------------------------------
Network Associates, Inc.(a) 42,300 1,797,750
- ---------------------------------------------------------------
Sterling Commerce, Inc.(a) 109,211 3,849,687
- ---------------------------------------------------------------
Sterling Software, Inc.(a) 78,000 2,042,625
- ---------------------------------------------------------------
Unisys Corp.(a) 450,000 11,981,250
- ---------------------------------------------------------------
Wind River Systems(a) 100,000 4,381,250
- ---------------------------------------------------------------
Yahoo! Inc.(a) 125,000 16,355,468
- ---------------------------------------------------------------
252,023,167
- ---------------------------------------------------------------
CONSUMER (JEWELRY, NOVELTIES & GIFTS)-0.15%
Blyth Industries, Inc.(a) 100,000 2,762,500
- ---------------------------------------------------------------
CONSUMER FINANCE-0.31%
Capital One Financial Corp. 54,900 5,586,075
- ---------------------------------------------------------------
DISTRIBUTORS (FOOD &
HEALTH)-0.79%
Cardinal Health, Inc. 124,800 11,801,400
- ---------------------------------------------------------------
SUPERVALU, INC 79,200 1,900,800
- ---------------------------------------------------------------
Sysco Corp. 27,000 727,312
- ---------------------------------------------------------------
14,429,512
- ---------------------------------------------------------------
ELECTRICAL EQUIPMENT-1.90%
American Power Conversion
Corp.(a) 100,000 4,243,750
- ---------------------------------------------------------------
General Electric Co. 140,000 12,250,000
- ---------------------------------------------------------------
Sanmina Corp.(a) 23,300 955,300
- ---------------------------------------------------------------
Solectron Corp.(a) 200,000 11,450,000
- ---------------------------------------------------------------
Symbol Technologies, Inc. 130,000 5,817,500
- ---------------------------------------------------------------
34,716,550
- ---------------------------------------------------------------
ELECTRONIC COMPANIES-0.70%
DTE Energy Co. 300,000 12,787,500
- ---------------------------------------------------------------
ELECTRONICS
(INSTRUMENTATION)-0.19%
Perkin-Elmer Corp. 11,900 1,003,319
- ---------------------------------------------------------------
Waters Corp.(a) 32,600 2,396,100
- ---------------------------------------------------------------
3,399,419
- ---------------------------------------------------------------
ELECTRONICS
(SEMICONDUCTORS)-1.29%
Intel Corp. 125,000 11,148,437
- ---------------------------------------------------------------
Maxim Integrated Products,
Inc.(a) 157,000 5,602,937
- ---------------------------------------------------------------
Microchip Technology, Inc.(a) 175,500 4,749,469
- ---------------------------------------------------------------
PMC-Sierra, Inc.(a) 50,000 2,243,750
- ---------------------------------------------------------------
23,744,593
- ---------------------------------------------------------------
ENTERTAINMENT-0.84%
Pixar, Inc.(a) 50,000 2,375,000
- ---------------------------------------------------------------
Time Warner, Inc. 115,000 10,673,437
- ---------------------------------------------------------------
Viacom, Inc.-Class B(a) 40,500 2,424,937
- ---------------------------------------------------------------
15,473,374
- ---------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
MARKET
SHARES VALUE
<S> <C> <C>
FINANCIAL (DIVERSIFIED)-3.93%
American Express Co. 50,000 $ 4,418,750
- ---------------------------------------------------------------
Associates First Capital
Corp.-Class A 58,969 4,157,314
- ---------------------------------------------------------------
Fannie Mae 104,600 7,406,987
- ---------------------------------------------------------------
FINOVA Group, Inc. 51,600 2,515,500
- ---------------------------------------------------------------
Freddie Mac 280,000 16,100,000
- ---------------------------------------------------------------
MGIC Investment Corp. 260,000 10,140,000
- ---------------------------------------------------------------
Morgan Stanley, Dean Witter,
Discover & Co. 154,000 9,971,500
- ---------------------------------------------------------------
SunAmerica, Inc. 245,000 17,272,500
- ---------------------------------------------------------------
71,982,551
- ---------------------------------------------------------------
HEALTH CARE (DIVERSIFIED)-2.41%
Abbott Laboratories 127,000 5,961,063
- ---------------------------------------------------------------
Allergan, Inc. 260,000 16,233,750
- ---------------------------------------------------------------
American Home Products Corp. 80,000 3,900,000
- ---------------------------------------------------------------
Johnson & Johnson 64,000 5,216,000
- ---------------------------------------------------------------
Warner-Lambert Co. 164,100 12,861,337
- ---------------------------------------------------------------
44,172,150
- ---------------------------------------------------------------
HEALTH CARE (DRUGS-GENERIC & OTHER)-1.44%
Mylan Laboratories, Inc. 440,000 15,152,500
- ---------------------------------------------------------------
Watson Pharmaceuticals, Inc.(a) 200,000 11,125,000
- ---------------------------------------------------------------
26,277,500
- ---------------------------------------------------------------
HEALTH CARE (DRUGS-MAJOR
PHARMACEUTICALS)-2.21%
Lilly (Eli) & Co. 76,800 6,216,000
- ---------------------------------------------------------------
Merck & Co., Inc. 67,500 9,129,375
- ---------------------------------------------------------------
Pfizer, Inc. 160,000 17,170,000
- ---------------------------------------------------------------
Schering-Plough Corp. 77,600 7,983,100
- ---------------------------------------------------------------
40,498,475
- ---------------------------------------------------------------
HEALTH CARE (HOSPITAL MANAGEMENT)-0.49%
Health Management Associates,
Inc.-Class A(a) 285,000 5,076,562
- ---------------------------------------------------------------
Universal Health Services,
Inc.-Class B(a) 77,100 3,956,194
- ---------------------------------------------------------------
9,032,756
- ---------------------------------------------------------------
HEALTH CARE (MEDICAL PRODUCTS &
SUPPLIES)-3.45%
Allegiance Corp. 142,600 5,302,938
- ---------------------------------------------------------------
Arterial Vascular Engineering,
Inc.(a) 139,400 4,286,550
- ---------------------------------------------------------------
Becton, Dickinson & Co. 490,000 20,641,250
- ---------------------------------------------------------------
Boston Scientific Corp.(a) 50,000 2,721,875
- ---------------------------------------------------------------
Guidant Corp. 310,000 23,715,000
- ---------------------------------------------------------------
Sofamor Danek Group, Inc.(a) 13,000 1,321,125
- ---------------------------------------------------------------
Stryker Corp. 91,100 3,820,506
- ---------------------------------------------------------------
Sybron International Corp.(a) 53,500 1,324,125
- ---------------------------------------------------------------
63,133,369
- ---------------------------------------------------------------
HEALTH CARE (SPECIALIZED SERVICES)-0.60%
Alza Corp.(a) 68,000 3,255,500
- ---------------------------------------------------------------
Omnicare, Inc. 100,900 3,487,356
- ---------------------------------------------------------------
</TABLE>
FS-3
<PAGE> 52
<TABLE>
<CAPTION>
MARKET
SHARES VALUE
<S> <C> <C>
HEALTH CARE (SPECIALIZED SERVICES)-(CONTINUED)
Orthodontic Centers of America,
Inc.(a) 100,000 $ 1,893,750
- ---------------------------------------------------------------
Quintiles Transnational Corp.(a) 53,400 2,416,350
- ---------------------------------------------------------------
11,052,956
- ---------------------------------------------------------------
HOMEBUILDING-0.17%
Clayton Homes, Inc. 196,300 3,030,381
- ---------------------------------------------------------------
HOUSEHOLD FURNISHINGS & APPLIANCES-0.72%
Maytag Corp. 265,000 13,100,938
- ---------------------------------------------------------------
HOUSEHOLD PRODUCTS (NON-DURABLES)-0.42%
Clorox Co. 21,700 2,370,725
- ---------------------------------------------------------------
Procter & Gamble Co. (The) 60,000 5,332,500
- ---------------------------------------------------------------
7,703,225
- ---------------------------------------------------------------
INSURANCE (LIFE/HEALTH)-1.10%
Equitable Companies, Inc. 254,000 12,446,000
- ---------------------------------------------------------------
Nationwide Financial Services,
Inc.-Class A 50,500 2,095,750
- ---------------------------------------------------------------
Provident Companies, Inc. 100,000 2,906,250
- ---------------------------------------------------------------
ReliaStar Financial Corp. 62,000 2,716,375
- ---------------------------------------------------------------
20,164,375
- ---------------------------------------------------------------
INSURANCE (MULTI-LINE)-0.70%
American International Group,
Inc. 30,000 2,557,500
- ---------------------------------------------------------------
Lincoln National Corp. 135,000 10,243,125
- ---------------------------------------------------------------
12,800,625
- ---------------------------------------------------------------
INSURANCE (PROPERTY-CASUALTY)-0.61%
Allstate Corp. (The) 240,000 10,335,000
- ---------------------------------------------------------------
Progressive Corp. 6,200 912,950
- ---------------------------------------------------------------
11,247,950
- ---------------------------------------------------------------
INVESTMENT BANKING/BROKERAGE-1.01%
Paine Webber Group, Inc. 267,000 8,927,812
- ---------------------------------------------------------------
Schwab (Charles) Corp. 200,000 9,587,500
- ---------------------------------------------------------------
18,515,312
- ---------------------------------------------------------------
INVESTMENT MANAGEMENT-0.71%
Franklin Resources, Inc. 88,000 3,327,500
- ---------------------------------------------------------------
T. Rowe Price Associates, Inc. 272,200 9,680,112
- ---------------------------------------------------------------
13,007,612
- ---------------------------------------------------------------
LODGING-HOTELS-0.48%
Carnival Corp. 272,000 8,806,000
- ---------------------------------------------------------------
MACHINERY (DIVERSIFIED)-0.93%
Caterpillar, Inc. 185,000 8,325,000
- ---------------------------------------------------------------
Ingersoll-Rand Co. 172,500 8,711,250
- ---------------------------------------------------------------
17,036,250
- ---------------------------------------------------------------
MANUFACTURING (DIVERSIFIED)-1.81%
Hillenbrand Industries, Inc. 34,800 2,059,725
- ---------------------------------------------------------------
Pentair, Inc. 19,200 722,400
- ---------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
MARKET
SHARES VALUE
<S> <C> <C>
MANUFACTURING (DIVERSIFIED)-(CONTINUED)
Premark International, Inc. 285,000 $ 9,030,937
- ---------------------------------------------------------------
Tyco International Ltd. 100,000 6,193,750
- ---------------------------------------------------------------
United Technologies Corp. 158,000 15,049,500
- ---------------------------------------------------------------
33,056,312
- ---------------------------------------------------------------
NATURAL GAS-1.35%
Coastal Corp. (The) 420,000 14,805,000
- ---------------------------------------------------------------
Columbia Energy Group 171,900 9,948,713
- ---------------------------------------------------------------
24,753,713
- ---------------------------------------------------------------
OIL & GAS (DRILLING & EQUIPMENT)-0.49%
Cooper Cameron Corp.(a) 100,000 3,475,000
- ---------------------------------------------------------------
Varco International, Inc.(a) 500,000 5,406,250
- ---------------------------------------------------------------
8,881,250
- ---------------------------------------------------------------
OIL & GAS (EXPLORATION & PRODUCTION)-0.15%
Apache Corp. 97,000 2,746,313
- ---------------------------------------------------------------
OIL & GAS (REFINING & MARKETING)-1.03%
Ashland, Inc. 200,000 9,625,000
- ---------------------------------------------------------------
Sun Company, Inc. 270,000 9,264,375
- ---------------------------------------------------------------
18,889,375
- ---------------------------------------------------------------
PERSONAL CARE-0.09%
Rexall Sundown, Inc.(a) 96,200 1,725,588
- ---------------------------------------------------------------
PHOTOGRAPHY/IMAGING-0.59%
Eastman Kodak Co. 139,000 10,772,500
- ---------------------------------------------------------------
PUBLISHING-0.15%
McGraw-Hill Companies, Inc. (The) 30,000 2,698,125
- ---------------------------------------------------------------
PUBLISHING (NEWSPAPERS)-0.58%
Knight-Ridder, Inc. 210,000 10,696,875
- ---------------------------------------------------------------
RAILROADS-0.25%
Kansas City Southern Industries,
Inc. 120,000 4,635,000
- ---------------------------------------------------------------
RESTAURANTS-0.26%
Starbucks Corp.(a) 45,000 1,951,875
- ---------------------------------------------------------------
Tricon Global Restaurants,
Inc.(a) 65,000 2,827,500
- ---------------------------------------------------------------
4,779,375
- ---------------------------------------------------------------
RETAIL (BUILDING SUPPLIES)-1.29%
Home Depot, Inc. 278,800 12,127,800
- ---------------------------------------------------------------
Lowe's Companies, Inc. 340,000 11,453,750
- ---------------------------------------------------------------
23,581,550
- ---------------------------------------------------------------
RETAIL (COMPUTERS & ELECTRONICS)-1.65%
Best Buy Co., Inc.(a) 317,400 15,235,200
- ---------------------------------------------------------------
CDW Computer Centers, Inc.(a) 90,000 6,744,375
- ---------------------------------------------------------------
Ingram Micro, Inc.-Class A(a) 121,300 5,519,150
- ---------------------------------------------------------------
Tandy Corp. 55,000 2,725,938
- ---------------------------------------------------------------
30,224,663
- ---------------------------------------------------------------
</TABLE>
FS-4
<PAGE> 53
<TABLE>
<CAPTION>
MARKET
SHARES VALUE
<S> <C> <C>
RETAIL (DEPARTMENT STORES)-0.82%
Federated Department Stores,
Inc.(a) 265,000 $ 10,185,938
- ---------------------------------------------------------------
Kohl's Corp.(a) 100,000 4,781,250
- ---------------------------------------------------------------
14,967,188
- ---------------------------------------------------------------
RETAIL (DISCOUNTERS)-0.44%
Dollar General Corp. 91,656 2,188,287
- ---------------------------------------------------------------
Dollar Tree Stores, Inc.(a) 150,000 5,784,375
- ---------------------------------------------------------------
7,972,662
- ---------------------------------------------------------------
RETAIL (DRUG STORES)-0.74%
CVS Corp. 102,160 4,667,435
- ---------------------------------------------------------------
Rite Aid Corp. 223,000 8,850,313
- ---------------------------------------------------------------
13,517,748
- ---------------------------------------------------------------
RETAIL (FOOD CHAINS)-1.84%
Albertson's, Inc. 27,400 1,522,413
- ---------------------------------------------------------------
Kroger Co.(a) 275,500 15,290,250
- ---------------------------------------------------------------
Safeway, Inc.(a) 351,314 16,797,200
- ---------------------------------------------------------------
33,609,863
- ---------------------------------------------------------------
RETAIL (GENERAL MERCHANDISE)-2.31%
Costco Companies, Inc.(a) 250,000 14,187,500
- ---------------------------------------------------------------
Dayton Hudson Corp. 289,000 12,246,375
- ---------------------------------------------------------------
Fred Meyer, Inc.(a) 135,700 7,234,506
- ---------------------------------------------------------------
Wal-Mart Stores, Inc. 125,000 8,625,000
- ---------------------------------------------------------------
42,293,381
- ---------------------------------------------------------------
RETAIL (SPECIALTY)-1.80%
Bed Bath & Beyond, Inc.(a) 225,000 6,201,563
- ---------------------------------------------------------------
Linens 'N Things, Inc.(a) 100,000 3,093,750
- ---------------------------------------------------------------
Office Depot, Inc.(a) 380,000 9,500,000
- ---------------------------------------------------------------
Staples, Inc.(a) 372,900 12,165,862
- ---------------------------------------------------------------
Williams-Sonoma, Inc.(a) 70,000 1,907,500
- ---------------------------------------------------------------
32,868,675
- ---------------------------------------------------------------
RETAIL (SPECIALTY-APPAREL)-1.33%
Abercrombie & Fitch Co.-Class
A(a) 43,000 1,706,563
- ---------------------------------------------------------------
Gap, Inc. 135,000 8,116,875
- ---------------------------------------------------------------
Men's Wearhouse, Inc. (The)(a) 157,500 3,819,375
- ---------------------------------------------------------------
TJX Companies, Inc. 568,000 10,756,500
- ---------------------------------------------------------------
24,399,313
- ---------------------------------------------------------------
SAVINGS & LOAN COMPANIES-1.72%
Dime Bancorp, Inc. 185,000 4,405,313
- ---------------------------------------------------------------
GreenPoint Financial Corp. 200,000 6,562,500
- ---------------------------------------------------------------
Washington Mutual, Inc. 546,000 20,440,875
- ---------------------------------------------------------------
31,408,688
- ---------------------------------------------------------------
SERVICES (ADVERTISING/MARKETING)-0.85%
Omnicom Group, Inc. 150,000 7,415,625
- ---------------------------------------------------------------
Outdoor Systems, Inc.(a) 300,000 6,618,750
- ---------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
MARKET
SHARES VALUE
<S> <C> <C>
SERVICES (ADVERTISING/MARKETING)-(CONTINUED)
Snyder Communications, Inc.(a) 45,000 $ 1,605,938
- ---------------------------------------------------------------
15,640,313
- ---------------------------------------------------------------
SERVICES (COMMERCIAL & CONSUMER)-1.46%
Cintas Corp. 101,900 5,451,650
- ---------------------------------------------------------------
G & K Services, Inc.-Class A 20,000 915,000
- ---------------------------------------------------------------
IMS Health, Inc. 30,000 1,995,000
- ---------------------------------------------------------------
Service Corp. International 334,700 11,923,687
- ---------------------------------------------------------------
Stewart Enterprises, Inc.-Class A 176,000 4,059,000
- ---------------------------------------------------------------
Viad Corp. 84,400 2,315,725
- ---------------------------------------------------------------
26,660,062
- ---------------------------------------------------------------
SERVICES (COMPUTER SYSTEMS)-0.33%
Gartner Group, Inc.-Class A(a) 65,000 1,291,875
- ---------------------------------------------------------------
Policy Management Systems
Corp.(a) 31,700 1,440,369
- ---------------------------------------------------------------
SunGard Data Systems, Inc.(a) 99,000 3,341,250
- ---------------------------------------------------------------
6,073,494
- ---------------------------------------------------------------
SERVICES (DATA PROCESSING)-1.68%
Ceridian Corp.(a) 54,900 3,149,888
- ---------------------------------------------------------------
CSG Systems International,
Inc.(a) 65,500 3,569,750
- ---------------------------------------------------------------
DST Systems, Inc.(a) 49,700 2,485,000
- ---------------------------------------------------------------
Equifax, Inc. 120,600 4,665,713
- ---------------------------------------------------------------
Fiserv, Inc.(a) 124,650 5,796,224
- ---------------------------------------------------------------
National Data Corp. 80,000 2,710,000
- ---------------------------------------------------------------
NOVA Corp.(a) 71,500 2,064,563
- ---------------------------------------------------------------
Paychex, Inc. 128,025 6,369,243
- ---------------------------------------------------------------
30,810,381
- ---------------------------------------------------------------
TELECOMMUNICATIONS (CELLULAR/WIRELESS)-0.13%
Level 3 Communications, Inc.(a) 75,000 2,442,188
- ---------------------------------------------------------------
TELECOMMUNICATIONS (LONG DISTANCE)-1.86%
AT&T Corp. 170,000 10,582,500
- ---------------------------------------------------------------
MCI WorldCom, Inc.(a) 422,926 23,366,662
- ---------------------------------------------------------------
33,949,162
- ---------------------------------------------------------------
TELEPHONE-3.25%
BellSouth Corp. 215,000 17,159,688
- ---------------------------------------------------------------
Century Telephone Enterprises,
Inc. 260,000 14,771,250
- ---------------------------------------------------------------
Qwest Communications
International, Inc.(a) 350,000 13,693,750
- ---------------------------------------------------------------
US West, Inc. 240,000 13,770,000
- ---------------------------------------------------------------
59,394,688
- ---------------------------------------------------------------
TEXTILES (APPAREL)-0.48%
VF Corp. 210,000 8,780,625
- ---------------------------------------------------------------
TEXTILES (HOME FURNISHINGS)-0.09%
Shaw Industries, Inc. 100,000 1,737,500
- ---------------------------------------------------------------
WASTE MANAGEMENT-0.65%
Allied Waste Industries, Inc.(a) 190,500 4,119,563
- ---------------------------------------------------------------
</TABLE>
FS-5
<PAGE> 54
<TABLE>
<CAPTION>
MARKET
SHARES VALUE
<S> <C> <C>
WASTE MANAGEMENT-(CONTINUED)
Waste Management, Inc. 172,825 $ 7,798,728
- ---------------------------------------------------------------
11,918,291
- ---------------------------------------------------------------
Total Domestic Common Stocks
(Cost $1,199,747,436) 1,740,817,989
- ---------------------------------------------------------------
FOREIGN STOCKS & OTHER EQUITY INTERESTS-2.18%
FINLAND-0.58%
Nokia Oyj A.B.-Class A-ADR
(Communications Equipment) 115,000 10,702,188
- ---------------------------------------------------------------
FRANCE-0.23%
Renault S.A.
(Automobiles) 100,000 4,276,428
- ---------------------------------------------------------------
GERMANY-0.97%
Daimler-Benz A.G.-ADR
(Automobiles) 110,000 8,669,375
- ---------------------------------------------------------------
Porsche A.G.
(Automobiles) 5,000 8,851,429
- ---------------------------------------------------------------
17,520,804
- ---------------------------------------------------------------
IRELAND-0.40%
Elan Corp. PLC-ADR(a)(Health
Care-Drugs-Generic & Other) 105,000 7,356,562
- ---------------------------------------------------------------
Total Foreign Stocks & Other
Equity Interests (Cost
$32,977,810) 39,855,982
- ---------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
PRINCIPAL MARKET
AMOUNT VALUE
<S> <C> <C>
CONVERTIBLE CORPORATE BONDS-0.23%
COMPUTERS (PERIPHERALS)-0.23%
EMC Corp., Conv. Sub. Notes,
3.25%, 03/15/02 (Cost
$1,963,721) $ 1,450,000 $ 4,188,688
- ---------------------------------------------------------------
RIGHTS & WARRANTS-0.01%
BANKS (REGIONAL)-0.01%
Golden State Bancorp, Litigation
Wts., expiring 01/01/01(a)
(Cost $281,640) 50,000 243,750
- ---------------------------------------------------------------
REPURCHASE AGREEMENT-2.40%(b)
Dean Witter Reynolds, Inc.,
5.55%, 11/02/98(c) (Cost
$43,998,698) 43,998,698 43,998,698
- ---------------------------------------------------------------
TOTAL INVESTMENTS-99.95% 1,829,105,107
- ---------------------------------------------------------------
OTHER ASSETS LESS
LIABILITIES-0.05% 927,121
- ---------------------------------------------------------------
NET ASSETS-100.00% $1,830,032,228
===============================================================
</TABLE>
Abbreviations:
ADR - American Depositary Receipt
Conv. - Convertible
Sub. - Subordinated
Wts. - Warrants
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 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.
(c) Joint repurchase agreement entered into 10/30/98 with a maturing value of
$300,138,750. Collateralized by $307,841,000 U.S. Government obligations, 0%
to 10.35% due 11/06/98 to 01/21/28 with an aggregate market value at
10/31/98 of $306,000,942.
See Notes to Financial Statements.
FS-6
<PAGE> 55
STATEMENT OF ASSETS AND LIABILITIES
October 31, 1998
<TABLE>
<S> <C>
ASSETS:
Investments, at market value (cost
$1,278,969,305) $1,829,105,107
- -------------------------------------------------------------
Receivables for:
Investments sold 3,181,065
- -------------------------------------------------------------
Capital stock sold 671,854
- -------------------------------------------------------------
Dividends and interest 974,357
- -------------------------------------------------------------
Investment for deferred compensation plan 37,349
- -------------------------------------------------------------
Other assets 14,821
- -------------------------------------------------------------
Total assets 1,833,984,553
- -------------------------------------------------------------
LIABILITIES:
Payables for:
Investments purchased 1,635,755
- -------------------------------------------------------------
Capital stock reacquired 1,160,787
- -------------------------------------------------------------
Deferred compensation 37,349
- -------------------------------------------------------------
Accrued advisory fees 912,099
- -------------------------------------------------------------
Accrued administrative services fees 6,377
- -------------------------------------------------------------
Accrued directors' fees 1,450
- -------------------------------------------------------------
Accrued operating expenses 198,508
- -------------------------------------------------------------
Total liabilities 3,952,325
- -------------------------------------------------------------
Net assets applicable to shares outstanding $1,830,032,228
=============================================================
Capital stock, $0.01 par value per share:
Authorized 1,000,000,000
- -------------------------------------------------------------
Outstanding 122,336,309
- -------------------------------------------------------------
Net asset value and redemption price per
share $ 14.96
=============================================================
</TABLE>
STATEMENT OF OPERATIONS
For the year ended October 31, 1998
<TABLE>
<S> <C>
INVESTMENT INCOME:
Dividends (net of $280,834 foreign withholding
tax) $ 11,487,830
- ------------------------------------------------------------
Interest 4,521,585
- ------------------------------------------------------------
Total investment income 16,009,415
- ------------------------------------------------------------
EXPENSES:
Advisory fees 11,372,220
- ------------------------------------------------------------
Administrative services fees 72,766
- ------------------------------------------------------------
Custodian fees 178,755
- ------------------------------------------------------------
Directors' fees 18,269
- ------------------------------------------------------------
Transfer agent fees 39,271
- ------------------------------------------------------------
Other 271,355
- ------------------------------------------------------------
Total expenses 11,952,636
- ------------------------------------------------------------
Less: Expenses paid indirectly (26,905)
- ------------------------------------------------------------
Net expenses 11,925,731
- ------------------------------------------------------------
Net investment income 4,083,684
- ------------------------------------------------------------
REALIZED AND UNREALIZED GAIN (LOSS) FROM
INVESTMENT SECURITIES, FOREIGN CURRENCIES,
FUTURES AND OPTION CONTRACTS:
Net realized gain (loss) from:
Investment securities 125,907,818
- ------------------------------------------------------------
Foreign currencies 265,909
- ------------------------------------------------------------
Futures contracts (2,274,503)
- ------------------------------------------------------------
Option contracts written (531,869)
- ------------------------------------------------------------
123,367,355
- ------------------------------------------------------------
NET UNREALIZED APPRECIATION OF:
Investment securities 30,375,403
- ------------------------------------------------------------
Foreign currencies 3,322
- ------------------------------------------------------------
30,378,725
- ------------------------------------------------------------
Net gain from investment securities,
foreign currencies, futures and option
contracts 153,746,080
- ------------------------------------------------------------
Net increase in net assets resulting from
operations $157,829,764
============================================================
</TABLE>
See Notes to Financial Statements.
FS-7
<PAGE> 56
STATEMENT OF CHANGES IN NET ASSETS
For the years ended October 31, 1998 and 1997
<TABLE>
<CAPTION>
1998 1997
-------------- --------------
<S> <C> <C>
OPERATIONS:
Net investment income $ 4,083,684 $ 1,608,756
- ----------------------------------------------------------------------------------------------
Net realized gain from investment securities, foreign
currencies, futures and option contracts 123,367,355 151,798,786
- ----------------------------------------------------------------------------------------------
Net unrealized appreciation of investment securities and
foreign currencies 30,378,725 212,044,735
- ----------------------------------------------------------------------------------------------
Net increase in net assets resulting from operations 157,829,764 365,452,277
- ----------------------------------------------------------------------------------------------
Distributions to shareholders from net investment income (1,659,397) (3,131,614)
- ----------------------------------------------------------------------------------------------
Distributions to shareholders from net realized gains (156,547,424) (114,611,563)
- ----------------------------------------------------------------------------------------------
Net equalization credits (See Note 1) -- 2,437,968
- ----------------------------------------------------------------------------------------------
Share transactions-net 180,175,249 139,078,724
- ----------------------------------------------------------------------------------------------
Net increase in net assets 179,798,192 389,225,792
==============================================================================================
NET ASSETS:
Beginning of period 1,650,234,036 1,261,008,244
- ----------------------------------------------------------------------------------------------
End of period $1,830,032,228 $1,650,234,036
- ----------------------------------------------------------------------------------------------
NET ASSETS CONSIST OF:
Capital (par value and additional paid-in) $1,158,384,602 $ 956,102,084
- ----------------------------------------------------------------------------------------------
Undistributed net investment income 4,164,155 23,591,883
- ----------------------------------------------------------------------------------------------
Undistributed net realized gain from investment
securities, foreign currencies, futures and option
contracts 117,344,347 150,779,670
- ----------------------------------------------------------------------------------------------
Net unrealized appreciation of investment securities and
foreign currencies 550,139,124 519,760,399
- ----------------------------------------------------------------------------------------------
$1,830,032,228 $1,650,234,036
==============================================================================================
</TABLE>
NOTES TO FINANCIAL STATEMENTS
October 31, 1998
NOTE 1-SIGNIFICANT ACCOUNTING POLICIES
AIM Summit Fund, Inc. (the "Fund") is a Maryland corporation registered under
the Investment Company Act of 1940, as amended, as a diversified, open-end
management investment company. The Fund's investment objective is capital
growth.
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities at the date of the
financial statements and the reported amounts of revenues and expenses during
the reporting period. Actual results could differ from those estimates. The
following is a summary of 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 the last sales price on the exchange on which
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 of the closing bid and asked
prices. Debt obligations (including convertible bonds) are valued on the
basis of prices provided by an independent pricing service. Prices provided
by an independent 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
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 Fund's
officers in a manner specifically authorized by the Board of Directors of the
Fund. Short-term obligations having 60 days or less to maturity are valued at
amortized cost which approximates market value. Generally, trading in foreign
securities is substantially completed each day at various times prior to the
close of the New York Stock Exchange. 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 New York Stock Exchange. 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 New York Stock Exchange
which would not be reflected in the
FS-8
<PAGE> 57
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, Investment Income and Distributions-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 and distributions to
shareholders are recorded on the ex-dividend date. On October 31, 1998,
undistributed net investment income was increased by $255,254 and
undistributed net realized gains decreased by $255,254 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.
C. Foreign Currency Translations-Portfolio securities and other assets and
liabilities denominated in foreign currencies are translated into U.S. dollar
amounts at the date of valuation. Purchases and sales of portfolio securities
and income items denominated in foreign currencies are translated into U.S.
dollar amounts on the respective dates of such transactions.
D. Foreign Currency Contracts-A foreign currency contract is an obligation to
purchase or sell a specific currency for an agreed-upon price at a future
date. The Fund may enter into a foreign currency contract to attempt to
minimize the risk to the Fund from adverse changes in the relationship
between currencies. The Fund may also enter into a foreign currency contract
for the purchase or sale of a security denominated in a foreign currency in
order to "lock in" the U.S. dollar price of that security. The Fund could be
exposed to risk if counterparties to the contracts are unable to meet the
terms of their contracts or if the value of the foreign currency changes
unfavorably.
E. 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.
F. Equalization-The Fund previously followed the accounting practice known as
equalization by which a portion of the proceeds from sales and costs of
repurchases of Fund shares, equivalent on a per share basis to the amount of
undistributed net investment income, is credited or charged to undistributed
net income when the transaction is recorded so that the undistributed net
investment income per share is unaffected by sales or redemptions of Fund
shares. Effective November 1, 1997, the Fund discontinued equalization
accounting and reclassified the cumulative equalization credits of
$22,107,269 from undistributed net investment income to paid-in capital. This
change has no effect on the net assets, the results of operations or the net
asset value per share of the Fund.
G. Stock Index Futures Contracts-The Fund may purchase or sell stock index
futures contracts as a hedge against changes in market conditions. Initial
margin deposits required upon entering into futures contracts are satisfied
by the segregation of specific securities as collateral for the account of
the broker (the Fund's agent in acquiring the futures position). During the
period the futures contracts are open, changes in the value of the contracts
are recognized as unrealized gains or losses by "marking to market" on a
daily basis to reflect the market value of the contracts at the end of each
day's trading. Variation margin payments are made or received depending upon
whether unrealized gains or losses are incurred. When the contracts are
closed, the Fund recognizes a realized gain or loss equal to the difference
between the proceeds from, or cost of, the closing transaction and the Fund's
basis in the contract. Risks include the possibility of an illiquid market
and that a change in the value of contracts may not correlate with changes in
the value of the securities being hedged.
H. Covered Call Options-The Fund may write call options, but only on a covered
basis; that is, the Fund will own the underlying security. Options written by
the Fund normally will have expiration dates between three and nine months
from the date written. The exercise price of a call option may be below,
equal to, or above the current market value of the underlying security at the
time the option is written. When the Fund writes a covered call option, an
amount equal to the premium received by the Fund is recorded as an asset and
an equivalent liability. The amount of the liability is subsequently
"marked-to-market" to reflect the current market value of the option written.
The current market value of a written option is the mean between the last bid
and asked prices on that day. If a written call option expires on the
stipulated expiration date, or if the Fund enters into a closing purchase
transaction, the Fund realizes a gain (or a loss if the closing purchase
transaction exceeds the premium received when the option was written) without
regard to any unrealized gain or loss on the underlying security, and the
liability related to such option is extinguished. If a written option is
exercised, the Fund realizes a gain or a loss from the sale of the underlying
security and the proceeds of the sale are increased by the premium originally
received.
A call option gives the purchaser of such option the right to buy, and the
writer (the Fund) the obligation to sell, the underlying security at the
stated exercise price during the option period. The purchaser of a call
option has the right to acquire the security which is the subject of the call
option at any time during the option period. During the option period, in
return for the premium paid by the purchaser of the option, the Fund has
given up the opportunity for capital appreciation above the exercise price
should the market price of the underlying security increase, but has retained
the risk of loss should the price of the underlying security decline. During
the option period, the Fund may be required at any time to deliver the
underlying security against payment of the exercise price. This obligation is
terminated upon the expiration of the option period or at such earlier time
at which the Fund effects a
FS-9
<PAGE> 58
closing purchase transaction by purchasing (at a price which may be higher
than that received when the call option was written) a call option identical
to the one originally written.
NOTE 2-ADVISORY FEES AND OTHER TRANSACTIONS WITH AFFILIATES
The Fund has entered into an investment advisory agreement with A I M Advisors,
Inc. ("AIM"). Under the terms of the master investment advisory agreement, the
Fund pays AIM a fee at the annual rate of 1.0% of the first $10 million of the
Fund's average daily net assets, 0.75% of the next $140 million of the Fund's
average daily net assets and 0.625% of the Fund's average daily net assets in
excess of $150 million. Under the terms of a sub-advisory agreement between AIM
and TradeStreet Investment Associates, Inc. ("TradeStreet"), AIM pays
TradeStreet a fee at an annual rate of 0.50% of the first $10 million of the
Fund's average daily net assets, 0.35% of the next $140 million of the Fund's
average daily net assets, 0.225% of the next $550 million of the Fund's average
daily net assets and 0.15% of the Fund's average daily net assets in excess of
$700 million.
