<PAGE> 1
As filed with the Securities and Exchange Commission on February 25, 2000
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. 24 X
---- ---
and/or
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940
Amendment No. 25 X
---- ---
(Check appropriate box or boxes)
AIM SUMMIT FUND, INC.
---------------------
(formerly Summit Investors Fund, Inc.)
(Exact Name of Registrant as Specified in Charter)
11 Greenway Plaza, Suite 100, Houston, Texas 77046-1173
-------------------------------------------------------
(Address of Principal Executive Offices) (Zip Code)
Registrant's Telephone Number, including Area Code (713) 626-1919
--------------
Charles T. Bauer
11 Greenway Plaza, Suite 100, Houston, Texas 77046-1173
-------------------------------------------------------
(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: February 28, 2000
-----------------
It is proposed that this filing will become effective:
immediately upon filing pursuant to paragraph (b)
---
X on February 28, 2000 pursuant to paragraph (b)
---
60 days after filing pursuant to paragraph (a)(1)
---
on (date) pursuant to paragraph (a)(1)
---
75 days after filing pursuant to paragraph (a)(2)
---
on (date) pursuant to paragraph (a)(2) 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.
AIM--Registered Trademark--
PROSPECTUS
FEBRUARY 28, 2000
Class I Shares of the fund are
offered to and may be purchased by
the general public primarily 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.
An investment in the fund:
- is not FDIC insured;
- may lose value; and
- is not guaranteed by a bank.
The Board of Directors voted to
request shareholder approval of
certain items. For further
information on these items, see
Submission of Matters to
Shareholders in this prospectus.
[AIM LOGO APPEARS HERE] INVEST WITH DISCIPLINE
--Registered Trademark--
<PAGE> 4
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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
- - - - - - - - - - - - - - - - - - - - - - - - -
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 Advisor A-4
Advisor Compensation A-4
Portfolio Managers A-4
OTHER INFORMATION A-5
- - - - - - - - - - - - - - - - - - - - - - - - -
Dividends and Distributions A-5
Submission of Matters to Shareholders A-5
FINANCIAL HIGHLIGHTS A-6
- - - - - - - - - - - - - - - - - - - - - - - - -
SHAREHOLDER INFORMATION A-7
- - - - - - - - - - - - - - - - - - - - - - - - -
Pricing of Shares A-7
Sales of Shares A-7
Redemption of Shares A-7
Taxes A-8
Open Account A-8
Other Information A-8
OBTAINING ADDITIONAL INFORMATION Back Cover
- - - - - - - - - - - - - - - - - - - - - - - - -
</TABLE>
The AIM Family of Funds, The AIM Family of Funds and Design (i.e., the AIM
logo), AIM and Design, AIM, AIM LINK, AIM Institutional Funds, aimfunds.com, La
Familia AIM de Fondos, La Familia AIM de Fondos and Design and Invest with
Discipline are registered service marks and AIM Bank Connection, AIM Funds, AIM
Funds and Design, AIM Internet Connect and AIM Investor are service marks of
A I M Management Group Inc.
No dealer, salesperson or any other person has been authorized to give any
information or to make any representations other than those contained in this
prospectus, and you should not rely on such other information or
representations.
<PAGE> 5
---------------------
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 portfolio managers believe have the potential for growth
in earnings, including small-sized growth companies, and in common stocks
believed to be undervalued 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 cycles.
The portfolio managers purchase securities of companies that they believe have
the potential for growth. The 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, for cash
management purposes, or for defensive purposes, the fund may temporarily hold
all or a portion of its assets in cash, money market instruments, shares of
affiliated money market funds, bonds or other debt securities. As a result, 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.
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.
---------------------
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 RETURNS
- ----------- -------
<S> <C>
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%
1999 ....................................... 50.76%
</TABLE>
During the periods shown in the bar chart, the highest quarterly return was
37.12% (quarter ended March 31, 1999) and the lowest quarterly return was
- -28.30% (quarter ended March 31, 1987).
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, 1999) 1 YEAR 5 YEARS 10 YEARS
- ----------------------------------------------------------
<S> <C> <C> <C>
Class I Shares 37.95% 30.13% 19.52%
S & P 500(1) 21.03% 28.54% 18.19%
- ----------------------------------------------------------
<CAPTION>
AVERAGE ANNUAL TOTAL RETURNS
- - - - - - - - - - - - -- - - - - - - - - - - - - - - - - -
(for the periods ended SINCE INCEPTION
December 31, 1999) INCEPTION DATE
- ----------------------------------------------------------
<S> <C>
Class I Shares 16.28% 11/01/82
S & P 500(1) 17.99%(2) 10/31/82(2)
- ----------------------------------------------------------
</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.
---------------------
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 0.63%
Other Expenses 0.04
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
---------------------
AIM SUMMIT FUND, INC.
---------------------
FUND MANAGEMENT
- --------------------------------------------------------------------------------
THE ADVISOR
A I M Advisors, Inc. (the advisor), 11 Greenway Plaza, Suite 100, Houston, TX
77046, serves as the fund's investment advisor. The advisor supervises all
aspects of the fund's operations and provides investment advisory services to
the fund, including obtaining and evaluating economic, statistical and financial
information to formulate and implement investment programs for the fund.
The advisor has acted as an investment advisor since its organization in 1976,
and together with its subsidiaries, advises or manages over 120 investment
portfolios, including the fund, encompassing a broad range of investment
objectives.
ADVISOR COMPENSATION
During the fiscal year ended October 31, 1999, the advisor received compensation
of 0.63% of average daily net assets.
PORTFOLIO MANAGERS
The advisor uses a team approach to investment management. The individual
members of the team who are primarily responsible for the day-to-day management
of the fund's portfolio, all of whom are officers of A I M Capital Management,
Inc., a wholly owned subsidiary of the advisor, are
- - 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.
- - 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.
- - 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.
- - Bret W. Stanley, Senior Portfolio Manager, who has been responsible for the
fund since 1999 and has been associated with the advisor and/or its affiliates
since 1998. From 1994 to 1998, he was Vice President and Portfolio Manager
with Van Kampen American Capital Asset Management, Inc.
- - 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.
A-4
<PAGE> 9
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AIM SUMMIT FUND, INC.
---------------------
OTHER INFORMATION
- --------------------------------------------------------------------------------
DIVIDENDS AND DISTRIBUTIONS
The fund expects that its distributions will consist primarily of capital gains.
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, if any,
annually.
SUBMISSION OF MATTERS TO SHAREHOLDERS
At a meeting held on February 3, 2000, the Board of Directors of the fund voted
to request shareholders to approve the following items that will affect the
fund:
- - Adoption of a Distribution Plan for the Class I shares of the fund. Under the
Distribution Plan and a related distribution agreement, the fund will pay a
fee of 0.10% of the average daily net assets attributable to Class I shares
held in AIM Summit Investors Plans I;
- - An Agreement and Plan of Reorganization which provides for the reorganization
of the fund, which is currently a Maryland corporation, as a Delaware business
trust;
- - A new advisory agreement between the fund and A I M Advisors, Inc. (AIM). The
principal changes to the advisory agreement are (i) the deletion of references
to the provision of administrative services and certain expense limitations
that are no longer applicable, and (ii) the clarification of provisions
relating to delegations of responsibilities and the non-exclusive nature of
AIM's services. The revised advisory agreement does not change the fees paid
by the fund (except that the agreement permits the fund to pay a fee to AIM in
connection with any new securities lending program implemented in the future);
and
- - Changing the fund's fundamental investment restrictions. The proposed
revisions to the fund's fundamental investment restrictions are described in
the fund's statement of additional information.
The Board of Directors of the fund has called a meeting of the fund's
shareholders to be held on or about May 3, 2000 to vote on these and other
proposals. Only shareholders of record as of February 18, 2000 will be entitled
to vote at the meeting. Proposals that are approved are currently expected to
become effective on or about June 30, 2000.
A-5
<PAGE> 10
---------------------
AIM SUMMIT FUND, INC.
---------------------
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
--------------------------------------------------------------------------
YEAR ENDED OCTOBER 31,
1999 1998 1997 1996 1995
- -------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of period $ 14.96 $ 15.15 $ 12.99 $ 12.14 $ 9.78
Income from investment operations:
Net investment income -- 0.03 0.02 0.04 0.04
Net gains on securities (both realized and
unrealized) 6.16 1.23 3.34 1.69 2.81
Total from investment operations 6.16 1.26 3.36 1.73 2.85
Less distributions:
Dividends from net investment income (0.04) (0.02) (0.03) (0.03) (0.10)
Distributions from net realized gains (0.91) (1.43) (1.17) (0.85) (0.39)
Total distributions (0.95) (1.45) (1.20) (0.88) (0.49)
Net asset value, end of period $ 20.17 $ 14.96 $ 15.15 $ 12.99 $ 12.14
Total return(a) 42.79% 9.49% 28.53% 15.61% 31.03%
- -------------------------------------------------------------------------------------------------------------------------
Ratios/supplemental data:
- -------------------------------------------------------------------------------------------------------------------------
Net assets, end of period (000s omitted) $2,623,901 $1,830,032 $1,650,234 $1,261,008 $1,050,011
Ratio of expenses to average net assets 0.67%(b) 0.67% 0.68% 0.70% 0.71%
Ratio of net investment income to average net
assets (0.01)%(b) 0.23% 0.11% 0.29% 0.33%
Portfolio turnover rate 92% 83% 88% 118% 126%
- -------------------------------------------------------------------------------------------------------------------------
</TABLE>
(a) Does not deduct sales charges.
(b) Ratios are based on average net assets of $2,381,357,904.
A-6
<PAGE> 11
---------------------
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
customary trading session 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 I 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 a Plan.
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: (1) original signatures of all
registered owners; (2) your account number; (3) if BFDS 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).
BFDS may require that you provide additional information, such as corporate
resolutions or powers of attorney, if applicable.
BFDS requires 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.
BFDS will accept a guarantee of your signature by a number of financial
institutions. Call BFDS 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 BFDS at (617)
483-5000. 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.
BFDS must receive your call during the hours of the customary trading session of
the NYSE in order to effect the redemption at that day's closing price.
BFDS normally will send out checks within one business day, and in any event
no more than seven days, after it accepts 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 BFDS a request in good order to redeem your shares, it will mail
you a check in the amount of the redemption proceeds to the address on record.
If your request is not in good order, you may have to provide BFDS with
additional documentation in order to redeem your shares.
If you redeem by telephone, we will mail you a check in the amount of the
redemption proceeds to your address of record
A-7
<PAGE> 12
---------------------
AIM SUMMIT FUND, INC.
---------------------
(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. BFDS uses 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. BFDS 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 BFDS.
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 and Trust Company 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.
OTHER INFORMATION
The fund currently offers two classes of shares each of which share a common
investment objective and portfolio of investments. The two classes differ only
with respect to distribution arrangements for different categories of investors.
A-8
<PAGE> 13
---------------------
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 review and obtain copies of the fund's SAI, reports and other
information at the SEC's Public Reference Room in Washington, DC; on the EDGAR
database on the SEC's Internet website (http://www.sec.gov); or, after paying a
duplication fee by sending a letter to the SEC's Public Reference Section,
Washington, DC 20549-0102 or by sending an electronic mail request to
[email protected]. Please call the SEC at 1-202-942-8090 for information about
the Public Reference Room.
- -----------------------------------
AIM Summit Fund, Inc.
SEC 1940 Act file number: 811-3443
- -----------------------------------
[AIM LOGO APPEARS HERE] SUM-PRO-1 INVEST WITH DISCIPLINE
--Registered Trademark--
<PAGE> 14
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 FUND SERVICES, INC., P.O. BOX 4739,
HOUSTON, TEXAS 77210-4739.