The Fund, pursuant to an administrative services agreement with AIM, has
agreed to reimburse AIM for certain costs incurred in providing accounting
services to the Fund. During the year ended October 31, 1998, the Fund
reimbursed AIM $72,766 for such services.
During the year ended October 31, 1998, the Fund paid legal fees of $6,861 for
services rendered by Kramer, Levin, Naftalis & Frankel as counsel to the Board
of Directors. A member of that firm is a director of the Fund.
Substantially all shares of the Fund are held of record by State Street Bank &
Trust Company as custodian for Summit Investors Plans, a unit investment trust
that is sponsored by A I M Distributors, Inc. (an affiliated company of AIM).
Certain officers and directors of the Fund are officers of AIM and A I M
Distributors, Inc.
NOTE 3-INDIRECT EXPENSES
During the year ended October 31, 1998, the Fund received reductions in
custodian fees of $26,905 under an expense offset arrangement. The effect of the
above arrangement resulted in a reduction of the Fund's total expenses of
$26,905 during the year ended October 31, 1998.
NOTE 4-DIRECTORS' FEES
Directors' fees represent remuneration paid or accrued to each director who is
not an "interested person" of AIM. The Fund may invest 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. Interest on
borrowings under the line of credit is payable on maturity or prepayment date.
Prior to an amendment of the line of credit on May 1, 1998, the Fund was limited
to borrowing up to the lesser of (i) $500,000,000 or (ii) the limits set by its
prospectus for borrowings. During the year ended October 31, 1998, 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 0.05% on the unused balance of
the committed line. 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 October 31, 1998 was
$1,469,938,551 and $1,409,377,755, respectively.
The amount of unrealized appreciation (depreciation) of investment securities
as of October 31, 1998, on a tax basis, is as follows:
<TABLE>
<S> <C>
Aggregate unrealized appreciation of
investment securities $576,816,675
- ---------------------------------------------------------
Aggregate unrealized (depreciation) of
investment securities (27,900,704)
- ---------------------------------------------------------
Net unrealized appreciation of investment
securities $548,915,971
=========================================================
* Cost of investments for tax purposes is $1,280,189,136.
</TABLE>
NOTE 7-CAPITAL STOCK
Changes in capital stock outstanding during the years ended October 31, 1998 and
1997 were as follows:
<TABLE>
<CAPTION>
1998 1997
--------------------------- -------------------------
SHARES AMOUNT SHARES AMOUNT
----------- ------------- ---------- ------------
<S> <C> <C> <C> <C>
Sold 13,962,660 $ 208,683,626 8,716,348 $114,553,393
- ------------------------------------------------------------------------------
Issued as reinvest-
ment of dividends 11,672,671 154,897,796 9,816,281 113,770,753
- ------------------------------------------------------------------------------
Reacquired (12,194,909) (183,406,173) (6,706,799) (89,245,422)
- ------------------------------------------------------------------------------
13,440,422 $ 180,175,249 11,825,830 $139,078,724
==============================================================================
</TABLE>
NOTE 8-OPTION CONTRACTS WRITTEN
Transactions in call options written during the year ended October 31, 1998 are
summarized as follows:
<TABLE>
<CAPTION>
OPTION CONTRACTS
-----------------------
NUMBER OF PREMIUMS
CONTRACTS RECEIVED
------ ----------
<S> <C> <C>
Beginning of period -- $ --
- --------------------------------------- ------ ----------
Written 3,452 1,420,661
- --------------------------------------- ------ ----------
Closed (1,752) (458,918)
- --------------------------------------- ------ ----------
Exercised (1,700) (961,743)
- --------------------------------------- ------ ----------
End of period -- $ --
======================================= ====== ==========
</TABLE>
FS-10
<PAGE> 59
NOTE 9-FINANCIAL HIGHLIGHTS
Shown below are the financial highlights for a share of capital stock
outstanding during each of the years in the five-year period ended October 31,
1998.
<TABLE>
<CAPTION>
1998 1997 1996 1995 1994
---------- ---------- ---------- ---------- --------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of period $ 15.15 $ 12.99 $ 12.14 $ 9.78 $ 10.46
- --------------------------------------------- ---------- ---------- ---------- ---------- --------
Income from investment operations:
Net investment income 0.03 0.02 0.04 0.04 0.10
- --------------------------------------------- ---------- ---------- ---------- ---------- --------
Net gains (losses) on securities (both
realized and unrealized) 1.23 3.34 1.69 2.81 (0.04)
- --------------------------------------------- ---------- ---------- ---------- ---------- --------
Total from investment operations 1.26 3.36 1.73 2.85 0.06
- --------------------------------------------- ---------- ---------- ---------- ---------- --------
Less distributions:
Dividends from net investment income (0.02) (0.03) (0.03) (0.10) (0.10)
- --------------------------------------------- ---------- ---------- ---------- ---------- --------
Distributions from net realized gains (1.43) (1.17) (0.85) (0.39) (0.64)
- --------------------------------------------- ---------- ---------- ---------- ---------- --------
Total distributions (1.45) (1.20) (0.88) (0.49) (0.74)
- --------------------------------------------- ---------- ---------- ---------- ---------- --------
Net asset value, end of period $ 14.96 $ 15.15 $ 12.99 $ 12.14 $ 9.78
============================================= ========== ========== ========== ========== ========
Total return(a) 9.49% 28.53% 15.61% 31.03% 0.61%
============================================= ========== ========== ========== ========== ========
Ratios/supplemental data:
Net assets, end of period (000s omitted) $1,830,032 $1,650,234 $1,261,008 $1,050,011 $765,073
============================================= ========== ========== ========== ========== ========
Ratio of expenses to average net assets 0.67%(b) 0.68% 0.70% 0.71% 0.72%
============================================= ========== ========== ========== ========== ========
Ratio of net investment income to average net
assets 0.23%(b) 0.11% 0.29% 0.33% 1.04%
============================================= ========== ========== ========== ========== ========
Portfolio turnover rate 83% 88% 118% 126% 122%
============================================= ========== ========== ========== ========== ========
</TABLE>
(a) Does not deduct sales charges.
(b) Ratios are based on average net assets of $1,785,555,221.
FS-11
<PAGE> 60
AIM SUMMIT FUND, INC.
------------------------------------------------------------------------
CLASS II SHARES
AIM SUMMIT FUND, INC. SEEKS TO PROVIDE GROWTH OF CAPITAL.
PROSPECTUS
MARCH 1, 1999
Class II Shares of the fund are
offered to and may be purchased by
the general public only through AIM
Summit Investors Plans II, a unit
investment trust. Details of AIM
Summit Investors Plans II, including
the creation and sales charges and
the custodian charges applicable to
AIM Summit Investors Plans II, are
found in the AIM Summit Investors
Plans II Prospectus. You should read
both this Prospectus and the
Prospectus of AIM Summit Investors
Plans II and keep these Prospectuses
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> 61
---------------------
AIM SUMMIT FUND, INC.
---------------------
TABLE OF CONTENTS
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
INVESTMENT OBJECTIVE AND STRATEGIES A-1
- - - - - - - - - - - - - - - - - - - - - - - - -
PRINCIPAL RISKS OF INVESTING IN THE
FUND A-1
- - - - - - - - - - - - - - - - - - - - - - - - -
FEE TABLE AND EXPENSE EXAMPLE A-2
- - - - - - - - - - - - - - - - - - - - - - - - -
Fee Table A-2
Expense Example A-2
FUND MANAGEMENT A-3
- - - - - - - - - - - - - - - - - - - - - - - - -
The Advisors A-3
Advisor Compensation A-3
Portfolio Managers A-3
OTHER INFORMATION A-3
- - - - - - - - - - - - - - - - - - - - - - - - -
Dividends and Distributions A-3
SHAREHOLDER INFORMATION A-4
- - - - - - - - - - - - - - - - - - - - - - - - -
Pricing of Shares A-4
Sales of Shares A-4
Redemption of Shares A-4
Taxes A-5
Open Account A-5
Distribution and Service (12b-1) Fees A-5
OBTAINING ADDITIONAL INFORMATION Back Cover
- - - - - - - - - - - - - - - - - - - - - - - - -
</TABLE>
The AIM Family of Funds, The AIM Family of Funds and Design (i.e., the AIM
logo), AIM and Design, AIM, AIM LINK, AIM Institutional Funds, aimfunds.com, La
Familia AIM de Fondos, La Familia AIM de Fondos and Design and Invest with
Discipline are registered service marks and AIM Bank Connection is a service
mark of A I M Management Group Inc.
No dealer, salesperson or any other person has been authorized to give any
information or to make any representations other than those contained in this
prospectus, and you should not rely on such other information or
representations.
<PAGE> 62
---------------------
AIM SUMMIT FUND, INC.
---------------------
INVESTMENT OBJECTIVE AND STRATEGIES
- --------------------------------------------------------------------------------
The fund's investment objective is growth of capital.
The fund seeks to meet this objective by investing primarily in common stocks
of companies that the fund's portfolio managers believe have the potential for
growth in earnings, including small-sized growth companies, and in common stocks
believed to be under-valued relative to other available investments. The fund
may also invest up to 20% of its total assets in foreign securities, including
securities of companies located in developing countries, i.e., those that are in
the initial stages of their industrial cycles.
The fund's portfolio managers purchase securities of companies that they
believe have the potential for growth. The fund's portfolio managers consider
whether to sell a particular security when they believe the security no longer
has that potential.
In anticipation of or in response to adverse market conditions or for cash
management purposes, the fund may hold all or a portion of its assets in cash,
money market instruments, bonds or other debt securities. As a result, the fund
may not achieve its investment objective.
PRINCIPAL RISKS OF INVESTING IN THE FUND
- --------------------------------------------------------------------------------
There is a risk that you could lose all or a portion of your investment in the
fund. The value of your investment in the fund will go up and down with the
prices of the securities in which the fund invests. The prices of equity
securities change in response to many factors, including the historical and
prospective earnings of the issuer, the value of its assets, general economic
conditions, interest rates, investor perceptions and market liquidity. This is
especially true with respect to equity securities of smaller companies, whose
prices may go up and down more than the prices of equity securities of larger,
more-established companies. Also, since equity securities of smaller companies
may not be traded as often as equity securities of larger, more-established
companies, it may be difficult or impossible for the fund to sell securities at
a desirable price.
Foreign securities have additional risks, including exchange rate changes,
political and economic upheaval, relatively low market liquidity, the relative
lack of information about these companies and the potential lack of strict
financial and accounting controls and standards.
The value of your shares could be adversely affected if the computer systems
used by the fund's investment advisor and the fund's other service providers are
unable to distinguish the year 2000 from the year 1900.
The fund's investment advisor and independent technology consultants are
working to avoid year 2000-related problems in its systems and to obtain
assurances that other service providers are taking similar steps. Year 2000
problems may also affect issuers in whose securities the fund invests.
An investment in the fund is not a deposit of a bank and is not insured or
guaranteed by the Federal Deposit Insurance Corporation or any other government
agency.
A-1
<PAGE> 63
---------------------
AIM SUMMIT FUND, INC.
---------------------
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>
ANNUAL FUND OPERATING EXPENSES
- - - - - - - - - - - - - - - - - - - - - - - - -
(expenses that are deducted
from fund assets)(1)
- ------------------------------------------------
<S> <C>
Management Fees 0.64%
----
Distribution and/or Service (12b-1)
Fees 0.30
----
Other Expenses 2.53
----
Total Annual Fund Operating Expenses 3.47
----
Expense Reimbursements(2) 1.97
Net Expenses 1.50%
- ------------------------------------------------
</TABLE>
(1) The fees and expenses are based on estimated average net assets for Class II
Shares.
(2) The investment advisor has contractually agreed to reimburse a portion of
Class II Shares 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 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,
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 II Shares $153 $474 $818 $1,791
- ------------------------------------------------------
</TABLE>
A-2
<PAGE> 64
---------------------
AIM SUMMIT FUND, INC.
---------------------
FUND MANAGEMENT
- --------------------------------------------------------------------------------
THE ADVISORS
A I M Advisors, Inc. (the advisor), 11 Greenway Plaza, Suite 100, Houston, TX
77046, serves as the fund's investment advisor. TradeStreet Investment
Associates, Inc. (the subadvisor), 101 South Tryon Street, Suite 1000,
Charlotte, North Carolina 28255, a wholly owned subsidiary of NationsBank, N.A.,
is the fund's subadvisor and provides certain investment advisory services to
the fund, subject to the overall supervision by the advisor and the fund's Board
of Directors. The advisors supervise all aspects of the fund's operations and
provide investment advisory services to the fund, including obtaining and
evaluating economic, statistical and financial information to formulate and
implement investment programs for the fund.
The advisor has acted as an investment advisor since its organization in 1976,
and together with its subsidiaries, advises or manages over 110 investment
portfolios, including the fund, encompassing a broad range of investment
objectives. The subadvisor has acted as an investment advisor since 1996.
ADVISOR COMPENSATION
During the fiscal year ended October 31, 1998, the advisor received compensation
of 0.64% of average daily net assets.
PORTFOLIO MANAGERS
The advisors use a team approach to investment management. The individual
members of the team who are primarily responsible for the day-to-day management
of the fund's portfolio, the first four of whom are officers of A I M Capital
Management, Inc., a wholly owned subsidiary of the advisor, are
- - David P. Barnard, Senior Portfolio Manager, who has been responsible for the
fund since 1995 and has been associated with the advisor and/or its affiliates
since 1982.
- - Jonathan C. Schoolar, Senior Portfolio Manager, who has been responsible for
the fund since 1995 and has been associated with the advisor and/or its
affiliates since 1986.
- - Charles D. Scavone, Senior Portfolio Manager, who has been responsible for the
fund since 1999 and has been associated with the advisor and/or its affiliates
since 1996. From 1994 to 1996, he was Associate Portfolio Manager for Van
Kampen American Capital Asset Management, Inc.
- - Kenneth A. Zschappel, Senior Portfolio Manager, who has been responsible for
the fund since 1999 and has been associated with the advisor and/or its
affiliates since 1990.
- - Jeffrey C. Moser, Senior Product Manager with the subadvisor, who has been
responsible for the fund since 1995 and has been associated with NationsBank
Texas since 1990, and the subadvisor since 1996.
Other Information
- --------------------------------------------------------------------------------
DIVIDENDS AND DISTRIBUTIONS
DIVIDENDS
The fund generally declares and pays dividends, if any, annually.
CAPITAL GAINS DISTRIBUTIONS
The fund generally distributes long-term and short-term capital gains (including
any net gains from foreign currency transactions), if any, annually.
A-3
<PAGE> 65
---------------------
AIM SUMMIT FUND, INC.
---------------------
SHAREHOLDER INFORMATION
- --------------------------------------------------------------------------------
PRICING OF SHARES
The fund prices its shares based on its net asset value. The fund values
portfolio securities for which market quotations are readily available at market
value. The fund values short-term investments maturing within 60 days at
amortized cost, which approximates market value. The fund values all other
securities and assets at their fair value. Securities and other assets quoted in
foreign currencies are valued in U.S. dollars based on the prevailing exchange
rates on that day. In addition, if between the time trading ends on a particular
security and the close of the New York Stock Exchange (NYSE), events occur that
materially affect the value of the security, the fund may value the security at
its fair value as determined in good faith by or under the supervision of the
fund's Board of Directors. The effect of using fair value pricing is that the
fund's net asset value will be subject to the judgment of the Board of Directors
or its designee instead of being determined by the market. Because the fund may
invest in securities that are primarily listed on foreign exchanges, the value
of the fund's shares may change on days when you will not be able to purchase or
redeem shares.
The 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. The fund prices purchase,
exchange and redemption orders at the net asset value calculated after the
transfer agent receives an order in good form.
SALES OF SHARES
The fund will not offer its Class II Shares to the general public except through
AIM Summit Investors Plans II. However, the following persons may purchase
shares of the fund directly through the fund's sponsor, A I M Distributors, Inc.
(the distributor) at net asset value: (a) any current or retired officer,
trustee, director, or employee, or any member of the immediate family (spouse,
children, parents and parents of spouse) of any such person, of A I M Management
Group Inc. (AIM Management) or its affiliates, or of any investment company
managed or advised by the advisor; or (b) any employee benefit plan established
for employees of AIM Management or its affiliates. The fund reserves the right
to reject any purchase order. The terms of offering of AIM Summit Investors
Plans II are contained in the Prospectus of AIM Summit Investors Plans II.
REDEMPTION OF SHARES
The following discussion relates only to those investors who hold shares of the
fund directly. Planholders should consult their AIM Summit Investors Plans II
Prospectus for the requirements for redemption of fund shares held in an AIM
Summit Investors Plans II.
You may redeem your shares of the fund at any time without charge, either by a
written request to A I M Fund Services, Inc. (the transfer agent), or by calling
the transfer agent at (800) 959-4246, subject to the restrictions specified
below. Upon receipt by the transfer agent of a proper request, the fund will
redeem shares in cash at the next determined net asset value. All written
redemption requests must be directed to the transfer agent, P.O. Box 4739,
Houston, TX 77210-4739.
Written requests for redemption must include: (1) original signatures of all
registered owners; (2) 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.
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.
You may also request redemptions by telephone by calling the transfer agent at
(800) 959-4246. You will be allowed to redeem by telephone if (1) the proceeds
are to be mailed to the address on record with us or transferred electronically
to a pre-authorized checking account; (2) the address on record with us has not
been changed within the last 30 days; (3) you do not hold physical share
certificates; (4) you can provide proper identification information; (5) the
proceeds of the redemption do not exceed $50,000; and (6) you have not
previously declined the telephone redemption privilege. Certain accounts,
including retirement accounts and 403(b) plans, may not redeem by telephone. The
transfer agent must receive your call during the hours the NYSE is open for
business in order to effect the redemption at that day's closing price.
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. The 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.
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.
A-4
<PAGE> 66
---------------------
AIM SUMMIT FUND, INC.
---------------------
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.
You may arrange for regular monthly or quarterly withdrawals from your account
of at least $50. 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.
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. Every year, an account statement showing the amount of
dividends and distributions you received from the fund during the prior year
will be sent to you. Any long-term or short-term capital gains realized from
redemptions of shares of the fund will be subject to federal income tax.
The foreign, state and local tax consequences of investing in shares of the
fund may differ materially from the federal income tax consequences described
above. You should consult your tax advisor before investing.
OPEN ACCOUNT
The following discussion of an open account is applicable only to those
shareholders who hold shares of the fund directly.
The fund maintains an open account for each shareholder, under which
additional fund shares acquired through reinvestment of dividends and capital
gains distributions are held by the transfer agent for the shareholder's account
unless the shareholder elects to receive stock certificates or to obtain
dividends and distributions in cash. Stock certificates (in full shares only)
are issued without charge (but only on written request) and may be redeposited
at any time. It is anticipated that as a matter of convenience most shareholders
will not request certificates. A shareholder receives a statement from the
transfer agent after each acquisition or redemption of fund shares, and after
each dividend or capital gains distribution.
DISTRIBUTION AND SERVICE (12b-1) FEES
The fund on behalf of the Class II Shares has adopted a 12b-1 plan that allows
the Class to pay distribution fees to 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
Class pays these fees out of its assets on an ongoing basis, over time these
fees will increase the cost of your investment and may cost you more than paying
other types of sales charges.
A-5
<PAGE> 67
---------------------
AIM SUMMIT FUND, INC.
---------------------
OBTAINING ADDITIONAL INFORMATION
- --------------------------------------------------------------------------------
More information may be obtained free of charge upon request. The Statement of
Additional Information (SAI), a current version of which is on file with the
Securities and Exchange Commission (SEC), contains more details about the fund
and is incorporated by reference into the prospectus (is legally a part of this
prospectus). Annual and semiannual reports to shareholders contain additional
information about the fund's investments. The fund's annual report also
discusses the market conditions and investment strategies that significantly
affected the fund's performance during its last fiscal year.
If you have questions about this fund, another fund in The AIM Family of
Funds--Registered Trademark-- or your account, or wish to obtain free copies of
the fund's current SAI or annual or semiannual reports, please contact us
- ---------------------------------------------------------
<TABLE>
<S> <C>
BY MAIL: A I M Distributors, Inc.
11 Greenway Plaza, Suite
100
Houston, TX 77046-1173
BY TELEPHONE: (800) 995-4246
- -----------------------------------------------------
</TABLE>
You also can obtain copies of the fund's SAI and other information at the SEC's
Public Reference Room in Washington, DC, on the SEC's website
(http://www.sec.gov), or by sending a letter, including a duplicating fee, to
the SEC's Public Reference Section, Washington, DC 20549-6009. Please call the
SEC at 1-800-SEC-0330 for information about the Public Reference Room.
- -----------------------------------
AIM Summit Fund, Inc.
SEC 1940 Act file number: 811-3443
- -----------------------------------
[AIM LOGO APPEARS HERE] www.aimfunds.com SUM2-PRO-1 INVEST WITH DISCIPLINE
--Registered Trademark--
<PAGE> 68
STATEMENT OF ADDITIONAL INFORMATION
AIM SUMMIT FUND, INC.
CLASS II SHARES
11 Greenway Plaza
Suite 100
Houston, Texas 77046-1173
(713) 626-1919
THIS STATEMENT OF ADDITIONAL INFORMATION IS NOT
A PROSPECTUS, AND IT SHOULD BE READ IN CONJUNCTION
WITH A PROSPECTUS OF THE ABOVE-NAMED FUND,
A COPY OF WHICH MAY BE OBTAINED FREE OF CHARGE FROM
AUTHORIZED DEALERS OR BY WRITING
A I M DISTRIBUTORS, INC., P.O. BOX 4264,
HOUSTON, TEXAS 77210-4264.
------------------
STATEMENT OF ADDITIONAL INFORMATION DATED MARCH 1, 1999
RELATING TO THE CLASS II SHARES PROSPECTUS DATED MARCH 1, 1999
<PAGE> 69
TABLE OF CONTENTS
<TABLE>
<S> <C>
INTRODUCTION............................................................................1
PERFORMANCE INFORMATION.................................................................1
Total Return Quotations........................................................3
GENERAL INFORMATION ABOUT THE FUND......................................................3
The Fund and its Capital Stock.................................................3
MANAGEMENT OF THE FUND..................................................................4
Directors and Officers.........................................................4
The Investment Advisor.........................................................9
The Sub-Advisor...............................................................11
Expenses .....................................................................12
Transfer Agent and Custodian..................................................12
Reports .....................................................................13
DIVIDENDS, DISTRIBUTIONS AND TAX MATTERS...............................................13
Reinvestment of Dividends and Distributions...................................13
Qualification as a Regulated Investment Company...............................13
Determination of Taxable Income of a Regulated Investment Company.............14
Excise Tax on Regulated Investment Companies..................................15
Fund Distributions............................................................16
Sale or Redemption of Fund Shares.............................................17
Foreign Shareholders..........................................................18
Effect of Future Legislation; Local Tax Considerations........................18
SHARE PURCHASES, REDEMPTIONS AND REPURCHASES...........................................19
Purchases and Redemptions.....................................................19
Suspension of Right of Redemption.............................................19
Valuation of Shares...........................................................19
The Distribution Plan.........................................................20
The Distribution Agreement....................................................22
INVESTMENT STRATEGIES AND RISKS........................................................22
Investment Program............................................................23
Common Stocks.................................................................23
Preferred Stocks..............................................................23
Convertible Securities........................................................23
Corporate Debt Securities.....................................................24
U.S. Government Securities....................................................24
Real Estate Investment Trusts ("REITs").......................................24
Warrants .....................................................................25
Foreign Securities............................................................25
Foreign Exchange Transactions.................................................26
Repurchase Agreements.........................................................26
Rule 144A Securities..........................................................27
Illiquid Securities...........................................................27
Lending of Fund Securities....................................................27
Futures Contracts.............................................................27
Risks as to Futures Contracts and Related Call Options........................29
Portfolio Turnover............................................................29
</TABLE>
<PAGE> 70
<TABLE>
<S> <C>
PORTFOLIO TRANSACTIONS AND BROKERAGE...................................................30
INVESTMENT RESTRICTIONS................................................................32
MISCELLANEOUS INFORMATION..............................................................34
Shareholder Inquiries.........................................................34
Legal Matters.................................................................34
FINANCIAL STATEMENTS...................................................................FS
</TABLE>
<PAGE> 71
INTRODUCTION
AIM Summit Fund, Inc. (the "Fund") is a 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. The information for the
for the Class II Shares (the "Class"), of the Fund is included in a Prospectus
dated March 1, 1999, which may be obtained without charge by written request to
A I M Distributors, Inc. ("AIM Distributors"). Investors may also call AIM
Distributors at (800) 995-4246 or dealers authorized by AIM Distributors to
distribute the Fund's shares. Investors must receive a Prospectus before they
invest.
This Statement of Additional Information is intended to furnish
prospective investors with additional information concerning the Class. Some of
the information required to be in this Statement of Additional Information is
also included in the Class' current prospectus and, in order to avoid
repetition, reference will be made to sections of the Prospectus. Additionally,
the Prospectus and this Statement of Additional Information omit certain
information contained in the registration statement filed with the SEC. Copies
of the registration statement, including items omitted from the Prospectus and
this Statement of Additional Information, may be obtained from the SEC by paying
the charges prescribed under its rules and regulations.
PERFORMANCE INFORMATION
All advertisements of the Fund will disclose the maximum creation and
sales charges, imposed by AIM Summit Investors Plans II (the "Plan") and other
fees (collectively, the "Sales Charges") on purchases of shares of the Class. If
any advertised performance data does not reflect the maximum Sales Charges, such
advertisement will disclose that the Sales Charges have not been deducted in
computing the performance data, and that, if reflected, the maximum Sales
Charges would reduce the performance quoted. Further information regarding the
Class' performance is contained in the Fund's annual report to shareholders,
which is available upon request and without charge.
From time to time and in its discretion, A I M Advisors, Inc. ("AIM")
or its affiliates may waive all or a portion of their fees and/or assume certain
expenses of any Class. 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 the Prospectus may not
be terminated without the approval of the Board of Directors. Such a practice
will have the effect of increasing that Class' yield and total return. The
performance of each Fund will vary from time to time and past results are not
necessarily indicative of future results. A Fund's performance is a function of
its portfolio management in selecting the type and quality of portfolio
securities and is affected by operating expenses of the Fund and market
conditions. A shareholder's investment in a Class is not insured or guaranteed.
These factors should be carefully considered by the investor before making an
investment in any Class.
Total return is calculated in accordance with a standardized formula
for computation of annualized total return. Standardized total return for the
shares of the Class reflects the deduction of the Class' maximum Sales Charges
at the time of purchase.
The Class' total return shows its overall change in value, including
changes in share price and assuming all dividends and capital gain distributions
are reinvested. A cumulative total return reflects the Class' 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 CLASS' 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
Class may separate its cumulative and average annual returns into income results
and capital gains or losses.
1
<PAGE> 72
Total return figures for the Class are neither fixed nor guaranteed,
and no principal is insured. The Class may provide performance information in
reports, sales literature and advertisements. The Class may also, from time to
time, quote information published or aired by publications or other media
entities which contain articles or segments relating to investment results or
other data. The following is a list of such publications or media entities:
Barron's Fortune USA Today
Bloomberg Investor's Business Daily U.S. News & World Report
Business Week Money Wall Street Journal
Economist Mutual Fund Forecaster Washington Post
Financial World Mutual Fund Magazine CNN
Forbes New York Times CNBC
The Class may also compare its performance to performance data of
similar mutual funds as published by the following services:
Bank Rate Monitor Mutual Fund Values (Morningstar)
CDA Weisenberger Ibbotson Associates
Donoghue's Lipper, Inc.
The Class' performance may also be compared in advertising to the
performance of comparative benchmarks such as the following:
Standard & Poor's 400 Index Consumer Price Index
Standard & Poor's 500 Stock Index Russell Midcap
Dow Jones Industrial Average NASDAQ
The Class 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
90 day Treasury Bills
Advertising for the Class may from time to time include discussions of
general economic conditions and interest rates, and may also include references
to the use of the Class as part of an individual's overall retirement investment
program. From time to time, sales literature and/or advertisements may disclose
(i) the largest holdings in the Class' portfolio, (ii) certain selling group
members and/or (iii) certain institutional shareholders.
From time to time, the Class' 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, or inflation.
Although performance data may be useful to prospective investors when
comparing the Class' 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 the Class.
Additional performance information is contained in the Fund's Annual
Report to Shareholders, which is available upon request without charge.
2
<PAGE> 73
TOTAL RETURN QUOTATIONS
The standard formula for calculating total return, as described in the
Prospectus, is as follows:
n
P(1+T) =ERV
Where P = a hypothetical initial payment of $1,000.
T = average annual total return (assuming the applicable maximum
sales load is deducted at the beginning of the 1, 5, or 10 year
periods).
n = number of years.
ERV = ending redeemable value of a hypothetical $1,000 payment at the
end of the 1, 5, or 10 year periods (or fractional portion of
such period).
Shares of the Class may be acquired by the general public only through
the Plan. Investors should consult the Prospectus of the Plan for complete
information regarding Creation and Sales Charges and Custodian Fees.
As of October 31, 1998, Class II Shares were not available to the
public.
Standard total return quotes may be accompanied by total return figures
calculated by alternative methods. For example, average annual total return may
be calculated without assuming payment of the full sales load according to the
following formula:
n
P(1+U) =ERV
Where P = a hypothetical initial payment of $1,000.
U = average annual total return assuming payment of only a stated
portion of, or none of, the applicable maximum sales load at the
beginning of the stated period.
n = number of years.
ERV = ending redeemable value of a hypothetical $1,000 payment at the
end of the stated period.
Cumulative total return across a stated period may be calculated as
follows:
n
P(1+V) =ERV
Where P = a hypothetical initial payment of $1,000.
V = cumulative total return assuming payment of all of, a stated
portion of, or none of, the applicable maximum sales load at the
beginning of the stated period.
n = number of years.
ERV = ending redeemable value of a hypothetical $1,000 payment at the
end of the stated period.
GENERAL INFORMATION ABOUT THE FUND
THE FUND AND ITS CAPITAL STOCK
The Fund is an open-end, diversified management investment company
organized as a corporation under the laws of the State of Maryland on February
17, 1982 and has an authorized capital of 1,000,000,000 shares of common stock,
par value $.01 per share. The Class and Class I Shares of the 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 Fund's
Board of Directors with respect to that class and, upon liquidation or
dissolution 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. Fractional shares have
3
<PAGE> 74
the same rights as full shares to the extent of their proportionate interest.
Shareholders of the Fund do not have cumulative voting rights. There are no
preemptive or conversion rights applicable to any of the Fund's shares. The
Fund's shares, when issued, are fully paid and non-assessable. Shares of the
Fund are redeemable at the net asset value thereof at the option of the holders
thereof.
The term "majority vote" means the affirmative vote of the Fund or of a
particular class of the Fund (a) more than 50% of the outstanding shares of the
Fund or class (b) 67% or more of the shares of the Fund or such class present at
a meeting if more than 50% of the outstanding shares of the Fund or class are
represented at the meeting in person or by proxy, whichever is less.
The Board of Directors of the Fund may classify or reclassify any
unissued shares into shares of any class or classes in addition to that already
authorized by setting or changing in any one or more respects, from time to
time, prior to the issuance of such shares, the preference, conversion or other
rights, voting powers, restrictions, limitations as to dividends, qualification,
or terms or conditions of redemption, of such shares. Any such classification or
reclassification will comply with the provisions of the laws of the State of
Maryland and the Investment Company Act of 1940, as amended (the "1940 Act").
MANAGEMENT OF THE FUND
The overall management of the business and affairs of the Fund is vested
with the Board of Directors. The Board of Directors approves all significant
agreements between the Fund and persons or companies furnishing services to the
Fund, including the Fund's agreements with the Fund's advisor, sub-advisor,
distributor, custodian and transfer agent. The day-to-day operations of the Fund
are delegated to the Fund's officers and to AIM, subject always to the
investment objective and policies of the Fund and to the general supervision of
the Fund's Board of Directors.
DIRECTORS AND OFFICERS
The directors and officers of the Fund and their principal occupations
during the last five years are set forth below. All of the Fund's executive
officers hold similar offices with some or all of the other investment companies
advised by A I M Advisors, Inc. (the "AIM Funds"). Unless otherwise indicated,
the address of each director and officer is 11 Greenway Plaza, Suite 100,
Houston, Texas 77046-1173.
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------
Position(s) Held Principal Occupation(s) During,
Name, Address and Age with Registrant At Least, the Past 5 years
- -----------------------------------------------------------------------------------------------------------------
<S> <C> <C>
*Charles T. Bauer (79) Chairman and Chairman of the Board of Directors, A I M
Director Management Group Inc., A I M Advisors, Inc.,
A I M Capital Management, Inc., A I M Distributors,
Inc., A I M Fund Services, Inc. and Fund
Management Company; and Director and Vice
Chairman of AMVESCAP PLC.
- -----------------------------------------------------------------------------------------------------------------
</TABLE>
- ------------------
* A director who is an "interested person" of the Fund and A I M Advisors,
Inc. as defined in the 1940 Act.
4
<PAGE> 75
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------
Position(s) Held Principal Occupation(s) During,
Name, Address and Age with Registrant At Least, the Past 5 years
- -----------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Bruce L. Crockett, (54) Director Director, ACE Limited (insurance company).
906 Frome Lane Formerly Director, President and Chief Executive
McLean, VA 22102 Officer, COMSAT Corporation; and Chairman,
Board of Governors of INTELSAT (international
communications company).
- -----------------------------------------------------------------------------------------------------------------
Owen Daly II (74) Director Director, Cortland Trust Inc. (investment company).
Six Blythewood Road Formerly, Director, CF & I Steel Corp.,
Baltimore, MD 21210 Monumental Life Insurance Company and
Monumental General Insurance Company; and
Chairman of the Board of Equitable Bancorporation
- -----------------------------------------------------------------------------------------------------------------
Edward K. Dunn, Jr. (63) Director Chairman of the Board of Directors, Mercantile
2 Hopkins Plaza, 20th Floor Mortgage Corp. Formerly, Vice Chairman of the
Baltimore, MD 21201 Board of Directors and President, Mercantile - Safe
Deposit & Trust Co.; and President, Mercantile
Bankshares.
- -----------------------------------------------------------------------------------------------------------------
Jack Fields (47) Director Chief Executive Officer, Texana Global, Inc.
Jetero Plaza, Suite E (foreign trading company) and Twenty-First
8810 Will Clayton Parkway Century Group, Inc. (governmental affairs
Humble, TX 77338 company). Formerly, Member of the U.S. House of
Representatives.
- -----------------------------------------------------------------------------------------------------------------
**Carl Frischling (62) Director Partner, Kramer, Levin, Naftalis & Frankel LLP (law
919 Third Avenue firm). Formerly, Partner, Reid & Priest (law firm).
New York, NY 10022
- -----------------------------------------------------------------------------------------------------------------
*Robert H. Graham (52) Director and Director, President and Chief Executive Officer,
President A I M Management Group Inc.; Director and
President, A I M Advisors, Inc.; Director and
Senior Vice President, A I M Capital Management,
Inc., A I M Distributors, Inc., A I M Fund
Services, Inc. and Fund Management Company; and
Director, AMVESCAP PLC.
- -----------------------------------------------------------------------------------------------------------------
Prema Mathai-Davis (48) Director Chief Executive Officer YWCA of the U.S.A.;
350 Fifth Avenue, Suite 301 Commissioner, New York City Department for the
New York, NY 10118 Aging; and Member of the Board of Directors,
Metropolitan Transportation Authority of New York
State.
- -----------------------------------------------------------------------------------------------------------------
Lewis F. Pennock (56) Director Attorney, private practice in Houston, Texas.
6363 Woodway, Suite 825
Houston, Texas 77057
- -----------------------------------------------------------------------------------------------------------------
</TABLE>
- ------------------
** A director who is an "interested person" of the Fund as defined in the
1940 Act.
* A director who is an "interested person" of the Fund and A I M Advisors,
Inc. as defined in the 1940 Act.
5
<PAGE> 76
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------
Position(s) Held Principal Occupation(s) During,
Name, Address and Age with Registrant At Least, the Past 5 years
- -----------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Ian W. Robinson (75) Director Formerly, Executive Vice President and Chief
183 River Drive Financial Officer, Bell Atlantic Management
Tequesta, Florida 33469 Services, Inc. (provider of centralized management
services to telephone companies); Executive Vice
President, Bell Atlantic Corporation (parent of
seven telephone companies); and Vice President and
Chief Financial Officer, Bell Telephone Company of
Pennsylvania and Diamond State Telephone Company.
- -----------------------------------------------------------------------------------------------------------------
Louis S. Sklar (59) Director Executive Vice President, Development and
Transco Tower, 50th Floor Operations, Hines Interests Limited Partnership
2800 Post Oak Blvd. (real estate development).
Houston, Texas 77056
- -----------------------------------------------------------------------------------------------------------------
***John J. Arthur (54) Senior Vice Director and Senior Vice President, A I M Advisors,
President and Inc.; and Vice President and Treasurer,
Treasurer A I M Management Group Inc.
- -----------------------------------------------------------------------------------------------------------------
Gary T. Crum (51) Senior Vice Director and President, A I M Capital Management,
President 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 (44) Senior Vice Director, Senior Vice President, General Counsel
President and and Secretary, A I M Advisors, Inc.; Senior Vice
Secretary President, General Counsel and Secretary,
A I M Management Group Inc.; Director, Vice
President and General Counsel, Fund Management
Company; General Counsel and Vice President, A I M
Fund Services, Inc.; and Vice President A I M
Capital Management, Inc. and A I M Distributors, Inc.
- -----------------------------------------------------------------------------------------------------------------
Dana R. Sutton (40) Vice President Vice President and Fund Controller, A I M
and Assistant Advisors, Inc.; and Assistant Vice President and
Treasurer Assistant Treasurer, Fund Management Company.
- -----------------------------------------------------------------------------------------------------------------
Melville B. Cox (55) Vice President Vice President and Chief Compliance Officer, A I M
Advisors, Inc., A I M Capital Management, Inc.,
A I M Distributors, Inc., A I M Fund Services, Inc.
and Fund Management Company.
- -----------------------------------------------------------------------------------------------------------------
Jonathan C. Schoolar (37) Vice President Senior Vice President, A I M Capital Management,
Inc.; and Vice President, A I M Advisors, Inc.
- -----------------------------------------------------------------------------------------------------------------
</TABLE>
- ------------------
*** Mr. Arthur and Ms. Relihan are married to each other.
6
<PAGE> 77
The Board of Directors has an Audit Committee, an Investments Committee,
and a Nominating and Compensation Committee.
The members of the Audit Committee are Messrs. Crockett, Daly, Dunn,
Fields, Frischling, Pennock, Robinson (Chairman), Sklar and Ms. Mathai-Davis.
The Audit Committee is responsible for meeting with the Fund's auditors to
review audit procedures and results and to consider any matters arising from an
audit to be brought to the attention of the directors as a whole with respect to
the Fund's fund accounting or its internal accounting controls, or for
considering such matters as may from time to time be set forth in a charter
adopted by the Board of Directors and such committee.
The members of the Investments Committee are Messrs. Bauer, Crockett,
Daly, Dunn, Fields, Frischling, Pennock, Robinson, Sklar (Chairman) and Ms.
Mathai-Davis. The Investments Committee is responsible for reviewing portfolio
compliance, brokerage allocation, portfolio investment pricing issues, interim
dividend and distribution issues, or considering such matters as may from time
to time be set forth in a charter adopted by the Board of Directors and such
committee.
The members of the Nominating and Compensation Committee are Messrs.
Crockett (Chairman), Daly, Dunn, Fields, Pennock, Robinson, Sklar and Ms.
Mathai-Davis. The Nominating and Compensation Committee is responsible for
considering and nominating individuals to stand for election as directors who
are not interested persons, reviewing from time to time the compensation payable
to the disinterested directors, or considering such matters as may from time to
time be set forth in a charter adopted by the board and such committee.
Remuneration of Directors
Each director is reimbursed for expenses incurred in connection with
each meeting of the Board of Directors or any Committee attended. Each director
of the Fund is compensated for his or her services according to a fee schedule
which recognizes the fact that such director also serves as a director or
trustee of certain other AIM Funds. Each such director receives a fee, allocated
among the AIM Funds for which he or she serves as a director or trustee, which
consists of an annual retainer component and a meeting fee component.
Set forth below is information regarding compensation paid or accrued
for each director of the Fund:
<TABLE>
<CAPTION>
==============================================================================
RETIREMENT
BENEFITS TOTAL
Estimated ACCRUED COMPENSATION
COMPENSATION BY ALL AIM FROM ALL AIM
DIRECTOR FROM FUND(1) FUNDS(2) FUNDS(3)
- ------------------------------------------------------------------------------
<S> <C> <C> <C>
Charles T. Bauer $ 0 $ 0 $ 0
- ------------------------------------------------------------------------------
Bruce L. Crockett 1,913 37,485 96,000
- ------------------------------------------------------------------------------
Owen Daly II 1,913 122,898 96,000
- ------------------------------------------------------------------------------
Edward K. Dunn 1,231 0 78,889
- ------------------------------------------------------------------------------
Jack Fields 1,903 15,826 95,500
- ------------------------------------------------------------------------------
Carl Frischling(4) 1,913 97,791 95,500
- ------------------------------------------------------------------------------
Robert H. Graham 0 0 0
- ------------------------------------------------------------------------------
John F. Kroeger (5) 1,818 107,896 91,654
==============================================================================
</TABLE>
7
<PAGE> 78
<TABLE>
<CAPTION>
==============================================================================
RETIREMENT
BENEFITS TOTAL
Estimated ACCRUED COMPENSATION
COMPENSATION BY ALL AIM FROM ALL AIM
DIRECTOR FROM FUND(1) FUNDS(2) FUNDS(3)
- ------------------------------------------------------------------------------
<S> <C> <C> <C>
Prema Mathai-Davis 177 0 32,636
- ------------------------------------------------------------------------------
Lewis F. Pennock 1,913 45,766 95,500
- ------------------------------------------------------------------------------
Ian Robinson 1,882 94,442 94,500
- ------------------------------------------------------------------------------
Louis S. Sklar 1,892 90,232 95,500
==============================================================================
</TABLE>
- ----------------
(1) The total amount of compensation deferred by all Directors of the Fund
during the fiscal year ended October 31, 1998, including interest earned
thereon, was $9,860.
(2) During the fiscal year ended October 31, 1998, the total amount of
expenses allocated to the Fund in respect of such retirement benefits was
$12,272. Data reflects compensation for the calendar year ended December 31,
1998.
(3) Each Director serves as director or trustee of a total of 12 registered
investment companies advised by AIM (comprised of over 50 portfolios). Data
reflects compensation earned during the calendar year ended December 31, 1998.
(4) During the fiscal year ended October 31, 1998, the Fund paid $6,861 in
legal fees for services rendered by Kramer, Levin, Naftalis & Frankel LLP. Mr.
Frischling is a partner in such firm.
(5) Mr. Kroeger was a director until June 11, 1998, when he resigned. On
that date he became a consultant to the Fund. Of the amount listed above, $1,060
was compensation for services as a director and the remainder as a consultant.
Mr. Kroeger passed away on November 26, 1998, Mr. Kroeger's widow will receive
his pension as described below under "AIM Fund Retirement Plan for Eligible
Directors/Trustees."
AIM Funds Retirement Plan for Eligible Directors/Trustees
Under the terms of the AIM Funds Retirement Plan for Eligible
Directors/Trustees (the "Plan"), each director (who is not an employee of any of
the AIM Funds, A I M Management Group Inc., or any of its subsidiaries) may be
entitled to certain benefits upon retirement from the Board of Directors.
Pursuant to the Plan, the normal retirement date is the date on which the
eligible director has attained age 65 and has completed at least five years of
continuous service with one or more of the regulated investment companies
managed, administered or distributed by AIM or its subsidiaries (the "Applicable
AIM Funds"). Each eligible director is entitled to receive an annual benefit
from the Applicable AIM Funds commencing on the first day of the calendar
quarter coincident with or following his date of retirement equal to 75% of the
retainer paid or accrued by the Applicable AIM Funds for such director during
the twelve-month period immediately preceding the director's retirement
(including amounts deferred under a separate agreement between the AIM Funds and
the director) for the number of such Director's years of service (not in excess
of 10 years of service) completed with respect to any of the Applicable AIM
Funds. Such benefit is payable to each eligible director in quarterly
installments. If an eligible director dies after attaining the normal retirement
date but before receipt of any benefits under the Plan commences, the director's
surviving spouse (if any) shall receive a quarterly survivor's benefit equal to
50% of the amount payable to the deceased director, for no more than ten years
beginning the first day of the calendar quarter following the date of the
director's death. Payments under the Plan are not secured or funded by any AIM
Fund.
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Set forth below is a table that shows the estimated annual benefits
payable to an eligible director upon retirement assuming the retainer amount
reflected below and various years of service. The estimated credited years of
service for Messrs. Crockett, Daly, Dunn, Fields, Frischling, Kroeger, Pennock,
Robinson, Sklar and Ms. Mathai-Davis are 11, 11, 0,1, 21, 20, 17, 11, 9 and 0
years, respectively.
ESTIMATED ANNUAL BENEFITS UPON RETIREMENT
<TABLE>
<CAPTION>
===============================================
Number of Years of Annual Compensation
Service With the Paid By All AIM Funds
Applicable AIM Funds
===============================================
<S> <C>
$90,000
===============================================
10 $67,500
- -----------------------------------------------
9 $60,750
- -----------------------------------------------
8 $54,000
- -----------------------------------------------
7 $47,250
- -----------------------------------------------
6 $40,500
- -----------------------------------------------
5 $33,750
===============================================
</TABLE>
Deferred Compensation Agreements
Messrs. Daly, Dunn, Fields, Frischling, Robinson and Sklar (for purposes
of this paragraph only, the "deferring directors") have each executed a Deferred
Compensation Agreement (collectively, the "Agreements"). Pursuant to the
Agreements, the deferring directors may elect to defer receipt of up to 100% of
their compensation payable by the Fund, and such amounts are placed into a
deferral account. Currently, the deferring directors may select various AIM
Funds in which all or part of his deferral account shall be deemed to be
invested. Distributions from the deferring directors' deferral accounts will be
paid in cash, in generally equal quarterly installments over a period of five
(5) or ten (10) years (depending on the Agreement) beginning on the date the
deferring director's retirement benefits commence under the Plan. The Fund's
Board of Directors, in its sole discretion, may accelerate or extend the
distribution of such deferral accounts after the deferring director's
termination of service as a director of the Fund. If a deferring director dies
prior to the distribution of amounts in his deferral account, the balance of the
deferral account will be distributed to his designated beneficiary in a single
lump sum payment as soon as practicable after such deferring director's death.
The Agreements are not funded and, with respect to the payments of amounts held
in the deferral accounts, the deferring directors have the status of unsecured
creditors of the Fund and of each other AIM Fund from which they are deferring
compensation.
THE INVESTMENT ADVISOR
The Fund has entered into an Investment Advisory Agreement, (the
"Advisory Agreement") with AIM. AIM is a wholly owned subsidiary of A I M
Management Group Inc. ("AIM Management"), 11 Greenway Plaza, Suite 100, Houston,
Texas 77046-1173. AIM was organized in 1976, and, together with its
subsidiaries, advises or manages over 110 investment company portfolios
encompassing a broad range of investment objectives. AIM Management is an
indirect wholly owned subsidiary of AMVESCAP PLC, 11 Devonshire Square, London
EC2M 4YR, United Kingdom. AMVESCAP PLC and its subsidiaries are an independent
investment management group engaged in institutional investment management and
retail mutual fund businesses in the United States, Europe and the Pacific
Region. Certain of the directors and officers of AIM are also executive officers
of the Fund and their affiliations are shown under "Directors and Officers."
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<PAGE> 80
AIM and the Fund have adopted a Code of Ethics which requires investment
personnel and certain other employees (a) to pre-clear all personal securities
transactions subject to the Code of Ethics; (b) to file reports or duplicate
confirmations regarding such transactions; (c) to refrain from personally
engaging in (i) short-term trading of a security, (ii) transactions involving a
security within seven days of an AIM Fund transaction involving the same
security, and (iii) transactions involving securities being considered for
investment by an AIM Fund; and (d) to abide by certain other provisions under
the Code of Ethics. The Code of Ethics also prohibits investment personnel and
all other AIM employees from purchasing securities in an initial public
offering. Personal trading reports are reviewed periodically by AIM, and the
Board of Directors reviews quarterly and annual reports (including information
on any substantial violations of the Code of Ethics). Sanctions for violations
of the Code of Ethics may include censure, monetary penalties, suspension or
termination of employment.
A I M Capital Management, Inc., ("AIM Capital") a wholly owned
subsidiary of AIM, is engaged in the business of providing investment advisory
services to investment companies, corporations, institutions and other accounts.
AIM Distributors, a registered broker-dealer and a wholly owned subsidiary of
AIM, acts as principal underwriter of other registered investment companies
advised or managed by AIM.
Pursuant to the terms of the Advisory Agreement, AIM: (a) supervises all
aspects of the operations of the Fund; (b) obtains and evaluates pertinent
information about significant developments and economic, statistical and
financial data, domestic, foreign or otherwise, whether affecting the economy
generally or the Fund, and whether concerning the individual issuers whose
securities are included in the Fund or the activities in which such issuers
engage, or with respect to securities which AIM considers desirable for
inclusion in the Fund; (c) determines which issuers and securities shall be
represented in the Fund's investment portfolio and regularly reports thereon to
the Fund's Board of Directors; and (d) formulates and implements continuing
programs for the purchases and sales of the securities of such issuers and
regularly reports thereon to the Fund's Board of Directors; and takes, on behalf
of the Fund, all actions which appear to the Fund necessary to carry into effect
such purchase and sale programs and supervisory functions as aforesaid,
including but not limited to the placing of orders for the purchase and sale of
securities for the Fund. Subject to the approval of the Board of Directors and
the shareholders of the Fund, AIM may delegate to a sub-advisor certain of its
duties, provided that AIM shall continue to supervise the performance of any
such sub-advisor. AIM entered into a sub-advisory agreement with TradeStreet as
described below. AIM maintains a trading desk and selects the core stocks which
generally comprise approximately 50% of the Fund's portfolio and the emerging
growth stocks which generally comprise 35% of the Fund's portfolio. The
remainder of the Fund's portfolio is invested in value-oriented stock selected
by the sub-advisor.
As compensation for its services, AIM receives an annual fee, calculated
daily and paid monthly, at the annual rate of 1.00% of the first $10 million of
the Fund's average daily net assets, 0.75% of the next $140 million of the
Fund's average daily net assets and 0.625% of the Fund's average daily net
assets in excess of $150 million. Although the advisory fee rate paid by the
Fund is higher than that paid by other investment companies, many of those
investment companies are a different size or have different objectives than the
Fund. The effective rate of fees and expenses paid by the Fund at its current
size is lower than that for other funds with similar investment objectives.
The portion of the Fund's portfolio invested in core stocks and in
emerging growth and value oriented stocks is determined by AIM.
AIM may from 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 the
Prospectus may not be terminated without the approval of the Board of Directors.
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<PAGE> 81
The Advisory Agreement will continue from year to year, provided that it
is specifically approved at least annually by (i) the Fund's Board of Directors
or the vote of a "majority of the outstanding voting securities" of the Fund (as
defined in the 1940 Act) and (ii) the affirmative vote of a majority of the
directors who are not parties to the agreement or "interested persons" of any
such party (the "Non-Interested Directors") by votes cast in person at a meeting
called for such purpose. The Fund or AIM may terminate the Advisory Agreement on
60 days' written notice without penalty. The Advisory Agreement terminates
automatically in the event of assignment, as defined in the 1940 Act.
The Advisory Agreement provides that upon the request of the Fund's
Board of Directors, AIM may perform, or arrange for the performance of, certain
accounting, shareholder servicing and other administrative services to the Fund
that are not required to be performed by AIM under the Advisory Agreement. For
such services, AIM is entitled to receive from the Fund reimbursement of its
costs or such reasonable compensation as may be agreed upon by AIM and the
Fund's Board of Directors upon a finding by the Board of Directors that the
provision of such services is in the best interests of the Fund and its
shareholders.
The Board of Directors has made such a finding and, accordingly, has
entered into an Administrative Services Agreement, with AIM (the "Administrative
Services Agreement"). Under the Administrative Services Agreement, AIM currently
provides the services of a principal financial officer and his staff, who
maintain the financial accounts and books and records of the Fund, including the
calculation of the daily net asset value of the Fund, and prepare tax returns
and financial statements for the Fund and also is reimbursed for any expenses
related to providing such services, as well as the services of staff responding
to various shareholder inquiries. The Administrative Services Agreement will
continue year to year, provided that it is specifically approved at least
annually by (i) the Fund's Board of Directors or the vote of a "majority of the
outstanding voting securities" of the Fund (as defined in the 1940 Act) and (ii)
the affirmative vote of a majority of the Non- Interested Directors by votes
cast in person at a meeting called for such purpose. In addition, a sub-contract
between AIM and A I M Fund Services, Inc. ("AFS"), a registered transfer agent
and wholly owned subsidiary of AIM, provides that AFS may perform certain
shareholders services for the Fund which are not required to be performed by AIM
under the Advisory Agreement. Currently, AFS provides certain shareholders
services for the Fund. For such services, while AFS is entitled to receive from
AIM such reimbursement of its costs associated with providing those services as
may be approved by the Board of Directors, AFS does not presently receive any
such reimbursement.
During the fiscal years ended October 31, 1998, 1997 and 1996, AIM
received management and advisory fees from the Fund of $11,372,220, $9,353,715
and $7,360,028, respectively. See "Expenses."
For the fiscal years ended October 31, 1998, 1997 and 1996, AIM was
reimbursed $72,766, $67,450 and $63,439, respectively, for costs associated with
performing administrative services.
THE SUB-ADVISOR
NationsBank of Texas, N.A. ("NationsBank Texas"), served as the Fund's
sub-advisor prior to April 1, 1996 pursuant to a sub-advisory agreement (the
"Sub-Advisory Agreement"). NationsBank, N.A., a bank holding company, indirectly
holds 100% of the voting stock of NationsBank Texas. Since April 1, 1996,
TradeStreet Investment Associates, Inc. ("TradeStreet"), 101 South Tryon Street,
Suite 1000, Charlotte, North Carolina 28255, has served as Sub-Advisor.
TradeStreet is a wholly owned subsidiary of NationsBank, N.A.
and a registered investment advisor.
Pursuant to the terms of the Sub-Advisory Agreement, AIM has appointed
TradeStreet to provide certain investment advisory services to the Fund, subject
to the overall supervision by AIM and the Fund's Board of Directors. As
Sub-Advisor, TradeStreet shall: (a) obtain and evaluate pertinent information
about significant developments and economic, statistical and financial data,
domestic, foreign or otherwise, whether affecting the economy generally or the
Fund, and whether concerning the individual issuers whose securities are
included in the Fund or the activities in which such issuers engage, or with
respect to securities which it or AIM considers desirable for inclusion in the
Fund's investment portfolio; and (b) to the extent requested by AIM,
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<PAGE> 82
determine which issues and securities shall be represented in the Fund's
investment portfolio, formulate programs for the purchases and sales of such
securities and regularly report thereon to AIM. In performing these services,
TradeStreet, is required to comply with all applicable provisions of federal or
state law, including the applicable provisions of the 1940 Act and the
Investment Advisers Act of 1940, as amended (the "Advisers Act"). Pursuant to
the terms of the Sub-Advisory Agreement, TradeStreet, under AIM's supervision,
will determine the value-oriented stocks to be purchased or sold by the Fund. It
is anticipated that approximately 25% of the Fund's portfolio will be invested
in value-oriented stocks, although that percentage may change from time to time
as deemed advisable by AIM based upon current market conditions.
As compensation for its services, AIM pays TradeStreet an annual fee,
calculated daily and paid monthly, at an annual rate of 0.50% of the first $10
million of the Fund's average daily net assets, 0.35% of the next $140 million
of the Fund's average daily net assets, 0.225% of the Fund's average daily net
assets in excess of $150 million and less than $700 million and 0.15% of the
Fund's average daily net assets in excess of $700 million. The sub-advisor's fee
is paid to TradeStreet by AIM from the advisory fee which AIM receives from the
Fund.
The Sub-Advisory Agreement will continue year to year, provided that it
is specifically approved at least annually by (i) the Fund's Board of Directors
or a vote of "a majority of the outstanding voting securities" of the Fund (as
defined by the 1940 Act), and (ii) by the affirmative vote of a majority of the
Non-Interested Directors by votes cast in person at a meeting called for such
purpose.
For the period November 1, 1995 through March 31, 1996, NationsBank
Texas received fees from AIM of $958,342. For the fiscal year ended October 31,
1998 and 1997 and for the period April 1, 1996 through the fiscal year ended
October 31, 1996, TradeStreet received fees from AIM of $3,405,833, $2,921,391
and $1,454,982, respectively. See "Expenses."
EXPENSES
All of the ordinary business expenses incurred in the operations of the
Fund and the offering of its shares shall be borne by the Fund unless
specifically provided otherwise in the Advisory Agreement. These expenses borne
by the Fund include but are not limited to brokerage commissions, taxes, legal,
auditing, or governmental fees, the cost of preparing share certificates,
custodian, transfer and shareholder service agent costs, expenses of issue,
sale, redemption and repurchase of shares, expenses of registering and
qualifying shares for sale, expenses relating to directors' and shareholders'
meetings, the cost of preparing and distributing reports and notices to
shareholders, the fees and other expenses incurred by the Fund in reports and
notices to shareholders, the fees and other expenses incurred by the Fund in
connection with membership in investment company organizations and the cost of
pricing copies of prospectuses and statements of additional information
distributed to the Fund's shareholders.
TRANSFER AGENT AND CUSTODIAN
A I M Fund Services, Inc. ("AFS"), a wholly owned subsidiary of AIM, 11
Greenway Plaza, Suite 100, Houston, Texas 77046-1173, acts as a transfer and
dividend disbursing agent for the Class. These services do not include any
supervisory function over management or provide any protection against any
possible depreciation of assets.
State Street Bank and Trust Company ("State Street Bank") acts as
custodian for the Fund's portfolio securities and cash. The Fund pays State
Street Bank, BFDS, and AFS such compensation as may be agree upon from time to
time.
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<PAGE> 83
REPORTS
The Fund will furnish shareholders semi-annually with a list of the
investments held in the Class' portfolio and its financial statements. The
annual financial statements will be audited by the Fund's independent certified
public accountants. The Board of Directors has selected KPMG LLP, 700 Louisiana,
Houston, Texas 77002, as the Fund's independent certified public accountants to
audit the Fund's books and review the Fund's tax returns.
DIVIDENDS, DISTRIBUTIONS AND TAX MATTERS
REINVESTMENT OF DIVIDENDS AND DISTRIBUTIONS
It is the present policy of the Fund to declare and pay annually net
investment income dividends and capital gains distributions. It is the Fund's
intention to distribute substantially all of its net investment income and
capital gains by the end of the calendar year. In determining the amount of
capital gains, if any, available for distribution, net capital gains will be
offset against available net capital losses, if any, carried forward from
previous fiscal periods. All dividends and distributions will be automatically
reinvested at the net asset value determined on the record date in full and
fractional shares of the Class unless the shareholder has elected prior to the
record date, by written notice to Boston Financial Data Services, Inc. ("BFDS"),
P.O. Box 8300, Boston, Massachusetts 02266-8300, Attention: AIM Summit Fund,
Inc., to receive all such payments in cash. Such reinvestments will not be
subject to sales charges and shares so purchased will be automatically credited
to the account of the shareholder.
Changes in the form of dividend and distribution payments may be made by
the shareholder at any time and will be effective as to any subsequent payment
if such notice is received by BFDS prior to the applicable record date. Any
dividend and distribution election will remain in effect until BFDS receives a
revised written election by the shareholder.
No attempt is made to present a detailed explanation of the tax
treatment of the Fund or its shareholders, and the discussion here is not
intended as a substitute for careful tax planning. Because shares of the Fund
may be purchased by individual investors through the Plan, the following
discussion is addressed only to individual (rather than corporate) investors.
QUALIFICATION AS A REGULATED INVESTMENT COMPANY
The Fund has elected to be taxed as a regulated investment company under
Subchapter M of the Internal Revenue Code of 1986, as amended (the "Code"). As a
regulated investment company, the Fund is not subject to federal income tax on
the portion of its net investment income (i.e., taxable interest, dividends and
other taxable ordinary income, net of expenses) and capital gain net income
(i.e., the excess of capital gains over capital losses) that it distributes to
shareholders, provided that it distributes at least 90% of its investment
company taxable income (i.e., net investment income and the excess of net
short-term capital gain over net long-term capital loss) for the taxable year
(the "Distribution Requirement"), and satisfies certain other requirements of
the Code that are described below. Distributions by the Fund made during the
taxable year or, under specified circumstances, within twelve months after the
close of the taxable year, will be considered distributions of income and gains
of the taxable year and can therefore satisfy the Distribution Requirement.
In addition to satisfying the Distribution Requirement, a regulated
investment company must derive at least 90% of its gross income from dividends,
interest, certain payments with respect to securities loans, gains from the sale
or other disposition of stock or securities or foreign currencies (to the extent
such currency gains are directly related to the regulated investment company's
principal business of investing in stock or securities) and other income
(including but not limited to gains from options, futures or forward contracts)
derived with respect to its business of investing in such stock, securities or
currencies (the "Income Requirement").
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<PAGE> 84
The Fund may use "equalization accounting" in determining the portion of
its net investment income and capital gain net income that has been distributed.
If the Fund that elects to use equalization accounting, it will allocate a
portion of its realized investment income and capital gains to redemptions of
Fund shares and will correspondingly reduce the amount of such income and gains
that it distributes in cash. However, the Fund intends to make cash
distributions for each taxable year in an aggregate amount that is sufficient to
satisfy the Distribution Requirement without taking into account its use of
equalization accounting. The Internal Revenue Service has not published any
guidance concerning the methods to be used in allocating investment income and
capital gains to redemptions of shares. In the event that the Internal Revenue
Service determines that the Fund is using an improper method of allocation and
has underdistributed its net investment income and capital gain net income for
any taxable year, the Fund may be liable for additional federal income tax.
In addition to satisfying the requirements described above, the Fund
must satisfy an asset diversification test in order to qualify as a regulated
investment company. Under this test, at the close of each quarter of the Fund's
taxable year, at least 50% of the value of the Fund's assets must consist of
cash and cash items, U.S. Government securities, securities of other regulated
investment companies, and securities of other issuers (as to which the Fund has
not invested more than 5% of the value of the Fund's total assets in securities
of such issuer and as to which the Fund does not hold more than 10% of the
outstanding voting securities of such issuer), and no more than 25% of the value
of its total assets may be invested in the securities of any one issuer (other
than U.S. Government securities and securities of other regulated investment
companies), or in two or more issuers which the Fund controls and which are
engaged in the same or similar trades or businesses.
If for any taxable year the Fund does not qualify as a regulated
investment company, all of its taxable income (including its net capital gain)
will be subject to tax at regular corporate rates without any deduction for
distributions to shareholders, and such distributions will be taxable as
ordinary dividends to the extent of the Fund's current and accumulated earnings
and profits.
DETERMINATION OF TAXABLE INCOME OF A REGULATED INVESTMENT COMPANY
In general, gain or loss recognized by the Fund on the disposition of an
asset will be a capital gain or loss. However, gain recognized on the
disposition of a debt obligation purchased by the Fund at a market discount
(generally, at a price less than its principal amount) will be treated as
ordinary income to the extent of the portion of the market discount which
accrued during the period of time the Fund held the debt obligation unless the
Fund made an election to accrue market discount into income. In addition, under
the rules of Code Section 988, gain or loss recognized on the disposition of a
debt obligation denominated in a foreign currency or an option with respect
thereto (but only to the extent attributable to changes in foreign currency
exchange rates), and gain or loss recognized on the disposition of a foreign
currency forward contract or of foreign currency itself, will generally be
treated as ordinary income or loss.
In general, for purposes of determining whether capital gain or loss
recognized by the Fund on the disposition of an asset is long-term or
short-term, the holding period of the asset may be affected if (a) the asset is
used to close a "short sale" (which includes for certain purposes the
acquisition of a put option) or is substantially identical to another asset so
used, (b) the asset is otherwise held by the Fund as part of a "straddle", or
(c) the asset is stock and the Fund grants certain call options with respect
thereto. In addition, a Fund may be required to defer the recognition of a loss
on the disposition of an asset held as part of a straddle to the extent of any
unrecognized gain on the offsetting position. Any gain recognized by a Fund on
the lapse of, or any gain or loss recognized by a Fund from a closing
transaction with respect to, an option written by the Fund will generally be
treated as a short-term capital gain or loss. In the case of covered options,
gain or loss may be long-term.
Some of the forward foreign currency exchange contracts, options and
futures contracts that the Fund may enter into will be subject to special tax
treatment as "Section 1256 contracts." Section 1256 contracts are treated as if
they are sold for their fair market value on the last business day of the
taxable year, regardless of whether a taxpayer's obligations (or rights) under
such contracts have terminated (by delivery, exercise,
14
<PAGE> 85
entering into a closing transaction or otherwise) as of such date. Any gain or
loss recognized as a consequence of the year-end deemed disposition of Section
1256 contracts is combined with any other gain or loss that was previously
recognized upon the termination of Section 1256 contracts during that taxable
year. The net amount of such gain or loss for the entire taxable year (including
gain or loss arising as a consequence of the year-end deemed sale of such
contracts) is deemed to be 60% long-term (taxable at a maximum rate of 20% for
non-corporate shareholders) and 40% short-term gain or loss. However, in the
case of Section 1256 contracts that are forward foreign currency exchange
contracts, the net gain or loss is separately determined and (as discussed
above) generally treated as ordinary income or loss.
Other hedging transactions that may be engaged in by the Fund (such as
short sales "against the box") may be subject to special tax treatment as
"constructive sales" under section 1259 of the Code if a Fund holds certain
"appreciated financial positions" (defined generally as any interest (including
a futures or forward contract, short sale or option) with respect to stock,
certain debt instruments, or partnership interests if there would be a gain were
such interest sold, assigned, or otherwise terminated at its fair market value).
Upon entering into a constructive sales transaction with respect to an
appreciated financial position, a Fund will be deemed to have constructively
sold such appreciated financial position and will recognize gain as if such
position were sold, assigned, or otherwise terminated at its fair market value
on the date of such constructive sale (and will take into account any gain for
the taxable year which includes such date) unless the closed transaction
exception applies.
Because application of the rules governing Section 1256 contracts and
constructive sales may affect the character of gains or losses and/or accelerate
the recognition of gains or losses from the affected investment positions, the
amount which must be distributed to shareholders and which will be taxed to
shareholders as ordinary income or long-term capital gain may be increased as
compared to a fund that did not engage in transactions involving Section 1256
contracts or constructive sales.
EXCISE TAX ON REGULATED INVESTMENT COMPANIES
A 4% non-deductible excise tax is imposed on regulated investment
companies that fail to distribute in each calendar year an amount equal to 98%
of ordinary taxable income for the calendar year and 98% of capital gain net
income for the one-year period ended on October 31 of such calendar year (or, at
the election of a regulated investment company having a taxable year ending
November 30 or December 31, for its taxable year (a "taxable year election")).
The balance of such income must be distributed during the next calendar year.
For the foregoing purposes, a regulated investment company is treated as having
distributed any amount on which it is subject to income tax for any taxable year
ending in such calendar year.
For purposes of the excise tax, a regulated investment company must (1)
reduce its capital gain net income (but not below its net capital gain) by the
amount of any net ordinary loss for any calendar year and (2) unless it has made
a taxable year election, exclude foreign currency gains and losses incurred
after October 31 of any year in determining the amount of ordinary taxable
income for the current calendar year (and, instead, include such gains and
losses in determining ordinary taxable income for the succeeding calendar year).
The Fund intends to make sufficient distributions or deemed
distributions of its ordinary taxable income and capital gain net income prior
to the end of each calendar year to avoid liability for the excise tax. However,
in the event that the Internal Revenue Service determines that the Fund is using
an improper method of allocation for purposes of equalization accounting (as
discussed above), such Fund may be liable for excise tax. Moreover, investors
should note that the Fund may in certain circumstances be required to
investments to make sufficient distributions to avoid excise tax liability.
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<PAGE> 86
FUND DISTRIBUTIONS
The Fund anticipates distributing substantially all of its investment
company taxable income for each taxable year. Such distributions will be taxable
to shareholders as ordinary income and treated as dividends for federal income
tax purposes, but they will qualify for the 70% dividends received deduction for
corporations only to the extent discussed below.
The Fund may either retain or distribute to shareholders its net capital
gain for each taxable year. The Fund currently intends to distribute any such
amounts. If net capital gain is distributed and designated as a capital gain
dividend, it will be taxable to shareholders as long-term capital gain (taxable
at a maximum rate of 20%), regardless of the length of time the shareholder has
held his shares or whether such gain was recognized by the Fund prior to the
date on which the shareholder acquired his shares. If the Fund elects to use
equalization accounting, however, a shareholder will be less likely to be taxed
on gain recognized prior to the date the shareholder acquires his shares since
such gain will in many cases have been allocated to shares of the Fund that have
previously been redeemed. Conversely, if the Fund elects to retain its net
capital gain, the Fund will be taxed thereon (except to the extent of any
available capital loss carryovers) at the 35% corporate tax rate. If the Fund
elects to retain its net capital gain, it is expected that the Fund also will
elect to have shareholders treated as if each received a distribution of its pro
rata share of such gain, with the result that each shareholder will be required
to report its pro rata share of such gain on its tax return as long-term capital
gain, will receive a refundable tax credit for its pro rata share of tax paid by
the Fund on the gain, and will increase the tax basis for its shares by an
amount equal to the deemed distribution less the tax credit.