----------------
STATEMENT OF ADDITIONAL INFORMATION DATED FEBRUARY 28, 2000,
RELATING TO THE CLASS I SHARES PROSPECTUS DATED FEBRUARY 28, 2000,
<PAGE> 15
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
<S> <C>
INTRODUCTION......................................................................................................1
Submission of Matters to Shareholders....................................................................1
PERFORMANCE INFORMATION...........................................................................................3
Total Return Quotations..................................................................................4
GENERAL INFORMATION ABOUT THE FUND................................................................................6
The Fund and its Capital Stock...........................................................................6
MANAGEMENT OF THE FUND............................................................................................6
Directors and Officers...................................................................................6
The Investment Advisor..................................................................................12
Expenses................................................................................................13
Transfer Agent and Custodian............................................................................14
Reports.................................................................................................14
DIVIDENDS, DISTRIBUTIONS AND TAX MATTERS.........................................................................14
Reinvestment of Dividends and Distributions.............................................................14
Qualification as a Regulated Investment Company.........................................................15
Determination of Taxable Income of a Regulated Investment Company.......................................15
Excise Tax on Regulated Investment Companies............................................................16
Fund Distributions......................................................................................17
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..................................................................................20
Investment Program......................................................................................21
Common Stocks...........................................................................................21
Preferred Stocks........................................................................................21
Convertible Securities..................................................................................22
Corporate Debt Securities...............................................................................22
U.S. Government Securities..............................................................................22
Real Estate Investment Trusts ("REITs").................................................................22
Warrants................................................................................................23
Foreign Securities......................................................................................23
Foreign Exchange Transactions...........................................................................24
Repurchase Agreements...................................................................................25
Rule 144A Securities....................................................................................25
Illiquid Securities.....................................................................................25
Equity-Linked Derivatives...............................................................................25
Investment in Other Investment Companies................................................................26
Temporary Defensive Investments.........................................................................26
Lending of Fund Securities..............................................................................26
Portfolio Turnover......................................................................................26
</TABLE>
i
<PAGE> 16
<TABLE>
<S> <C>
OPTIONS, FUTURES AND CURRENCY STRATEGIES.........................................................................27
Introduction............................................................................................27
General Risks of Options, Futures and Currency Strategies...............................................27
Cover...................................................................................................28
Writing Call Options....................................................................................28
Over-The-Counter Options................................................................................28
Index Options...........................................................................................29
Limitations on Options..................................................................................29
Interest Rate, Currency and Stock Index Futures Contracts...............................................29
Options on Futures Contracts............................................................................30
Forward Contracts.......................................................................................30
Limitations on Use of Futures, Call Options on Futures and Certain Call Options on Currencies...........31
PORTFOLIO TRANSACTIONS AND BROKERAGE.............................................................................31
INVESTMENT RESTRICTIONS..........................................................................................34
MISCELLANEOUS INFORMATION........................................................................................35
Shareholder Inquiries...................................................................................35
Legal Matters...........................................................................................35
FINANCIAL STATEMENTS.............................................................................................FS
</TABLE>
ii
<PAGE> 17
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
February 28, 2000, which may be obtained without charge by written request to
A I M Distributors, Inc. ("AIM Distributors"). Investors may also call A I M
Fund Services, Inc. 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.
SUBMISSION OF MATTERS TO SHAREHOLDERS
At a meeting held on February 3, 2000, the Board of Directors of the
Fund, on behalf of Class I Shares, voted to request shareholder approval to
amend the Fund's fundamental investment restrictions. The Board of Directors has
called a meeting of the Fund's shareholders to be held on or about May 3, 2000.
Only shareholders of record as of February 18, 2000 are entitled to vote at the
meeting. Proposals that are approved are currently expected to become effective
on or about June 30, 2000.
If shareholders approve the proposal to amend the Fund's fundamental
investment restrictions, the Fund will operate under the following Fundamental
investment restrictions:
The Fund is subject to the following investment restrictions, which may
be changed only by a vote of a majority of the Fund's outstanding shares:
(a) the Fund is a "diversified company" as defined in the 1940 Act. The
Fund will not purchase the securities of any issuer if, as a result, the
Fund would fail to be a diversified company within the meaning of the 1940
Act, and the rules and regulations promulgated thereunder, as such statute,
rules and regulations are amended from time to time or are interpreted from
time to time by the SEC staff (collectively, the 1940 Act laws and
interpretations) or except to the extent that the Fund may be permitted to
do so by exemptive order or similar relief (collectively, with the 1940 Act
laws and interpretations, the 1940 Act laws, interpretations and
exemptions). In complying with this restriction, however, the Fund may
purchase securities of other investment companies to the extent permitted
by the 1940 Act laws, interpretations and exemptions.
(b) the Fund may not borrow money or issue senior securities, except as
permitted by the 1940 Act laws, interpretations and exemptions.
(c) the Fund may not underwrite the securities of other issuers. This
restriction does not prevent the Fund from engaging in transactions
involving the acquisition, disposition or resale of its portfolio
securities, regardless of whether the Fund may be considered to be an
underwriter under the Securities Act of 1933.
(d) the Fund will not make investments that will result in the
concentration (as that term may be defined or interpreted by the 1940 Act
laws, interpretations and exemptions) of its investments in the securities
of issuers primarily engaged in the same industry. This restriction does
not limit the Fund's investments in (i) obligations issued or guaranteed by
the U.S. Government, its agencies or
1
<PAGE> 18
instrumentalities, or (ii) tax-exempt obligations issued by governments or
political subdivisions of governments. In complying with this restriction,
the Fund will not consider a bank-issued guaranty or financial guaranty
insurance as a separate security.
(e) the Fund may not purchase real estate or sell real estate unless
acquired as a result of ownership of securities or other instruments. This
restriction does not prevent the Fund from investing in issuers that
invest, deal, or otherwise engage in transactions in real estate or
interests therein, or investing in securities that are secured by real
estate or interests therein.
(f) the Fund may not purchase physical commodities or sell physical
commodities unless acquired as a result of ownership of securities or other
instruments. This restriction does not prevent the Fund from engaging in
transactions involving futures contracts and options thereon or investing
in securities that are secured by physical commodities.
(g) the Fund may not make personal loans or loans of its assets to
persons who control or are under common control with the Fund, except to
the extent permitted by 1940 Act laws, interpretations and exemptions. This
restriction does not prevent the Fund from, among other things, purchasing
debt obligations, entering into repurchase agreements, loaning its assets
to broker-dealers or institutional investors, or investing in loans,
including assignments and participation interests.
The investment restrictions set forth above provide the Fund with the
ability to operate under new interpretations of the 1940 Act or pursuant to
exemptive relief from the SEC without receiving prior shareholder approval of
the change. Even though the Fund has this flexibility, the Board of Directors
has adopted internal guidelines for the Fund relating to certain of these
restrictions which the adviser must follow in managing the Fund. Any changes to
these guidelines, which are set forth below, require the approval of the Board
of Directors.
1. In complying with the fundamental restriction regarding issuer
diversification, the Fund will not, with respect to 75% of its total
assets, purchase the securities of any issuer (other than securities
issued or guaranteed by the U.S. Government or any of its agencies or
instrumentalities), if, as a result, (i) more than 5% of the Fund's
total assets would be invested in the securities of that issuer or (ii)
the Fund would hold more than 10% of the outstanding voting securities
of that issuer. The Fund may (i) purchase securities of other
investment companies as permitted by Section 12(d)(1) of the 1940 Act
and (ii) invest its assets in securities of other money market Funds
and lend money to other investment companies or their series portfolios
that have AIM or an affiliate of AIM as an investment adviser (an AIM
Fund), subject to the terms and conditions of any exemptive orders
issued by the SEC.
2. In complying with the fundamental restriction regarding borrowing money
and issuing senior securities, the Fund may borrow money in an amount
not exceeding 33 1/3% of its total assets (including the amount
borrowed) less liabilities (other than borrowings). The Fund may borrow
from banks, broker-dealers or an AIM Fund. The Fund may not borrow for
leveraging, but may borrow for temporary or emergency purposes, in
anticipation of or in response to adverse market conditions, or for
cash management purposes. The Fund may not purchase additional
securities when any borrowings from banks exceed 5% of the Fund's total
assets.
3. In complying with the fundamental restriction regarding industry
concentration, the Fund may invest up to 25% of its total assets in the
securities of issuers whose principal business activities are in the
same industry.
4. In complying with the fundamental restriction with regard to making
loans, the Fund may lend up to 33 1/3% of its total assets and may lend
money to another AIM Fund, on such terms and conditions as the SEC may
require in an exemptive order.
2
<PAGE> 19
If a percentage restriction is adhered to at the time of investment, a later
change in percentage resulting from changes in values of assets will not be
considered a violation of the restriction.
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, 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 or amended to the
Fund's detriment during the period stated in the agreement between AIM and the
Fund. Fee waivers or reductions or commitments to reduce expenses will have the
effect of increasing that Fund's yield and total return.
The performance of the Fund will vary from time to time and past
results are not necessarily indicative of future results. The 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 the Class is not insured or
guaranteed. These factors should be carefully considered by the investor before
making an investment in the 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.
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
3
<PAGE> 20
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 Treasury Notes
30-year Treasury Bonds
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.
The Fund may participate in the initial public offering ("IPO") market,
and a significant portion of the Fund's returns may be attributable to its
investment in IPOs. Investments in IPOs could have a magnified impact on a fund
with a small asset base. There is no guarantee that as a fund's assets grow, it
will continue to experience substantially similar performance by investing in
IPOs.
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.
TOTAL RETURN QUOTATIONS
The standard formula for calculating total return, as described in the
Prospectus, is as follows:
n
P(1+T) =ERV
4
<PAGE> 21
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-year,
five-years, ten years and since inception periods ended October 31, 1999, was
42.79%, 24.93%, 18.05% and 15.31%, 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, 1999, was 30.65%, 22.73% and 17.00%,
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:
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.
5
<PAGE> 22
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 1,760,000,000 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,
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.
6
<PAGE> 23
<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 (80) Chairman and Director Director and Chairman, A I M 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 Executive
Vice Chairman of AMVESCAP PLC.
Bruce L. Crockett, (55) Director Director, ACE Limited (insurance company). Formerly
906 Frome Lane Director, President and Chief Executive Officer, COMSAT
McLean, VA 22102 Corporation; and Chairman, Board of Governors of
INTELSAT (international communications company).
Owen Daly II (75) Director Formerly, Director, Cortland Trust Inc. (investment
Six Blythewood Road company), CF & I Steel Corp., Monumental Life Insurance
Baltimore, MD 21210 Company and Monumental General Insurance Company; and
Chairman of the Board of Equitable Bancorporation
Edward K. Dunn, Jr. (64) Director Chairman of the Board of Directors, Mercantile Mortgage
2 Hopkins Plaza, 8th Floor, Corp. Formerly, Vice Chairman of the Board of
Suite 805 Directors, President and Chief Operating Officer,
Baltimore, MD 21201 Mercantile - Safe Deposit & Trust Co.; and President,
Mercantile Bankshares.
Jack Fields (48) Director Chief Executive Officer, Texana Global, Inc.(foreign
Jetero Plaza, Suite E trading company) and Twenty-First Century Group, Inc.
8810 Will Clayton Parkway (governmental affairs company) and Director, Telscape
Humble, TX 77338 International and Administaff. Formerly, Member of the
U.S. House of Representatives.
**Carl Frischling (63) 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 (53) Director and Director, President and Chief Executive Officer, A I M
President Management Group Inc.; Director and President, A I M
Advisors, Inc.; Director and Senior Vice President,
A I M Capital Management, Inc., A I M Distributors,
Inc., A I M Fund Services, Inc. and Fund Management
Company; and Director and CEO, Managed Products,
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.
** A director who is an "interested person" of the Fund as defined in the 1940
Act.
7
<PAGE> 24
<TABLE>
<CAPTION>
Position(s) Held Principal Occupation(s) During,
Name, Address and Age with Registrant At Least, the Past 5 years
- --------------------- ---------------- -------------------------------
<S> <C> <C>
Prema Mathai-Davis (49) Director Chief Executive Officer YWCA of the USA.
350 Fifth Avenue, Suite 301
New York, NY 10118
Lewis F. Pennock (57) Director Partner, Pennock & Cooper (law firm).
6363 Woodway, Suite 825
Houston, Texas 77057
Louis S. Sklar (60) Director Executive Vice President, Development and Operations,
The Williams Tower, Hines Interests Limited Partnership (real estate
50th Floor development).
2800 Post Oak Blvd.
Houston, Texas 77056
Gary T. Crum (52) Senior Vice Director and President, A I M Capital Management, Inc.;
President Director and Executive Vice President, A I M Management
Group Inc.; Director and Senior Vice President, A I M
Advisors, Inc.; and Director, A I M Distributors, Inc.
and AMVESCAP PLC.
Carol F. Relihan (45) Senior Vice Director, Senior Vice President, General Counsel and
President and Secretary, A I M Advisors, Inc.; Senior Vice President,
Secretary 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 (41) Vice President and Vice President and Fund Controller, A I M Advisors,
Treasurer Inc.; and Assistant Vice President and Assistant
Treasurer, Fund Management Company.
Melville B. Cox (56) Vice President Vice President and Chief Compliance Officer, A I M
Advisors, Inc., A I M Capital Management, Inc.,
A I M Distributors, Inc., A I M Fund Services, Inc.
and Fund Management Company.
Edgar M. Larsen (59) Vice President Vice President, A I M Capital Management, Inc.
</TABLE>
The Board of Directors has an Audit Committee, a Capitalization
Committee, an Investments Committee and a Nominating and Compensation Committee.
The members of the Audit Committee are Messrs. Crockett, Daly, Dunn
(Chairman), Fields, Frischling, Pennock and Sklar and Dr. Mathai-Davis. The
Audit Committee is responsible for: (i) considering management's recommendations
of independent accountants for the Fund and evaluating such accountants'
performance, costs and financial stability; (ii) with AIM, reviewing and
coordinating audit plans prepared by the Fund's independent accountants and
management's internal audit staff; and (iii) reviewing financial statements
contained in periodic reports to shareholders with the Fund's independent
accountants and management.
8
<PAGE> 25
The members of the Capitalization Committee are Messrs. Bauer, Graham
(Chairman) and Pennock. The Capitalization Committee is responsible for: (i)
increasing or decreasing the aggregate number of shares of any class of the
Fund's common stock by classifying and reclassifying the Fund's authorized but
unissued shares of common stock, up to the Fund's authorized capital; (ii)
fixing the terms of such classified or reclassified shares of common stock; and
(iii) issuing such classified or reclassified shares of common stock upon the
terms set forth in the Fund's prospectus, up to the Fund's authorized capital.
The members of the Investments Committee are Messrs. Bauer, Crockett,
Daly, Dunn, Fields, Frischling, Pennock and Sklar (Chairman) and Dr.
Mathai-Davis. The Investments Committee is responsible for: (i) overseeing AIM's
investment related compliance systems and procedures to ensure their continued
adequacy; and (ii) considering and acting, on an interim basis between meetings
of the full Board, on investment related matters requiring Board consideration,
including dividends and distributions, brokerage policies and pricing matters.
The members of the Nominating and Compensation Committee are Messrs.
Crockett (Chairman), Daly, Dunn, Fields, Pennock and Sklar and Dr. Mathai-Davis.
The Nominating and Compensation Committee is responsible for: (i) considering
and nominating individuals to stand for election as independent directors as
long as the Fund maintains a distribution plan pursuant to Rule 12b-1 under the
1940 Act; (ii) reviewing from time to time the compensation payable to the
independent directors; and (iii) making recommendations to the Board regarding
matters related to compensation, including deferred compensation plans and
retirement plans for the independent directors.
The Nominating and Compensation Committee will consider nominees
recommended by a shareholder to serve as directors, provided (i) that such
person is a shareholder of record at the time he or she submits such names and
is entitled to vote at the meeting of shareholders at which directors will be
elected, and (ii) that the Nominating and Compensation Committee or the Board,
as applicable, shall make the final determination of persons to be nominated.
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.
9
<PAGE> 26
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 2,045 37,485 103,500
Owen Daly II 2,045 122,898 103,500
Edward K. Dunn 2,045 55,565 103,500
Jack Fields 2,004 15,826 101,500
Carl Frischling(4) 2,035 97,791 103,500
Robert H. Graham 0 0 0
John F. Kroeger (5) 0 40,461 0
Prema Mathai-Davis 2,045 11,870 101,500
Lewis F. Pennock 2,035 45,755 103,500
Ian Robinson (6) 858 94,442 25,000
Louis S. Sklar 2,035 90,232 101,500
</TABLE>
- -----------
(1) The total amount of compensation deferred by all Directors of the Fund
during the fiscal year ended October 31, 1999, including interest earned
thereon, was $13,529.
(2) During the fiscal year ended October 31, 1999, the total amount of expenses
allocated to the Fund in respect of such retirement benefits was $13,895. Data
reflects compensation for the calendar year ended December 31, 1999.
(3) Each Director serves as director or trustee of a total of 12 registered
investment companies advised by AIM. Data reflects compensation earned during
the calendar year ended December 31, 1999.
(4) During the fiscal year ended October 31, 1999, the Fund paid $8,316 in legal
fees to Mr. Frischling's law firm, Kramer Levin Naftalis & Frankel LLP, for
services rendered to the independent directors of the fund.
(5) Mr. Kroeger was a director until June 11, 1998. 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."
(6) Mr. Robinson was a director until March 12, 1999, when he retired.
10
<PAGE> 27
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. ("AIM Management"), or any of its
affiliates) 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 affiliates (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 or her date of retirement
equal to a maximum of 75% of the annual 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 Applicable AIM Funds and the director)
and based on 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 Applicable AIM
Fund.
Set forth below is a table that shows the estimated annual benefits
payable to an eligible director upon retirement assuming a specific level of
compensation and years of service classifications. The estimated credited years
of service for Messrs. Crockett, Daly, Dunn, Fields, Frischling, Kroeger,
Pennock, Robinson, and Sklar and Dr. Mathai-Davis are 13, 13, 2, 3, 23, 20, 18,
11, 10 and 1 years, respectively.
ESTIMATED ANNUAL BENEFITS UPON RETIREMENT
<TABLE>
<CAPTION>
Number of Years of Annual Retirement
Service With the Compensation Paid By All
Applicable AIM Funds Applicable AIM Funds
-------------------- ------------------------
<S> <C>
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 and Sklar and Dr. Mathai-Davis
(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
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<PAGE> 28
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 or her deferral account, the balance
of the deferral account will be distributed to his or her 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 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
120 investment 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 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.
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.
12
<PAGE> 29
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 or amended to the Fund's detriment during the
period stated in the agreement between AIM and the Fund.
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 (the "Sub-Contract"). 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. Effective March 13, 2000, the
Sub-Contract will be terminated.
During the fiscal years ended October 31, 1999, 1998 and 1997, AIM
received management and advisory fees from the Fund of $15,096,393, $11,372,220
and $9,353,715, respectively. See "Expenses."
For the fiscal years ended October 31, 1999, 1998 and 1997, AIM was
reimbursed $114,068, $72,766 and $67,450, respectively, for costs associated
with performing administrative services.
Prior to July 1, 1999, TradeStreet Investment Associates, Inc.
("TradeStreet"), 101 South Tryon Street, Suite 1000, Charlotte, North Carolina
28255, served as Sub-Advisor. Trade Street is a wholly owned subsidiary of
NationsBank, N.A. and a registered investment advisor.
For the period November 1, 1998 through July 1, 1999 and the fiscal
year ended October 31, 1998 and 1997, TradeStreet received fees from AIM of
$2,774,130, $3,405,833 and $2,921,391, 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
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<PAGE> 30
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" or the
"Custodian") 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.
AFS, a wholly owned subsidiary of AIM, 11 Greenway Plaza, Suite 100,
Houston, Texas 77046-1173, will act as a transfer and dividend disbursing agent
for the Class beginning on March 13, 2000.
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
agreed 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, 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 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.
14
<PAGE> 31
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 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
15
<PAGE> 32
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.
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
16
<PAGE> 33
(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.
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.
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").
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<PAGE> 34
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
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 identification number,
using IRS Form W-7. For a copy of the IRS Form W-7 and accompanying
instructions, please contact your tax advisor.
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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 Plans' 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 the customary
trading session 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 the
customary trading session 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 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.
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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, prior to the determination of net
asset value. 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 customary trading
session 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
customary trading session 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 customary trading session 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, as custodian for the Plan. 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
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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 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 capabilities than is the case with other types of securities
in which the Fund may invest.
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, 2000, 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, 2000, 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 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.
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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 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 25% of the total assets of the Fund.
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<PAGE> 39
REITs are trusts which sell equity or debt securities to investors and
use the proceeds to invest 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 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
Depositary Receipts ("ADRs"), European Depositary 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
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<PAGE> 40
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 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.
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<PAGE> 41
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 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 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.
EQUITY-LINKED DERIVATIVES
The Fund may invest in equity-linked derivative products designed to
replicate the composition and performance of particular indices. Examples of
such products include S&P Depositary Receipts ("SPDRs"), World Equity Benchmark
Series ("WEBs"), NASDAQ 100 tracking shares ("QQQs"), Dow Jones Industrial
Average Instruments ("DIAMONDS") and Optomised Portfolios as Listed Securities
("OPALS"). Investments in equity-linked derivatives involve the same risks
associated with a direct investment in the types of securities included in the
indices such products are designed to track. There can be no assurance that the
trading price
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of the equity-linked derivatives will equal the underlying value of the basket
of securities purchased to replicate a particular index or that such basket will
replicate the index. Investments in equity-linked derivatives may constitute
investment in other investment companies. See "Investment in Other Investment
Companies."
INVESTMENT IN OTHER INVESTMENT COMPANIES
The Fund may invest in other investment companies to the extent
permitted by the 1940 Act, and rules and regulations thereunder, and if
applicable, exemptive orders granted by the SEC. The following restrictions
apply to investments in other investment companies other than Affiliated Money
Market Funds (defined below): (i) the Fund may not purchase more than 3% of the
total outstanding voting stock of another investment company; (ii) the Fund may
not invest more than 5% of its total assets in securities issued by another
investment company; and (iii) the Fund may not invest more than 10% of its total
assets in securities issued by other investment companies other than Affiliated
Money Market Funds. With respect to the Fund's purchase of shares of another
investment company, including Affiliated Money Market Funds, the Fund will
indirectly bear its proportionate share of the advisory fees and other operating
expenses of such investment company. The Fund has obtained an exemptive order
from the SEC allowing it to invest in money market funds that have AIM or an
affiliate of AIM as an investment adviser (the "Affiliated Money Market Funds"),
provided that investments in Affiliated Money Market Funds do not exceed 25% of
the total assets of the fund. With respect to the fund's purchase of shares of
the Affiliated Money Market Funds, the Fund will indirectly pay the advisory
fees and other operating expenses of the Affiliated Money Market Funds.
TEMPORARY DEFENSIVE INVESTMENTS
In anticipation of or in response to adverse market conditions, for
cash management purposes, or for defensive purposes, the Fund may temporarily
hold all or a portion of its assets in cash, money market instruments, shares of
affiliated money market funds, bonds, or other debt securities. The Fund may
also invest up to 25% of its total assets in Affiliated Money Market Funds for
these purposes. 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.
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.
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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OPTIONS, FUTURES AND CURRENCY STRATEGIES
INTRODUCTION
The Fund may use forward contracts, futures contracts, call options on
securities, call options on indices, call options on currencies, and call
options on futures contracts to attempt to hedge against the overall level of
investment and currency risk normally associated with the Fund's investments.
These instruments are often referred to as "derivatives," which may be defined
as financial instruments whose performance is derived, at least in part, from
the performance of another asset (such as a security, currency or an index of
securities).
GENERAL RISKS OF OPTIONS, FUTURES AND CURRENCY STRATEGIES
The use by the Fund of call options, futures contracts and forward
currency contracts involves special considerations and risks, as described
below. Risks pertaining to particular strategies are described in the sections
that follow.
(1) Successful use of hedging transactions depends upon AIM's ability
to correctly predict the direction of changes in the value of the applicable
markets and securities, contracts and/or currencies. While AIM is experienced in
the use of these instruments, there can be no assurance that any particular
hedging strategy will succeed.
(2) There might be imperfect correlation, or even no correlation,
between the price movements of an instrument (such as a call option contract)
and the price movements of the investments being hedged. Such a lack of
correlation might occur due to factors unrelated to the value of the investments
being hedged, such as changing interest rates, market liquidity, and speculative
or other pressures on the markets in which the hedging instrument is traded.