Ordinary income dividends paid by the Fund with respect to a taxable
year will qualify for the 70% dividends received deduction generally available
to corporations (other than corporations, such as "S" corporations, which are
not eligible for the deduction because of their special characteristics and
other than for purposes of special taxes such as the accumulated earnings tax
and the personal holding company tax) to the extent of the amount of qualifying
dividends received by the Fund from domestic corporations for the taxable year.
A dividend received by the Fund will not be treated as a qualifying dividend (a)
if it has been received with respect to any share of stock that the Fund has
held for less than 46 days (91 days in the case of certain preferred stock),
excluding for this purpose under the rules of Code Section 246(c)(3)and(4) (i)
any day more than 45 days (or 90 days in the case of certain preferred stock)
after the date on which the stock becomes ex-dividend, and (ii) any period
during which the Fund has an option to sell, is under a contractual obligation
to sell, has made and not closed a short sale of, has granted certain options to
buy or has otherwise diminished its risk of loss by holding other positions with
respect to, such (or substantially identical) stock; (b) to the extent that the
Fund is under an obligation (pursuant to a short sale or otherwise) to make
related payments with respect to positions in substantially similar or related
property; or (c) to the extent the stock on which the dividend is paid is
treated as debt-financed under the rules of Code Section 246A. Moreover, the
dividends received deduction for a corporate shareholder may be disallowed or
reduced (a) if the corporate shareholder fails to satisfy the foregoing
requirements with respect to its shares of the Fund, or (b) by application of
Code Section 246(b) which in general limits the dividends received deduction to
70% of the shareholder's taxable income (determined without regard to the
dividends received deduction and certain other items).
Alternative minimum tax ("AMT") is imposed in addition to, but only to
the extent it exceeds, the regular tax and is computed at a maximum rate of 28%
for non-corporate taxpayers and 20% for corporate taxpayers on the excess of the
taxpayer's alternative minimum taxable income ("AMTI") over an exemption amount.
The corporate dividends received deduction is not itself an item of tax
preference that must be added back to taxable income or is otherwise disallowed
in determining a corporation's AMTI. However, corporate shareholders will
generally be required to take the full amount of any dividend received from the
Fund into account (without a dividend received deduction) in determining their
adjusted current earnings, which are used in computing an additional corporate
preference item (i.e., 75% of the excess of a corporate taxpayer's adjusted
current earnings over its AMTI (determined without regard to this item and the
AMTI net operating loss deduction)) that is includable in AMTI. For taxable
years beginning after 1997, however, certain small corporations are wholly
exempt from the AMT.
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Investment income that may be received by certain of the Funds from
sources within foreign countries may be subject to foreign taxes withheld at the
source. The United States has entered into tax treaties with many foreign
countries which entitle any such Funds to a reduced rate of, or exemption from,
taxes on such income. It is impossible to determine the effective rate of
foreign tax in advance since the amount of any such Fund's assets to be invested
in various countries is not known.
Distributions by the Fund that do not constitute ordinary income
dividends or capital gain dividends will be treated as a return of capital to
the extent of (and in reduction of) the shareholder's tax basis in his shares;
any excess will be treated as gain from the sale of his shares, as discussed
below.
Distributions by the Fund will be treated in the manner described above
regardless of whether such distributions are paid in cash or reinvested in
additional shares of the Fund. Shareholders receiving a distribution in the form
of additional shares will be treated as receiving a distribution in an amount
equal to the fair market value of the shares received, determined as of the
reinvestment date.
In addition, if the net asset value at the time a shareholder purchases
shares of the Fund reflects undistributed net investment income or recognized
capital gain net income, or unrealized appreciation in the value of the assets
of the Fund, distributions of such amounts will be taxable to the shareholder in
the manner described above, although such distributions economically constitute
a return of capital to the shareholder.
Ordinarily, shareholders are required to take distributions by the Fund
into account in the year in which the distributions are made. However, dividends
declared in October, November or December of any year and payable to
shareholders of record on a specified date in such a month will be deemed to
have been received by the shareholders (and made by the Fund) on December 31 of
such calendar year if such dividends are actually paid in January of the
following year. Shareholders will be advised annually as to the U.S. federal
income tax consequences of distributions made (or deemed made) during the year
in accordance with the guidance that has been provided by the Internal Revenue
Service ("IRS").
The Fund will be required in certain cases to withhold and remit to the
U.S. Treasury 31% of ordinary income dividends and capital gain dividends, and
the proceeds of redemption of shares, paid to any shareholder (1) who has
provided either an incorrect tax identification number or no number at all, (2)
who is subject to backup withholding by the Internal Revenue Service for failure
to report the receipt of interest or dividend income properly, or (3) who has
failed to certify to the Fund that he is not subject to backup withholding or
that it is an "exempt recipient."
SALE OR REDEMPTION OF FUND SHARES
A shareholder will recognize gain or loss on the sale or redemption of
shares of the Fund in an amount equal to the difference between the proceeds of
the sale or redemption and the shareholder's adjusted tax basis in the shares.
All or a portion of any loss so recognized may be disallowed if the shareholder
purchases other shares of the Fund within 30 days before or after the sale or
redemption. In general, any gain or loss arising from (or treated as arising
from) the sale or redemption of shares of the Fund will be considered capital
gain or loss and will be long-term capital gain or loss if the shares were held
for longer than one year. Except to the extent otherwise provided in future
Treasury regulations, any long-term capital gain recognized by a non-corporate
shareholder will be subject to tax at a maximum rate of 20%. However, any
capital loss arising from the sale or redemption of shares held for six months
or less will be treated as a long-term capital loss to the extent of the amount
of capital gain dividends received on such shares. For this purpose, the special
holding period rules of Code Section 246(c)(3) and (4) generally will apply in
determining the holding period of shares. Long-term capital gains of
non-corporate taxpayers are currently taxed at a maximum rate that in some cases
may be 19.6% lower than the maximum rate applicable to ordinary income. Capital
losses in any year are deductible only to the extent of capital gains plus, in
the case of a non-corporate taxpayer, $3,000 of ordinary income.
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<PAGE> 88
If a shareholder (i) incurs a sales load in acquiring shares of the
Fund, (ii) disposes of such shares less than 91 days after they are acquired and
(iii) subsequently acquires shares of the same or another Fund at a reduced
sales load pursuant to a right to reinvest at such reduced sales load acquired
in connection with the acquisition of the shares disposed of, then the sales
load on the shares disposed of (to the extent of the reduction in the sales load
on the shares subsequently acquired) shall not be taken into account in
determining gain or loss on the shares disposed of but shall be treated as
incurred on the acquisition of the shares subsequently acquired.
FOREIGN SHAREHOLDERS
Taxation of a shareholder who, as to the United States, is a nonresident
alien individual, foreign trust or estate ("foreign shareholder"), depends on
whether the income from the Fund is "effectively connected" with a U.S. trade or
business carried on by such shareholder. If the income from the Fund is not
effectively connected with a U.S. trade or business carried on by a foreign
shareholder, ordinary income dividends will be subject to U.S. withholding tax
at the rate of 30% (or lower treaty rate) upon the gross amount of the dividend.
Such a foreign shareholder would generally be exempt from U.S. federal income
tax on gains realized on the sale of shares of the Fund, capital gain dividends
and amounts retained by the Fund that are designated as undistributed capital
gains.
If the income from the Fund is effectively connected with a U.S. trade
or business carried on by a foreign shareholder, then ordinary income dividends,
capital gain dividends and any gains realized upon the sale of shares of the
Fund will be subject to U.S. federal income tax at the rates applicable to U.S.
citizens or domestic corporations.
In the case of foreign shareholders, the Fund may be required to
withhold U.S. federal income tax at a rate of 31% on distributions that are
otherwise exempt from withholding tax (or taxable at a reduced treaty rate)
unless such shareholders furnish the Fund with proper notification of their
foreign status.
Foreign persons who file a United States tax return after December 31,
1996, for a U.S. Tax refund and who are not eligible to obtain a social security
number must apply to the IRS for an individual taxpayer identification number,
using IRS Form W-7. For a copy of the IRS Form W-7 and accompanying
instructions, please contact your tax advisor.
The tax consequences to a foreign shareholder entitled to claim the
benefits of an applicable tax treaty may be different from those described
herein. Foreign shareholders are urged to consult their own tax advisers with
respect to the particular tax consequences to them of an investment in the Fund,
including the applicability of foreign taxes.
EFFECT OF FUTURE LEGISLATION; LOCAL TAX CONSIDERATIONS
The foregoing general discussion of U.S. federal income tax consequences
is based on the Code and the regulations issued thereunder as in effect on the
date of this Statement of Additional Information. Future legislative or
administrative changes or court decisions may significantly change the
conclusions expressed herein, and any such changes or decisions may have a
retroactive effect with respect to the transactions contemplated herein.
Rules of state and local taxation of ordinary income dividends and
capital gain dividends from regulated investment companies often differ from the
rules for U.S. federal income taxation described above. Shareholders are urged
to consult their tax advisers as to the consequences of these and other state
and local tax rules affecting investment in the Fund.
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<PAGE> 89
SHARE PURCHASES, REDEMPTIONS AND REPURCHASES
PURCHASES AND REDEMPTIONS
The terms of offering of shares of the Class and the methods of
accomplishing redemption are set forth in full in the Class' Prospectus and in
the Plan.
SUSPENSION OF RIGHT OF REDEMPTION
The right of redemption may be suspended or the date of payment
postponed when (a) trading on the New York Stock Exchange (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 disposal of portfolio securities or the
valuation of the net assets of the Fund not reasonably practicable.
VALUATION OF SHARES
In accordance with the current rules and regulations of the SEC, the net
asset value of a Fund share is determined as of the close of trading of the NYSE
(generally 4:00 p.m. Eastern Time) on each day in which the NYSE is open for
trading. Net asset value is determined by dividing the value of the Fund's
securities, cash and other assets (including accrued expenses but excluding
capital and surplus), by the number of shares outstanding. 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 share is determined as of the close of the NYSE on such
day. Determination of the Fund's net asset value per share is made in accordance
with generally accepted accounting principles. Portfolio securities are valued
using market values, if available. For purposes of determining net asset value
per share, futures and options contract closing prices which are available 15
minutes after the close of trading of the NYSE are generally used. The net asset
values per share of the Class and Class I shares of the Fund will differ from
each other because different expenses are attributable to each class. The income
or loss and the expenses (except those listed below) of the Fund are allocated
to each class on the basis of the net assets of the Fund allocable to each such
class, calculated as of the close of business on the previous business day, as
adjusted for the current day's shareholder activity of each class. Distribution,
service fees and transfer agency fees (to the extent different rates are charged
to different classes) and certain other fees are allocated only to the class to
which such expenses relate. The net asset value per share of the Class is
determined by subtracting the liabilities (e.g., the expenses) of the Fund
allocated to the Class from the assets of the Fund allocated to the Class and
dividing the result by the total number of shares outstanding of the Class.
Determination of the Fund's net asset value per share is made in accordance with
generally accepted accounting principles.
A security listed or traded on an exchange (except convertible bonds) is
valued at its last sale price on the exchange where the security is principally
traded, or lacking any sales on a particular day, the security is valued at the
closing bid price on that day. Each security traded in the over-the-counter
market (but not including securities reported on the NASDAQ National Market
System) is valued on the basis of prices provided by independent pricing
services. Each security reported on the NASDAQ National Market System is valued
at the last sale price on the valuation date, or absent a last sales price, at
the closing bid price on that day, option contracts are valued at the mean
between the closing bid and asked prices on the exchange where the contracts are
principally traded; and futures contracts are valued at final settlement price
quotations from the primary exchange on which they are traded. Debt obligations
(including convertible bonds) are valued on the basis of prices provided by an
independent pricing service. Prices provided by the independent pricing service
may be determined without exclusive reliance on quoted prices, and may reflect
appropriate factors such as dividend rate, yield, type of issue, coupon rate and
maturity. Securities for which market quotations are not readily available or
for which market quotations are not reflective of fair market value are valued
at fair value as determined in good faith by or under the supervision of the
Fund's officers in a manner specifically authorized by the Board of Directors of
the Fund. Notwithstanding the above, short-term obligations with maturities of
60 days or less are valued at amortized cost which approximates market value.
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<PAGE> 90
Generally, trading in foreign securities, as well as 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 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
will 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.
THE DISTRIBUTION PLAN
The Fund has adopted a Distribution Plan pursuant to Rule 12b-1 under
the 1940 Act relating to the Class of the Fund (the "Distribution Plan"). The
Distribution Plan provides that the Class pay 0.30% per annum of its average
daily net assets as compensation to AIM Distributors for the purpose of
financing any activity which is primarily intended to result in the sale of the
shares of the Class. The Distribution 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 the shares of the
Class. Payments can also be directed by AIM Distributors to selected
institutions who have entered into service agreements with respect to the Class
and who provides continuing personal services to their customers who own shares
of the Class. 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 Class
shares that are held in such institution's customers' accounts which were
purchased on or after a prescribed date set forth in the Distribution Plan.
Activities appropriate for financing under the Distribution 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 Distribution Plan.
Of the aggregate amount payable under the Distribution Plan, payments to
dealers and other financial institutions that provide continuing personal
shareholder services to their customers who purchase and own shares of the
Class, in amounts of up to 0.25% of the average daily net assets of the Class
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 Distribution Plan.
Payments pursuant to the Distribution Plans are subject to any applicable
limitations imposed by rules of the National Association of Securities Dealers,
Inc.
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 shares of the Class 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 Class. 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 Fund;
assisting customers in changing dividend options, account designations and
addresses, and in enrolling in any of several special investment plans offered
in connection with the purchase of the shares of the Class; 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 shares of the Class; and providing
such other information and services as the Class or the customer may reasonably
request.
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<PAGE> 91
Under a Shareholder Service Agreement, the 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 Class during such period at the annual rate of
0.25% of the average daily net asset value of the Fund's shares purchased. 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 the shares of the Class are held.
The Distribution Plan is subject to any applicable limitations imposed
from time to time by rules of the National Association of Securities Dealers,
Inc.
AIM Distributors may from time to time waive or reduce any portion of
its 12b-1 fee for the Class. 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 the Prospectus may not be
terminated without the approval of the Board of Directors.
Under the Distribution Plan, certain financial institutions which have
entered into service agreements and which sell shares of the Class on an agency
basis, may receive payments from the Fund pursuant to the Distribution Plan. AIM
Distributors does not act as principal, but rather as agent for the Class, in
making dealer incentive and shareholder servicing payments under the
Distribution Plan. These payments are an obligation of the Fund on behalf of the
Class and not of AIM Distributors.
The Distribution Plan requires AIM Distributors to provide the Board of
Directors at least quarterly with a written report of the amounts expended
pursuant to the Distribution Plan 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 Distribution Plan.
As required by Rule 12b-1, the Distribution Plan and related form of
Shareholder Service Agreements were approved by the Board of Directors,
including a majority of the directors who are not "interested persons" (as
defined in the 1940 Act) of the Fund and who have no direct or indirect
financial interest in the operation of the Distribution Plan or in any
agreements related to the Distribution Plan ("Non-Interested Directors"). In
approving the Distribution Plan in accordance with the requirements of Rule
12b-1, the directors considered various factors and determined that there is a
reasonable likelihood that the Distribution Plan would benefit the Class and its
respective shareholders.
The Distribution Plan does not obligate the Fund on behalf of the Class
to reimburse AIM Distributors for the actual expenses AIM Distributors may incur
in fulfilling its obligations under the Distribution Plan. Thus, even if AIM
Distributors' actual expenses exceed the fee payable to AIM Distributors
thereunder at any given time, the Fund on behalf of the Class 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 the Distribution Plan is terminated earlier in accordance with
its terms, the Distribution Plan continues as long as such continuance is
specifically approved at least annually by the Board of Directors, including a
majority of the Non-Interested Directors.
The Distribution Plan may be terminated by the vote of a majority of the
Non-Interested Directors, or by the majority of the outstanding voting
securities.
Any change in the Distribution Plan that would increase materially the
distribution expenses paid by the applicable class requires shareholder
approval; otherwise, it may be amended by the directors, including a majority of
the Non-Interested Directors, by votes cast in person at a meeting called for
the purpose of voting upon such amendment. As long as the Distribution Plan is
in effect, the selection or nomination of the Non- Interested Directors is
committed to the discretion of the Non-Interested Directors.
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<PAGE> 92
THE DISTRIBUTION AGREEMENT
The Fund has entered into a Distribution Agreement (the "Distribution
Agreement") with AIM Distributors, a registered broker-dealer and a wholly owned
subsidiary of AIM, which in turn is a wholly owned subsidiary of AIM Management,
under which the Fund will issue shares at net asset value primarily to State
Street Bank and Trust Company, as custodian for the Plan ("State Street Bank" or
the "Custodian"). The address of AIM Distributors is P.O. Box 4264, Houston,
Texas 77210-4264. AIM Distributors acts as sponsor and principal underwriter of
the Plan. AIM Distributors does not receive any fee from the Fund pursuant to
the Distribution Agreement. The Distribution Agreement provides that AIM
Distributors will pay promotional expenses, including the incremental costs of
printing prospectuses, statements of additional information, annual reports and
other periodic reports for distribution to persons who are not shareholders of
the Fund and the costs of preparing and distributing any other supplemental
sales literature. AIM Distributors has not undertaken to sell any specified
number of shares of the Fund. The Fund or AIM Distributors may terminate the
Distribution Agreement on 60 days' written notice without penalty. The
Distribution Agreement will terminate automatically in the event of assignment.
Certain directors and officers of the Fund are affiliated with AIM Distributors
and AIM Management.
INVESTMENT STRATEGIES AND RISKS
Consistent with the Fund's objective of capital growth, the Fund's
assets will tend to be fully invested in:
1. Core Stocks -- These are securities issued by companies which
have established a long-term record of earnings growth and which are
believed by AIM, as the Fund's advisor, to be capable of sustaining such
growth in the future. Generally (but not always) the common stocks of
these companies will be listed on a national securities exchange.
2. Emerging Growth Stocks -- These securities are issued by
smaller growth-oriented companies. The securities of a number of such
companies are traded only in the over-the-counter market. Such
securities may not have widespread interest among institutional
investors. Accordingly, such securities may present increased
opportunity for gain if significant institutional investor interest
subsequently develops, but may also involve additional risk of loss in
the event of adverse developments because of the limited market for such
securities. The business prospects and earnings of emerging growth
companies may be subject to more rapid or unanticipated changes than in
the case of larger, better established concerns.
3. Value-Oriented Stocks -- These are stocks which are believed
to be currently undervalued relative to other available investments.
Since this belief may be based upon projections made by the Fund's
advisor or sub-advisor of earnings, dividends or price-earnings ratios
(which projections may differ significantly from similar projections
made by other investors), the Fund's ability to realize capital
appreciation on value-oriented stocks may be more dependent upon the
advisor's and sub-advisor's capabilities than is the case with other
types of securities in which the Fund may invest.
In anticipation of or in response to adverse market conditions or for
cash management purposes, the Fund may hold all or a portion of its assets in
cash, money market securities, bond or other debt securities. As a result, the
Fund may not achieve its investment objective. Such money market instruments
will consist of obligations of, or guaranteed by, the United States Government
or its agencies or instrumentalities; certificates of deposit, bankers'
acceptances, time deposits, master notes and other obligations of domestic banks
having total assets of at least $500 million; and commercial paper rated in the
highest category by a nationally recognized statistical rating organization.
The Fund may make short sales or maintain a short position in securities
if at all times when such a short position is open the Fund owns at least an
equal amount of such securities or securities convertible into or exchangeable
at no added cost for at least an equal amount of such securities.
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<PAGE> 93
The receipt by the Fund of new money primarily through the medium of
continuing investments under systematic investment plans may tend to produce a
more even rate of influx than is the case with other funds. This may furnish a
base for a gradual and planned accumulation of positions in individual portfolio
securities when such a program is deemed to be appropriate. One example of how
this concept could be employed is through a program of "dollar-cost averaging"
in the purchase of securities for the Class. "Dollar-cost averaging" involves
the purchase of a fixed dollar amount of stock of a company at regular
intervals. The number of shares of stock obtained upon each purchase will
therefore vary with the price of the stock, with more shares being obtained as
the price to the stock declines and fewer shares being obtained as the price of
the stock increases. Such a program could be hampered by increased redemptions
of the Fund's shares which would reduce amounts available for investment by the
Fund.
AIM provided the initial capitalization for the Class and, accordingly,
as of the date of this Statement of Additional Information, owned all the
outstanding shares of the Class. The Fund expects that the sale of shares of the
Class to the Plan will promptly reduce the percentage of the shares owned by AIM
to less than 1% of the total shares outstanding. As of February 1, 1999, the
directors and officers of the Fund as a group owned beneficially less than 1% of
each Class of the Fund's outstanding shares.
INVESTMENT PROGRAM
The Fund's investment objective and the methods by which the Fund seeks
to achieve that objective is set forth in the Prospectus under the caption
"Investment Objectives and Strategies" and "Principal Risks of Investing in the
Fund." It is the current policy of the Fund not to purchase or own the common
stock of any company which, in the opinion of AIM, derives a substantial portion
of its revenues from the manufacture of alcoholic beverages or tobacco products
or the operation of gambling establishments. In the opinion of management based
upon current conditions, such policy will not have a significant effect on the
investment performance of the Fund. This policy may be modified or rescinded by
the Fund's Board of Directors without shareholder approval.
COMMON STOCKS
The Fund may invest in common stocks. Common stocks represent the
residual ownership interest in the issuer and are entitled to the income and
increase in the value of the assets and business of the entity after all of its
obligations and preferred stocks are satisfied. Common stocks generally have
voting rights. Common stocks fluctuate in price in response to many factors
including historical and prospective earnings of the issuer, the value of its
assets, general economic conditions, interest rates, investor perceptions and
market liquidity.
PREFERRED STOCKS
The Fund may invest in preferred stocks. Preferred stock has a
preference over common stock in liquidation (and generally dividends as well)
but is subordinated to the liabilities of the issuer in all respects. As a
general rule the market value of preferred stock with a fixed dividend rate and
no conversion element varies inversely with interest rates and perceived credit
risk, while the market price of convertible preferred stock generally also
reflects some element of conversion value. Because preferred stock is junior to
debt securities and other obligations of the issuer, deterioration in the credit
quality of the issuer will cause greater changes in the value of a preferred
stock than in a more senior debt security with similar stated yield
characteristics. Unlike interest payments on debt securities, preferred stock
dividends are payable only if declared by the issuer's board of directors.
Preferred stock also may be subject to optional or mandatory redemption
provisions.
CONVERTIBLE SECURITIES
The Fund may invest in convertible securities. A convertible security is
a bond, debenture, note, preferred stock or other security that may be converted
into or exchanged for a prescribed amount of common stock or other equity
security of the same or a different issuer within a particular period of time at
a specified
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<PAGE> 94
price or formula. A convertible security entitles the holder to receive interest
paid or accrued on debt or the dividend paid on preferred stock until the
convertible security matures or is redeemed, converted or exchanged. Before
conversion, convertible securities have characteristics similar to
nonconvertible income securities in that they ordinarily provide a stable stream
of income with generally higher yields than those of common stocks of the same
or similar issuers. Convertible securities rank senior to common stock in a
corporation's capital structure but are usually subordinated to comparable
nonconvertible securities. Convertible securities may be subject to redemption
at the option of the issuer at a price established in the convertible security's
governing instrument. Although the Fund will only purchase convertible
securities that AIM considers to have adequate protection parameters, including
an adequate capacity to pay interest and repay principal in a timely manner, it
invests without regard to corporate bond ratings.
CORPORATE DEBT SECURITIES
The Fund may invest in corporate debt securities. Corporations issue
debt securities of various types, including bonds and debentures (which are
long-term), notes (which may be short- or long-term), bankers acceptances
(indirectly secured borrowings to facilitate commercial transactions) and
commercial paper (short-term unsecured notes). These securities typically
provide for periodic payments of interest, at a rate which may be fixed or
adjustable, with payment of principal upon maturity and are generally not
secured by assets of the issuer or otherwise guaranteed. The values of fixed
rate income securities tend to vary inversely with changes in interest rates,
with longer-term securities generally being more volatile than shorter-term
securities. Corporate securities frequently are subject to call provisions that
entitle the issuer to repurchase such securities at a predetermined price prior
to their stated maturity. In the event that a security is called during a period
of declining interest rates, the Fund may be required to reinvest the proceeds
in securities having a lower yield. In addition, in the event that a security
was purchased at a premium over the call price, the Fund will experience a
capital loss if the security is called. Adjustable rate corporate debt
securities may have interest rate caps and floors.
U.S. GOVERNMENT SECURITIES
The Fund may invest in securities issued or guaranteed by the United
States government or its agencies or instrumentalities. These include Treasury
securities (bills, notes, bonds and other debt securities) which differ only in
their interest rates, maturities and times of issuance. U.S. Government agency
and instrumentality securities include securities which are supported by the
full faith and credit of the U.S., securities that are supported by the right of
the agency to borrow from the U.S. Treasury, securities that are supported by
the discretionary authority of the U.S. Government to purchase certain
obligations of the agency or instrumentality and securities that are supported
only by the credit of such agencies. While the U.S. Government may provide
financial support to such U.S. government-sponsored agencies or
instrumentalities, no assurance can be given that it always will do so. The U.S.
government, its' agencies and instrumentalities do not guarantee the market
value of their securities and consequently the values of such securities
fluctuate.
REAL ESTATE INVESTMENT TRUSTS ("REITs")
The Fund may invest in equity and/or debt securities issued by REITs.
Such investments will not exceed 10% of the total assets of the Fund.
REITs are trusts which sell equity or debt securities to investors and
use the proceeds to invests in real estate or interests therein. A REIT may
focus on particular projects, such as apartment complexes, or geographic
regions, such as the Southeastern United States, or both.
To the extent that the Fund has the ability to invest in REITs, the Fund
could conceivably own real estate directly as a result of a default on the
securities it owns. The Fund, therefore, may be subject to certain risks
associated with the direct ownership of real estate including difficulties in
valuing and trading real estate, declines in the value of real estate, risks
related to general and local economic condition, adverse change in the climate
for real estate, environmental liability risks, increases in property taxes and
operating expense, changes in zoning laws, casualty or condemnation losses,
limitations on rents, changes in neighborhood values, the appeal of properties
to tenants, and increases in interest rates.
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In addition to the risks described above, equity REITs may be affected
by and changes in the value of the underlying property owned by the trusts,
while mortgage REITs may be affected by the quality of any credit extended.
Equity and mortgage REITs are dependent upon management skill, are not
diversified, and are therefore subject to the risk of financing single or a
limited number of projects. Such trusts are also subject to heavy cash flow
dependency, defaults by borrowers, self-liquidation, and the possibility of
failing to maintain exemption from the 1940 Act. Changes in interest rates may
also affect the value of debt securities held by the Fund. By investing in REITs
indirectly through the Fund, a shareholder will bear not only his/her
proportionate share of the expenses of the Fund, but also, indirectly, similar
expenses of the REITs.
WARRANTS
The Fund may, from time to time, invest in warrants. Warrants are, in
effect, longer-term call options. They give the holder the right to purchase a
given number of shares of a particular company at specified prices within
certain periods of time. The purchaser of a warrant expects that the market
price of the security will exceed the purchase price of the warrant plus the
exercise price of the warrant, thus giving him a profit. Of course, since the
market price may never exceed the exercise price before the expiration date of
the warrant, the purchaser of the warrant risks the loss of the entire purchase
price of the warrant. Warrants generally trade in the open market and may be
sold rather than exercised. Warrants are sometimes sold in unit form with other
securities of an issuer. Units of warrants and common stock may be employed in
financing young, unseasoned companies. The purchase price of a warrant varies
with the exercise price of a warrant, the current market value of the underlying
security, the life of the warrant and various other investment factors.
FOREIGN SECURITIES
The Fund has reserved the investment flexibility to invest up to 20% of
its total assets in foreign securities. 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. The Fund 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. The Fund may also
purchase securities of foreign issuers which are in the form of American
Depository Receipts ("ADRs"), European Depository receipts ("EDRs"), or other
securities representing underlying securities of foreign issuers. ADRs, EDRs,
and other securities representing underlying securities of foreign issuers are
included in the percentage limitations applicable to the Fund's investments in
foreign securities. To the extent it invests in securities denominated in
foreign currencies, the Fund bears the risks of changes in the exchange rates
between U.S. currency and the foreign currency, as well as the availability and
status of foreign securities markets.
Investments by the Fund in foreign securities, whether denominated in
U.S. dollars or foreign currencies including Eurodollar, Yankee dollar and other
foreign obligations, may entail some or all of the risks set forth below.
Investments by the Fund in ADRs and EDRs may entail certain political and
economic risks and regulatory risks described below.
Currency Risk. The value of the Fund'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.
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Political and Economic Risk. The economies of many of the countries in
which the Fund may invest are not as developed as the United States economy and
may be subject to significantly different economic and political forces.
Political or social instability, expropriation or confiscatory taxation, and
limitations on the removal of funds or other assets could also adversely affect
the value of the Fund'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. In addition, income from foreign
securities owned by the Fund may be reduced by a withholding tax at the source,
which tax would reduce dividend income payable to the Fund's shareholders.
Market Risk. The securities markets in many of the countries in which
the Fund may 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.
On January 1, 1999, certain members of the European Economic and
Monetary Union ("EMU"), namely Austria, Belgium, Finland, France, Germany,
Ireland, Italy, Luxembourg, the Netherlands, Portugal, and Spain established a
common European currency known as the "euro" and each member's local currency
became a denomination of the euro. It is anticipated that each participating
country will replace its local currency with the euro on July 1, 2002. Any other
European country that is a member of the European Union and satisfies the
criteria for participation in the EMU may elect to participate in the EMU and
may supplement its existing currency with the euro. The anticipated replacement
of existing currencies with the euro on July 1, 2002 could cause market
disruptions before or after July 1, 2002 and could adversely affect the value of
securities held by the Fund.
FOREIGN EXCHANGE TRANSACTIONS
Purchases and sales of foreign securities are usually made with foreign
currencies, and consequently the Fund may from time to time hold cash balances
in the form of foreign currencies and multinational currency units. Such foreign
currencies and multinational currency units will usually be acquired on a spot
(i.e. cash) basis at the spot rate prevailing in foreign exchange markets and
will result in currency conversion costs to the Fund. The Fund attempts to
purchase and sell foreign currencies on as favorable a basis as practicable;
however, some price spread on foreign exchange transactions (to cover service
charges) may be incurred, particularly when the Fund changes investments from
one country to another, or when U.S. dollars are used to purchase foreign
securities. Certain countries could adopt policies which would prevent the Fund
from transferring cash out of such countries, and the Fund may be affected
either favorably or unfavorably by fluctuations in relative exchange rates while
the Fund holds foreign currencies.
REPURCHASE AGREEMENTS
The Fund may enter into repurchase agreements. A repurchase agreement is
an instrument under which the Fund acquires ownership of a debt security and the
seller (usually a broker or a bank) agrees, at the time of the sale, to
repurchase the obligation at a mutually agreed upon time and price, thereby
determining the yield during the Fund's holding period. In the event of
bankruptcy or other default of a seller of a repurchase agreement, the Fund may
experience both delays in liquidating the underlying securities and losses,
including: (a) a possible decline in the value of the underlying security during
the period in which the Fund seeks to enforce its rights thereto; (b) a possible
subnormal level of income and lack of access to income
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during this period; and (c) expenses of enforcing its rights. A repurchase
agreement is collateralized by the security acquired by the Fund and its value
is marked to market daily in order to minimize the Fund's risk. Repurchase
agreements usually are for short periods, such as one or two days, but may be
entered into for longer periods of time. Repurchase agreements are not included
in the Fund's restrictions on lending. Repurchase agreements are considered to
be loans by the Fund under the 1940 Act.
RULE 144A SECURITIES
The Fund may purchase securities which, while privately placed, are
eligible for purchase and sale pursuant to Rule 144A under the Securities Act of
1933 (the "1933 Act"). This Rule permits certain qualified institutional buyers,
such as the Fund, to trade in privately placed securities even though such
securities are not registered under the 1933 Act. AIM, under the supervision of
the Fund's Board of Directors, will consider whether securities purchased under
Rule 144A are illiquid and thus subject to the Fund's restriction of investing
no more than 15% of its assets in illiquid securities. Determination of whether
a Rule 144A security is liquid or not is a question of fact. In making this
determination AIM will consider the trading markets for the specific security
taking into account the unregistered nature of a Rule 144A security. In
addition, AIM could consider the (i) frequency of trades and quotes, (ii) number
of dealers and potential purchasers, (iii) dealer undertakings to make a market,
and (iv) nature of the security and of market place trades (for example, the
time needed to dispose of the security, the method of soliciting offers and the
mechanics of transfer). The liquidity of Rule 144A securities will also be
monitored by AIM and, if as a result of changed conditions, it is determined
that a Rule 144A security is no longer liquid, the Fund's holdings of illiquid
securities will be reviewed to determine what, if any, action is required to
assure that the Fund does not invest more than 15% of its assets in illiquid
securities. Investing in Rule 144A securities could have the effect of
increasing the amount of the Fund's investments in illiquid securities if
qualified institutional buyers are unwilling to purchase such securities.
ILLIQUID SECURITIES
The Fund may invest up to 15% of its net assets in securities that are
illiquid. Illiquid securities include securities that have no readily available
market quotations and cannot be disposed of promptly (within seven days) in the
normal course of business at a price at which they are valued. Illiquid
securities may include securities that are subject to restrictions on resale
because they have not been registered under the Securities Act of 1933.
Restricted securities may, in certain circumstances, be resold pursuant to Rule
144A, and thus may or may not constitute illiquid securities. The Fund's Board
of Directors is responsible for developing and establishing guidelines and
procedures for determining the liquidity of Rule 144A restricted securities on
behalf of the Fund and monitoring AIM's implementation of the guidelines and
procedures. Limitations on the resale of restricted securities may have an
adverse effect on their marketability, which may prevent the Fund from disposing
of them promptly at reasonable prices. The Fund may have to bear the expense of
registering such securities for resale, and the risk of substantial delays in
effecting such registrations.
LENDING OF FUND SECURITIES
The Fund may also lend its portfolio securities in amounts up to 33 1/3%
of its total assets to financial institutions in accordance with the investment
restrictions of the Fund. Such loans would involve risks of delay in receiving
additional collateral in the event the value of the collateral decreased below
the value of the securities loaned or of delay in recovering the securities
loaned or even loss of rights in the collateral should the borrower of the
securities fail financially. However, loans will be made only when, in AIM's
judgment, the income to be earned from the loans justifies the attendant risks.
FUTURES CONTRACTS
The Fund may purchase and sell stock index futures contracts in order to
hedge the value of its portfolio against changes in market conditions. In cases
of purchases of stock index futures contracts, an amount of
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liquid assets, equal to the cost of the stock index futures contracts (less any
related margin deposits), will be segregated to collateralize the position and
ensure that the use of such stock index futures contracts is unleveraged. Unlike
when the Fund purchases or sells a security, no price is paid or received by the
Fund upon the purchase or sale of a stock index futures contract. Initially, the
Fund will be required to deposit with its custodian for the account of the
broker a stated amount, as called for by the particular contract, of cash or
U.S. Treasury bills. This amount is known as "initial margin." The nature of
initial margin in futures transactions is different from that of margin in
securities transactions in that stock index futures contract margin does not
involve the borrowing of funds by the customer to finance the transactions.