(3) Hedging strategies, if successful, can reduce risk of loss by
wholly or partially offsetting the negative effect of unfavorable price
movements in the investments being hedged. However, hedging strategies can also
reduce opportunity for gain by offsetting the positive effect of favorable price
movements in the hedged investments.
(4) There is no assurance that a liquid secondary market will exist for
any particular call option, futures contract, forward contract or call option
thereon at any particular time.
(5) As described below, the Fund is required to maintain assets as
"cover," and might be required to maintain segregated accounts or make margin
payments when it takes positions in instruments involving obligations to third
parties. If a Fund were unable to close out its positions in such instruments,
it might be required to continue to maintain such assets or accounts or make
such payments until the position expired or matured. The requirements might
impair the Fund's ability to sell a portfolio security or make an investment at
a time when it would otherwise be favorable to do so, or require that the Fund
sell a portfolio security at a disadvantageous time.
(6) There is no assurance that the Fund will use hedging transactions.
For example, if the Fund determines that the cost of hedging will exceed the
potential benefit to the Fund, the Fund will not enter into such transaction.
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COVER
Transactions using forward contracts, futures contracts and call
options expose the Fund to an obligation to another party. The Fund will not
enter into any such transactions unless it owns either (1) an offsetting
("covered") position in securities, currencies, forward contracts or futures
contracts or (2) cash, liquid assets and/or short-term debt securities with a
value sufficient at all times to cover its potential obligations not covered as
provided in (1) above. The Fund will comply with SEC guidelines regarding cover
for these instruments and, if the guidelines so require, set aside cash or
liquid securities. To the extent that a futures contract, forward contract or
option is deemed to be illiquid, the assets used to "cover" the Fund's
obligation will also be treated as illiquid for purposes of determining the
Fund's maximum allowable investment in illiquid securities.
Assets used as cover cannot be sold while the position in the
corresponding forward contract, futures contract or call option is open, unless
they are replaced with other appropriate assets. If a large portion of the
Fund's assets is used for cover or otherwise set aside, it could affect
portfolio management or the Fund's ability to meet redemption requests or other
current obligations.
WRITING CALL OPTIONS
The Fund may write (sell) covered call options on securities, futures
contracts, forward contracts, indices and currencies. As the writer of a call
option, the Fund would have the obligation to deliver the underlying security,
cash or currency (depending on the type of derivative) to the holder (buyer) at
a specified price (the exercise price) at any time until (American style) or on
(European style) a certain date (the expiration date). So long as the obligation
of the Fund continues, it may be assigned an exercise notice, requiring it to
deliver the underlying security, cash or currency against payment of the
exercise price. This obligation terminates upon the expiration of the call
option, or such earlier time at which the Fund effects a closing purchase
transaction by purchasing an option identical to that previously sold.
When writing a call option the Fund, in return for the premium, gives
up the opportunity for profit from a price increase in the underlying security,
contract or currency above the exercise price, and retains the risk of loss
should the price of the security, contract or currency decline. Unlike one who
owns securities, contracts or currencies not subject to an option, the Fund has
no control over when it may be required to sell the underlying securities,
contracts or currencies, since most options may be exercised at any time prior
to the option's expiration. If a call option that the Fund has written expires,
it will realize a gain in the amount of the premium; however, such gain may be
offset by a decline in the market value of the underlying security, contract or
currency during the option period. If the call option is exercised, the Fund
will realize a gain or loss from the sale of the underlying security, contract
or currency, which will be increased or offset by the premium received.
Writing call options can serve as a limited hedge because declines in
the value of the hedged investment would be offset to the extent of the premium
received for writing the option.
Closing transactions may be effected in order to realize a profit on an
outstanding call option, to prevent an underlying security, contract or currency
from being called or to permit the sale of the underlying security, contract or
currency. Furthermore, effecting a closing transaction will permit the Fund to
write another call option on the underlying security, contract or currency with
either a different exercise price or expiration date, or both.
OVER-THE-COUNTER OPTIONS
Options may be either listed on an exchange or traded in
over-the-counter ("OTC") markets. Listed options are third-party contracts
(i.e., performance of the obligations of the purchaser and seller is guaranteed
by the exchange or clearing corporation) and have standardized strike prices and
expiration dates. OTC options are two-party contracts with negotiated strike
prices and expiration dates. OTC options differ from exchange-traded options in
that OTC options are transacted with dealers directly and not through a clearing
corporation (which guarantees performance). Consequently, there is a risk of
non-performance by the dealer. Since no exchange is involved, OTC options are
valued on the basis of an average of the last bid prices obtained from dealers,
unless a quotation from only one dealer is available, in which case only that
dealer's
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price will be used. In the case of OTC options, there can be no assurance that a
liquid secondary market will exist for any particular option at any specific
time. Although the Fund will enter into OTC options only with dealers that are
expected to be capable of entering into closing transactions with it, there is
no assurance that the Fund will in fact be able to close out an OTC option
position at a favorable price prior to expiration. In the event of insolvency of
the dealer, a Fund might be unable to close out an OTC option position at any
time prior to its expiration.
The Fund may sell OTC options and, in connection therewith, segregate
assets or cover its obligations with respect to OTC options written by it. The
assets used as cover for OTC options written by the Fund will be considered
illiquid unless the OTC options are sold to qualified dealers who agree that the
Fund may repurchase any OTC option it writes at a maximum price to be calculated
by a formula set forth in the option agreement. The cover for an OTC option
written subject to this procedure would be considered illiquid only to the
extent that the maximum repurchase price under the formula exceeds the intrinsic
value of the option.
INDEX OPTIONS
Calls on indices are similar to calls on securities or futures
contracts except that all settlements are in cash and gain or loss depends on
changes in the index in question (and thus on price movements in the securities
market or a particular market sector generally) rather than on price movements
in individual securities or futures contracts. The amount of cash is equal to
the difference between the closing price of the index and the exercise price of
the call times a specified multiple (the "multiplier"), which determines the
total dollar value for each point of such difference.
The risks of investment in index options may be greater than options on
securities. Because index options are settled in cash, when the Fund writes a
call on an index it cannot provide in advance for its potential settlement
obligations by acquiring and holding the underlying securities. The Fund can
offset some of the risk of writing a call index option position by holding a
diversified portfolio of securities similar to those on which the underlying
index is based. However, the Fund cannot, as a practical matter, acquire and
hold a portfolio containing exactly the same securities as underlie the index
and, as a result, bears a risk that the value of the securities held will not be
perfectly correlated with the value of the index.
LIMITATIONS ON OPTIONS
The Fund will not write call options if, immediately after such sale,
the aggregate value of securities or obligations underlying the outstanding
options exceeds 20% of the Fund's total assets.
INTEREST RATE, CURRENCY AND STOCK INDEX FUTURES CONTRACTS
The Fund may enter into interest rate, currency or stock index futures
contracts (collectively, "Futures" or "Futures Contracts") as a hedge against
changes in prevailing levels of interest rates, currency exchange rates or stock
price levels, respectively, in order to establish more definitely the effective
return on securities or currencies held or intended to be acquired by it. The
Fund's hedging may include sales of Futures as an offset against the effect of
expected increases in interest rates, and decreases in currency exchange rates
and stock prices, and purchases of Futures as an offset against the effect of
expected declines in interest rates, and increases in currency exchange rates or
stock prices.
A Futures Contract is a two party agreement to buy or sell a specified
amount of a specified security or currency (or delivery of a cash settlement
price, in the case of an index future) for a specified price at a designated
date, time and place. A stock index future provides for the delivery, at a
designated date, time and place, of an amount of cash equal to a specified
dollar amount times the difference between the stock index value at the close of
trading on the contract and the price agreed upon in the Futures Contract; no
physical delivery of stocks comprising the index is made. Brokerage fees are
incurred when a Futures Contract is bought or sold, and margin deposits must be
maintained at all times the Future is outstanding.
The Fund will only enter into Futures Contracts that are traded (either
domestically or internationally) on futures exchanges and are standardized as to
maturity date and underlying financial instrument. Futures exchanges and trading
thereon in the United States are regulated under the Commodity Exchange Act and
by the Commodity Futures Trading Commission ("CFTC"). Foreign futures exchanges
and trading thereon
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<PAGE> 46
are not regulated by the CFTC and are not subject to the same regulatory
controls. For a further discussion of the risks associated with investments in
foreign securities, see "Foreign Securities" in this Statement of Additional
Information.
Closing out an open Future is effected by entering into an offsetting
Future for the same aggregate amount of the identical financial instrument or
currency and the same delivery date. There can be no assurance, however, that
the Fund will be able to enter into an offsetting transaction with respect to a
particular Future at a particular time. If the Fund is not able to enter into an
offsetting transaction, it will continue to be required to maintain the margin
deposits on the Future.
A Fund's Futures transactions will be entered into for hedging purposes
only; that is, Futures will be sold to protect against a decline in the price of
securities or currencies that the Fund owns, or Futures will be purchased to
protect the Fund against an increase in the price of securities or currencies it
has committed to purchase or expects to purchase.
"Margin" with respect to Futures is the amount of funds that must be
deposited by the Fund in order to initiate Futures trading and maintain its open
positions in Futures. A margin deposit made when the Futures Contract is entered
("initial margin") is intended to ensure the Fund's performance under the
Futures Contract. The margin required for a particular Future is set by the
exchange on which the Future is traded and may be significantly modified from
time to time by the exchange during the term of the Futures Contract.
Subsequent payments, called "variation margin," to and from the futures
commission merchant through which the Fund entered into the Futures Contract
will be made on a daily basis as the price of the underlying security, currency
or index fluctuates making the Futures more or less valuable, a process known as
marking-to-market.
If the Fund were unable to liquidate a Future or an option on a Futures
position due to the absence of a liquid secondary market or the imposition of
price limits, it could incur substantial losses. The Fund would continue to be
subject to market risk with respect to the position. In addition, except in the
case of purchased options, the Fund would continue to be required to make daily
variation margin payments and might be required to maintain the position being
hedged by the Future or option or to maintain cash or securities in a segregated
account.
OPTIONS ON FUTURES CONTRACTS
Call options on Futures Contracts are similar to options on securities
or currencies except that call options on Futures Contracts give the purchaser
the right, in return for the premium paid, to assume a long position in a
Futures Contract at a specified exercise price at any time during the period of
the option. Upon exercise of the call option, the delivery of the Futures
position by the writer of the call option (the Fund) to the holder of the option
will be accompanied by delivery of the accumulated balance in the writer's
Futures margin account.
FORWARD CONTRACTS
A forward contract is an obligation, usually arranged with a commercial
bank or other currency dealer, to purchase or sell a currency against another
currency at a future date and price as agreed upon by the parties. The Fund
either may accept or make delivery of the currency at the maturity of the
forward contract. The Fund may also, if its contra party agrees prior to
maturity, enter into a closing transaction involving the purchase or sale of an
offsetting contract. Forward contracts are traded over-the-counter, and not on
organized commodities or securities exchanges. As a result, it may be more
difficult to value such contracts, and it may be difficult to enter into closing
transactions.
The Fund may engage in forward currency transactions in anticipation
of, or to protect itself against, fluctuations in exchange rates. The Fund may
enter into forward contracts with respect to a specific purchase or sale of a
security, or with respect to its portfolio positions generally. When the Fund
purchases a security denominated in a foreign currency for settlement in the
near future, it may immediately purchase in the forward market the currency
needed to pay for and settle the purchase. By entering into a forward contract
with respect to the specific purchase or sale of a security denominated in a
foreign currency, the Fund can secure
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<PAGE> 47
an exchange rate between the trade and settlement dates for that purchase or
sale transaction. This practice is sometimes referred to as "transaction
hedging." Position hedging is the purchase or sale of foreign currency with
respect to portfolio security positions denominated or quoted in a foreign
currency.
The cost to a Fund of engaging in forward contracts varies with factors
such as the currencies involved, the length of the contract period and the
market conditions then prevailing. Because forward contracts are usually entered
into on a principal basis, no fees or commissions are involved. The use of
forward contracts does not eliminate fluctuations in the prices of the
underlying securities the Fund owns or intends to acquire, but it does establish
a rate of exchange in advance. In addition, while forward contract sales limit
the risk of loss due to a decline in the value of the hedged currencies, they
also limit any potential gain that might result should the value of the
currencies increase.
LIMITATIONS ON USE OF FUTURES, CALL OPTIONS ON FUTURES AND CERTAIN CALL OPTIONS
ON CURRENCIES
To the extent that the Fund enters into Futures Contracts, call options
on Futures Contracts and call options on foreign currencies traded on a
CFTC-regulated exchange, in each case other than for bona fide hedging purposes
(as defined by the CFTC), the aggregate initial margin and premiums required to
establish those positions (excluding the amount by which options are
"in-the-money") will not exceed 5% of the total assets of the Fund, after taking
into account unrealized profits and unrealized losses on any contracts it has
entered into. This guideline may be modified by the Board of Directors, without
a shareholder vote. This limitation does not limit the percentage of the Fund's
assets at risk to 5%.
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.
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 or account provided the Fund follows
procedures adopted by the Boards of
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<PAGE> 48
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.
Allocation of IPO Securities Transactions
From time to time, certain of the AIM Funds or accounts may become
interested in participating in security distributions that are available in an
IPO, and occasions may arise when purchases of such securities by one AIM Fund
or account may also be considered for purchase by one or more other AIM Funds or
accounts. In such cases, it shall be AIM's practice to specifically combine or
otherwise bunch indications of interest for IPO securities for all AIM Funds and
accounts participating in purchase transactions for that security, and to
allocate such transactions in accordance with the following procedures:
AIM will determine the eligibility of each AIM Fund and account that seeks
to participate in a particular IPO by reviewing a number of factors, including
suitability of the investment with the AIM Fund's or account's investment
objective, policies and strategies, the liquidity of the AIM Fund or account if
such investment is purchased, and whether the portfolio manager intends to hold
the security as a long-term investment. The allocation of limited supply
securities issued in IPOs will be made to eligible AIM Funds and accounts in a
manner designed to be fair and equitable for the eligible AIM Funds and
accounts, and so that there is equal allocation of IPOs over the longer term.
Where multiple funds or accounts are eligible, rotational participation may
occur, based on the extent to which an AIM Fund or account has participated in
previous IPOs as well as the size of the AIM Fund or account. Each eligible AIM
Fund and account with an asset level of less than $500 million, will be placed
in one of three tiers, depending upon its asset level. The AIM Funds and
accounts in the tier containing funds and accounts with the smallest asset
levels will participate first, each receiving a 40 basis point allocation
(rounded to the nearest share round lot that approximates 40 basis points) (the
"Allocation"), based on that AIM Fund's or account's net assets. This process
continues until all of the AIM Funds and accounts in the three tiers receive
their Allocations, or until the shares are all allocated. Should securities
remain after this process, eligible AIM Funds and accounts will receive their
Allocations on a straight pro rata basis. For the tier of AIM Funds and accounts
not receiving a full Allocation, the Allocation may be made only to certain AIM
Funds or accounts so that each may receive close to or exactly 40 basis points.
When any AIM Funds and/or account with substantially identical investment
objectives and policies participate in syndicates, they will do so in amounts
that are substantially proportionate to each other. In these cases, the net
assets of the largest AIM Fund will be used to determine in which tier, as
described in the paragraph above, such group of AIM Funds or accounts will be
placed. If no AIM Fund is participating, then the net assets of the largest
account will be used to determine tier placement. The price per share of
securities purchased in such syndicate transactions will be the same for each
AIM Fund and account.
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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, in
written form or on computer software. 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, 1999, the Fund held an amount of common stock issued
by Morgan Stanley Dean Witter & Co., Inc. and Lehman Brothers Holdings, Inc.
having a market value of $16,988,125 and $2,947,500, 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, 1999, 1998 and 1997, the Fund
paid brokerage commissions of $3,472,778, $3,027,892 and $2,573,656,
respectively. For the fiscal year ended October 31, 1999, 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 $625,053,096 and the related brokerage commissions were $536,125.
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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.)
(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.
34
<PAGE> 51
(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. See "Submission of Matters to Shareholders."
MISCELLANEOUS INFORMATION
SHAREHOLDER INQUIRIES
Shareholder inquiries concerning the status of an account should be
directed to A I M Fund Services, Inc. by calling (800) 995-4246.
LEGAL MATTERS
Legal matters for the Fund have been passed upon by Ballard Spahr
Andrews & Ingersoll, LLP, 1735 Market Street, Philadelphia, Pennsylvania 19103.
35
<PAGE> 52
FINANCIAL STATEMENTS
FS
<PAGE> 53
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, 1999, 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, 1999, 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, 1999, 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 LLP
KPMG LLP
December 3, 1999
Houston, Texas
FS-1
<PAGE> 54
SCHEDULE OF INVESTMENTS
October 31, 1999
<TABLE>
<CAPTION>
MARKET
SHARES VALUE
<S> <C> <C>
COMMON STOCKS & OTHER EQUITY
INTERESTS-96.11%
AUTO PARTS & EQUIPMENT-0.13%
SPX Corp.(a) 40,000 $ 3,390,000
- ---------------------------------------------------------------
AUTOMOBILES-0.99%
Ford Motor Co. 225,000 12,346,875
- ---------------------------------------------------------------
Porsche A.G., Pfd. (Germany) 5,000 13,624,047
- ---------------------------------------------------------------
25,970,922
- ---------------------------------------------------------------
BANKS (MAJOR REGIONAL)-0.80%
Fleet Boston Corp. 400,000 17,450,000
- ---------------------------------------------------------------
Northern Trust Corp. 36,000 3,476,250
- ---------------------------------------------------------------
20,926,250
- ---------------------------------------------------------------
BANKS (MONEY CENTER)-0.44%
Chase Manhattan Corp. (The) 133,500 11,664,562
- ---------------------------------------------------------------
BIOTECHNOLOGY-2.39%
Amgen, Inc.(a) 220,000 17,545,000
- ---------------------------------------------------------------
Biogen, Inc.(a) 350,000 25,943,750
- ---------------------------------------------------------------
Celera Genomics(a) 5,950 232,794
- ---------------------------------------------------------------
Genzyme Corp.(a) 500,000 19,125,000
- ---------------------------------------------------------------
62,846,544
- ---------------------------------------------------------------
BROADCASTING (TELEVISION, RADIO &
CABLE)-0.84%
AT&T Corp.-Liberty Media
Group-Class A(a) 250,000 9,921,875
- ---------------------------------------------------------------
Comcast Corp.-Class A 200,000 8,425,000
- ---------------------------------------------------------------
USA Networks, Inc.(a) 80,500 3,627,531
- ---------------------------------------------------------------
21,974,406
- ---------------------------------------------------------------
COMMUNICATIONS EQUIPMENT-11.99%
General Instrument Corp.(a) 250,000 13,453,125
- ---------------------------------------------------------------
JDS Uniphase Corp.(a) 660,000 110,137,500
- ---------------------------------------------------------------
Lucent Technologies Inc. 500,000 32,125,000
- ---------------------------------------------------------------
Motorola, Inc. 700,000 68,206,250
- ---------------------------------------------------------------
Nokia Oyj-ADR (Finland) 400,000 46,225,000
- ---------------------------------------------------------------
Telefonaktiebolaget LM
Ericsson-ADR (Sweden) 600,000 25,650,000
- ---------------------------------------------------------------
Tellabs, Inc.(a) 300,000 18,975,000
- ---------------------------------------------------------------
314,771,875
- ---------------------------------------------------------------
COMPUTERS (HARDWARE)-2.39%
International Business Machines
Corp. 475,000 46,728,125
- ---------------------------------------------------------------
Sun Microsystems, Inc.(a) 150,000 15,871,875
- ---------------------------------------------------------------
62,600,000
- ---------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
MARKET
SHARES VALUE
<S> <C> <C>
COMPUTERS (NETWORKING)-4.67%
Cisco Systems, Inc.(a) 1,200,000 $ 88,800,000
- ---------------------------------------------------------------
Exodus Communications, Inc.(a) 250,000 21,500,000
- ---------------------------------------------------------------
VeriSign, Inc.(a) 100,000 12,350,000
- ---------------------------------------------------------------
122,650,000
- ---------------------------------------------------------------
COMPUTERS (PERIPHERALS)-3.68%
Adaptec, Inc.(a) 527,000 23,715,000
- ---------------------------------------------------------------
EMC Corp.(a) 1,000,000 73,000,000
- ---------------------------------------------------------------
96,715,000
- ---------------------------------------------------------------
COMPUTERS (SOFTWARE &
SERVICES)-17.42%
America Online, Inc.(a) 860,000 111,531,250
- ---------------------------------------------------------------
Computer Associates
International, Inc. 540,000 30,510,000
- ---------------------------------------------------------------
eBay, Inc.(a) 250,000 33,781,250
- ---------------------------------------------------------------
Electronics for Imaging, Inc.(a) 300,000 12,093,750
- ---------------------------------------------------------------
Inktomi Corp.(a) 330,000 33,474,375
- ---------------------------------------------------------------
Intuit, Inc.(a) 600,000 17,475,000
- ---------------------------------------------------------------
Lycos, Inc.(a) 430,000 23,005,000
- ---------------------------------------------------------------
Microsoft Corp.(a) 1,040,000 96,265,000
- ---------------------------------------------------------------
RealNetworks, Inc.(a) 200,000 21,937,500
- ---------------------------------------------------------------
Unisys Corp.(a) 450,000 10,912,500
- ---------------------------------------------------------------
VERITAS Software Corp.(a) 200,000 21,575,000
- ---------------------------------------------------------------
Yahoo! Inc.(a) 250,000 44,765,625
- ---------------------------------------------------------------
457,326,250
- ---------------------------------------------------------------
DISTRIBUTORS (FOOD &
HEALTH)-0.54%
McKesson HBOC, Inc. 710,000 14,244,375
- ---------------------------------------------------------------
ELECTRIC COMPANIES-2.05%
Illinova Corp. 415,000 13,202,187
- ---------------------------------------------------------------
Niagara Mohawk Holdings, Inc.(a) 1,185,000 18,811,875
- ---------------------------------------------------------------
Texas Utilities Co. 560,000 21,700,000
- ---------------------------------------------------------------
53,714,062
- ---------------------------------------------------------------
ELECTRICAL EQUIPMENT-1.80%
American Power Conversion
Corp.(a) 200,000 4,487,500
- ---------------------------------------------------------------
General Electric Co. 150,000 20,334,375
- ---------------------------------------------------------------
Koninklijke (Royal) Philips
Electronics N.V.-ADR
(Netherlands) 178,000 18,500,875
- ---------------------------------------------------------------
</TABLE>
FS-2
<PAGE> 55
<TABLE>
<CAPTION>
MARKET
SHARES VALUE
<S> <C> <C>
ELECTRICAL EQUIPMENT-(CONTINUED)
Sanmina Corp.(a) 45,000 $ 4,052,812
- ---------------------------------------------------------------
47,375,562
- ---------------------------------------------------------------
ELECTRONICS
(INSTRUMENTATION)-0.70%
Alpha Industries, Inc.(a) 100,000 5,525,000
- ---------------------------------------------------------------
PE Corp-PE Biosystems Group 23,800 1,544,025
- ---------------------------------------------------------------
Waters Corp.(a) 212,000 11,262,500
- ---------------------------------------------------------------
18,331,525
- ---------------------------------------------------------------
ELECTRONICS
(SEMICONDUCTORS)-6.36%
Analog Devices, Inc.(a) 150,000 7,968,750
- ---------------------------------------------------------------
Broadcom Corp.-Class A(a) 380,000 48,568,750
- ---------------------------------------------------------------
Maxim Integrated Products,
Inc.(a) 157,000 12,393,187
- ---------------------------------------------------------------
Microchip Technology, Inc.(a) 134,300 8,947,737
- ---------------------------------------------------------------
PMC-Sierra, Inc.(a) 600,000 56,550,000
- ---------------------------------------------------------------
Texas Instruments, Inc. 260,000 23,335,000