Rather, the initial margin is in the nature of a performance bond or good faith
deposit on the contract which is returned to the Fund upon termination of the
futures contract assuming all contractual obligations have been satisfied.
Subsequent payments, called "variation margin," to and from the broker will be
made on a daily basis as the price of the stock index futures contract
fluctuates making the long and short positions in the futures contract more or
less valuable, a process known as "marking-to-market." For example, when the
Fund has purchased a stock index futures contract and the price of the
underlying stock index has risen, that position will have increased in value and
the Fund will receive from the broker a variation margin payment with respect to
that increase in value. Conversely, where the Fund has purchased a stock index
futures contract and the price of the underlying stock index has declined, that
position would be less valuable and the Fund would be required to make a
variation margin payment to the broker. At any time prior to expiration of the
stock index futures contract, the Fund may elect to close the position by taking
an opposite position which will operate to terminate the Fund's position in the
stock index futures contract. A final determination of variation margin is then
made, additional cash is required to be paid by or released to the Fund and the
Fund realizes a loss or gain.
Stock Index Futures Contracts
A stock index assigns relative values to the common stocks included in
the index and the index fluctuates with changes in the market values of the
common stocks so included. A stock index futures contract is an agreement
pursuant to which two parties agree to take or make delivery of an amount of
cash equal to a specified dollar amount times the difference between the stock
index value at the close of the last trading day of the contract and the price
at which the futures contract is originally struck. No physical delivery of the
underlying stocks in the index is made. The Fund will only enter into domestic
stock index futures. Currently, stock index futures contracts can be purchased
or sold primarily with respect to broad based stock indices such as the S&P's
500 Stock Index, the NYSE Composite Index, the American Stock Exchange Major
Market Index, the NASDAQ - 100 Stock Index and the Value Line Stock Index. The
stock indices listed above consist of a spectrum of stocks not limited to any
one industry such as utility stocks. Utility stocks, at most, would be expected
to comprise a minority of the stocks comprising the portfolio of the index. The
Fund will only enter into stock index futures contracts as a hedge against
changes resulting from market conditions in the values of the securities held or
which it intends to purchase. When the Fund anticipates a significant market or
market sector advance, the purchase of a stock index futures contract affords a
hedge against not participating in such advance. Conversely, in anticipation of
or in a general market or market sector decline that adversely affects the
market values of the Fund's portfolio of securities, the Fund may sell stock
index futures contracts. Generally, the Fund may elect to close a position in a
futures contract by taking an opposite position which will operate to terminate
the Fund's position in the futures contract. The Fund may also write call
options with respect to such futures contracts. As the writer of a call option
on a futures contract, the Fund would be required to assume a short position in
a futures contract at a specified exercise price if the option is exercised
during the option period. If the option is exercised on the last trading date
prior to the expiration date of the option, the settlement of the option will be
made entirely in cash equal to the difference between the exercise price of the
option and the closing price of the underlying futures contract on the
expiration date. The Fund may purchase or sell futures contracts if, immediately
thereafter, the sum of the amount of initial margin deposits and premiums on
open positions with respect to futures contracts and related call options would
not exceed 5% of the market value of the Fund's total assets.
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RISKS AS TO FUTURES CONTRACTS AND RELATED CALL OPTIONS
There are several risks in connection with the use of stock index
futures contracts and related call options as hedging devices. One risk arises
because of the imperfect correlation between movements in the price of hedging
instruments and movements in the price of the stocks, which are the subject of
the hedge. If the price of a hedging instrument moves less than the price of the
stocks, which are the subject of the hedge, the hedge will not be fully
effective. If the price of a hedging instrument moves more than the price of the
stocks, the Fund will experience either a loss or gain on the hedging instrument
which will not be completely offset by movements in the price of the stocks,
which are the subject of the hedge. The use of call options on futures contracts
involves the additional risk that changes in the value of the underlying futures
contract will not be fully reflected in the value of the call option.
Successful use of hedging instruments by the Fund is also subject to
AIM's ability to predict correctly movements in the direction of the stock
market, of interest rates or of particular stock indices. Because of possible
price distortions in the futures and options markets and because of the
imperfect correlation between movements in the prices of hedging instruments and
the investments being hedged, even a correct forecast by AIM of general market
trends may not result in a completely successful hedging transaction. AIM does
not intend to use hedging instruments if the cost of these instruments exceed
their expected benefit to the Fund.
It is also possible that where the Fund has sold stock index futures
contracts to hedge its portfolio against a decline in the market, the market may
advance and the value of stocks or debt securities held in its portfolio may
decline. If this occurred, the Fund would lose money on the stock index futures
contracts and also experience a decline in the value of its portfolio
securities.
Positions in futures contracts or options may be closed out only on an
exchange on which such contracts are traded. Although the Fund intends to
purchase or sell stock index futures contracts only on exchanges or boards of
trade where there appears to be an active market, there is no assurance that a
liquid market on an exchange or a board of trade will exist for any particular
contract at any particular time. If there is not a liquid market, it may not be
possible to close a stock index futures or option position at such time. In the
event of adverse price movements under those circumstances, the Fund would
continue to be required to make daily cash payments of maintenance margin on its
futures positions. The extent to which the Fund may engage in stock index
futures contracts will be limited by Internal Revenue Code requirements for
qualification as a regulated investment company and the Fund's intent to
continue to qualify as such. The result of a hedging program cannot be foreseen
and may cause the Fund to suffer losses which it would not otherwise sustain.
PORTFOLIO TURNOVER
Consistent with its objective of capital growth, the Fund does not
intend to engage in substantial short-term trading. However, the Fund reserves
the right to dispose of any security without regard to the period of time it has
been held and to take short-term or long-term profits when such action is
consistent with its investment program. The Fund's historical portfolio turnover
rates are included in the Financial Highlights table in the Prospectus. A higher
rate of portfolio turnover may result in higher transaction costs, including
brokerage commissions. The Fund's turnover may vary greatly from year to year
and may exceed 100% during years when the Fund has taken a significant defensive
position or otherwise makes changes in the investment strategies which it
pursues consistent with its overall investment objective. Also, to the extent
that higher portfolio turnover results in a higher rate of net realized capital
gains to the Fund, the portion of the Fund's distributions constituting taxable
capital gains may increase.
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PORTFOLIO TRANSACTIONS AND BROKERAGE
General Brokerage Policy
AIM makes decisions to buy and sell securities for the Fund, selects
broker-dealers, effects the Fund's investment portfolio transactions, allocates
brokerage fees in such transactions, and where applicable, negotiates
commissions and spreads on transactions. AIM's primary consideration in
effecting a security transaction is to obtain the most favorable execution of
the order, which includes the best price on the security and a low commission
rate. While AIM seeks reasonably competitive commission rates, the Fund may not
pay the lowest commission or spread available. See "Section 28(e) Standards"
below.
Some of the securities in which the Fund invests are traded in
over-the-counter markets. In such transactions, the Fund deals directly with
dealers who make markets in the securities involved, except when better prices
are available elsewhere. Portfolio transactions placed through dealers who are
primary market makers are effected at net prices without commissions, but which
include compensation in the form of a mark up or mark down.
Traditionally, commission rates have not been negotiated on stock
markets outside the United States. Although in recent years many overseas stock
markets have adopted a system of negotiated rates, a number of markets maintain
an established schedule of minimum commission rates.
AIM may determine target levels of commission business with various
brokers on behalf of its clients (including the Fund) over a certain time
period. The target levels will be based upon the following factors, among
others: (1) the execution services provided by the broker; (2) the research
services provided by the broker; and (3) the broker's interest in mutual funds
in general and in the Fund and other mutual funds advised by AIM or AIM Capital
(collectively, the "AIM Funds") in particular, including sales of the Fund and
of the other AIM Funds. In connection with (3) above, the Fund's trades may be
executed directly by dealers that sell shares of the AIM Funds or by other
broker-dealers with which such dealers have clearing arrangements. AIM will not
use a specific formula in connection with any of these considerations to
determine the target levels.
AIM will seek, whenever possible, to recapture for the benefit of the
Fund any commissions, fees, brokerage or similar payments paid by the Fund on
portfolio transactions. Normally, the only fees which AIM can recapture are the
soliciting dealer fees on the tender of a Fund's portfolio securities in a
tender or exchange offer.
The Fund may engage in certain principal and agency transactions with
banks and their affiliates that own 5% or more of the outstanding voting
securities of the Fund, provided the conditions of an exemptive order received
by the Fund from the SEC are met. In addition, the Fund may purchase or sell a
security from or to another AIM Fund provided the Fund follows procedures
adopted by the Boards of Directors/Trustees of the various AIM Funds, including
the Fund. These inter-fund transactions do not generate brokerage commissions
but may result in custodial fees or taxes or other related expenses.
Allocation of Portfolio Transactions
AIM and its affiliates manage several other investment accounts. Some of
these accounts may have investment objectives similar to the Fund. Occasionally,
identical securities will be appropriate for investment by the Fund and by
another AIM Fund or one or more of these investment accounts. However, the
position of each account in the same securities and the length of time that each
account may hold its investment in the same securities may vary. The timing and
amount of purchase by each account will also be determined by its cash position.
If the purchase or sale of securities is consistent with the investment policies
of the Fund(s) and one or more of these accounts, and is considered at or about
the same time, AIM will fairly allocate transactions in such securities among
the Fund(s) and these accounts. AIM may combine such transactions, in accordance
with applicable laws and regulations, to obtain the most favorable execution.
Simultaneous transactions could, however, adversely affect a Fund's ability to
obtain or dispose of the full amount of a security which it seeks to purchase or
sell.
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Sometimes the procedure for allocating portfolio transactions among the
various investment accounts advised by AIM could have an adverse effect on the
price or amount of securities available to a Fund. In making such allocations,
AIM considers the investment objectives and policies of its advisory clients,
the relative size of portfolio holdings of the same or comparable securities,
the availability of cash for investment, the size of investment commitments
generally held, and the judgments of the persons responsible for recommending
the investment.
Section 28(e) Standards
Section 28(e) of the Securities Exchange Act of 1934 provides that AIM,
under certain circumstances, lawfully may cause an account to pay a higher
commission than the lowest available. Under Section 28(e), AIM must make a good
faith determination that the commissions paid are "reasonable in relation to the
value of the brokerage and research services provided ... viewed in terms of
either that particular transaction or [AIM's] overall responsibilities with
respect to the accounts as to which it exercises investment discretion." The
services provided by the broker also must lawfully and appropriately assist AIM
in the performance of its investment decision-making responsibilities.
Accordingly, in recognition of research services provided to it, the Fund may
pay a broker higher commissions than those available from another broker.
Research services received from broker-dealers supplement AIM's own
research (and the research of its affiliates), and may include the following
types of information: statistical and background information on the U.S. and
foreign economies, industry groups and individual companies; forecasts and
interpretations with respect to the U.S. and foreign economies, securities,
markets, specific industry groups and individual companies; information on
federal, state, local and foreign political developments; portfolio management
strategies; performance information on securities, indexes and investment
accounts; information concerning prices of securities; and information supplied
by specialized services to AIM and to the Fund's directors with respect to the
performance, investment activities, and fees and expenses of other mutual funds.
Broker-dealers may communicate such information electronically, orally or in
written form. Research services may also include the providing of custody
services, as well as the providing of equipment used to communicate research
information, the providing of specialized consultations with AIM personnel with
respect to computerized systems and data furnished to AIM as a component of
other research services, the arranging of meetings with management of companies,
and the providing of access to consultants who supply research information.
The outside research assistance is useful to AIM since the
broker-dealers used by AIM tend to follow a broader universe of securities and
other matters than AIM's staff can follow. In addition, the research provides
AIM with a diverse perspective on financial markets. Research services provided
to AIM by broker-dealers are available for the benefit of all accounts managed
or advised by AIM or by its affiliates. Some broker-dealers may indicate that
the provision of research services is dependent upon the generation of certain
specified levels of commissions and underwriting concessions by AIM's clients,
including the Fund. However, the Fund is not under any obligation to deal with
any broker-dealer in the execution of transactions in portfolio securities.
In some cases, the research services are available only from the
broker-dealer providing them. In other cases, the research services may be
obtainable from alternative sources in return for cash payments. AIM believes
that the research services are beneficial in supplementing AIM's research and
analysis and that they improve the quality of AIM's investment advice. The
advisory fee paid by the Fund is not reduced because AIM receives such services.
However, to the extent that AIM would have purchased research services had they
not been provided by broker-dealers, the expenses to AIM could be considered to
have been reduced accordingly.
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Transaction With Regular Brokers
As of October 31, 1998, the Fund held an amount of common stock issued
by Morgan Stanley & Co., Inc. and PaineWebber, Inc. having a market value of
$9,971,500 and $8,927,812, respectively. Both are regular brokers of the Fund,
as that term is defined in Rule 10b-1 under the 1940 Act.
Brokerage Commissions Paid
For the fiscal years ended October 31, 1998, 1997 and 1996, the Fund
paid brokerage commissions of $3,027,892, $2,573,656 and $3,138,280,
respectively. For the fiscal year ended October 31, 1998, AIM allocated certain
of the Fund's brokerage transactions to certain broker-dealers that provided AIM
with certain research, statistical and other information. Such transactions
amounted to $238,490,666 and the related brokerage commissions were $303,996.
No brokerage commissions were paid by the Fund to any broker who is an
affiliated person of the Fund, an affiliated person of such person or an
affiliated person of the Fund, the Fund's principal underwriter, or AIM.
Portfolio Turnover
The decrease in portfolio turnover rate from 1996 to 1997 resulted from
strong corporate earnings and thus a reduced need to restructure the Fund's
portfolio holdings.
INVESTMENT RESTRICTIONS
The Fund's investment program is subject to a number of investment
restrictions which reflect self- imposed standards as well as federal and state
regulatory limitations. These restrictions are designed to minimize (but cannot
eliminate) certain risks associated with investing in specified types of
securities or engaging in certain transactions and to limit the amount of the
Fund's assets which may be concentrated in any specific industry or issue. The
most significant of these restrictions provide that the Fund will not purchase a
security if as a result of such purchase:
(1) More than 25% of the value of the Fund's total assets would be
invested in the securities of issuers primarily engaged in the
same industry, except that this restriction does not apply to
obligations issued or guaranteed by the United States Government
or its agencies or instrumentalities;
(2) More than 5% of the value of the Fund's total assets would be
invested in the securities of a single issuer, except that this
restriction does not apply to obligations issued or guaranteed by
the United States Government or its agencies or
instrumentalities, or repurchase agreements pertaining to such
securities, and except that the Fund may purchase securities of
other investment companies to the extent permitted by applicable
law or exemptive order; or
(3) The Fund would own more than 10% of the outstanding voting
securities of any issuer or more than 10% of any class of
securities of an issuer, with the debt and preferred stock of an
issuer each considered to be a separate single class for this
purpose, except that the Fund may purchase securities of other
investment companies to the extent permitted by applicable law or
exemptive order.
Also the Fund will not:
(4) Purchase or hold securities of any issuer if the Fund has
knowledge that the officers and directors of the Fund and its
investment advisor collectively own beneficially more than 5% of
the outstanding securities of such issuer. (Individual holdings
of less than 1/2 of 1% will not be counted for the purpose of
this restriction.)
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(5) Borrow money or issue senior securities, except that the Fund may
borrow from banks for temporary or emergency purposes in amounts
up to 10% of the value of its total assets at the time of
borrowing. (This provision is included solely to facilitate the
orderly sale of portfolio securities to accommodate abnormally
heavy redemption requests if they should occur and is not for
leverage purposes. Any borrowings by the Fund will be repaid
prior to the purchase of additional portfolio securities.)
(6) Underwrite securities issued by any other person.
(7) Invest in real estate or purchase oil, gas or mineral interests,
except that this restriction does not apply to marketable
securities secured by real estate or interests therein or issued
by issuers which invest in real estate or interests therein, or
to securities issued by companies engaged in the exploration,
development, production, refining, transporting and marketing of
oil, gas or minerals.
(8) Buy or sell commodities or commodity futures contracts.
(9) Make loans of money or securities other than (a) through the
purchase of securities in accordance with the Fund's investment
program, and (b) by entering into repurchase agreements; provided
that the Fund may lend its portfolio securities so long as the
value of securities loaned by it does not exceed an amount equal
to 33 1/3% of the Fund's total assets.
(10) Purchase securities on margin, except to the extent necessary for
the clearance of its securities transactions.
(11) Make short sales of securities or maintain a short position in
securities unless at all times when a short position is open, the
Fund owns at least an equal amount of such securities or owns
securities convertible into or exchangeable for at least an equal
amount of such securities, and unless not more than 10% of the
Fund's total assets (taken at current value) is held as
collateral for such short sales at any one time.
(12) Invest in companies for the purpose of exercising control or
management except that the Fund may purchase securities of other
investment companies to the extent permitted by applicable law or
exemptive order.
(13) Purchase or sell puts or purchase calls.
The foregoing percentage limitations will be calculated by giving effect
to such purchase and will be based upon values at the time of purchase. The Fund
may retain any security purchased by it notwithstanding changes in the value of
its assets occurring subsequent to the time of any such purchase.
The foregoing investment restrictions are matters of fundamental policy
which may not be changed without the vote of a majority of the Fund's
outstanding shares. In addition to the foregoing restrictions and subject to
amendment by the Board of Directors of the Fund, the Fund may not invest more
than 5% of its total assets in financial futures contracts or related call
options.
33
<PAGE> 104
MISCELLANEOUS INFORMATION
SHAREHOLDER INQUIRIES
Shareholder inquiries concerning the status of an account should be
directed to AIM Distributors by calling (800) 995-4246.
LEGAL MATTERS
The law firm of Ballard Spahr Andrews & Ingersoll, LLP, Philadelphia,
Pennsylvania, serves as counsel to the Fund.
34
<PAGE> 105
FINANCIAL STATEMENTS
FS
<PAGE> 106
INDEPENDENT AUDITORS' REPORT
To the Shareholders and Board of Directors
AIM Summit Fund, Inc:
We have audited the accompanying statement of assets and
liabilities of the AIM Summit Fund, Inc., including the
schedule of investments, as of October 31, 1998, the
related statement of operations for the year then ended,
the statement of changes in net assets for each of the
years in the two-year period then ended, and financial
highlights for each of the years in the five-year period
then ended. These financial statements and financial
highlights are the responsibility of the Fund's
management. Our responsibility is to express an opinion
on these financial statements and financial highlights
based on our audits.
We conducted our audits in accordance with generally
accepted auditing standards. Those standards require that
we plan and perform the audit to obtain reasonable
assurance about whether the financial statements and
financial highlights are free of material misstatement.
An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial
statements. Our procedures included confirmation of
securities owned as of October 31, 1998, by
correspondence with the custodian and brokers. An audit
also includes assessing the accounting principles used
and significant estimates made by management, as well as
evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for
our opinion.
In our opinion, the financial statements and financial
highlights referred to above present fairly, in all
material respects, the financial position of AIM Summit
Fund, Inc. as of October 31, 1998, and the results of its
operations for the year then ended, the changes in its
net assets for each of the years in the two-year period
then ended, and the financial highlights for each of the
years in the five-year period then ended, in conformity
with generally accepted accounting principles.
/s/ KPMG PEAT MARWICK LLP
---------------------------------
KPMG Peat Marwick LLP
Houston, Texas
December 4, 1998
FS-1
<PAGE> 107
SCHEDULE OF INVESTMENTS
October 31, 1998
<TABLE>
<CAPTION>
MARKET
SHARES VALUE
<S> <C> <C>
DOMESTIC COMMON STOCKS-95.13%
AEROSPACE/DEFENSE-1.59%
General Dynamics Corp. 270,000 $ 15,980,625
- ---------------------------------------------------------------
Gulfstream Aerospace Corp.(a) 100,000 4,425,000
- ---------------------------------------------------------------
Sundstrand Corp. 185,000 8,683,438
- ---------------------------------------------------------------
29,089,063
- ---------------------------------------------------------------
AIRLINES-0.68%
Southwest Airlines Co. 60,000 1,271,250
- ---------------------------------------------------------------
UAL Corp. 173,000 11,234,188
- ---------------------------------------------------------------
12,505,438
- ---------------------------------------------------------------
AUTOMOBILES-0.67%
Ford Motor Co. 225,000 12,206,250
- ---------------------------------------------------------------
BANKS (MAJOR REGIONAL)-0.15%
Northern Trust Corp. 36,000 2,655,000
- ---------------------------------------------------------------
BANKS (REGIONAL)-0.51%
AmSouth Bancorporation 52,500 2,103,281
- ---------------------------------------------------------------
First Tennessee National Corp. 29,100 922,106
- ---------------------------------------------------------------
Hibernia Corp.-Class A 85,000 1,418,438
- ---------------------------------------------------------------
North Fork Bancorporation, Inc. 100,000 1,987,500
- ---------------------------------------------------------------
Star Banc Corp. 37,000 2,798,125
- ---------------------------------------------------------------
9,229,450
- ---------------------------------------------------------------
BIOTECHNOLOGY-1.15%
Amgen, Inc.(a) 112,000 8,799,000
- ---------------------------------------------------------------
Biogen, Inc.(a) 175,000 12,162,500
- ---------------------------------------------------------------
20,961,500
- ---------------------------------------------------------------
BROADCASTING (TELEVISION, RADIO & CABLE)-2.90%
Chancellor Media Corp.(a) 300,000 11,512,500
- ---------------------------------------------------------------
Clear Channel Communications,
Inc.(a) 80,000 3,645,000
- ---------------------------------------------------------------
Comcast Corp.-Class A 400,000 19,750,000
- ---------------------------------------------------------------
Liberty Media Group(a) 125,000 4,757,813
- ---------------------------------------------------------------
Tele-Communications, Inc.-Class
A(a) 300,000 12,637,500
- ---------------------------------------------------------------
Univision Communications, Inc.(a) 25,600 755,200
- ---------------------------------------------------------------
53,058,013
- ---------------------------------------------------------------
BUILDING MATERIALS-0.47%
USG Corp. 180,000 8,583,750
- ---------------------------------------------------------------
CHEMICALS-0.43%
Rohm & Haas Co. 231,600 7,816,500
- ---------------------------------------------------------------
COMMUNICATIONS EQUIPMENT-1.49%
Andrew Corp.(a) 19,300 316,037
- ---------------------------------------------------------------
General Instrument Corp.(a) 175,000 4,495,313
- ---------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
MARKET
SHARES VALUE
<S> <C> <C>
COMMUNICATIONS EQUIPMENT-(CONTINUED)
Lucent Technologies, Inc. 280,000 $ 22,452,500
- ---------------------------------------------------------------
27,263,850
- ---------------------------------------------------------------
COMPUTERS (HARDWARE)-5.50%
Apple Computer, Inc.(a) 150,000 5,568,750
- ---------------------------------------------------------------
Comdisco, Inc. 262,600 4,053,887
- ---------------------------------------------------------------
Dell Computer Corp.(a) 840,000 55,125,000
- ---------------------------------------------------------------
Gateway 2000, Inc.(a) 200,000 11,162,500
- ---------------------------------------------------------------
IDX Systems Corp.(a) 150,000 6,356,250
- ---------------------------------------------------------------
International Business Machines
Corp. 123,600 18,346,875
- ---------------------------------------------------------------
100,613,262
- ---------------------------------------------------------------
COMPUTERS (NETWORKING)-4.09%
3Com Corp.(a) 500,000 18,031,250
- ---------------------------------------------------------------
Ascend Communications, Inc.(a) 448,750 21,652,187
- ---------------------------------------------------------------
Broadcom Corp.(a) 140,000 11,611,250
- ---------------------------------------------------------------
Cisco Systems, Inc.(a) 375,000 23,625,000
- ---------------------------------------------------------------
74,919,687
- ---------------------------------------------------------------
COMPUTERS (PERIPHERALS)-2.71%
EMC Corp.(a) 400,000 25,750,000
- ---------------------------------------------------------------
Jabil Circuit, Inc.(a) 200,000 9,262,500
- ---------------------------------------------------------------
Lexmark International Group,
Inc.(a) 160,000 11,190,000
- ---------------------------------------------------------------
Storage Technology Corp.(a) 100,000 3,343,750
- ---------------------------------------------------------------
49,546,250
- ---------------------------------------------------------------
COMPUTERS (SOFTWARE & SERVICES)-13.77%
America Online, Inc. 220,000 27,953,750
- ---------------------------------------------------------------
Aspect Development, Inc.(a) 100,000 3,159,375
- ---------------------------------------------------------------
AT Home Corporation(a) 100,000 4,425,000
- ---------------------------------------------------------------
BMC Software, Inc.(a) 330,000 15,860,625
- ---------------------------------------------------------------
Cadence Design Systems, Inc.(a) 150,000 3,206,250
- ---------------------------------------------------------------
Citrix Systems, Inc.(a) 80,000 5,670,000
- ---------------------------------------------------------------
Computer Sciences Corp.(a) 130,000 6,857,500
- ---------------------------------------------------------------
Compuware Corp.(a) 460,000 24,926,250
- ---------------------------------------------------------------
Concord EFS, Inc.(a) 407,650 11,618,025
- ---------------------------------------------------------------
Electronic Arts, Inc.(a) 50,000 2,056,250
- ---------------------------------------------------------------
Electronics for Imaging, Inc.(a) 200,000 4,812,500
- ---------------------------------------------------------------
Engineering Animation, Inc.(a) 200,000 8,762,500
- ---------------------------------------------------------------
GeoCities(a) 67,800 1,995,862
- ---------------------------------------------------------------
HBO & Co. 300,000 7,875,000
- ---------------------------------------------------------------
Inktomi Corp.(a) 60,000 5,058,750
- ---------------------------------------------------------------
Intuit, Inc.(a) 150,000 7,575,000
- ---------------------------------------------------------------
J.D. Edwards & Co.(a) 60,000 1,965,000
- ---------------------------------------------------------------
Jack Henry & Associates, Inc. 220,000 10,037,500
- ---------------------------------------------------------------
</TABLE>
FS-2
<PAGE> 108
<TABLE>
<CAPTION>
MARKET
SHARES VALUE
<S> <C> <C>
COMPUTERS (SOFTWARE & SERVICES)-(CONTINUED)
Lycos, Inc.(a) 250,000 $ 10,156,250
- ---------------------------------------------------------------
Microsoft Corp.(a) 450,000 47,643,750
- ---------------------------------------------------------------
Network Associates, Inc.(a) 42,300 1,797,750
- ---------------------------------------------------------------
Sterling Commerce, Inc.(a) 109,211 3,849,687
- ---------------------------------------------------------------
Sterling Software, Inc.(a) 78,000 2,042,625
- ---------------------------------------------------------------
Unisys Corp.(a) 450,000 11,981,250
- ---------------------------------------------------------------
Wind River Systems(a) 100,000 4,381,250
- ---------------------------------------------------------------
Yahoo! Inc.(a) 125,000 16,355,468
- ---------------------------------------------------------------
252,023,167
- ---------------------------------------------------------------
CONSUMER (JEWELRY, NOVELTIES & GIFTS)-0.15%
Blyth Industries, Inc.(a) 100,000 2,762,500
- ---------------------------------------------------------------
CONSUMER FINANCE-0.31%
Capital One Financial Corp. 54,900 5,586,075
- ---------------------------------------------------------------
DISTRIBUTORS (FOOD &
HEALTH)-0.79%
Cardinal Health, Inc. 124,800 11,801,400
- ---------------------------------------------------------------
SUPERVALU, INC 79,200 1,900,800
- ---------------------------------------------------------------
Sysco Corp. 27,000 727,312
- ---------------------------------------------------------------
14,429,512
- ---------------------------------------------------------------
ELECTRICAL EQUIPMENT-1.90%
American Power Conversion
Corp.(a) 100,000 4,243,750
- ---------------------------------------------------------------
General Electric Co. 140,000 12,250,000
- ---------------------------------------------------------------
Sanmina Corp.(a) 23,300 955,300
- ---------------------------------------------------------------
Solectron Corp.(a) 200,000 11,450,000
- ---------------------------------------------------------------
Symbol Technologies, Inc. 130,000 5,817,500
- ---------------------------------------------------------------
34,716,550
- ---------------------------------------------------------------
ELECTRONIC COMPANIES-0.70%
DTE Energy Co. 300,000 12,787,500
- ---------------------------------------------------------------
ELECTRONICS
(INSTRUMENTATION)-0.19%
Perkin-Elmer Corp. 11,900 1,003,319
- ---------------------------------------------------------------
Waters Corp.(a) 32,600 2,396,100
- ---------------------------------------------------------------
3,399,419
- ---------------------------------------------------------------
ELECTRONICS
(SEMICONDUCTORS)-1.29%
Intel Corp. 125,000 11,148,437
- ---------------------------------------------------------------
Maxim Integrated Products,
Inc.(a) 157,000 5,602,937
- ---------------------------------------------------------------
Microchip Technology, Inc.(a) 175,500 4,749,469
- ---------------------------------------------------------------
PMC-Sierra, Inc.(a) 50,000 2,243,750
- ---------------------------------------------------------------
23,744,593
- ---------------------------------------------------------------
ENTERTAINMENT-0.84%
Pixar, Inc.(a) 50,000 2,375,000
- ---------------------------------------------------------------
Time Warner, Inc. 115,000 10,673,437
- ---------------------------------------------------------------
Viacom, Inc.-Class B(a) 40,500 2,424,937
- ---------------------------------------------------------------
15,473,374
- ---------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
MARKET
SHARES VALUE
<S> <C> <C>
FINANCIAL (DIVERSIFIED)-3.93%
American Express Co. 50,000 $ 4,418,750
- ---------------------------------------------------------------
Associates First Capital
Corp.-Class A 58,969 4,157,314
- ---------------------------------------------------------------
Fannie Mae 104,600 7,406,987
- ---------------------------------------------------------------
FINOVA Group, Inc. 51,600 2,515,500
- ---------------------------------------------------------------
Freddie Mac 280,000 16,100,000
- ---------------------------------------------------------------
MGIC Investment Corp. 260,000 10,140,000
- ---------------------------------------------------------------
Morgan Stanley, Dean Witter,
Discover & Co. 154,000 9,971,500
- ---------------------------------------------------------------
SunAmerica, Inc. 245,000 17,272,500
- ---------------------------------------------------------------
71,982,551
- ---------------------------------------------------------------
HEALTH CARE (DIVERSIFIED)-2.41%
Abbott Laboratories 127,000 5,961,063
- ---------------------------------------------------------------
Allergan, Inc. 260,000 16,233,750
- ---------------------------------------------------------------
American Home Products Corp. 80,000 3,900,000
- ---------------------------------------------------------------
Johnson & Johnson 64,000 5,216,000
- ---------------------------------------------------------------
Warner-Lambert Co. 164,100 12,861,337
- ---------------------------------------------------------------
44,172,150
- ---------------------------------------------------------------
HEALTH CARE (DRUGS-GENERIC & OTHER)-1.44%
Mylan Laboratories, Inc. 440,000 15,152,500
- ---------------------------------------------------------------
Watson Pharmaceuticals, Inc.(a) 200,000 11,125,000
- ---------------------------------------------------------------
26,277,500
- ---------------------------------------------------------------
HEALTH CARE (DRUGS-MAJOR
PHARMACEUTICALS)-2.21%
Lilly (Eli) & Co. 76,800 6,216,000
- ---------------------------------------------------------------
Merck & Co., Inc. 67,500 9,129,375
- ---------------------------------------------------------------
Pfizer, Inc. 160,000 17,170,000
- ---------------------------------------------------------------
Schering-Plough Corp. 77,600 7,983,100
- ---------------------------------------------------------------
40,498,475
- ---------------------------------------------------------------
HEALTH CARE (HOSPITAL MANAGEMENT)-0.49%
Health Management Associates,
Inc.-Class A(a) 285,000 5,076,562
- ---------------------------------------------------------------
Universal Health Services,
Inc.-Class B(a) 77,100 3,956,194
- ---------------------------------------------------------------
9,032,756
- ---------------------------------------------------------------
HEALTH CARE (MEDICAL PRODUCTS &
SUPPLIES)-3.45%
Allegiance Corp. 142,600 5,302,938
- ---------------------------------------------------------------
Arterial Vascular Engineering,
Inc.(a) 139,400 4,286,550
- ---------------------------------------------------------------
Becton, Dickinson & Co. 490,000 20,641,250
- ---------------------------------------------------------------
Boston Scientific Corp.(a) 50,000 2,721,875
- ---------------------------------------------------------------
Guidant Corp. 310,000 23,715,000
- ---------------------------------------------------------------
Sofamor Danek Group, Inc.(a) 13,000 1,321,125
- ---------------------------------------------------------------
Stryker Corp. 91,100 3,820,506
- ---------------------------------------------------------------
Sybron International Corp.(a) 53,500 1,324,125
- ---------------------------------------------------------------
63,133,369
- ---------------------------------------------------------------
HEALTH CARE (SPECIALIZED SERVICES)-0.60%
Alza Corp.(a) 68,000 3,255,500
- ---------------------------------------------------------------
Omnicare, Inc. 100,900 3,487,356
- ---------------------------------------------------------------
</TABLE>
FS-3
<PAGE> 109
<TABLE>
<CAPTION>
MARKET
SHARES VALUE
<S> <C> <C>
HEALTH CARE (SPECIALIZED SERVICES)-(CONTINUED)
Orthodontic Centers of America,
Inc.(a) 100,000 $ 1,893,750
- ---------------------------------------------------------------
Quintiles Transnational Corp.(a) 53,400 2,416,350
- ---------------------------------------------------------------
11,052,956
- ---------------------------------------------------------------
HOMEBUILDING-0.17%
Clayton Homes, Inc. 196,300 3,030,381
- ---------------------------------------------------------------
HOUSEHOLD FURNISHINGS & APPLIANCES-0.72%
Maytag Corp. 265,000 13,100,938
- ---------------------------------------------------------------
HOUSEHOLD PRODUCTS (NON-DURABLES)-0.42%
Clorox Co. 21,700 2,370,725
- ---------------------------------------------------------------
Procter & Gamble Co. (The) 60,000 5,332,500