- ---------------------------------------------------------------
Vitesse Semiconductor Corp.(a) 200,000 9,175,000
- ---------------------------------------------------------------
166,938,424
- ---------------------------------------------------------------
ENGINEERING & CONSTRUCTION-0.30%
McDermott International, Inc. 435,000 7,884,375
- ---------------------------------------------------------------
EQUIPMENT (SEMICONDUCTOR)-0.14%
KLA-Tencor Corp.(a) 45,000 3,563,437
- ---------------------------------------------------------------
FINANCIAL (DIVERSIFIED)-3.54%
American Express Co. 44,000 6,776,000
- ---------------------------------------------------------------
Associates First Capital
Corp.-Class A 117,938 4,304,737
- ---------------------------------------------------------------
Citigroup, Inc. 510,000 27,603,750
- ---------------------------------------------------------------
Fannie Mae 104,600 7,400,450
- ---------------------------------------------------------------
Freddie Mac 280,000 15,137,500
- ---------------------------------------------------------------
MGIC Investment Corp. 530,000 31,667,500
- ---------------------------------------------------------------
92,889,937
- ---------------------------------------------------------------
HEALTH CARE (DIVERSIFIED)-0.20%
Abbott Laboratories 127,000 5,127,625
- ---------------------------------------------------------------
HEALTH CARE (DRUGS-GENERIC &
OTHER)-0.24%
Watson Pharmaceuticals, Inc.(a) 200,000 6,350,000
- ---------------------------------------------------------------
HEALTH CARE (DRUGS-MAJOR
PHARMACEUTICALS)-0.90%
Lilly (Eli) & Co. 76,800 5,289,600
- ---------------------------------------------------------------
Pfizer, Inc. 270,000 10,665,000
- ---------------------------------------------------------------
Schering-Plough Corp. 155,200 7,682,400
- ---------------------------------------------------------------
23,637,000
- ---------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
MARKET
SHARES VALUE
<S> <C> <C>
HEALTH CARE (HOSPITAL
MANAGEMENT)-1.03%
Health Management Associates,
Inc.-Class A(a) 3,060,000 $ 27,157,500
- ---------------------------------------------------------------
HEALTH CARE (LONG TERM
CARE)-0.47%
Manor Care, Inc.(a) 780,000 12,285,000
- ---------------------------------------------------------------
HEALTH CARE (MANAGED CARE)-1.04%
United Healthcare Corp. 530,000 27,394,375
- ---------------------------------------------------------------
HEALTH CARE (MEDICAL PRODUCTS &
SUPPLIES)-1.74%
Beckman Coulter, Inc. 330,000 15,180,000
- ---------------------------------------------------------------
Guidant Corp. 620,000 30,612,500
- ---------------------------------------------------------------
45,792,500
- ---------------------------------------------------------------
INSURANCE (LIFE/HEALTH)-0.93%
AXA Financial, Inc. 508,000 16,287,750
- ---------------------------------------------------------------
UnumProvident Corp. 250,000 8,234,375
- ---------------------------------------------------------------
24,522,125
- ---------------------------------------------------------------
INSURANCE (MULTI-LINE)-1.03%
American International Group,
Inc. 261,937 26,963,140
- ---------------------------------------------------------------
INSURANCE
(PROPERTY-CASUALTY)-0.48%
XL Capital Ltd.-Class A 235,000 12,616,562
- ---------------------------------------------------------------
INVESTMENT
BANKING/BROKERAGE-1.74%
Lehman Brothers Holdings, Inc. 40,000 2,947,500
- ---------------------------------------------------------------
Morgan Stanley, Dean Witter,
Discover & Co. 154,000 16,988,125
- ---------------------------------------------------------------
Schwab (Charles) Corp. (The) 660,000 25,698,750
- ---------------------------------------------------------------
45,634,375
- ---------------------------------------------------------------
LEISURE TIME (PRODUCTS)-0.78%
Mattel, Inc. 1,540,000 20,597,500
- ---------------------------------------------------------------
LODGING-HOTELS-0.46%
Carnival Corp. 272,000 12,104,000
- ---------------------------------------------------------------
MANUFACTURING (DIVERSIFIED)-0.64%
Tyco International Ltd. 200,000 7,987,500
- ---------------------------------------------------------------
United Technologies Corp. 145,000 8,772,500
- ---------------------------------------------------------------
16,760,000
- ---------------------------------------------------------------
MANUFACTURING (SPECIALIZED)-0.61%
Parker Hannifin Corp. 350,000 16,034,375
- ---------------------------------------------------------------
NATURAL GAS-0.47%
Coastal Corp. (The) 293,600 12,367,900
- ---------------------------------------------------------------
OIL & GAS (DRILLING &
EQUIPMENT)-2.06%
Diamond Offshore Drilling, Inc. 380,000 12,065,000
- ---------------------------------------------------------------
</TABLE>
FS-3
<PAGE> 56
<TABLE>
<CAPTION>
MARKET
SHARES VALUE
<S> <C> <C>
OIL & GAS (DRILLING & EQUIPMENT)-(CONTINUED)
ENSCO International, Inc. 580,000 $ 11,237,500
- ---------------------------------------------------------------
Schlumberger Ltd. 260,000 15,746,250
- ---------------------------------------------------------------
Transocean Offshore, Inc. 555,000 15,089,063
- ---------------------------------------------------------------
54,137,813
- ---------------------------------------------------------------
OIL (DOMESTIC INTEGRATED)-0.70%
Atlantic Richfield Co. 142,000 13,232,625
- ---------------------------------------------------------------
USX-Marathon Group 175,500 5,111,438
- ---------------------------------------------------------------
18,344,063
- ---------------------------------------------------------------
PAPER & FOREST PRODUCTS-1.12%
Georgia Pacific Group 380,000 15,081,250
- ---------------------------------------------------------------
International Paper Co. 270,000 14,208,750
- ---------------------------------------------------------------
29,290,000
- ---------------------------------------------------------------
PUBLISHING-0.68%
Dow Jones & Co., Inc. 194,000 11,931,000
- ---------------------------------------------------------------
McGraw-Hill Cos., Inc. (The) 60,000 3,577,500
- ---------------------------------------------------------------
Reader's Digest Association,
Inc.-Class A 75,000 2,418,750
- ---------------------------------------------------------------
17,927,250
- ---------------------------------------------------------------
REAL ESTATE INVESTMENT
TRUSTS-0.50%
Starwood Hotels & Resorts
Worldwide, Inc. 575,000 13,189,063
- ---------------------------------------------------------------
RESTAURANTS-0.10%
Tricon Global Restaurants,
Inc.(a) 65,000 2,612,188
- ---------------------------------------------------------------
RETAIL (BUILDING SUPPLIES)-0.58%
Home Depot, Inc. (The) 200,000 15,100,000
- ---------------------------------------------------------------
RETAIL (COMPUTERS &
ELECTRONICS)-1.45%
Best Buy Co., Inc.(a) 544,800 30,270,450
- ---------------------------------------------------------------
Circuit City Stores-Circuit City
Group 180,000 7,683,750
- ---------------------------------------------------------------
37,954,200
- ---------------------------------------------------------------
RETAIL (DEPARTMENT STORES)-1.38%
Federated Department Stores,
Inc.(a) 440,000 18,782,500
- ---------------------------------------------------------------
Kohl's Corp.(a) 100,000 7,481,250
- ---------------------------------------------------------------
Saks, Inc.(a) 575,000 9,882,813
- ---------------------------------------------------------------
36,146,563
- ---------------------------------------------------------------
RETAIL (DISCOUNTERS)-0.18%
Family Dollar Stores, Inc. 225,000 4,640,625
- ---------------------------------------------------------------
RETAIL (FOOD CHAINS)-0.44%
Kroger Co. (The)(a) 551,000 11,467,688
- ---------------------------------------------------------------
RETAIL (GENERAL
MERCHANDISE)-1.58%
Dayton Hudson Corp. 289,000 18,676,625
- ---------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
MARKET
SHARES VALUE
<S> <C> <C>
RETAIL (GENERAL MERCHANDISE)-(CONTINUED)
Wal-Mart Stores, Inc. 400,000 $ 22,675,000
- ---------------------------------------------------------------
41,351,625
- ---------------------------------------------------------------
RETAIL (SPECIALTY)-0.44%
Bed Bath & Beyond, Inc.(a) 225,000 7,495,313
- ---------------------------------------------------------------
Linens 'n Things, Inc.(a) 100,000 3,975,000
- ---------------------------------------------------------------
11,470,313
- ---------------------------------------------------------------
RETAIL (SPECIALTY-APPAREL)-1.15%
Abercrombie & Fitch Co.-Class
A(a) 86,000 2,343,500
- ---------------------------------------------------------------
American Eagle Outfitters,
Inc.(a) 275,000 11,773,438
- ---------------------------------------------------------------
Gap, Inc. (The) 150,000 5,568,750
- ---------------------------------------------------------------
Intimate Brands, Inc. 81,270 3,332,070
- ---------------------------------------------------------------
Talbots, Inc. (The) 150,000 7,059,375
- ---------------------------------------------------------------
30,077,133
- ---------------------------------------------------------------
SERVICES
(ADVERTISING/MARKETING)-0.99%
Omnicom Group, Inc. 150,000 13,200,000
- ---------------------------------------------------------------
Outdoor Systems, Inc.(a) 300,000 12,712,500
- ---------------------------------------------------------------
25,912,500
- ---------------------------------------------------------------
SERVICES (COMMERCIAL &
CONSUMER)-0.45%
Cintas Corp. 123,700 7,452,925
- ---------------------------------------------------------------
Gartner Group, Inc.-Class B(a) 7,812 73,238
- ---------------------------------------------------------------
IMS Health, Inc. 60,000 1,740,000
- ---------------------------------------------------------------
Viad Corp. 100,000 2,456,250
- ---------------------------------------------------------------
11,722,413
- ---------------------------------------------------------------
SERVICES (COMPUTER SYSTEMS)-1.13%
Brocade Communications Systems,
Inc.(a) 110,000 29,590,000
- ---------------------------------------------------------------
SERVICES (DATA PROCESSING)-1.66%
Concord EFS, Inc.(a) 450,000 12,178,125
- ---------------------------------------------------------------
First Data Corp. 480,000 21,930,000
- ---------------------------------------------------------------
National Data Corp. 80,000 1,920,000
- ---------------------------------------------------------------
Paychex, Inc. 192,037 7,561,457
- ---------------------------------------------------------------
43,589,582
- ---------------------------------------------------------------
TELECOMMUNICATIONS (CELLULAR/
WIRELESS)-0.81%
Western Wireless Corp.-Class A(a) 400,000 21,150,000
- ---------------------------------------------------------------
TELECOMMUNICATIONS (LONG
DISTANCE)-2.65%
AT&T Corp. 355,000 16,596,250
- ---------------------------------------------------------------
Global TeleSystems Group, Inc.(a) 700,000 16,756,250
- ---------------------------------------------------------------
MCI WorldCom, Inc.(a) 422,926 36,292,337
- ---------------------------------------------------------------
69,644,837
- ---------------------------------------------------------------
</TABLE>
FS-4
<PAGE> 57
<TABLE>
<CAPTION>
MARKET
SHARES VALUE
<S> <C> <C>
TELEPHONE-1.59%
Bell Atlantic Corp. 200,000 $ 12,987,500
- ---------------------------------------------------------------
Qwest Communications
International, Inc.(a) 800,000 28,800,000
- ---------------------------------------------------------------
41,787,500
- ---------------------------------------------------------------
WASTE MANAGEMENT-0.54%
Waste Management, Inc. 778,000 14,295,750
- ---------------------------------------------------------------
Total Common Stocks & Other
Equity Interests (Cost
$1,615,087,599) 2,522,522,589
- ---------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT
<S> <C> <C>
CONVERTIBLE BONDS & NOTES-0.87%
COMPUTERS (PERIPHERALS)-0.36%
EMC Corp., Conv. Sub. Notes,
3.25%, 03/15/02 $ 1,450,000 9,348,875
- ---------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
PRINCIPAL MARKET
AMOUNT VALUE
<S> <C> <C>
TELECOMMUNICATIONS (LONG
DISTANCE)-0.51%
Level 3 Communications Inc.,
Conv. Bonds, 6.00%, 09/15/09 $11,000,000 $ 13,530,000
- ---------------------------------------------------------------
Total Convertible Bonds &
Notes (Cost $12,998,720) 22,878,875
- ---------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
SHARES
<S> <C> <C>
MONEY MARKET FUNDS-3.46%
STIC Liquid Assets Portfolio(b) 45,440,308 45,440,308
- ---------------------------------------------------------------
STIC Prime Portfolio(b) 45,440,308 45,440,308
- ---------------------------------------------------------------
Total Money Market Funds
(Cost $90,880,616) 90,880,616
- ---------------------------------------------------------------
TOTAL INVESTMENTS-100.44% 2,636,282,080
- ---------------------------------------------------------------
LIABILITIES LESS OTHER
ASSETS-(0.44%) (11,667,071)
- ---------------------------------------------------------------
NET ASSETS-100.00% $2,624,615,009
===============================================================
</TABLE>
Abbreviations:
ADR - American Depositary Receipt
Conv. - Convertible
Pfd. - Preferred
Sub. - Subordinated
Notes to Schedule of Investment:
(a)
Non-income producing security.
(b)
The security shares the same
investment advisor as the Fund.
See Notes to Financial Statements.
FS-5
<PAGE> 58
STATEMENT OF ASSETS AND LIABILITIES
October 31, 1999
<TABLE>
<S> <C>
ASSETS:
Investments, at market value (cost
$1,718,966,935) $2,636,282,080
- -------------------------------------------------------------
Receivables for:
Capital stock sold 99,498
- -------------------------------------------------------------
Dividends and interest 1,053,988
- -------------------------------------------------------------
Investment for deferred compensation plan 48,076
- -------------------------------------------------------------
Other assets 12,253
- -------------------------------------------------------------
Total assets 2,637,495,895
- -------------------------------------------------------------
LIABILITIES:
Payables for:
Investments purchased 10,772,227
- -------------------------------------------------------------
Capital stock reacquired 469,021
- -------------------------------------------------------------
Deferred compensation 48,076
- -------------------------------------------------------------
Accrued advisory fees 1,342,674
- -------------------------------------------------------------
Accrued administrative services fees 10,000
- -------------------------------------------------------------
Accrued directors' fees 1,448
- -------------------------------------------------------------
Accrued operating expenses 237,440
- -------------------------------------------------------------
Total liabilities 12,880,886
- -------------------------------------------------------------
Net assets applicable to shares outstanding $2,624,615,009
=============================================================
NET ASSETS:
Class I $2,623,900,667
- -------------------------------------------------------------
Class II $ 714,342
- -------------------------------------------------------------
Capital stock, $0.01 par value per share:
Class I:
Authorized 1,000,000,000
- -------------------------------------------------------------
Outstanding 130,118,500
=============================================================
Class II
Authorized 1,000,000,000
- -------------------------------------------------------------
Outstanding 35,504
=============================================================
Class I
Net asset value and redemption price per
share $ 20.17
=============================================================
Class II
Net asset value and redemption price per
share $ 20.12
=============================================================
</TABLE>
STATEMENT OF OPERATIONS
For the year ended October 31, 1999
<TABLE>
<S> <C>
INVESTMENT INCOME:
Dividends (net of $72,416 foreign withholding
tax) $ 10,836,685
- ------------------------------------------------------------
Interest 4,978,635
- ------------------------------------------------------------
Total investment income 15,815,320
- ------------------------------------------------------------
EXPENSES:
Advisory fees 15,096,393
- ------------------------------------------------------------
Administrative services fees 114,068
- ------------------------------------------------------------
Custodian fees 231,799
- ------------------------------------------------------------
Directors' fees 22,879
- ------------------------------------------------------------
Transfer agent fees 49,863
- ------------------------------------------------------------
Other 467,498
- ------------------------------------------------------------
Total expenses 15,982,500
- ------------------------------------------------------------
Less: Expenses paid indirectly (28,145)
- ------------------------------------------------------------
Net expenses 15,954,355
- ------------------------------------------------------------
Net investment income (loss) (139,035)
- ------------------------------------------------------------
REALIZED AND UNREALIZED GAIN (LOSS) FROM
INVESTMENT SECURITIES AND FOREIGN
CURRENCIES:
Net realized gain (loss) from:
Investment securities 418,809,758
- ------------------------------------------------------------
Foreign currencies (275,578)
- ------------------------------------------------------------
418,534,180
============================================================
CHANGE IN NET UNREALIZED APPRECIATION
(DEPRECIATION) OF:
Investment securities 367,179,343
- ------------------------------------------------------------
Foreign currencies (3,322)
============================================================
367,176,021
============================================================
Net gain from investment securities and
foreign currencies 785,710,201
============================================================
Net increase in net assets resulting from
operations $785,571,166
============================================================
</TABLE>
See Notes to Financial Statements.
FS-6
<PAGE> 59
STATEMENT OF CHANGES IN NET ASSETS
For the years ended October 31, 1999 and 1998
<TABLE>
<CAPTION>
1999 1998
-------------- --------------
<S> <C> <C>
OPERATIONS:
Net investment income (loss) $ (139,035) $ 4,083,684
- ----------------------------------------------------------------------------------------------
Net realized gain from investment securities foreign
currencies, futures and options contracts 418,534,180 123,367,355
- ----------------------------------------------------------------------------------------------
Change in net unrealized appreciation of investment
securities and foreign currencies 367,176,021 30,378,725
- ----------------------------------------------------------------------------------------------
Net increase in net assets resulting from operations 785,571,166 157,829,764
- ----------------------------------------------------------------------------------------------
Distributions to shareholders from net investment
income-Class I (4,242,441) (1,659,397)
- ----------------------------------------------------------------------------------------------
Distributions to shareholders from net realized gains-Class I (112,082,098) (156,547,424)
- ----------------------------------------------------------------------------------------------
Share transactions-net:
- ----------------------------------------------------------------------------------------------
Class I 124,655,784 180,175,249
- ----------------------------------------------------------------------------------------------
Class II 680,370 --
- ----------------------------------------------------------------------------------------------
Net increase in net assets 794,582,781 179,798,192
- ----------------------------------------------------------------------------------------------
NET ASSETS:
Beginning of period 1,830,032,228 1,650,234,036
- ----------------------------------------------------------------------------------------------
End of period $2,624,615,009 $1,830,032,228
==============================================================================================
NET ASSETS CONSIST OF:
Capital (par value and additional paid-in) $1,290,320,756 $1,158,384,602
- ----------------------------------------------------------------------------------------------
Undistributed net investment income (loss) (94,294) 4,164,155
- ----------------------------------------------------------------------------------------------
Undistributed net realized gain from investment
securities, foreign currencies, futures and option
contracts 417,073,402 117,344,347
- ----------------------------------------------------------------------------------------------
Net unrealized appreciation of investment securities and
foreign currencies 917,315,145 550,139,124
- ----------------------------------------------------------------------------------------------
$2,624,615,009 $1,830,032,228
==============================================================================================
</TABLE>
See Notes to Financial Statements.
FS-7
<PAGE> 60
NOTES TO FINANCIAL STATEMENTS
October 31, 1999
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 (the "1940 Act"), as a
diversified, open-end management investment company. The Fund consists of two
classes of shares: Class I shares and Class II shares. Class II shares commenced
sales on July 19, 1999. The Fund's investment objective is growth of capital.
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities at the date of the
financial statements and the reported amounts of revenues and expenses during
the reporting period. Actual results could differ from those estimates. The
following is a summary of the significant accounting policies followed by the
Fund in the preparation of its financial statements.
A. Security Valuations -- A security listed or traded on an exchange (except
convertible bonds) is valued at its last sales price on the exchange where
the security is principally traded, or lacking any sales on a particular day,
the security is valued at the closing bid price on that day. Each security
reported on the NASDAQ National Market System is valued at the last sales
price on the valuation date or absent a last sales price, at the closing bid
price. Debt obligations (including convertible bonds) are valued on the basis
of prices provided by an independent pricing service. Prices provided by the
pricing service may be determined without exclusive reliance on quoted
prices, and may reflect appropriate factors such as yield, type of issue,
coupon rate and maturity date. Securities for which market prices are not
provided by any of the above methods are valued based upon quotes furnished
by independent sources and are valued at the last bid price in the case of
equity securities and in the case of debt obligations, the mean between the
last bid and asked prices. Securities for which market quotations are not
readily available or are questionable are valued at fair value as determined
in good faith by or under the supervision of the Company's officers in a
manner specifically authorized by the Board of Directors of the Company.
Short-term obligations having 60 days or less to maturity are valued at
amortized cost which approximates market value. For purposes of determining
net asset value per share, futures and options contracts generally will be
valued 15 minutes after the close of trading of the New York Stock Exchange
("NYSE").
Generally, trading in foreign securities is substantially completed each
day at various times prior to the close of the NYSE. The values of such
securities used in computing the net asset value of the Fund's shares are
determined as of such times. Foreign currency exchange rates are also
generally determined prior to the close of the NYSE. Occasionally, events
affecting the values of such securities and such exchange rates may occur
between the times at which they are determined and the close of the NYSE
which would not be reflected in the computation of the Fund's net asset
value. If events materially affecting the value of such securities occur
during such period, then these securities will be valued at their fair value
as determined in good faith by or under the supervision of the Board of
Directors.
B. Securities Transactions, 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 is recorded on the
ex-dividend date. The Fund may elect to use a portion of the proceeds of
capital stock redemptions as distributions for Federal income tax purposes.
Distributions from income and net realized capital gains, if any, are
generally paid annually and recorded on ex-dividend date.
On October 31, 1999, undistributed net investment income was increased by
$123,027, undistributed net realized gains decreased by $6,723,027 and
paid-in capital increased by $6,600,000 as a result of differing book/tax
treatment of foreign currency transactions, equalization credits and net
operating loss reclassifications in order to comply with the requirements of
the American Institute of Certified Public Accountants of Position 93-2. Net
assets of the Fund were unaffected by the reclassification discussed above.
C. 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.
D. Foreign Currency Translations -- Portfolio securities and other assets and
liabilities denominated in foreign currencies are translated into U.S. dollar
amounts at 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. The Fund does
not separately account for that portion of the results of operations
resulting from changes in foreign exchange rates on investments and the
fluctuations arising from changes in market prices of securities held. Such
fluctuations are included with the net realized and unrealized gain or loss
from investments.
E. 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
FS-8
<PAGE> 61
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.
F. Bond Premiums -- It is the policy of the Fund not to amortize market premiums
on bonds for financial reporting purposes.
G. Expenses -- Distribution expenses directly attributable to a class of shares
are charged to that class' operations. All other expenses which are
attributable to more than one class are allocated among the classes.
NOTE 2-ADVISORY FEES AND OTHER TRANSACTIONS WITH AFFILIATES
The Fund has entered into a master investment advisory agreement with A I M
Advisors, Inc. ("AIM"). Under the terms of the master investment advisory
agreement, the Fund pays an advisory fee to AIM at the annual rate of 1.00% of
the first $10 million of the Fund's average daily net assets, plus 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. Prior to June 30,
1999, AIM had a sub-advisory agreement with TradeStreet Investment Associates,
("TradeStreet").
The Fund, pursuant to a master administrative services agreement with AIM, has
agreed to pay AIM for certain administrative costs incurred in providing
accounting services to the Fund. During the year ended October 31, 1999, AIM was
paid $114,068 for such services.
The Fund has entered into a Distribution Agreement with A I M Distributors,
Inc. ("AIM Distributors") to serve as the distributor for the Fund. The Fund has
adopted a plan pursuant to Rule 12b-1 under the 1940 Act with respect to the
Fund's Class II shares (the "Distribution Plan"). The Fund , pursuant to the
Distribution Plan, pays AIM Distributors compensation at the annual rate of
0.30% of the Fund's average daily net assets of Class II shares. Of this amount,
the Fund may pay a service fee of 0.25% of the average daily net assets of Class
II shares to selected dealers and financial institutions who furnish continuing
personal shareholder services to their customers who purchase and own Class II
shares of the Fund. Any amounts not paid as a service fee under the Distribution
Plan would constitute an asset-based sales charge. The Distribution Plan also
imposes a cap on the total sales charges, including asset-based sales charges
that may be paid by the Class II shares. During the period July 19, 1999 (date
sales commenced) through October 31, 1999, the Class II shares paid AIM
Distributors $195 as compensation under the Plans.