- ---------------------------------------------------------------
7,703,225
- ---------------------------------------------------------------
INSURANCE (LIFE/HEALTH)-1.10%
Equitable Companies, Inc. 254,000 12,446,000
- ---------------------------------------------------------------
Nationwide Financial Services,
Inc.-Class A 50,500 2,095,750
- ---------------------------------------------------------------
Provident Companies, Inc. 100,000 2,906,250
- ---------------------------------------------------------------
ReliaStar Financial Corp. 62,000 2,716,375
- ---------------------------------------------------------------
20,164,375
- ---------------------------------------------------------------
INSURANCE (MULTI-LINE)-0.70%
American International Group,
Inc. 30,000 2,557,500
- ---------------------------------------------------------------
Lincoln National Corp. 135,000 10,243,125
- ---------------------------------------------------------------
12,800,625
- ---------------------------------------------------------------
INSURANCE (PROPERTY-CASUALTY)-0.61%
Allstate Corp. (The) 240,000 10,335,000
- ---------------------------------------------------------------
Progressive Corp. 6,200 912,950
- ---------------------------------------------------------------
11,247,950
- ---------------------------------------------------------------
INVESTMENT BANKING/BROKERAGE-1.01%
Paine Webber Group, Inc. 267,000 8,927,812
- ---------------------------------------------------------------
Schwab (Charles) Corp. 200,000 9,587,500
- ---------------------------------------------------------------
18,515,312
- ---------------------------------------------------------------
INVESTMENT MANAGEMENT-0.71%
Franklin Resources, Inc. 88,000 3,327,500
- ---------------------------------------------------------------
T. Rowe Price Associates, Inc. 272,200 9,680,112
- ---------------------------------------------------------------
13,007,612
- ---------------------------------------------------------------
LODGING-HOTELS-0.48%
Carnival Corp. 272,000 8,806,000
- ---------------------------------------------------------------
MACHINERY (DIVERSIFIED)-0.93%
Caterpillar, Inc. 185,000 8,325,000
- ---------------------------------------------------------------
Ingersoll-Rand Co. 172,500 8,711,250
- ---------------------------------------------------------------
17,036,250
- ---------------------------------------------------------------
MANUFACTURING (DIVERSIFIED)-1.81%
Hillenbrand Industries, Inc. 34,800 2,059,725
- ---------------------------------------------------------------
Pentair, Inc. 19,200 722,400
- ---------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
MARKET
SHARES VALUE
<S> <C> <C>
MANUFACTURING (DIVERSIFIED)-(CONTINUED)
Premark International, Inc. 285,000 $ 9,030,937
- ---------------------------------------------------------------
Tyco International Ltd. 100,000 6,193,750
- ---------------------------------------------------------------
United Technologies Corp. 158,000 15,049,500
- ---------------------------------------------------------------
33,056,312
- ---------------------------------------------------------------
NATURAL GAS-1.35%
Coastal Corp. (The) 420,000 14,805,000
- ---------------------------------------------------------------
Columbia Energy Group 171,900 9,948,713
- ---------------------------------------------------------------
24,753,713
- ---------------------------------------------------------------
OIL & GAS (DRILLING & EQUIPMENT)-0.49%
Cooper Cameron Corp.(a) 100,000 3,475,000
- ---------------------------------------------------------------
Varco International, Inc.(a) 500,000 5,406,250
- ---------------------------------------------------------------
8,881,250
- ---------------------------------------------------------------
OIL & GAS (EXPLORATION & PRODUCTION)-0.15%
Apache Corp. 97,000 2,746,313
- ---------------------------------------------------------------
OIL & GAS (REFINING & MARKETING)-1.03%
Ashland, Inc. 200,000 9,625,000
- ---------------------------------------------------------------
Sun Company, Inc. 270,000 9,264,375
- ---------------------------------------------------------------
18,889,375
- ---------------------------------------------------------------
PERSONAL CARE-0.09%
Rexall Sundown, Inc.(a) 96,200 1,725,588
- ---------------------------------------------------------------
PHOTOGRAPHY/IMAGING-0.59%
Eastman Kodak Co. 139,000 10,772,500
- ---------------------------------------------------------------
PUBLISHING-0.15%
McGraw-Hill Companies, Inc. (The) 30,000 2,698,125
- ---------------------------------------------------------------
PUBLISHING (NEWSPAPERS)-0.58%
Knight-Ridder, Inc. 210,000 10,696,875
- ---------------------------------------------------------------
RAILROADS-0.25%
Kansas City Southern Industries,
Inc. 120,000 4,635,000
- ---------------------------------------------------------------
RESTAURANTS-0.26%
Starbucks Corp.(a) 45,000 1,951,875
- ---------------------------------------------------------------
Tricon Global Restaurants,
Inc.(a) 65,000 2,827,500
- ---------------------------------------------------------------
4,779,375
- ---------------------------------------------------------------
RETAIL (BUILDING SUPPLIES)-1.29%
Home Depot, Inc. 278,800 12,127,800
- ---------------------------------------------------------------
Lowe's Companies, Inc. 340,000 11,453,750
- ---------------------------------------------------------------
23,581,550
- ---------------------------------------------------------------
RETAIL (COMPUTERS & ELECTRONICS)-1.65%
Best Buy Co., Inc.(a) 317,400 15,235,200
- ---------------------------------------------------------------
CDW Computer Centers, Inc.(a) 90,000 6,744,375
- ---------------------------------------------------------------
Ingram Micro, Inc.-Class A(a) 121,300 5,519,150
- ---------------------------------------------------------------
Tandy Corp. 55,000 2,725,938
- ---------------------------------------------------------------
30,224,663
- ---------------------------------------------------------------
</TABLE>
FS-4
<PAGE> 110
<TABLE>
<CAPTION>
MARKET
SHARES VALUE
<S> <C> <C>
RETAIL (DEPARTMENT STORES)-0.82%
Federated Department Stores,
Inc.(a) 265,000 $ 10,185,938
- ---------------------------------------------------------------
Kohl's Corp.(a) 100,000 4,781,250
- ---------------------------------------------------------------
14,967,188
- ---------------------------------------------------------------
RETAIL (DISCOUNTERS)-0.44%
Dollar General Corp. 91,656 2,188,287
- ---------------------------------------------------------------
Dollar Tree Stores, Inc.(a) 150,000 5,784,375
- ---------------------------------------------------------------
7,972,662
- ---------------------------------------------------------------
RETAIL (DRUG STORES)-0.74%
CVS Corp. 102,160 4,667,435
- ---------------------------------------------------------------
Rite Aid Corp. 223,000 8,850,313
- ---------------------------------------------------------------
13,517,748
- ---------------------------------------------------------------
RETAIL (FOOD CHAINS)-1.84%
Albertson's, Inc. 27,400 1,522,413
- ---------------------------------------------------------------
Kroger Co.(a) 275,500 15,290,250
- ---------------------------------------------------------------
Safeway, Inc.(a) 351,314 16,797,200
- ---------------------------------------------------------------
33,609,863
- ---------------------------------------------------------------
RETAIL (GENERAL MERCHANDISE)-2.31%
Costco Companies, Inc.(a) 250,000 14,187,500
- ---------------------------------------------------------------
Dayton Hudson Corp. 289,000 12,246,375
- ---------------------------------------------------------------
Fred Meyer, Inc.(a) 135,700 7,234,506
- ---------------------------------------------------------------
Wal-Mart Stores, Inc. 125,000 8,625,000
- ---------------------------------------------------------------
42,293,381
- ---------------------------------------------------------------
RETAIL (SPECIALTY)-1.80%
Bed Bath & Beyond, Inc.(a) 225,000 6,201,563
- ---------------------------------------------------------------
Linens 'N Things, Inc.(a) 100,000 3,093,750
- ---------------------------------------------------------------
Office Depot, Inc.(a) 380,000 9,500,000
- ---------------------------------------------------------------
Staples, Inc.(a) 372,900 12,165,862
- ---------------------------------------------------------------
Williams-Sonoma, Inc.(a) 70,000 1,907,500
- ---------------------------------------------------------------
32,868,675
- ---------------------------------------------------------------
RETAIL (SPECIALTY-APPAREL)-1.33%
Abercrombie & Fitch Co.-Class
A(a) 43,000 1,706,563
- ---------------------------------------------------------------
Gap, Inc. 135,000 8,116,875
- ---------------------------------------------------------------
Men's Wearhouse, Inc. (The)(a) 157,500 3,819,375
- ---------------------------------------------------------------
TJX Companies, Inc. 568,000 10,756,500
- ---------------------------------------------------------------
24,399,313
- ---------------------------------------------------------------
SAVINGS & LOAN COMPANIES-1.72%
Dime Bancorp, Inc. 185,000 4,405,313
- ---------------------------------------------------------------
GreenPoint Financial Corp. 200,000 6,562,500
- ---------------------------------------------------------------
Washington Mutual, Inc. 546,000 20,440,875
- ---------------------------------------------------------------
31,408,688
- ---------------------------------------------------------------
SERVICES (ADVERTISING/MARKETING)-0.85%
Omnicom Group, Inc. 150,000 7,415,625
- ---------------------------------------------------------------
Outdoor Systems, Inc.(a) 300,000 6,618,750
- ---------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
MARKET
SHARES VALUE
<S> <C> <C>
SERVICES (ADVERTISING/MARKETING)-(CONTINUED)
Snyder Communications, Inc.(a) 45,000 $ 1,605,938
- ---------------------------------------------------------------
15,640,313
- ---------------------------------------------------------------
SERVICES (COMMERCIAL & CONSUMER)-1.46%
Cintas Corp. 101,900 5,451,650
- ---------------------------------------------------------------
G & K Services, Inc.-Class A 20,000 915,000
- ---------------------------------------------------------------
IMS Health, Inc. 30,000 1,995,000
- ---------------------------------------------------------------
Service Corp. International 334,700 11,923,687
- ---------------------------------------------------------------
Stewart Enterprises, Inc.-Class A 176,000 4,059,000
- ---------------------------------------------------------------
Viad Corp. 84,400 2,315,725
- ---------------------------------------------------------------
26,660,062
- ---------------------------------------------------------------
SERVICES (COMPUTER SYSTEMS)-0.33%
Gartner Group, Inc.-Class A(a) 65,000 1,291,875
- ---------------------------------------------------------------
Policy Management Systems
Corp.(a) 31,700 1,440,369
- ---------------------------------------------------------------
SunGard Data Systems, Inc.(a) 99,000 3,341,250
- ---------------------------------------------------------------
6,073,494
- ---------------------------------------------------------------
SERVICES (DATA PROCESSING)-1.68%
Ceridian Corp.(a) 54,900 3,149,888
- ---------------------------------------------------------------
CSG Systems International,
Inc.(a) 65,500 3,569,750
- ---------------------------------------------------------------
DST Systems, Inc.(a) 49,700 2,485,000
- ---------------------------------------------------------------
Equifax, Inc. 120,600 4,665,713
- ---------------------------------------------------------------
Fiserv, Inc.(a) 124,650 5,796,224
- ---------------------------------------------------------------
National Data Corp. 80,000 2,710,000
- ---------------------------------------------------------------
NOVA Corp.(a) 71,500 2,064,563
- ---------------------------------------------------------------
Paychex, Inc. 128,025 6,369,243
- ---------------------------------------------------------------
30,810,381
- ---------------------------------------------------------------
TELECOMMUNICATIONS (CELLULAR/WIRELESS)-0.13%
Level 3 Communications, Inc.(a) 75,000 2,442,188
- ---------------------------------------------------------------
TELECOMMUNICATIONS (LONG DISTANCE)-1.86%
AT&T Corp. 170,000 10,582,500
- ---------------------------------------------------------------
MCI WorldCom, Inc.(a) 422,926 23,366,662
- ---------------------------------------------------------------
33,949,162
- ---------------------------------------------------------------
TELEPHONE-3.25%
BellSouth Corp. 215,000 17,159,688
- ---------------------------------------------------------------
Century Telephone Enterprises,
Inc. 260,000 14,771,250
- ---------------------------------------------------------------
Qwest Communications
International, Inc.(a) 350,000 13,693,750
- ---------------------------------------------------------------
US West, Inc. 240,000 13,770,000
- ---------------------------------------------------------------
59,394,688
- ---------------------------------------------------------------
TEXTILES (APPAREL)-0.48%
VF Corp. 210,000 8,780,625
- ---------------------------------------------------------------
TEXTILES (HOME FURNISHINGS)-0.09%
Shaw Industries, Inc. 100,000 1,737,500
- ---------------------------------------------------------------
WASTE MANAGEMENT-0.65%
Allied Waste Industries, Inc.(a) 190,500 4,119,563
- ---------------------------------------------------------------
</TABLE>
FS-5
<PAGE> 111
<TABLE>
<CAPTION>
MARKET
SHARES VALUE
<S> <C> <C>
WASTE MANAGEMENT-(CONTINUED)
Waste Management, Inc. 172,825 $ 7,798,728
- ---------------------------------------------------------------
11,918,291
- ---------------------------------------------------------------
Total Domestic Common Stocks
(Cost $1,199,747,436) 1,740,817,989
- ---------------------------------------------------------------
FOREIGN STOCKS & OTHER EQUITY INTERESTS-2.18%
FINLAND-0.58%
Nokia Oyj A.B.-Class A-ADR
(Communications Equipment) 115,000 10,702,188
- ---------------------------------------------------------------
FRANCE-0.23%
Renault S.A.
(Automobiles) 100,000 4,276,428
- ---------------------------------------------------------------
GERMANY-0.97%
Daimler-Benz A.G.-ADR
(Automobiles) 110,000 8,669,375
- ---------------------------------------------------------------
Porsche A.G.
(Automobiles) 5,000 8,851,429
- ---------------------------------------------------------------
17,520,804
- ---------------------------------------------------------------
IRELAND-0.40%
Elan Corp. PLC-ADR(a)(Health
Care-Drugs-Generic & Other) 105,000 7,356,562
- ---------------------------------------------------------------
Total Foreign Stocks & Other
Equity Interests (Cost
$32,977,810) 39,855,982
- ---------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
PRINCIPAL MARKET
AMOUNT VALUE
<S> <C> <C>
CONVERTIBLE CORPORATE BONDS-0.23%
COMPUTERS (PERIPHERALS)-0.23%
EMC Corp., Conv. Sub. Notes,
3.25%, 03/15/02 (Cost
$1,963,721) $ 1,450,000 $ 4,188,688
- ---------------------------------------------------------------
RIGHTS & WARRANTS-0.01%
BANKS (REGIONAL)-0.01%
Golden State Bancorp, Litigation
Wts., expiring 01/01/01(a)
(Cost $281,640) 50,000 243,750
- ---------------------------------------------------------------
REPURCHASE AGREEMENT-2.40%(b)
Dean Witter Reynolds, Inc.,
5.55%, 11/02/98(c) (Cost
$43,998,698) 43,998,698 43,998,698
- ---------------------------------------------------------------
TOTAL INVESTMENTS-99.95% 1,829,105,107
- ---------------------------------------------------------------
OTHER ASSETS LESS
LIABILITIES-0.05% 927,121
- ---------------------------------------------------------------
NET ASSETS-100.00% $1,830,032,228
===============================================================
</TABLE>
Abbreviations:
ADR - American Depositary Receipt
Conv. - Convertible
Sub. - Subordinated
Wts. - Warrants
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 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.
(c) Joint repurchase agreement entered into 10/30/98 with a maturing value of
$300,138,750. Collateralized by $307,841,000 U.S. Government obligations, 0%
to 10.35% due 11/06/98 to 01/21/28 with an aggregate market value at
10/31/98 of $306,000,942.
See Notes to Financial Statements.
FS-6
<PAGE> 112
STATEMENT OF ASSETS AND LIABILITIES
October 31, 1998
<TABLE>
<S> <C>
ASSETS:
Investments, at market value (cost
$1,278,969,305) $1,829,105,107
- -------------------------------------------------------------
Receivables for:
Investments sold 3,181,065
- -------------------------------------------------------------
Capital stock sold 671,854
- -------------------------------------------------------------
Dividends and interest 974,357
- -------------------------------------------------------------
Investment for deferred compensation plan 37,349
- -------------------------------------------------------------
Other assets 14,821
- -------------------------------------------------------------
Total assets 1,833,984,553
- -------------------------------------------------------------
LIABILITIES:
Payables for:
Investments purchased 1,635,755
- -------------------------------------------------------------
Capital stock reacquired 1,160,787
- -------------------------------------------------------------
Deferred compensation 37,349
- -------------------------------------------------------------
Accrued advisory fees 912,099
- -------------------------------------------------------------
Accrued administrative services fees 6,377
- -------------------------------------------------------------
Accrued directors' fees 1,450
- -------------------------------------------------------------
Accrued operating expenses 198,508
- -------------------------------------------------------------
Total liabilities 3,952,325
- -------------------------------------------------------------
Net assets applicable to shares outstanding $1,830,032,228
=============================================================
Capital stock, $0.01 par value per share:
Authorized 1,000,000,000
- -------------------------------------------------------------
Outstanding 122,336,309
- -------------------------------------------------------------
Net asset value and redemption price per
share $ 14.96
=============================================================
</TABLE>
STATEMENT OF OPERATIONS
For the year ended October 31, 1998
<TABLE>
<S> <C>
INVESTMENT INCOME:
Dividends (net of $280,834 foreign withholding
tax) $ 11,487,830
- ------------------------------------------------------------
Interest 4,521,585
- ------------------------------------------------------------
Total investment income 16,009,415
- ------------------------------------------------------------
EXPENSES:
Advisory fees 11,372,220
- ------------------------------------------------------------
Administrative services fees 72,766
- ------------------------------------------------------------
Custodian fees 178,755
- ------------------------------------------------------------
Directors' fees 18,269
- ------------------------------------------------------------
Transfer agent fees 39,271
- ------------------------------------------------------------
Other 271,355
- ------------------------------------------------------------
Total expenses 11,952,636
- ------------------------------------------------------------
Less: Expenses paid indirectly (26,905)
- ------------------------------------------------------------
Net expenses 11,925,731
- ------------------------------------------------------------
Net investment income 4,083,684
- ------------------------------------------------------------
REALIZED AND UNREALIZED GAIN (LOSS) FROM
INVESTMENT SECURITIES, FOREIGN CURRENCIES,
FUTURES AND OPTION CONTRACTS:
Net realized gain (loss) from:
Investment securities 125,907,818
- ------------------------------------------------------------
Foreign currencies 265,909
- ------------------------------------------------------------
Futures contracts (2,274,503)
- ------------------------------------------------------------
Option contracts written (531,869)
- ------------------------------------------------------------
123,367,355
- ------------------------------------------------------------
NET UNREALIZED APPRECIATION OF:
Investment securities 30,375,403
- ------------------------------------------------------------
Foreign currencies 3,322
- ------------------------------------------------------------
30,378,725
- ------------------------------------------------------------
Net gain from investment securities,
foreign currencies, futures and option
contracts 153,746,080
- ------------------------------------------------------------
Net increase in net assets resulting from
operations $157,829,764
============================================================
</TABLE>
See Notes to Financial Statements.
FS-7
<PAGE> 113
STATEMENT OF CHANGES IN NET ASSETS
For the years ended October 31, 1998 and 1997
<TABLE>
<CAPTION>
1998 1997
-------------- --------------
<S> <C> <C>
OPERATIONS:
Net investment income $ 4,083,684 $ 1,608,756
- ----------------------------------------------------------------------------------------------
Net realized gain from investment securities, foreign
currencies, futures and option contracts 123,367,355 151,798,786
- ----------------------------------------------------------------------------------------------
Net unrealized appreciation of investment securities and
foreign currencies 30,378,725 212,044,735
- ----------------------------------------------------------------------------------------------
Net increase in net assets resulting from operations 157,829,764 365,452,277
- ----------------------------------------------------------------------------------------------
Distributions to shareholders from net investment income (1,659,397) (3,131,614)
- ----------------------------------------------------------------------------------------------
Distributions to shareholders from net realized gains (156,547,424) (114,611,563)
- ----------------------------------------------------------------------------------------------
Net equalization credits (See Note 1) -- 2,437,968
- ----------------------------------------------------------------------------------------------
Share transactions-net 180,175,249 139,078,724
- ----------------------------------------------------------------------------------------------
Net increase in net assets 179,798,192 389,225,792
==============================================================================================
NET ASSETS:
Beginning of period 1,650,234,036 1,261,008,244
- ----------------------------------------------------------------------------------------------
End of period $1,830,032,228 $1,650,234,036
- ----------------------------------------------------------------------------------------------
NET ASSETS CONSIST OF:
Capital (par value and additional paid-in) $1,158,384,602 $ 956,102,084
- ----------------------------------------------------------------------------------------------
Undistributed net investment income 4,164,155 23,591,883
- ----------------------------------------------------------------------------------------------
Undistributed net realized gain from investment
securities, foreign currencies, futures and option
contracts 117,344,347 150,779,670
- ----------------------------------------------------------------------------------------------
Net unrealized appreciation of investment securities and
foreign currencies 550,139,124 519,760,399
- ----------------------------------------------------------------------------------------------
$1,830,032,228 $1,650,234,036
==============================================================================================
</TABLE>
NOTES TO FINANCIAL STATEMENTS
October 31, 1998
NOTE 1-SIGNIFICANT ACCOUNTING POLICIES
AIM Summit Fund, Inc. (the "Fund") is a Maryland corporation registered under
the Investment Company Act of 1940, as amended, as a diversified, open-end
management investment company. The Fund's investment objective is capital
growth.
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities at the date of the
financial statements and the reported amounts of revenues and expenses during
the reporting period. Actual results could differ from those estimates. The
following is a summary of 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 the last sales price on the exchange on which
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 of the closing bid and asked
prices. Debt obligations (including convertible bonds) are valued on the
basis of prices provided by an independent pricing service. Prices provided
by an independent 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
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 Fund's
officers in a manner specifically authorized by the Board of Directors of the
Fund. Short-term obligations having 60 days or less to maturity are valued at
amortized cost which approximates market value. Generally, trading in foreign
securities is substantially completed each day at various times prior to the
close of the New York Stock Exchange. 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 New York Stock Exchange. 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 New York Stock Exchange
which would not be reflected in the
FS-8
<PAGE> 114
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, Investment Income and Distributions-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 and distributions to
shareholders are recorded on the ex-dividend date. On October 31, 1998,
undistributed net investment income was increased by $255,254 and
undistributed net realized gains decreased by $255,254 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.
C. Foreign Currency Translations-Portfolio securities and other assets and
liabilities denominated in foreign currencies are translated into U.S. dollar
amounts at the date of valuation. Purchases and sales of portfolio securities
and income items denominated in foreign currencies are translated into U.S.
dollar amounts on the respective dates of such transactions.
D. Foreign Currency Contracts-A foreign currency contract is an obligation to
purchase or sell a specific currency for an agreed-upon price at a future
date. The Fund may enter into a foreign currency contract to attempt to
minimize the risk to the Fund from adverse changes in the relationship
between currencies. The Fund may also enter into a foreign currency contract
for the purchase or sale of a security denominated in a foreign currency in
order to "lock in" the U.S. dollar price of that security. The Fund could be
exposed to risk if counterparties to the contracts are unable to meet the
terms of their contracts or if the value of the foreign currency changes
unfavorably.
E. 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.
F. Equalization-The Fund previously followed the accounting practice known as
equalization by which a portion of the proceeds from sales and costs of
repurchases of Fund shares, equivalent on a per share basis to the amount of
undistributed net investment income, is credited or charged to undistributed
net income when the transaction is recorded so that the undistributed net
investment income per share is unaffected by sales or redemptions of Fund
shares. Effective November 1, 1997, the Fund discontinued equalization
accounting and reclassified the cumulative equalization credits of
$22,107,269 from undistributed net investment income to paid-in capital. This
change has no effect on the net assets, the results of operations or the net
asset value per share of the Fund.
G. Stock Index Futures Contracts-The Fund may purchase or sell stock index
futures contracts as a hedge against changes in market conditions. Initial
margin deposits required upon entering into futures contracts are satisfied
by the segregation of specific securities as collateral for the account of
the broker (the Fund's agent in acquiring the futures position). During the
period the futures contracts are open, changes in the value of the contracts
are recognized as unrealized gains or losses by "marking to market" on a
daily basis to reflect the market value of the contracts at the end of each
day's trading. Variation margin payments are made or received depending upon
whether unrealized gains or losses are incurred. When the contracts are
closed, the Fund recognizes a realized gain or loss equal to the difference
between the proceeds from, or cost of, the closing transaction and the Fund's
basis in the contract. Risks include the possibility of an illiquid market
and that a change in the value of contracts may not correlate with changes in
the value of the securities being hedged.
H. Covered Call Options-The Fund may write call options, but only on a covered
basis; that is, the Fund will own the underlying security. Options written by
the Fund normally will have expiration dates between three and nine months
from the date written. The exercise price of a call option may be below,
equal to, or above the current market value of the underlying security at the
time the option is written. When the Fund writes a covered call option, an
amount equal to the premium received by the Fund is recorded as an asset and
an equivalent liability. The amount of the liability is subsequently
"marked-to-market" to reflect the current market value of the option written.
The current market value of a written option is the mean between the last bid
and asked prices on that day. If a written call option expires on the
stipulated expiration date, or if the Fund enters into a closing purchase
transaction, the Fund realizes a gain (or a loss if the closing purchase
transaction exceeds the premium received when the option was written) without
regard to any unrealized gain or loss on the underlying security, and the
liability related to such option is extinguished. If a written option is
exercised, the Fund realizes a gain or a loss from the sale of the underlying
security and the proceeds of the sale are increased by the premium originally
received.
A call option gives the purchaser of such option the right to buy, and the
writer (the Fund) the obligation to sell, the underlying security at the
stated exercise price during the option period. The purchaser of a call
option has the right to acquire the security which is the subject of the call
option at any time during the option period. During the option period, in
return for the premium paid by the purchaser of the option, the Fund has
given up the opportunity for capital appreciation above the exercise price
should the market price of the underlying security increase, but has retained
the risk of loss should the price of the underlying security decline. During
the option period, the Fund may be required at any time to deliver the
underlying security against payment of the exercise price. This obligation is
terminated upon the expiration of the option period or at such earlier time
at which the Fund effects a
FS-9
<PAGE> 115
closing purchase transaction by purchasing (at a price which may be higher
than that received when the call option was written) a call option identical
to the one originally written.
NOTE 2-ADVISORY FEES AND OTHER TRANSACTIONS WITH AFFILIATES
The Fund has entered into an investment advisory agreement with A I M Advisors,
Inc. ("AIM"). Under the terms of the master investment advisory agreement, the
Fund pays AIM a fee at the annual rate of 1.0% of the first $10 million of the
Fund's average daily net assets, 0.75% of the next $140 million of the Fund's
average daily net assets and 0.625% of the Fund's average daily net assets in
excess of $150 million. Under the terms of a sub-advisory agreement between AIM
and TradeStreet Investment Associates, Inc. ("TradeStreet"), AIM pays
TradeStreet a fee at an annual rate of 0.50% of the first $10 million of the
Fund's average daily net assets, 0.35% of the next $140 million of the Fund's
average daily net assets, 0.225% of the next $550 million of the Fund's average
daily net assets and 0.15% of the Fund's average daily net assets in excess of
$700 million.
The Fund, pursuant to an administrative services agreement with AIM, has
agreed to reimburse AIM for certain costs incurred in providing accounting
services to the Fund. During the year ended October 31, 1998, the Fund
reimbursed AIM $72,766 for such services.
During the year ended October 31, 1998, the Fund paid legal fees of $6,861 for
services rendered by Kramer, Levin, Naftalis & Frankel as counsel to the Board
of Directors. A member of that firm is a director of the Fund.
Substantially all shares of the Fund are held of record by State Street Bank &
Trust Company as custodian for Summit Investors Plans, a unit investment trust
that is sponsored by A I M Distributors, Inc. (an affiliated company of AIM).
Certain officers and directors of the Fund are officers of AIM and A I M
Distributors, Inc.
NOTE 3-INDIRECT EXPENSES
During the year ended October 31, 1998, the Fund received reductions in
custodian fees of $26,905 under an expense offset arrangement. The effect of the
above arrangement resulted in a reduction of the Fund's total expenses of
$26,905 during the year ended October 31, 1998.
NOTE 4-DIRECTORS' FEES
Directors' fees represent remuneration paid or accrued to each director who is
not an "interested person" of AIM. The Fund may invest 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. Interest on
borrowings under the line of credit is payable on maturity or prepayment date.
Prior to an amendment of the line of credit on May 1, 1998, the Fund was limited
to borrowing up to the lesser of (i) $500,000,000 or (ii) the limits set by its
prospectus for borrowings. During the year ended October 31, 1998, 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 0.05% on the unused balance of
the committed line. 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 October 31, 1998 was
$1,469,938,551 and $1,409,377,755, respectively.
The amount of unrealized appreciation (depreciation) of investment securities
as of October 31, 1998, on a tax basis, is as follows:
<TABLE>
<S> <C>
Aggregate unrealized appreciation of
investment securities $576,816,675
- ---------------------------------------------------------
Aggregate unrealized (depreciation) of
investment securities (27,900,704)
- ---------------------------------------------------------
Net unrealized appreciation of investment
securities $548,915,971
=========================================================
* Cost of investments for tax purposes is $1,280,189,136.
</TABLE>
NOTE 7-CAPITAL STOCK
Changes in capital stock outstanding during the years ended October 31, 1998 and
1997 were as follows:
<TABLE>
<CAPTION>
1998 1997
--------------------------- -------------------------
SHARES AMOUNT SHARES AMOUNT
----------- ------------- ---------- ------------
<S> <C> <C> <C> <C>
Sold 13,962,660 $ 208,683,626 8,716,348 $114,553,393
- ------------------------------------------------------------------------------
Issued as reinvest-
ment of dividends 11,672,671 154,897,796 9,816,281 113,770,753
- ------------------------------------------------------------------------------
Reacquired (12,194,909) (183,406,173) (6,706,799) (89,245,422)
- ------------------------------------------------------------------------------
13,440,422 $ 180,175,249 11,825,830 $139,078,724
==============================================================================
</TABLE>
NOTE 8-OPTION CONTRACTS WRITTEN
Transactions in call options written during the year ended October 31, 1998 are
summarized as follows:
<TABLE>
<CAPTION>
OPTION CONTRACTS
-----------------------
NUMBER OF PREMIUMS
CONTRACTS RECEIVED
------ ----------
<S> <C> <C>
Beginning of period -- $ --
- --------------------------------------- ------ ----------
Written 3,452 1,420,661
- --------------------------------------- ------ ----------
Closed (1,752) (458,918)
- --------------------------------------- ------ ----------
Exercised (1,700) (961,743)
- --------------------------------------- ------ ----------
End of period -- $ --
======================================= ====== ==========
</TABLE>
FS-10
<PAGE> 116
NOTE 9-FINANCIAL HIGHLIGHTS
Shown below are the financial highlights for a share of capital stock
outstanding during each of the years in the five-year period ended October 31,
1998.
<TABLE>
<CAPTION>
1998 1997 1996 1995 1994
---------- ---------- ---------- ---------- --------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of period $ 15.15 $ 12.99 $ 12.14 $ 9.78 $ 10.46
- --------------------------------------------- ---------- ---------- ---------- ---------- --------
Income from investment operations:
Net investment income 0.03 0.02 0.04 0.04 0.10
- --------------------------------------------- ---------- ---------- ---------- ---------- --------
Net gains (losses) on securities (both
realized and unrealized) 1.23 3.34 1.69 2.81 (0.04)
- --------------------------------------------- ---------- ---------- ---------- ---------- --------
Total from investment operations 1.26 3.36 1.73 2.85 0.06
- --------------------------------------------- ---------- ---------- ---------- ---------- --------
Less distributions:
Dividends from net investment income (0.02) (0.03) (0.03) (0.10) (0.10)
- --------------------------------------------- ---------- ---------- ---------- ---------- --------
Distributions from net realized gains (1.43) (1.17) (0.85) (0.39) (0.64)
- --------------------------------------------- ---------- ---------- ---------- ---------- --------
Total distributions (1.45) (1.20) (0.88) (0.49) (0.74)
- --------------------------------------------- ---------- ---------- ---------- ---------- --------
Net asset value, end of period $ 14.96 $ 15.15 $ 12.99 $ 12.14 $ 9.78
============================================= ========== ========== ========== ========== ========
Total return(a) 9.49% 28.53% 15.61% 31.03% 0.61%
============================================= ========== ========== ========== ========== ========
Ratios/supplemental data:
Net assets, end of period (000s omitted) $1,830,032 $1,650,234 $1,261,008 $1,050,011 $765,073
============================================= ========== ========== ========== ========== ========
Ratio of expenses to average net assets 0.67%(b) 0.68% 0.70% 0.71% 0.72%
============================================= ========== ========== ========== ========== ========
Ratio of net investment income to average net
assets 0.23%(b) 0.11% 0.29% 0.33% 1.04%
============================================= ========== ========== ========== ========== ========
Portfolio turnover rate 83% 88% 118% 126% 122%
============================================= ========== ========== ========== ========== ========
</TABLE>
(a) Does not deduct sales charges.
(b) Ratios are based on average net assets of $1,785,555,221.
FS-11
<PAGE> 117
PART C: OTHER INFORMATION
Item 23. Exhibits
a (1) - (a) Articles of Incorporation, of the Registrant, as
filed with the State of Maryland on February 17,
1982, were filed as an Exhibit to Registrant's
Pre-Effective Amendment No. 1 on Form N-1 filed on
September 30, 1982, and were filed electronically as
an Exhibit with the Registrant's Post-Effective
Amendment No. 19 on February 27, 1996, and are
incorporated by reference herein.
- (b) Articles of Amendment to the Articles of
Incorporation, as filed with the State of Maryland on
September 16, 1982, were filed as an Exhibit to
Registrant's Pre-Effective Amendment No. 1 on Form
N-1 filed on September 30, 1982, and were filed
electronically as an Exhibit with the Registrant's
Post-Effective Amendment No. 19 on February 27, 1996,
and are incorporated by reference herein.
- (c) Articles of Amendment to the Articles of
Incorporation, as filed with the State of Maryland on
September 30, 1982, were filed electronically as an
Exhibit with the Registrant's Post-Effective
Amendment No. 19 on February 27, 1996, and are
incorporated by reference herein.
- (d) Articles of Amendment to the Articles of
Incorporation, as filed with the State of Maryland on
November 23, 1988, were filed as an Exhibit to
Registrant's Post-Effective Amendment No. 9 on Form
N-1A filed on September 12, 1988, and were filed
electronically as an Exhibit with the Registrant's
Post-Effective Amendment No. 19 on February 27, 1996,
and are incorporated by reference herein.
- (e) Articles Supplementary to the Articles of
Incorporation as filed with the State of Maryland on
December 21, 1998, were filed electronically as an
Exhibit with the Registrant's Post-Effective
Amendment No. 22 on December 29, 1998 and are
incorporated by reference herein.
- (f) Articles of Amendment to the Articles of
Incorporation as filed with the State of Maryland on
December 21, 1998, were filed electronically as an
Exhibit with the Registrant's Post-Effective
Amendment No. 22 on December 29, 1998 and are
incorporated by reference herein.
b (1) - (a) By-Laws of the Registrant were filed as an
Exhibit to Registrant's Pre-Effective Amendment No. 1
on Form N-1 filed on September 30, 1982.
- (b) Amended By-Laws of the Registrant as adopted on
February 18, 1987, were filed as an Exhibit to
Registrant's Post-Effective Amendment No. 10 on Form
N-1A filed on April 28, 1989.
- (c) Amended By-Laws of the Registrant as adopted on
May 24, 1988, were filed as an Exhibit to
Registrant's Post-Effective Amendment No. 10 on Form
N-1A filed on April 28, 1989.
(2) - (a) Amended and Restated By-Laws of the Registrant as
adopted on June 11, 1989, were filed as an Exhibit to
Registrant's Post-Effective Amendment No. 11 on Form
N-1A filed on April 30, 1990, and were filed
electronically as an Exhibit
1
<PAGE> 118
with the Registrant's Post-Effective Amendment No. 19
on February 27, 1996.
- (b) First Amendment to the Amended and Restated
By-Laws of the Registrant as adopted on May 3, 1991,
was filed as an Exhibit to Registrant's
Post-Effective Amendment No. 13 on Form N-1A filed on
April 30, 1992, and was filed electronically as an
Exhibit with the Registrant's Post-Effective
Amendment No. 19 on February 27, 1996.
- (c) Second Amendment to the Amended and Restated
By-Laws of the Registrant as adopted on March 14,
1995, was filed electronically as an Exhibit with the
Registrant's Post-Effective Amendment No. 19 on
February 27, 1996.
(3) - (a) Amended and Restated By-Laws of the Registrant as
adopted on December 11, 1996, were filed
electronically as an Exhibit with Registrant's
Post-Effective Amendment No. 20 on February 24, 1997,
and are incorporated by reference herein.
c - Instruments Defining Rights of Security Holders -
None.
d (1) - Investment Advisory Agreement, dated October 5, 1988,
between Registrant and A I M Advisors, Inc., was
filed as an Exhibit to Registrant's Post-Effective
Amendment No. 13 on Form N-1A filed on April 30,
1992.
(2) - Investment Advisory Agreement, dated October 18,
1993, between Registrant and A I M Advisors, Inc.,
was filed as an Exhibit to Registrant's
Post-Effective Amendment No. 15 on Form N-1A filed on
December 29, 1993, and was filed electronically as an
Exhibit with the Registrant's Post-Effective
Amendment No. 19 on February 27, 1996.
(3) - Master Investment Advisory Agreement, dated February
28, 1997, between Registrant and A I M Advisors,
Inc., was filed electronically as an Exhibit with the
Registrant's Post-Effective Amendment No. 21 on
February 27, 1998, and is incorporated by reference
herein.
(4) - Sub-Advisory Agreement, dated October 5, 1988,
between A I M Advisors, Inc. and NCNB Texas National
Bank, was filed as an Exhibit to Registrant's
Post-Effective Amendment No. 13 on Form N-1A filed on
April 30, 1992.
(5) - Sub-Advisory Agreement, dated October 18, 1993,
between A I M Advisors, Inc. and NationsBank of
Texas, N.A., was filed as an Exhibit to Registrant's
Post-Effective Amendment No. 15 on Form N-1A filed on
December 29, 1993, and was filed electronically as an
Exhibit with the Registrant's Post-Effective
Amendment No. 19 on February 27, 1996.
(6) - Sub-Advisory Agreement, dated October 18, 1993,
between A I M Advisors, Inc. and NationsBank of
Texas, N.A., as assumed by TradeStreet Investment
Associates, Inc., as of April 1, 1996.
(7) - Assumption Agreement, dated April 1, 1996, between
A I M Advisors, Inc. and TradeStreet Investment
Associates, Inc., was filed electronically as an
Exhibit with Registrant's Post-Effective Amendment
No. 20, on February 24, 1997.
2
<PAGE> 119
(8) - Sub-Advisory Agreement, dated February 28, 1997,
between A I M Advisors, Inc. and TradeStreet
Investment Associates, Inc. was filed electronically
as an Exhibit with the Registrant's Post-Effective
Amendment No. 21 on February 27, 1998, and is
incorporated by reference herein.
(9) - (a) Foreign Country Selection and Mandatory
Securities Depository Responsibilities Delegation
Agreement, dated September 9, 1998, by and between
A I M Advisors, Inc. and the Registrant, was filed
electronically as an Exhibit with the Registrant's
Post-Effective Amendment No. 22 on December 29, 1998
and is incorporated by reference herein.
- (b) Amendment No. 1, dated September 28, 1998 to the
Foreign Country Selection and Mandatory Securities
Depository Responsibilities Delegation Agreement,
dated September 9, 1998, by and between A I M
Advisors, Inc. and the Registrant, was filed
electronically as an Exhibit with the Registrant's
Post-Effective Amendment No. 22 on December 29, 1998
and is incorporated by reference herein.
(c) Amendment No. 2, dated December 14, 1998, to the
Foreign Country Selection and Mandatory Securities
Depository Responsibilities Delegation Agreement,
dated September 9, 1998, by and between A I M
Advisors, Inc. and the Registrant, is filed
electronically herewith.
(d) Amendment No. 3, dated December 22, 1998, to the
Foreign Country Selection and Mandatory Securities
Depository Responsibilities Delegation Agreement,
dated September 9, 1998, by and between A I M
Advisors, Inc. and the Registrant, is filed
electronically herewith.
(e) Amendment No. 4, dated January 26, 1999, to the
Foreign Country Selection and Mandatory Securities
Depository Responsibilities Delegation Agreement,
dated September 9, 1998, by and between A I M
Advisors, Inc. and the Registrant, is filed
electronically herewith.
(f) Amendment No. 5, dated March 1, 1999, to the
Foreign Country Selection and Mandatory Securities
Depository Responsibilities Delegation Agreement,
dated September 9, 1998, by and between A I M
Advisors, Inc. and the Registrant, is filed
electronically herewith.
e (1) - Distribution Agreement, dated August 27, 1985,
between Registrant and A I M Distributors, Inc., was
filed as an Exhibit to Registrant's Post-Effective
Amendment No. 5 on Form N-1A filed on April 28, 1986.
(2) - Distribution Agreement, dated October 18, 1993,
between Registrant and A I M Distributors, Inc., was
filed as an Exhibit to Registrant's Post-Effective
Amendment No. 15 on Form N-1A filed on December 29,
1993, and was filed electronically as an Exhibit with
the Registrant's Post-Effective Amendment No. 19 on
February 27, 1996.
(3) - (a) Distribution Agreement, dated February 28, 1997,
between Registrant and A I M Distributors, Inc. was
filed electronically as an Exhibit with the
Registrant's Post-Effective Amendment No. 21 on
February 27, 1998, and is incorporated by reference
herein.
3
<PAGE> 120
- (b) Amendment No. 1 to the Distribution Agreement,
dated February 28, 1997, between Registrant and A I M
Distributors, Inc., is filed electronically herewith.
f (1) - Retirement Plan for Registrant's Non-Affiliated
Directors was filed as an Exhibit to Registrant's
Post-Effective Amendment No. 17 on Form N-1A filed on
December 23, 1994.
(2) - Retirement Plan for Registrant's Non-Affiliated
Directors, effective as of March 8, 1994, as restated
September 18, 1995, was filed electronically as an
Exhibit with the Registrant's Post-Effective
Amendment No. 19 on February 27, 1996 and is
incorporated by reference herein.
(3) - Form of Deferred Compensation Agreement for
Registrant's Non-Affiliated Directors was filed as an
Exhibit to Registrant's Post-Effective Amendment No.
17 on Form N-1A filed on December 23, 1994.
(4) - Form of Deferred Compensation Plan for Registrant's
Non-Affiliated Directors as approved on December 5,
1995, was filed electronically as an Exhibit with the
Registrant's Post-Effective Amendment No. 19 on
February 27, 1996, and is incorporated by reference
herein.
(5) - Form of Deferred Compensation Agreement for
Registrant's Non-Affiliated Directors for
Non-Interested Directors and Trustees, as approved
March 12, 1997, was filed electronically as an
Exhibit with the Registrant's Post-Effective
Amendment No. 21 on February 27, 1998, and is
incorporated by reference herein.
g (1) - Custodian Contract, between Registrant and State
Street Bank and Trust Company, was filed as an
Exhibit to Registrant's Post-Effective Amendment No.
7 on Form N-1A filed on March 1, 1988.
(2) - (a) Custodian Contract, dated March 7, 1988, between
Registrant and State Street Bank and Trust Company,
was filed electronically as an Exhibit with the
Registrant's Post-Effective Amendment No. 19 on
February 27, 1996, and is incorporated by reference
herein.
- (b) Amendment No. 1, dated September 19, 1995, to the
Custodian Contract dated March 7, 1988, between
Registrant and State Street Bank and Trust Company,
was filed electronically as an Exhibit with the
Registrant's Post-Effective Amendment No. 19 on
February 27, 1996, and is incorporated by reference
herein.
- (c) Amendment No. 2 dated September 28, 1996 to the
Custodian Contract dated March 7, 1988 between
Registrant and State Street Bank and Trust Company
was filed electronically as an Exhibit with the
Registrant's Post-Effective Amendment No. 22 on
December 29, 1998 and is incorporated by reference
herein.
- (d) Amendment to Custodian Contract dated September
9, 1998, to the Custodian Contract dated March 7,
1988 between Registrant and State Street Bank and
Trust Company was filed electronically as an Exhibit
with the Registrant's Post-Effective Amendment No. 22
on December 29, 1998 and is incorporated by reference
herein.
4
<PAGE> 121
h (1) - Transfer Agency Agreement was filed as an Exhibit to
Registrant's Post-Effective Amendment No. 2 to
Registrant's Registration Statement on Form N-1 filed
on May 13, 1983.
(2) - Administrative Services Agreement, dated June 11,
1989, between Registrant and A I M Advisors, Inc.,
was filed as an Exhibit to Registrant's
Post-Effective Amendment No. 11 on Form N-1A filed
on April 30, 1990.
(3) - Administrative Services Agreement, dated October 18,
1993, between the Registrant and A I M Advisors,
Inc., was filed as an Exhibit to Registrant's
Post-Effective Amendment No. 15 on Form N-1A filed on
December 29, 1993, and was filed electronically as an
Exhibit with the Registrant's Post-Effective
Amendment No. 19 on February 27, 1996.
(4) - Administrative Services Agreement, dated February 28,
1997, between the Registrant and A I M Distributors,
Inc., was filed electronically as an Exhibit with the
Registrant's Post-Effective Amendment No. 21 on
February 27, 1998, and is incorporated by reference
herein.
(5) - (a) Administrative Services Agreement, dated October
18, 1993, between A I M Advisors, Inc. and A I M Fund
Services, Inc., was filed as an Exhibit to
Registrant's Post-Effective Amendment No. 15 on Form
N-1A filed on December 29, 1993, and was filed
electronically as an Exhibit with the Registrant's
Post-Effective Amendment No. 19 on February 27, 1996.
- (b) Amendment No.1, dated May 11, 1994, to the
Administrative Services Agreement, dated October 18,
1993, between A I M Advisors, Inc. and A I M Fund
Services, Inc., was filed as an Exhibit to
Registrant's Post-Effective Amendment No. 17 on Form
N-1A filed on December 23, 1994, and was filed
electronically as an Exhibit with the Registrant's
Post-Effective Amendment No. 19 on February 27, 1996.
- (c) Amendment No. 2, dated July 1, 1994, to the
Administrative Services Agreement, dated October 18,
1993, between A I M Advisors, Inc. and A I M Fund
Services, Inc., was filed as an Exhibit to
Registrant's Post-Effective Amendment No. 17 on Form
N-1A filed on December 23, 1994, and was filed
electronically as an Exhibit with the Registrant's
Post-Effective Amendment No. 19 on February 27, 1996.
- (d) Amendment No. 3, dated September 16, 1994, to the
Administrative Services Agreement, dated October 18,
1993, between A I M Advisors, Inc. and A I M Fund
Services, Inc., was filed as an Exhibit to
Registrant's Post-Effective Amendment No. 17 on Form
N-1A filed on December 23, 1994, and was filed
electronically as an Exhibit with the Registrant's
Post-Effective Amendment No. 19 on February 27, 1996.
- (e) Amendment No. 4, dated November 1, 1994, to the
Administrative Services Agreement, dated November 1,
1994, between A I M Advisors, Inc. and A I M Fund
Services, Inc., was filed electronically as an
Exhibit with the Registrant's Post-Effective
Amendment No. 19 on February 27, 1996.
(10)- Administrative Services Agreement, dated February 28,
1997, between A I M Advisors, Inc. and A I M Fund
Services, Inc., was filed electronically as
5
<PAGE> 122
an Exhibit with the Registrant's Post-Effective
Amendment No. 21 on February 27, 1998, and is
incorporated by reference herein herewith.
(11)- Form of Transfer Agency Agreement and Service
Agreement, between Registrant and A I M Fund
Services, Inc., was filed electronically as an
Exhibit with the Registrant's Post-Effective
Amendment No. 22 on December 29, 1998 and is
incorporated by reference herein.
i(1) - Opinion and consent of Spengler Carlson Gubar Brodsky
& Frischling, dated March 5, 1984, was filed as an
Exhibit to Registrant's Post-Effective
Amendment No. 3 on Form N-1A filed on March 7, 1984,
and was filed electronically as an Exhibit with the
Registrant's Post-Effective Amendment No. 19 on
February 27, 1996, and is incorporated by reference
herein.
(2) - Opinion and Consent of Ballard Spahr Andrews &
Ingersoll, LLP was filed electronically as an Exhibit
with the Registrant's Post-Effective Amendment No. 22
on December 29, 1998 and are incorporated by
reference herein.
j(1) - Auditors Consent of KPMG LLP, is filed electronically
herewith.
(2) - Consent of Ballard Spahr Andrews & Ingersoll, LLP is
filed electronically herewith.
k - Financial Statements - None.
l - Letter from A I M Distributors, Inc., dated September
24, 1992, re: initial capital, was filed as an
Exhibit to the Registrant's Pre-Effective Amendment
No. 1 on Form N-1 filed on September 30, 1982, and
was filed electronically as an Exhibit with the
Registrant's Post-Effective Amendment No. 19 on
February 27, 1996, and is incorporated by reference
herein.
m - Distribution Plan and Form of Shareholder Service
Agreement for Registrant's Class II Shares is filed
electronically herewith.
n - Financial Data Schedule is filed electronically
herewith.
o - Rule 18f-3 Plan, effective as of December 8, 1998, is
filed electronically herewith.
Item 24. Persons Controlled by or under Common Control With Registrant.
Provide a list or diagram of all persons directly or indirectly
controlled by or under common control with the Registrant. For any person
controlled by another person, disclose the percentage of voting securities owned
by the immediately controlling person or other basis of that person's control.
For each company, also provide the state or other sovereign power under the laws
of which the company is organized.
All of Registrant's issued and outstanding shares of Class I
Shares of Common Stock are owned of record by State Street Bank and Trust
Company ("State Street") as custodian for Summit Investors Plans I, a unit
investment trust. State Street votes such shares in accordance with the
instructions received from beneficial owners of Registrant's shares; and, as to
shares for which no instructions are received, proportionately based upon the
votes cast by beneficial owners who furnished instructions.
6
<PAGE> 123
Item 25. Indemnification
State the general effect of any contract, arrangements or statute
under which any director, officer, underwriter or affiliated person of the
Registrant is insured or indemnified against any liability incurred in their
official capacity, other than insurance provided by any director, officer,
affiliated person or underwriter for their own protection.
Under the terms of the Maryland General Corporation Law and the
Registrant's Articles of Incorporation and By-laws, the Registrant may indemnify
any person who was or is a director, officer or employee of the Registrant to
the maximum extent permitted by the Maryland General Corporation Law. The
specific terms of such indemnification are reflected in the Registrant's
Articles of Incorporation and By-laws, which are incorporated herein by
reference. No indemnification will be provided by the Registrant to any director
or officer of the Registrant for any liability to the Registrant or shareholders
to which such director or officer would otherwise be subject by reason of
willful misfeasance, bad faith, gross negligence or reckless disregard of duty.
Insofar as indemnification for liability arising under the
Securities Act of 1933 may be permitted to directors, officers and controlling
persons of the Registrant pursuant to the foregoing provisions, or otherwise,
the Registrant has been advised that in the opinion of the Securities and
Exchange Commission such indemnification is against public policy and is,
therefore, unenforceable. In the event that a claim for indemnification against
such liabilities (other than the payment by the Registrant of expenses incurred
or paid by a director, officer or controlling person of the Registrant in the
successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered hereby, the Registrant will, unless in the opinion of its counsel the
matter has been settled by controlling precedent, submit to a court of
appropriate jurisdiction the question whether such indemnification by it is
against public policy and will be governed by the final adjudication of such
issue. Insurance coverage is provided under a joint Mutual Fund and Investment
Advisory Professional Directors and Officers Liability Policy, issued by ICI
Mutual Insurance Company, with a $35,000,000 limit of liability.
Item 26. Business and Other Connections of Investment Advisor
Describe any other business, profession, vocation or employment of
a substantial nature that each investment advisor of the Registrant, and each
director, officer or partner of the advisor is, or has been, engaged within the
two fiscal years for his or her own account or in the capacity of director,
officer, employee, partner or trustee.
A I M Advisors, Inc.
See Statement of Additional Information, Part B under headings
"General Information About the Fund - Directors and Officers" for
information concerning A I M Advisors, Inc.
TradeStreet Investment Associates, Inc.
The names and principal occupations of the chief executive officer
and each director of TradeStreet Investment Associates, Inc.
("TradeStreet") are as follows:
Holly D. Deem President and Chief Executive Officer,
TradeStreet; Senior Vice President,
NationsBank, N.A.
Martin E. Galt III Senior Executive Vice President, Asset
Management Group
7
<PAGE> 124
All of the foregoing persons may be reached c/o TradeStreet
Investment Associates, Inc., 101 South Tryon Street, Suite 1000, Charlotte,
North Carolina 28255.
Item 27. Principal Underwriters
(a) State the name of each investment company (other than the
Registrant) for which each principal underwriter currently distributing the
Registrant's securities also acts as a principal underwriter, depositor, or
investment adviser.
A I M Distributors, Inc., the Registrant's principal
underwriter, also acts as a principal underwriter, depositor
or investment advisor to the following investment companies:
AIM Advisor Funds, Inc.
AIM Equity Funds, Inc. (Retail Classes)
AIM Funds Group
AIM Growth Series
AIM International Funds, Inc.
AIM Investment Funds
AIM Investment Securities Funds (Retail Class)
AIM Series Trust
AIM Special Opportunities Funds
AIM Tax-Exempt Funds, Inc.
AIM Variable Insurance Funds, Inc.
GT Global Floating Rate Fund, Inc.
AIM Summit Investors Plans I
(b) Provide the information required by the following table for
each director, officer, or partner of each principal underwriter named in the
response to Item 20:
<TABLE>
<CAPTION>
Name and Principal Positions and Offices Positions and Offices
Business Address * with Underwriter with Registrant
- ------------------- ------------------------ --------------------
<S> <C> <C>
Charles T. Bauer Chairman of the Board of Directors Chairman & Director
Michael J. Cemo President & Director None
Gary T. Crum Director Senior Vice President
James L. Salners Executive Vice President None
Robert H. Graham Senior Vice President & Director President & Director
John Caldwell Senior Vice President None
W. Gary Littlepage Senior Vice President & Director None
Marilyn M. Miller Senior Vice President None
Gene L. Needles Senior Vice President None
Gordon J. Sprague Senior Vice President None
Michael C. Vessels Senior Vice President None
</TABLE>
- ----------
* 11 Greenway Plaza, Suite 100
Houston, TX 77046-1173
8
<PAGE> 125
<TABLE>
<CAPTION>
Name and Principal Positions and Offices Positions and Offices
Business Address * with Underwriter with Registrant
- ------------------- ------------------------ --------------------
<S> <C> <C>
B. J. Thompson First Vice President None
James R. Anderson Vice President None
Dawn M. Hawley Vice President & Treasurer None
Mary K. Coleman Vice President None
Mary A. Corcoran Vice President None
Melville B. Cox Vice President & Chief Compliance Officer Vice President
Sidney M. Dilgren Vice President None
Tony D. Green Vice President None
Ofelia M. Mayo Vice President, General Counsel & Assistant Assistant Secretary
Secretary
Charles H. McLaughlin Vice President None
Terri L. Ransdell Vice President None
Carol F. Relihan Vice President Senior Vice President & Secretary
Kamala C. Sachidanandan Vice President None
Frank V. Serebrin Vice President None
Christopher T. Simutis Vice President None
Gary K. Wendler Vice President None
Luke P. Beausoleil Assistant Vice President None
Scott E. Burman Assistant Vice President None
Tisha B. Christopher Assistant Vice President None
Glenda A. Dayton Assistant Vice President None
Mary E. Gentempo Assistant Vice President None
David E. Hessel Assistant Vice President, None
Assistant Treasurer & Controller
Simon R. Hoyle Assistant Vice President None
Kathryn A. Jordan Assistant Vice President None
Kim T. McAuliffe Assistant Vice President None
Ivy B. McLemore Assistant Vice President None
Mary C. Mangham Assistant Vice President None
David B. O'Neil Assistant Vice President None
Rebecca Starling-Klatt Assistant Vice President None
Nicholas D. White Assistant Vice President None
</TABLE>
- ----------
* 11 Greenway Plaza, Suite 100
Houston, TX 77046-1173
9
<PAGE> 126
<TABLE>
<CAPTION>
Name and Principal Positions and Offices Positions and Offices
Business Address * with Underwriter with Registrant
- ------------------- ------------------------ --------------------
<S> <C> <C>
Nancy L. Martin Assistant General Counsel & Assistant Assistant Secretary
Secretary
Norman W. Woodson Assistant Vice President None
Samuel D. Sirko Assistant General Counsel & Assistant Assistant Secretary
Secretary
Kathleen J. Pflueger Secretary Assistant Secretary
Stephen I. Winer Assistant Secretary Assistant Secretary
P. Michelle Grace Assistant Secretary Assistant Secretary
Lisa A. Moss Assistant Secretary Assistant Secretary
</TABLE>
- ----------
* 11 Greenway Plaza, Suite 100
Houston, TX 77046-1173
(c) Provide the information required by the following table for
all commissions and other compensation received, directly or indirectly, from
the Registrant during the last fiscal year by each principal underwriter who is
not an affiliated person of the Registrant or any affiliated person of an
affiliated person.
Not applicable.
Item 28. Location of Accounts and Records
State the name and address of each person maintaining physical
possession of each account, book, or other document required to be maintained by
section 31(a) [15 U.S.C. 80a-30(a)] and the rules under that section.
A I M Advisors, Inc., 11 Greenway Plaza, Suite 100, Houston, Texas
77046, maintains physical possession of each such account, book or
other document of the Registrant at its principal executive
offices, except for those maintained by the Registrant's Custodian
and Transfer Agent, State Street Bank and Trust Company, 225
Franklin Street, Boston, Massachusetts 02105 and its partially
owned subsidiary, Boston Financial Data Services, Inc., P.O. Box
8300, Boston, Massachusetts 02266-8300.
Item 29. Management Services
Provide a summary of the substantive provisions of any
management-related service contract not discussed in Part A or B, disclosing the
parties to the contract and the total amount paid and by whom for the
Registrant's last three fiscal years.
None.
- ----------
* 11 Greenway Plaza, Suite 100
Houston, TX 77046-1173
10
<PAGE> 127
Item 30. Undertakings
In initial registration statements filed under the Securities Act,
provide an undertaking to file an amendment to the registration statement with
certified financial statements showing the initial capital received before
accepting subscriptions from more than 25 persons if the Registrant intends to
raise its initial capital under section 14(a)(3) [15 U.S.C. 80a-14(a)(3)].
Not Applicable.
11
<PAGE> 128
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933 and the
Investment Company Act of 1940, the Registrant certifies that it meets all of
the requirements for effectiveness of this Registration Statement pursuant to
Rule 485(b) under the Securities Act of 1933 and has duly caused this Amendment
to its Registration Statement to be signed on its behalf by the undersigned,
thereunto duly authorized, in the city of Houston, Texas on the 25th day of
February, 1999.
REGISTRANT: AIM SUMMIT FUND, INC.
By: /s/ ROBERT H. GRAHAM
---------------------------
Robert H. Graham, President
Pursuant to the requirements of the Securities Act of 1933, this
Amendment to the Registration Statement has been signed below by the following
persons in the capacities and on the dates indicated:
<TABLE>
<CAPTION>
SIGNATURES TITLE DATE
---------- ----- ----
<S> <C> <C>
/s/ CHARLES T. BAUER Chairman & Director February 25, 1999
- ----------------------
(Charles T. Bauer)
/s/ ROBERT H. GRAHAM Director & President February 25, 1999
- ---------------------- (Principal Executive Officer)
(Robert H. Graham)
/s/ BRUCE L. CROCKETT Director February 25, 1999
- ----------------------
(Bruce L. Crockett)
/s/ OWEN DALY II Director February 25, 1999
- ----------------------
(Owen Daly II)
/s/ EDWARD K. DUNN, JR. Director February 25, 1999
- ----------------------
(Edward K. Dunn, Jr.)
/s/ JACK FIELDS Director February 25, 1999
- ----------------------
(Jack Fields)
/s/ CARL FRISCHLING Director February 25, 1999
- ----------------------
(Carl Frischling)
/s/ PREMA MATHAI-DAVIS Director February 25, 1999
- ----------------------
(Prema Mathai-Davis)
/s/ LEWIS F. PENNOCK Director February 25, 1999
- ----------------------
(Lewis F. Pennock)
/s/ IAN W. ROBINSON Director February 25, 1999
- ----------------------
(Ian W. Robinson)
/s/ LOUIS S. SKLAR Director February 25, 1999
- ----------------------
(Louis S. Sklar)
Senior Vice President &
/s/ JOHN J. ARTHUR Treasurer (Principal Financial February 25, 1999
- ---------------------- and Accounting Officer)
(John J. Arthur)
</TABLE>
<PAGE> 129
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
Exhibit
Number
- ------
<S> <C> <C>
d(9)(c) - Amendment No. 2, December 14, 1998, to the Foreign Country Selection and
Mandatory Securities Depository Responsibilities Delegation Agreement, dated
September 9, 1998, by and between Registrant and A I M Advisors, Inc.
d(9)(d) - Amendment No. 3, December 22, 1998, to the Foreign Country Selection and
Mandatory Securities Depository Responsibilities Delegation Agreement, dated
September 9, 1998, by and between Registrant and A I M Advisors, Inc.
d(9)(e) - Amendment No. 4, January 26, 1999, to the Foreign Country Selection and
Mandatory Securities Depository Responsibilities Delegation Agreement, dated
September 9, 1998, by and between Registrant and A I M Advisors, Inc.
d(9)(f) - Amendment No. 5, March 1, 1999, to the Foreign Country Selection and
Mandatory Securities Depository Responsibilities Delegation Agreement, dated
September 9, 1998, by and between Registrant and A I M Advisors, Inc.
e(3)(b) - Amendment No. 1, to the Distribution Agreement, dated February 28, 1997
j(1) - Auditors Consent of KPMG LLP, is filed electronically herewith.
(2) - Consent of Ballard Spahr Andrews & Ingersoll, LLP.
m - Distribution Plan and Form of Shareholder Service for Registrant's Class II Shares
n - Financial Data Schedule
o - Rule 18f-3 Plan, effective as of December 8, 1998
</TABLE>
<PAGE> 1
EXHIBIT d(9)(c)
AMENDMENT NO. 2
TO
FOREIGN COUNTRY SELECTION
AND MANDATORY SECURITIES DEPOSITORY RESPONSIBILITIES
DELEGATION AGREEMENT
This Amendment No. 2, dated as of December 14, 1998, amends the
Foreign Country Selection and Mandatory Securities Depository Responsibilities
Delegation Agreement (the "Agreement"), dated September 9, 1998, between A I M
Advisors, Inc., a Delaware corporation and each registered investment company
(the "Investment Companies") and its respective portfolios (the "Funds") listed
on the signature page thereof.
W I T N E S S E T H:
WHEREAS, the parties to the Agreement desire to amend the Agreement to
add AIM V.I. Global Growth and Income Fund and AIM V.I. Telecommunications Fund
of AIM Variable Insurance Funds, Inc. as a party to the agreement;
NOW, THEREFORE, the parties agree as follows;
1. The list of Investment Companies and Funds covered by the
Agreement is hereby amended to include the following:
"AIM V.I. Global Growth and Income Fund
AIM V.I. Telecommunications Fund"
2. In all other respects, the Agreement is hereby confirmed and
remains in full force and effect.
<PAGE> 2
IN WITNESS WHEREOF, the parties have caused this Amendment No. 2 to be
executed by their respective officers on the date first written above.
A I M ADVISORS, INC.
Attest: /s/ NANCY L. MARTIN By: /s/ ROBERT H. GRAHAM
------------------------------- ----------------------------
Assistant Secretary President
(SEAL)
AIM ADVISOR FUNDS, INC. AIM SPECIAL OPPORTUNITIES FUNDS
AIM Advisor Flex Fund AIM Small Cap Opportunities Fund
AIM Advisor International Value Fund
AIM Advisor Large Cap Value Fund AIM SUMMIT FUND, INC.
AIM Advisor MultiFlex Fund
AIM Advisor Real Estate Fund AIM INTERNATIONAL FUNDS, INC.
AIM Asian Growth Fund
AIM EQUITY FUNDS, INC. AIM European Development Fund
AIM Aggressive Growth Fund AIM International Equity Fund
AIM Blue Chip Fund AIM Global Aggressive Growth Fund
AIM Capital Development Fund AIM Global Growth Fund
AIM Charter Fund AIM Global Income Fund
AIM Constellation Fund
AIM Weingarten Fund AIM VARIABLE INSURANCE FUNDS, INC.
AIM V.I. Aggressive Growth Fund
AIM FUNDS GROUP AIM V.I. Balanced Fund
AIM Balanced Fund AIM V.I. Capital Appreciation Fund
AIM Global Utilities Fund AIM V.I. Capital Development Fund
AIM High Yield Fund AIM V.I. Diversified Income Fund
AIM Income Fund AIM V.I. Global Growth and Income Fund
AIM Money Market Fund AIM V.I. Global Utilities Fund
AIM Select Growth Fund AIM V.I. Government Securities Fund
AIM Value Fund AIM V.I. Growth Fund
AIM V.I. Growth & Income Fund
AIM INVESTMENT SECURITIES FUNDS AIM V.I. High Yield Fund
AIM High Yield Fund II AIM V.I. International Equity Fund
AIM V.I. Money Market Fund
AIM V.I. Telecommunications Fund
AIM V.I. Value Fund
Attest: /s/ NANCY L. MARTIN By: /s/ ROBERT H. GRAHAM
------------------------------- ----------------------------
Assistant Secretary President
(SEAL)
<PAGE> 1
EXHIBIT d(9)(d)
AMENDMENT NO. 3
TO
FOREIGN COUNTRY SELECTION
AND MANDATORY SECURITIES DEPOSITORY RESPONSIBILITIES
DELEGATION AGREEMENT
This Amendment No. 3, dated as of December 22, 1998, amends the Foreign
Country Selection and Mandatory Securities Depository Responsibilities
Delegation Agreement, dated September 9, 1998, between A I M Advisors, Inc., a
Delaware corporation and each registered investment company (the "Investment
Companies") and its respective portfolios (the "Funds") listed on the signature
page thereof (as amended and supplemented, the "Agreement").
NOW, THEREFORE, the parties agree as follows;
The list of Investment Companies and Funds covered by the Agreement is
hereby amended to include the following portfolio of AIM Special
Opportunities Funds:
AIM Mid Cap Opportunities Fund
In all other respects, the Agreement is hereby confirmed and remains in
full force and effect.
<PAGE> 2
IN WITNESS WHEREOF, the parties have caused this Amendment No. 3 to be
executed by their respective officers on the date first written above.
A I M ADVISORS, INC.
Attest: /s/ P. MICHELLE GRACE By: /s/ CAROL F. RELIHAN
----------------------------- -------------------------------
Assistant Secretary Senior Vice President
AIM ADVISOR FUNDS, INC. AIM SPECIAL OPPORTUNITIES FUNDS
AIM Advisor Flex Fund AIM Small Cap Opportunities Fund
AIM Advisor International Value Fund AIM Mid Cap Opportunities Fund
AIM Advisor Large Cap Value Fund
AIM Advisor MultiFlex Fund AIM SUMMIT FUND, INC.
AIM Advisor Real Estate Fund
AIM INTERNATIONAL FUNDS, INC.
AIM EQUITY FUNDS, INC. AIM Asian Growth Fund
AIM Aggressive Growth Fund AIM European Development Fund
AIM Blue Chip Fund AIM International Equity Fund
AIM Capital Development Fund AIM Global Aggressive Growth Fund
AIM Charter Fund AIM Global Growth Fund
AIM Constellation Fund AIM Global Income Fund
AIM Weingarten Fund
AIM VARIABLE INSURANCE FUNDS, INC.
AIM FUNDS GROUP AIM V.I. Aggressive Growth Fund
AIM Balanced Fund AIM V.I. Balanced Fund
AIM Global Utilities Fund AIM V.I. Capital Appreciation Fund
AIM High Yield Fund AIM V.I. Capital Development Fund
AIM Income Fund AIM V.I. Diversified Income Fund
AIM Money Market Fund AIM V.I. Global Growth and Income Fund
AIM Select Growth Fund AIM V.I. Global Utilities Fund
AIM Value Fund AIM V.I. Government Securities Fund
AIM V.I. Growth Fund
AIM INVESTMENT SECURITIES FUNDS AIM V.I. Growth & Income Fund
AIM High Yield Fund II AIM V.I. High Yield Fund
AIM V.I. International Equity Fund
AIM V.I. Money Market Fund
AIM V.I. Telecommunications Fund
AIM V.I. Value Fund
Attest: /s/ P. MICHELLE GRACE By: /s/ ROBERT H. GRAHAM
----------------------------- -----------------------------------
Assistant Secretary President
<PAGE> 1
EXHIBIT d(9)(e)
AMENDMENT NO. 4
TO
FOREIGN COUNTRY SELECTION
AND MANDATORY SECURITIES DEPOSITORY RESPONSIBILITIES
DELEGATION AGREEMENT
This Amendment No. 4, dated as of January 26, 1999, amends the Foreign
Country Selection and Mandatory Securities Depository Responsibilities
Delegation Agreement, dated September 9, 1998, between A I M Advisors, Inc., a
Delaware corporation and each registered investment company (the "Investment
Companies") and its respective portfolios (the "Funds") listed on the signature
page thereof (as amended and supplemented, the "Agreement").
NOW, THEREFORE, the parties agree as follows;
The list of Investment Companies and Funds covered by the Agreement is
hereby amended to include the following investment companies and funds:
EMERGING MARKETS DEBT PORTFOLIO
GROWTH PORTFOLIO
Small Cap Portfolio
Value Portfolio
GLOBAL INVESTMENT PORTFOLIO
Global Consumer Products and Services Portfolio
Global Financial Services Portfolio
Global Infrastructure Portfolio
Global Natural Resources Portfolio
GT GLOBAL FLOATING RATE FUND, INC. (doing business as AIM
Floating Rate Fund)
AIM SERIES TRUST
AIM Global Trends Fund
FLOATING RATE PORTFOLIO
AIM EASTERN EUROPE FUND
AIM INVESTMENT FUNDS
AIM Global Government Income Fund
AIM Strategic Income Fund
AIM Emerging Markets Debt Fund
AIM Global Growth & Income Fund
AIM Emerging Markets Fund
AIM Developing Markets Fund
AIM Latin American Growth Fund
AIM Global Financial Services Fund
<PAGE> 2
AIM Global Health Care Fund
AIM Global Telecommunications Fund
AIM Global Consumer Products and Services Fund
AIM Global Infrastructure Fund
AIM Global Resources Fund
AIM GROWTH SERIES
AIM New Pacific Growth Fund
AIM Europe Growth Fund
AIM Japan Growth Fund
AIM International Growth Fund
AIM Worldwide Growth Fund
AIM Mid Cap Equity Fund
AIM Small Cap Growth Fund
AIM Basic Value Fund
GT GLOBAL VARIABLE INVESTMENT TRUST
GT Global Variable Latin America Fund
GT Global Variable Telecommunications Fund
GT Global Variable Growth & Income Fund
GT Global Variable Strategic Income Fund
GT Global Variable Emerging Markets Fund
GT Global Variable Government Income Fund
GT Global Variable U.S. Government Income Fund
GT Global Variable Infrastructure Fund
GT Global Variable Natural Resources Fund
GT GLOBAL VARIABLE INVESTMENT SERIES
GT Global Variable New Pacific Fund
GT Global Variable Europe Fund
GT Global Variable America Fund
GT Global Variable International Fund
GT Global Variable Money Market Fund
In all other respects, the Agreement is hereby confirmed and remains in
full force and effect.
<PAGE> 3
IN WITNESS WHEREOF, the parties have caused this Amendment No. 4 to be
executed by their respective officers on the date first written above.
A I M ADVISORS, INC.
Attest: /s/ P. MICHELLE GRACE By: /s/ CAROL F. RELIHAN
--------------------------------- ---------------------------------
Assistant Secretary Senior Vice President
AIM ADVISOR FUNDS, INC. AIM INTERNATIONAL FUNDS, INC.
AIM Advisor Flex Fund AIM Asian Growth Fund
AIM Advisor International Value Fund AIM European Development Fund
AIM Advisor Large Cap Value Fund AIM International Equity Fund
AIM Advisor MultiFlex Fund AIM Global Aggressive Growth Fund
AIM Advisor Real Estate Fund AIM Global Growth Fund
AIM Global Income Fund
AIM EQUITY FUNDS, INC.
AIM Aggressive Growth Fund AIM VARIABLE INSURANCE FUNDS, INC.
AIM Blue Chip Fund AIM V.I. Aggressive Growth Fund
AIM Capital Development Fund AIM V.I. Balanced Fund
AIM Charter Fund AIM V.I. Capital Appreciation Fund
AIM Constellation Fund AIM V.I. Capital Development Fund
AIM Weingarten Fund AIM V.I. Diversified Income Fund
AIM V.I. Global Growth and Income Fund
AIM FUNDS GROUP AIM V.I. Global Utilities Fund
AIM Balanced Fund AIM V.I. Government Securities Fund
AIM Global Utilities Fund AIM V.I. Growth Fund
AIM High Yield Fund AIM V.I. Growth & Income Fund
AIM Income Fund AIM V.I. High Yield Fund
AIM Money Market Fund AIM V.I. International Equity Fund
AIM Select Growth Fund AIM V.I. Money Market Fund
AIM Value Fund AIM V.I. Telecommunications Fund
AIM V.I. Value Fund
AIM INVESTMENT SECURITIES FUNDS
AIM High Yield Fund II EMERGING MARKETS DEBT PORTFOLIO
AIM SPECIAL OPPORTUNITIES FUNDS GROWTH PORTFOLIO
AIM Small Cap Opportunities Fund Small Cap Portfolio
AIM Mid Cap Opportunities Fund Value Portfolio
AIM SUMMIT FUND, INC.
<PAGE> 4
GLOBAL INVESTMENT PORTFOLIO AIM GROWTH SERIES
Global Consumer Products and Services AIM New Pacific Growth Fund
Portfolio AIM Europe Growth Fund
Global Financial Services Portfolio AIM Japan Growth Fund
Global Infrastructure Portfolio AIM International Growth Fund
Global Natural Resources Portfolio AIM Worldwide Growth Fund
AIM Mid Cap Equity Fund
GT GLOBAL FLOATING RATE FUND, INC. AIM Small Cap Growth Fund
(doing business as AIM Floating Rate AIM Basic Value Fund
Fund)
GT GLOBAL VARIABLE INVESTMENT TRUST
AIM SERIES TRUST GT Global Variable Latin America Fund
AIM Global Trends Fund GT Global Variable Telecommunications
Fund
FLOATING RATE PORTFOLIO GT Global Variable Growth & Income
Fund
AIM EASTERN EUROPE FUND GT Global Variable Strategic Income
Fund
AIM INVESTMENT FUNDS GT Global Variable Emerging Markets
AIM Global Government Income Fund Fund
AIM Strategic Income Fund GT Global Variable Government Income
AIM Emerging Markets Debt Fund Fund
AIM Global Growth & Income Fund GT Global Variable U.S. Government
AIM Emerging Markets Fund Income Fund
AIM Developing Markets Fund GT Global Variable Infrastructure Fund
AIM Latin American Growth Fund GT Global Variable Natural Resources
AIM Global Financial Services Fund Fund
AIM Global Health Care Fund
AIM Global Telecommunications Fund GT GLOBAL VARIABLE INVESTMENT SERIES
AIM Global Consumer Products and GT Global Variable New Pacific Fund
Services Fund GT Global Variable Europe Fund
AIM Global Infrastructure Fund GT Global Variable America Fund
AIM Global Resources Fund GT Global Variable International Fund
GT Global Variable Money Market Fund
/s/ SAMUEL D. SIRKO
Attest: /s/ P. MICHELLE GRACE By: /s/ ROBERT H. GRAHAM
------------------------------ ------------------------------------
Assistant Secretary President
<PAGE> 1
EXHIBIT d(9)(f)
AMENDMENT NO. 5
TO
FOREIGN COUNTRY SELECTION
AND MANDATORY SECURITIES DEPOSITORY RESPONSIBILITIES
DELEGATION AGREEMENT
This Amendment No. 5, dated as of March 1, 1999, amends the Foreign
Country Selection and Mandatory Securities Depository Responsibilities
Delegation Agreement, dated September 9, 1998, between A I M Advisors, Inc., a
Delaware corporation and each registered investment company (the "Investment
Companies") and its respective portfolios (the "Funds") listed on the signature
page thereof (as amended and supplemented, the "Agreement").
NOW, THEREFORE, the parties agree as follows;
The list of Investment Companies and Funds covered by the Agreement is
hereby amended to include the following portfolio of AIM Equity Funds,
Inc.:
AIM Large Cap Growth Fund
In all other respects, the Agreement is hereby confirmed and remains in
full force and effect.
<PAGE> 2
IN WITNESS WHEREOF, the parties have caused this Amendment No. 5 to be
executed by their respective officers on the date first written above.
A I M ADVISORS, INC.
Attest: By: /s/ CAROL F. RELIHAN
-------------------------------- -------------------------------
Assistant Secretary Senior Vice President
AIM ADVISOR FUNDS, INC. AIM INTERNATIONAL FUNDS, INC.
AIM Advisor Flex Fund AIM Asian Growth Fund
AIM Advisor International Value Fund AIM European Development Fund
AIM Advisor Large Cap Value Fund AIM International Equity Fund
AIM Advisor MultiFlex Fund AIM Global Aggressive Growth Fund
AIM Advisor Real Estate Fund AIM Global Growth Fund
AIM Global Income Fund
AIM EQUITY FUNDS, INC.
AIM Aggressive Growth Fund AIM VARIABLE INSURANCE FUNDS, INC.
AIM Blue Chip Fund AIM V.I. Aggressive Growth Fund
AIM Capital Development Fund AIM V.I. Balanced Fund
AIM Charter Fund AIM V.I. Capital Appreciation Fund
AIM Constellation Fund AIM V.I. Capital Development Fund
AIM Large Cap Growth Fund AIM V.I. Diversified Income Fund
AIM Weingarten Fund AIM V.I. Global Growth and Income Fund
AIM V.I. Global Utilities Fund
AIM FUNDS GROUP AIM V.I. Government Securities Fund
AIM Balanced Fund AIM V.I. Growth Fund
AIM Global Utilities Fund AIM V.I. Growth & Income Fund
AIM High Yield Fund AIM V.I. High Yield Fund
AIM Income Fund AIM V.I. International Equity Fund
AIM Money Market Fund AIM V.I. Money Market Fund
AIM Select Growth Fund AIM V.I. Telecommunications Fund
AIM Value Fund AIM V.I. Value Fund
AIM INVESTMENT SECURITIES FUNDS EMERGING MARKETS DEBT PORTFOLIO
AIM High Yield Fund II
GROWTH PORTFOLIO
AIM SPECIAL OPPORTUNITIES FUNDS Small Cap Portfolio
AIM Small Cap Opportunities Fund Value Portfolio
AIM Mid Cap Opportunities Fund
AIM SUMMIT FUND, INC.
<PAGE> 3
GLOBAL INVESTMENT PORTFOLIO AIM GROWTH SERIES
Global Consumer Products and Services AIM New Pacific Growth Fund
Portfolio AIM Europe Growth Fund
Global Financial Services Portfolio AIM Japan Growth Fund
Global Infrastructure Portfolio AIM International Growth Fund
Global Natural Resources Portfolio AIM Worldwide Growth Fund
AIM Mid Cap Equity Fund
GT GLOBAL FLOATING RATE FUND, INC. AIM Small Cap Growth Fund
(doing business as AIM Floating Rate AIM Basic Value Fund
Fund)
GT GLOBAL VARIABLE INVESTMENT
AIM SERIES TRUST TRUST
AIM Global Trends Fund GT Global Variable Latin America Fund
GT Global Variable Telecommunications
FLOATING RATE PORTFOLIO Fund
GT Global Variable Growth & Income
AIM EASTERN EUROPE FUND Fund
GT Global Variable Strategic Income
AIM INVESTMENT FUNDS Fund
AIM Global Government Income Fund GT Global Variable Emerging Markets
AIM Strategic Income Fund Fund
AIM Emerging Markets Debt Fund GT Global Variable Government Income
AIM Global Growth & Income Fund Fund
AIM Emerging Markets Fund GT Global Variable U.S. Government
AIM Developing Markets Fund Income Fund
AIM Latin American Growth Fund GT Global Variable Infrastructure
AIM Global Financial Services Fund Fund
AIM Global Health Care Fund GT Global Variable Natural Resources
AIM Global Telecommunications Fund Fund
AIM Global Consumer Products and
Services Fund GT GLOBAL VARIABLE INVESTMENT SERIES
AIM Global Infrastructure Fund GT Global Variable New Pacific Fund
AIM Global Resources Fund GT Global Variable Europe Fund
GT Global Variable America Fund
GT Global Variable International Fund
GT Global Variable Money Market Fund
/s/ SAMUEL D. SIRKO
Attest: /s/ P. MICHELLE GRACE By: /s/ ROBERT H. GRAHAM
-------------------------------- ------------------------------------
Assistant Secretary President
<PAGE> 1
EXHIBIT e(3)(b)
AMENDMENT NO. 1
DISTRIBUTION AGREEMENT
Amendment No. 1 , made this 1st day of March 1999 by and
between AIM SUMMIT FUND, INC., a Maryland corporation (the "Company") and A I M
DISTRIBUTORS, INC., a Delaware corporation (the "Distributor") to that certain
agreement made as of the 28th day of February, 1997 (the "Distribution
Agreement").
WHEREAS, the Company and the Distributor have entered into the
Distribution Agreement; and
WHEREAS, the Company has divided its common stock into two
classes named Class I Shares and Class II Shares; and
WHEREAS, the parties desire to clarify that the Distributor
will act as the principal distributor of both Class I Shares and Class II Shares
of Common Stock; and
WHEREAS, the Distributor is to be compensated by the Company
for distribution efforts relating to Class II Shares.
NOW, THEREFORE, in consideration of the premises and of other
good and valuable consideration by each of the parties hereto to the other party
paid and of the agreements, covenants and obligations herein contained and
intending to be legally bound, the parties hereto agree as follows:
1. Except as set forth below, the terms "Company shares," "its
shares," "Company common stock" and "its common stock" as used
in the Distribution Agreement shall mean Class I Shares and
Class II Shares of the Company.
2. Section 1(b) provides that the Distribution Agreement may be
continued by the affirmative vote of a specified percentage of
the holders of the Company's shares. Section 11 provides that
the Distribution Agreement may be terminated by the vote of a
majority of the outstanding voting securities of the Company.
In order to make it clear that the Distribution Agreement may
be continued or terminated, as the case may be, on a class
basis, all references to the Company's shares or to the
outstanding voting securities of the Company in paragraph 1(b)
and paragraph 11 of the Distribution Agreement shall mean
Class I Shares or Class II Shares of the Company, as the case
may be.
3. A new paragraph 12 shall be added which reads in its entirety
as follows:
12. Subject to the limitations, if any, of applicable law
including the applicable National Association of
Securities Dealers, Inc. ("NASD") Conduct Rules
(formerly, the NASD Rules of Fair Practice) regarding
asset-based sales charges, the Company shall pay to
the Distributor as a reimbursement for all or a
portion of such expenses, or as
<PAGE> 2
reasonable compensation for distribution of the Class
II Shares, an asset-based sales charge in an amount
equal to 0.05% per annum of the average daily net
asset value of the Class II Shares from time to time
(the "Distributor's 12b-1 Share"), such sales charge
to be payable pursuant to the distribution plan
adopted pursuant to Rule 12b-1 under the Investment
Company Act of 1940 Act (the "Plan"). The
Distributor's 12b-1 Share shall accrue daily and be
paid to the Distributor as soon as practicable after
the end of each such calendar month (unless the
Distributor shall specify a later date in written
instructions to the Company). The Distributor shall
maintain adequate books and records to permit
calculations periodically (but not less than monthly)
of, and shall calculate on a monthly basis, the
Distributor's 12b-1 Share to be paid to the
Distributor. The Company shall be entitled to rely on
Distributor's books, records and calculations
relating to Distributor's 12b-1 Share.
4. Except as modified by this Amendment Agreement, the
Distribution Agreement is hereby ratified and confirmed and
remains in full force and effect.
IN WITNESS WHEREOF, this Amendment Agreement has been duly
executed by the parties hereto.
DATED: March 1, 1999 AIM SUMMIT FUND, INC.
ATTEST:
By: /s/ ROBERT H. GRAHAM
- -------------------------- ----------------------------
Name: Name: Robert H. Graham
Title: Title: President
A I M DISTRIBUTORS, INC.
ATTEST:
By: /s/ MICHAEL J. CEMO
- -------------------------- ----------------------------
Name: Name: Michael J. Cemo
Title: Title: President
2
<PAGE> 1
Exhibit j(1)
INDEPENDENT AUDITORS' CONSENT
The Board of Directors and Shareholders of
AIM Summit Fund, Inc.
We consent to the use of our report on AIM Summit Fund, Inc. dated December 4,
1998 included herein and to the references to our firm under the heading
"Financial Highlights" in the Prospectus and "Reports" in the Statement of
Additional Information.
/s/ KPMG LLP
-------------------
KPMG LLP
Houston, Texas
February 25, 1999
<PAGE> 1
Exhibit j(2)
CONSENT OF COUNSEL
AIM Summit Fund, Inc.
We hereby consent to the use of our name and to the reference to our
firm under the caption "General Information - Legal Matters" in each of the AIM
Summit Fund, Inc. Class I Shares Prospectus and the AIM Summit Fund, Inc. Class
II Shares Prospectus which are included in Post-Effective Amendment No. 23 to
the Registration Statement under the Securities Act of 1933 (No. 2-76909) and
Amendment No. 24 to the Registration Statement under the Investment Company Act
of 1940 (No. 811-3443) on Form N-1A of AIM Summit Fund, Inc.
/s/ Ballard Spahr Andrews & Ingersoll, LLP
------------------------------------------
Ballard Spahr Andrews & Ingersoll, LLP
February 16, 1999
<PAGE> 1
EXHIBIT m
DISTRIBUTION PLAN
OF
AIM SUMMIT FUND, INC.
(Class II Shares)
SECTION 1. AIM Summit Fund, Inc. (the "Fund") may act
as a distributor of its Class II Shares (the
"Shares"), pursuant to Rule 12b-1 under the
Investment Company Act of 1940 (the "1940 Act"),
according to the terms of this Distribution Plan (the
"Distribution Plan").
SECTION 2. The Fund may incur pursuant to the terms of
this Distribution Plan, expenses at the rates of .30%
per annum of the average daily net assets of the Fund
attributable to the Shares, subject to any applicable
limitations imposed from time to time by applicable
rules of the National Association of Securities
Dealers, Inc.
SECTION 3. Amounts set forth in Section 2 may be used
to finance any activity which is primarily intended
to result in the sale of the Shares, including, but
not limited to, expenses of organizing and conducting
sales seminars, advertising programs, finders fees,
printing of prospectuses and statements of additional
information (and supplements thereto) and reports for
other than existing shareholders, preparation and
distribution of advertising material and sales
literature, overhead, supplemental payments to
dealers and other institutions as asset-based sales
charges. Amounts set forth in Section 2 may also be
used to finance payments of service fees under a
shareholder service arrangement to be established by
A I M Distributors, Inc. ("Distributors") as the
Fund's distributor in accordance with Section 4, and
the costs of administering the Distribution Plan. To
the extent that amounts paid hereunder are not used
specifically to reimburse Distributors for any such
expense, such amounts may be treated as compensation
for Distributors' services. All amounts expended
pursuant to the Distribution Plan shall be paid to
Distributors and are the legal obligation of the Fund
and not of Distributors. That portion of the amounts
paid under the Distribution Plan that is not paid or
advanced by Distributors to dealers or other
institutions that provide personal continuing
shareholder service as a service fee pursuant to
Section 4 shall be deemed an asset-based sales
charge. No provision of this Distribution Plan shall
be interpreted to prohibit any payments by the Fund
during periods when the Fund has suspended or
otherwise limited sales.
SECTION 4.
(a) Amounts expended by the Fund under the Distribution
Plan shall be used in part for the implementation by
Distributors of shareholder service arrangements with respect
to the Shares and AIM Summit Investors Plans II ("Plan II").
The maximum service fee paid to any service provider shall be
twenty-five one-hundredths of one
1
<PAGE> 2
percent (0.25%) per annum of the average daily net assets of
the Fund attributable to the Shares beneficially owned by the
customers of such service provider.
(b) Pursuant to this program, Distributors may enter into
agreements substantially in the form attached hereto as
Exhibit A ("Service Agreements") with such broker-dealers
("Dealers") as may be selected from time to time by
Distributors for the provision of personal shareholder
services in connection with the Shares or Plan II to the
Dealers' clients and customers ("Customers") to Customers who
may from time to time directly or beneficially own Shares. The
personal continuing shareholder services to be rendered by
Dealers under the Service Agreements may include, but shall
not be limited to, the following: (i) distributing sales
literature; (ii) answering routine Customer inquiries
concerning the Fund and the Shares; (iii) assisting Customers
in changing dividend options, account designations and
addresses and enrolling into any of several retirement plans
offered; (iv) assisting in the establishment and maintenance
of customer accounts and records, and in the processing of
purchase and redemption transactions; (v) investing dividends
and capital gains distributions automatically in Shares; and
(vi) providing such other information and services as the Fund
or the Customer may reasonably request.
SECTION 5. Any amendment to this Plan that requires the
approval of the shareholders of Class II pursuant to
Rule 12b-1 under the 1940 Act shall become effective
as to Class II upon the approval of such amendment by
a "majority of the outstanding voting securities" (as
defined in the 1940 Act) of Class II, provided that
the Board of Directors of the Fund has approved such
amendment in accordance with the provisions of the
Section 6 of this Distribution Plan.
SECTION 6. This Distribution Plan, any amendment to
this Distribution Plan and any agreements related to
this Distribution Plan shall become effective
immediately upon the receipt by the Fund of both (a)
the affirmative vote of a majority of the Board of
Directors of the Fund, and (b) the affirmative vote
of a majority of those directors of the Fund who are
not "interested persons" of the Fund (as defined in
the 1940 Act) and have no direct or indirect
financial interest in the operation of this
Distribution Plan or any agreements related to it
(the "Disinterested Directors"), cast in person at a
meeting called for the purpose of voting on this
Distribution Plan or such agreements. Notwithstanding
the foregoing, no such amendment that requires the
approval of the shareholders of Class II shall become
effective as to Class II until such amendment has
been approved by the shareholders of Class II in
accordance with the provisions of Section 5 of this
Distribution Plan.
SECTION 7. Unless sooner terminated pursuant to
Section 9, this Distribution Plan shall continue in
effect until June 30, 1999 below and thereafter shall
continue in effect so long as such continuance is
specifically approved, at least annually, in the
manner provided for approval of this Distribution
Plan in Section 6.
2
<PAGE> 3
SECTION 8. Distributors shall provide to the Fund's
Board of Directors and the Board of Directors shall
review, at least quarterly, a written report of the
amounts so expended and the purposes for which such
expenditures were made.
SECTION 9. This Distribution Plan may be terminated at
any time by vote of a majority of the Disinterested
Directors, or by vote of a majority of the
outstanding voting securities of the Shares. If this
Distribution Plan is terminated, the obligation of
the Fund to make payments pursuant to this
Distribution Plan will also cease and the Fund will
not be required to make any payments beyond the
termination date even with respect to expenses
incurred prior to the termination date.
SECTION 10. Any agreement related to this Distribution
Plan shall be made in writing, and shall provide:
(a) that such agreement may be terminated at any time,
without payment of any penalty, by vote of a majority of the
Disinterested Directors or by a vote of the outstanding voting
securities of the Fund attributable to the Shares, on not more
than sixty (60) days' written notice to any other party to the
agreement; and
(b) that such agreement shall terminate automatically in
the event of its assignment.
SECTION 11. This Distribution Plan may not be amended to
increase materially the amount of distribution
expenses provided for in Section 2 hereof unless such
amendment is approved in the manner provided in
Section 5 hereof, and no material amendment to the
Distribution Plan shall be made unless approved in
the manner provided for in Section 6 hereof.
AIM SUMMIT FUND, INC.
(On behalf of its Class II Shares)
Attest: /s/ STEPHEN I. WINER By: /s/ ROBERT H. GRAHAM
-------------------------- -----------------------------
Assistant Secretary President
Effective as of March 1, 1999
3
<PAGE> 4
SHAREHOLDER SERVICE AGREEMENT
FOR CLASS II SHARES OF AIM SUMMIT FUND, INC. AND
AIM SUMMIT INVESTORS PLANS II
This Shareholder Service Agreement (the "Agreement") has been
adopted pursuant to Rule 12b-1 under the Investment Company Act of 1940 (the
"1940 Act") by AIM Summit Fund, Inc. (the "Fund"), under a Distribution Plan
(the "Plan") adopted pursuant to said Rule. This Agreement, being made between
A I M Distributors, Inc. ("Distributors"), solely as agent for the Fund, and
the undersigned authorized dealer, defines the services to be provided by the
authorized dealer for which it is to receive payments pursuant to the Plan
adopted by the Fund. The Plan and the Agreement have been approved by a majority
of the directors of the Fund, including a majority of the directors who are not
interested persons of the Fund, and who have no direct or indirect financial
interest in the operation of the Plan or related agreements (the "Disinterested
Directors"), by votes cast in person at a meeting called for the purpose of
voting on the Plan. Such approval included a determination that in the exercise
of their reasonable business judgment and in light of their fiduciary duties,
there is a reasonable likelihood that the Plan will benefit such Fund and its
shareholders.
1. To the extent that you provide continuing personal shareholder services
to customers who may, from time to time, directly or beneficially
(through AIM Summit Investors Plans II) own Class II Shares of the
Fund, including but not limited to, distributing sales literature,
answering routine customer inquiries regarding the Fund or the Plans,
assisting customers in changing dividend options, account designations
and addresses, and in enrolling into investment plans offered in
connection with the purchase of the Fund's shares, assisting in the
establishment and maintenance of customer accounts and records and in
the processing of purchase and redemption transactions, investing
dividends and capital gains distributions automatically in shares and
providing such other services as the Fund or the customer may
reasonably request, we, solely as agent for the Fund, shall pay you a
fee periodically or arrange for such fee to be paid to you.
2. The fee paid with respect to Class II Shares of the Fund will be
calculated at the end of each payment period for each business day of
the Fund during such payment period at the annual rate of .25% as
applied to the average net asset value of the Class II Shares of the
Fund purchased or acquired through exchange on or after the Plan
Calculation Date. Fees calculated in this manner shall be paid to you
only if your firm is the dealer of record at the close of business on
the last business day of the applicable payment period, for the account
in which such shares are held (the "Subject Shares"). In addition
Distributors will begin paying such fees to you after an initial 12
month holding period.
3. The total of the fees shall be paid to you within 45 days after the
close of each payment period.
4. We reserve the right to withhold payment with respect to the Subject
Shares purchased by you and redeemed or repurchased by the Fund or by
us as Agent within seven (7) business days after the date of our
confirmation of such purchase. We reserve the right at anytime to
impose minimum fee payment requirements before any periodic payments
will be made to you hereunder.
5. This Agreement does not require any broker-dealer to provide transfer
agency and recordkeeping related services as nominee for its customers.
<PAGE> 5
6. You shall furnish us and the Fund with such information as shall
reasonably be requested either by the directors of the Fund or by us
with respect to the fees paid to you pursuant to this Agreement.
7. We shall furnish the directors of the Fund, for their review on a
quarterly basis, a written report of the amounts expended under the
Plan by us and the purposes for which such expenditures were made.
8. Neither you nor any of your employees or agents are authorized to make
any representation concerning shares of the Fund except those contained
in the then current Prospectus for the Fund, and you shall have no
authority to act as agent for the Fund or for the Distributor.
9. We may enter into other similar Shareholder Service Agreements with any
other person without your consent.
10. This Agreement may be amended at any time without your consent by
Distributors mailing a copy of an amendment to you at the address set
forth below. Such amendment shall become effective on the date
specified in such amendment unless you elect to terminate this
Agreement within thirty (30) days of your receipt of such amendment.
11. This Agreement may be terminated at any time without payment of any
penalty by the vote of a majority of the directors of the Fund who are
Disinterested Directors or by a vote of a majority of the Fund's
outstanding Class II Shares, on sixty (60) days' written notice. It
will be terminated by any act which terminates either the Selected
Dealer Agreement between your firm and us or the Fund's Distribution
Plan, and in any event, it shall terminate automatically in the event
of its assignment as that term is defined in the 1940 Act.
12. The provisions of the Distribution Agreement between the Fund and us,
insofar as they relate to the Plan, are incorporated herein by
reference. This Agreement shall become effective upon execution and
delivery hereof and shall continue in full force and effect as long as
the continuance of the Plan and this related Agreement are approved at
least annually by a vote of the directors, including a majority of the
Disinterested Directors, cast in person at a meeting called for the
purpose of voting thereon. All communications to us should be sent to
the address of Distributors as shown at the bottom of this Agreement.
Any notice to you shall be duly given if mailed or transmitted by
facsimile to you at the address specified by you below.
13. You represent that you provide to your customers who own shares of the
Fund directly or through AIM Summit Investors Plans II personal
services as defined from time to time in applicable regulations of the
National Association of Securities Dealers, Inc., and that you will
continue to accept payments under this Agreement only so long as you
provide such services.
2
<PAGE> 6
14. This Agreement shall be construed in accordance with the laws of the
State of Texas.
A I M DISTRIBUTORS, INC.
Date: By:
------------------------- ----------------------------------
The undersigned agrees to abide by the foregoing terms and conditions:
Date: By:
------------------------- ----------------------------------
Signature
-------------------------------------
Print Name Title
-------------------------------------
Dealer's Name
-------------------------------------
Address
-------------------------------------
City State Zip
-------------------------------------
Telephone
-------------------------------------
Facsimile Number
Please sign both copies and return one copy to:
A I M Distributors, Inc.
11 Greenway Plaza, Suite 100
Houston, Texas 77046-1173
3
<PAGE> 1
EXHIBIT o
MULTIPLE CLASS PLAN
OF
A I M SUMMIT FUND, INC.
1. This Multiple Class Plan (the "Multiple Class Plan") adopted
in accordance with Rule 18f-3 under the Act shall govern the
terms and conditions under which the Fund may issue separate
Classes of Shares representing interests in the Fund.
2. Definitions. As used herein, the terms set forth below shall
have the meanings ascribed to them below.
a. Act - Investment Company Act of 1940, as amended.
b. Class - a class of Shares of the Fund.
c. Class I Shares - shall mean those Shares designated
as Class I Shares in the Fund's organizing documents.
d. Class II Shares - shall mean those Shares designated
as Class II Shares in the Fund's organizing
documents.
e. Directors - the directors of the Fund.
f. Distribution Expenses - expenses incurred in
activities which are primarily intended to result in
the distribution and sale of Shares as defined in a
Plan of Distribution and/or agreements relating
thereto.
g. Distribution Fee - a fee paid by a fund to the
Distributor to compensate the Distributor for
Distribution Expenses.
h. Distributor - A I M Distributors, Inc.
i. Fund - AIM Summit Fund, Inc.
j. Plan I - AIM Summit Investors Plans I, a unit
investment trust.
k. Plan II - AIM Summit Investors Plans II, a unit
investment trust.
l. Plan I Holders - holders of beneficial interests in
Plan I.
m. Plan II Holders - holders of beneficial interests in
Plan II.
<PAGE> 2
n. Plan of Distribution - Any plan adopted under Rule
12b-1 under the Act with respect to payment of a
Distribution Fee and/or Service Fee.
o. Record Keeping Fees - fees payable to State Street
under a Custodian Agreement relating to Plan II.
p. Service Fee - a fee paid to financial intermediaries
for the ongoing provision of personal services to
Plan II Holders or Shareholders of Class II and/or
the maintenance of accounts for Plan II Holders or
Shareholders of Class II.
q. Shareholder - a holder of Class I or Class II Shares
of the Fund.
r. State Street - State Street Bank and Trust Company.
3. Allocation of Income and Expenses.
a. Distribution and Service Fees - Class II Shares shall
bear directly any and all Distribution Fees and/or
Service Fees payable by such Class II Shares pursuant
to a Plan of Distribution adopted by the Fund with
respect to such Class II Shares.
b. Transfer Agency Fees - Class II Shares shall bear
directly the transfer agency fees and expenses
specifically attributable to Class II Shares.
c. Record Keeping Fees - Class II Shares shall bear the
Record Keeping Fees. Similar fees with respect to
Class I Shares are paid by Plan I Holders at the
account level or are borne by the Distributor.
d. Allocation of Other Expenses - Each Class shall bear
proportionately, based upon relative net assets, all
other expenses incurred by the Fund based on the
relative net assets attributable to each such Class.
e. Allocation of Income, Gains and Losses - The Fund
will allocate income and realized and unrealized
capital gains and losses to a Class based on the
relative net assets of each Class.
f. Waiver and Reimbursement of Expenses - The Fund's
adviser, underwriter or any other provider of
services to the Fund may waive or reimburse the
expenses of a particular Class or Classes to the
extent permitted by applicable law, and so long as
such waiver or reimbursement does not subject the
Fund to taxation.
4. Distribution and Servicing Arrangements. The distribution and
servicing arrangements identified below, if any, will apply
for the following Classes offered by the Fund. The provisions
of the Fund's prospectuses describing the distribution and
servicing arrangements in detail are incorporated herein by
this reference.
2
<PAGE> 3
a. Class I Shares. Class I Shares shall be offered at
net asset value and are not subject to ongoing
Distribution Fees, service fees or record keeping
fees.
b. Class II Shares. Class II Shares shall be offered at
net asset value, subject to ongoing Service Fees,
Distribution Fees, Transfer Agency Fees and
Recordkeeping Fees approved from time to time by the
Directors and set forth in the Fund's Distribution
Plan and prospectus.
5. Service, Record Keeping, Transfer Agent and Distribution Fees.
The Service Fee, Record Keeping Fee, Transfer Agent Fee and
Distribution Fee applicable to Class II shall be those set
forth in the Fund's prospectus, relevant portions of which are
incorporated herein by this reference. All other terms and
conditions with respect to Service Fees and Distribution Fees
shall be governed by the Plan of Distribution adopted by the
Fund with respect to such fees and Rule 12b-1 of the Act.
6. Approval Required. This Multiple Class Plan shall not take
effect until a majority of the Directors of the Fund,
including a majority of the Directors who are not interested
persons of the Fund, shall find that the Multiple Class Plan,
as proposed and including the expense allocations, is in the
best interests of each Class individually and the Fund as a
whole.
7. Amendments. This Multiple Class Plan may not be amended to
materially change the provisions of this Multiple Class Plan
unless such amendment is approved in the manner specified in
Section 6 above.
3
<TABLE> <S> <C>
<ARTICLE> 6
<LEGEND>
This schedule contains summary financial information from the AIM Summit
Fund, Inc. October 31, 1998 annual report.
</LEGEND>
<CIK> 0000701748
<NAME> AIM SUMMIT FUND, INC.
<SERIES>
<NUMBER> 1
<NAME> AIM SUMMIT FUND, INC.
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> OCT-31-1998
<PERIOD-END> OCT-31-1998
<INVESTMENTS-AT-COST> 1278969305
<INVESTMENTS-AT-VALUE> 1829105107
<RECEIVABLES> 4827276
<ASSETS-OTHER> 52170
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 1833984553
<PAYABLE-FOR-SECURITIES> 1635755
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 2316570
<TOTAL-LIABILITIES> 3952325
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 1158384602
<SHARES-COMMON-STOCK> 122336309
<SHARES-COMMON-PRIOR> 108895887
<ACCUMULATED-NII-CURRENT> 3908901
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 117599601
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 550139124
<NET-ASSETS> 1830032228
<DIVIDEND-INCOME> 11487830
<INTEREST-INCOME> 4521585
<OTHER-INCOME> 0
<EXPENSES-NET> (11925731)
<NET-INVESTMENT-INCOME> 4083684
<REALIZED-GAINS-CURRENT> 123367355
<APPREC-INCREASE-CURRENT> 30378725
<NET-CHANGE-FROM-OPS> 157829764
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> (1659397)
<DISTRIBUTIONS-OF-GAINS> (156547424)
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 13962660
<NUMBER-OF-SHARES-REDEEMED> (12194909)
<SHARES-REINVESTED> 11672671
<NET-CHANGE-IN-ASSETS> 179798192
<ACCUMULATED-NII-PRIOR> 23591883
<ACCUMULATED-GAINS-PRIOR> 150779670
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 11372220
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 11952636
<AVERAGE-NET-ASSETS> 1785555221
<PER-SHARE-NAV-BEGIN> 15.15
<PER-SHARE-NII> 0.03
<PER-SHARE-GAIN-APPREC> 1.23
<PER-SHARE-DIVIDEND> (0.02)
<PER-SHARE-DISTRIBUTIONS> (1.43)
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 14.96
<EXPENSE-RATIO> .67
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