During the year ended October 31, 1999, the Fund paid legal fees of $8,316 for
services rendered by Kramer, Levin, Naftalis & Frankel LLP as counsel to the
Company's directors. A member of that firm is a director of the Company.
Substantially all shares of the Fund are held of record by State Street Bank
and Trust Company as custodian for AIM Summit Investors Plans I and II, unit
investments trusts that are sponsored by AIM Distributors. Certain officers and
directors of the Fund are officers of AIM and AIM Distributors.
NOTE 3-INDIRECT EXPENSES
During the year ended October 31, 1999, the Fund received reductions in
custodian fees of $28,145 under expense offset arrangements. The effect of the
above arrangements resulted in a reduction of the Fund's total expenses of
$28,145 during the year ended October 31, 1999.
NOTE 4-DIRECTORS' FEES
Directors' fees represent remuneration paid to directors who are not an
"interested person" of AIM. The Company invests directors' fees, if so elected
by a director, in mutual fund shares in accordance with a deferred compensation
plan.
NOTE 5-BANK BORROWINGS
The Fund is a participant in a committed line of credit facility with a
syndicate administered by The Chase Manhattan Bank. The Fund may borrow up to
the lesser of (i) $1,000,000,000 or (ii) the limits set by its prospectus for
borrowings. The Fund and other funds advised by AIM which are parties to the
line of credit may borrow on a first come, first served basis. During the year
ended October 31, 1999, the Fund did not borrow under the line of credit
agreement. The funds which are party to the line of credit are charged a
commitment fee of 0.09% on the unused balance of the committed line. Prior to
May 28, 1999, the commitment fee rate was 0.05%. The commitment fee is allocated
among the funds based on their respective average net assets for the period.
NOTE 6-INVESTMENT SECURITIES
The aggregate amount of investment securities (other than short-term securities)
purchased and sold by the Fund during the year ended October 31, 1999 was
$2,104,224,796 and $2,129,918,843, respectively.
The amount of unrealized appreciation (depreciation) of investment securities,
for tax purposes, as of October 31, 1999 is as follows:
<TABLE>
<S> <C>
Aggregate unrealized appreciation of
investment securities $973,683,957
- ---------------------------------------------------------
Aggregate unrealized appreciation
(depreciation) of investment securities (65,121,247)
- ---------------------------------------------------------
Net unrealized appreciation of investment
securities $908,562,710
=========================================================
</TABLE>
* Cost of investments for tax purposes is $1,727,719,370.
FS-9
<PAGE> 62
NOTE 7-CAPITAL STOCK
Changes in capital stock outstanding during the years ended October 31, 1999 and
1998 were as follows:
<TABLE>
<CAPTION>
1999 1998
--------------------------- ---------------------------
SHARES AMOUNT SHARES AMOUNT
----------- ------------- ----------- -------------
<S> <C> <C> <C> <C>
Sold:
Class I 13,483,892 $ 237,827,156 13,962,660 $ 208,683,626
- -----------------------------------------------------------------------------------------------------------------------
Class II* 36,977 708,414 -- --
- -----------------------------------------------------------------------------------------------------------------------
Issued as reinvestment of dividends:
Class I 7,006,133 112,308,495 11,672,671 154,897,796
- -----------------------------------------------------------------------------------------------------------------------
Reacquired:
Class I (12,707,834) (225,479,867) (12,194,909) (183,406,173)
- -----------------------------------------------------------------------------------------------------------------------
Class II* (1,473) (28,044) -- --
- -----------------------------------------------------------------------------------------------------------------------
7,817,695 $ 125,336,154 13,440,422 $ 180,175,249
=======================================================================================================================
</TABLE>
* Class II shares commenced sales on July 19, 1999.
NOTE 8-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,
1999 for Class I shares and for the period July 19, 1999 (date sales commenced)
through October 31, 1999 for Class II shares.
<TABLE>
<CAPTION>
CLASS II
JULY 19, 1999
CLASS I TO
---------------------------------------------------------------- OCTOBER 31,
1999 1998 1997 1996 1995 1999
---------- ---------- ---------- ---------- ---------- -------------
<S> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of period $ 14.96 $ 15.15 $ 12.99 $ 12.14 $ 9.78 $20.68
- ----------------------------------------------- ---------- ---------- ---------- ---------- ---------- ------
Income from investment operations:
Net investment income -- 0.03 0.02 0.04 0.04 --
- ----------------------------------------------- ---------- ---------- ---------- ---------- ---------- ------
Net gains (losses) on securities (both
realized and unrealized) 6.16 1.23 3.34 1.69 2.81 (0.56)
- ----------------------------------------------- ---------- ---------- ---------- ---------- ---------- ------
Total from investment operations 6.16 1.26 3.36 1.73 2.85 (0.56)
- ----------------------------------------------- ---------- ---------- ---------- ---------- ---------- ------
Less distributions:
Dividends from net investment income (0.04) (0.02) (0.03) (0.03) (0.10) --
- ----------------------------------------------- ---------- ---------- ---------- ---------- ---------- ------
Distributions from net realized gains (0.91) (1.43) (1.17) (0.85) (0.39) --
- ----------------------------------------------- ---------- ---------- ---------- ---------- ---------- ------
Total distributions (0.95) (1.45) (1.20) (0.88) (0.49) --
- ----------------------------------------------- ---------- ---------- ---------- ---------- ---------- ------
Net asset value, end of period $ 20.17 $ 14.96 $ 15.15 $ 12.99 $ 12.14 $20.12
=============================================== ========== ========== ========== ========== ========== ======
Total return(a) 42.79% 9.49% 28.53% 15.61% 31.03% (2.71)%
=============================================== ========== ========== ========== ========== ========== ======
Ratios/supplemental data:
Net assets, end of period (000s omitted) $2,623,901 $1,830,032 $1,650,234 $1,261,008 $1,050,011 $ 714
=============================================== ========== ========== ========== ========== ========== ======
Ratio of expenses to average net assets 0.67%(b) 0.67% 0.68% 0.70% 0.71% 1.46%(c)
=============================================== ========== ========== ========== ========== ========== ======
Ratio of net investment income (loss) to
average net assets (0.01)%(b) 0.23% 0.11% 0.29% 0.33% (0.80)%(c)
=============================================== ========== ========== ========== ========== ========== ======
Portfolio turnover rate 92% 83% 88% 118% 126% 92%
=============================================== ========== ========== ========== ========== ========== ======
</TABLE>
(a) Does not deduct sales charges and is not annualized for periods less than
one year.
(b) Ratios are based on average net assets of $2,381,357,904.
(c) Ratios are annualized and based on average net assets of $227,867.
FS-10
<PAGE> 63
AIM SUMMIT FUND, INC.
---------------------------------------------------------------------
Class II Shares
AIM Summit Fund, Inc. seeks to provide growth of capital.
AIM--Registered Trademark--
PROSPECTUS
FEBRUARY 28, 2000
Class II Shares of the fund are offered to
and may be purchased by the general public
primarily 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.
An investment in the fund:
- is not FDIC insured;
- may lose value; and
- is not guaranteed by a bank.
The Board of Directors voted to
request shareholder approval of
certain items. For further
information on these items, see
Submission of Matters to
Shareholders in this prospectus.
[AIM LOGO APPEARS HERE] INVEST WITH DISCIPLINE
--Registered Trademark--
<PAGE> 64
---------------------
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
- - - - - - - - - - - - - - - - - - - - - - - - -
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 Advisor A-4
Advisor Compensation A-4
Portfolio Managers A-4
OTHER INFORMATION A-5
- - - - - - - - - - - - - - - - - - - - - - - - -
Dividends and Distributions A-5
Submission of Matters to Shareholders A-5
FINANCIAL HIGHLIGHTS A-6
- - - - - - - - - - - - - - - - - - - - - - - - -
SHAREHOLDER INFORMATION A-7
- - - - - - - - - - - - - - - - - - - - - - - - -
Pricing of Shares A-7
Sales of Shares A-7
Redemption of Shares A-7
Taxes A-8
Open Account A-8
Distribution and Service (12b-1) Fees A-8
Other Information A-8
OBTAINING ADDITIONAL INFORMATION Back Cover
- - - - - - - - - - - - - - - - - - - - - - - - -
</TABLE>
The AIM Family of Funds, The AIM Family of Funds and Design (i.e., the AIM
logo), AIM and Design, AIM, AIM LINK, AIM Institutional Funds, aimfunds.com, La
Familia AIM de Fondos, La Familia AIM de Fondos and Design and Invest with
Discipline are registered service marks and AIM Bank Connection, AIM Funds, AIM
Funds and Design, AIM Internet Connect and AIM Investor are service marks of
A I M Management Group Inc.
No dealer, salesperson or any other person has been authorized to give any
information or to make any representations other than those contained in this
prospectus, and you should not rely on such other information or
representations.
<PAGE> 65
---------------------
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 portfolio managers believe have the potential for growth
in earnings, including small-sized growth companies, and in common stocks
believed to be undervalued 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 portfolio managers purchase securities of companies that they believe have
the potential for growth. The 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, for cash
management purposes, or for defensive purposes, the fund may temporarily hold
all or a portion of its assets in cash, money market instruments, shares of
affiliated money market funds, bonds or other debt securities. As a result, 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.
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> 66
---------------------
AIM SUMMIT FUND, INC.
---------------------
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 RETURNS
- ----------- -------
<S> <C>
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%
1999 ....................................... 50.76%
</TABLE>
The returns are those of the fund's Class I Shares, which are not offered in
this prospectus. Class II Shares would have substantially similar annual returns
because the shares are invested in the same portfolio of securities, but would
be lower to the extent that the classes have different expenses.
During the periods shown in the bar chart, the highest quarterly return was
37.12% (quarter ended March 31, 1999) and the lowest quarterly return was
- -28.30% (quarter ended March 31, 1987).
PERFORMANCE TABLE
The following performance table compares the fund's performance to that of a
broad-based securities market index.
<TABLE>
<CAPTION>
AVERAGE ANNUAL TOTAL RETURNS
- ------------------------------------------------------------------------------
(for the periods ended SINCE INCEPTION
December 31, 1999) 1 YEAR 5 YEARS 10 YEARS INCEPTION DATE
- ------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Class I Shares 37.95% 30.13% 19.52% 16.28% 11/01/82
Class II Shares -- -- -- -- 07/19/99
S & P 500(1) 21.03% 28.54% 18.19% 17.99%(2) 10/31/82(2)
- ------------------------------------------------------------------------------
</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> 67
---------------------
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 0.63%
Distribution and/or Service (12b-1)
Fees 0.30
Other Expenses 2.54
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 limit net expenses.
As a result of 12b-1 fees, long-term shareholders in the fund may pay more than
the maximum permitted initial sales charge.
EXPENSE EXAMPLE
This example is intended to help you compare the costs of investing in 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 $350 $1,065 $1,803 $3,747
- --------------------------------------------------------
</TABLE>
A-3
<PAGE> 68
---------------------
AIM SUMMIT FUND, INC.
---------------------
FUND MANAGEMENT
- --------------------------------------------------------------------------------
THE ADVISOR
A I M Advisors, Inc. (the advisor), 11 Greenway Plaza, Suite 100, Houston, TX
77046, serves as the fund's investment advisor. The advisor supervises all
aspects of the fund's operations and provides investment advisory services to
the fund, including obtaining and evaluating economic, statistical and financial
information to formulate and implement investment programs for the fund.
The advisor has acted as an investment advisor since its organization in 1976,
and together with its subsidiaries, advises or manages over 120 investment
portfolios, including the fund, encompassing a broad range of investment
objectives.
ADVISOR COMPENSATION
During the fiscal year ended October 31, 1999, the advisor received compensation
of 0.63% of average daily net assets.
PORTFOLIO MANAGERS
The advisor uses a team approach to investment management. The individual
members of the team who are primarily responsible for the day-to-day management
of the fund's portfolio, all of whom are officers of A I M Capital Management,
Inc., a wholly owned subsidiary of the advisor, are
- - 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.
- - 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.
- - 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.
- - Bret W. Stanley, Senior Portfolio Manager, who has been responsible for the
fund since 1999 and has been associated with the advisor and/or its affiliates
since 1998. From 1994 to 1998, he was Vice President and portfolio manager
with Van Kampen American Capital Asset Management, Inc.
- - 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.
A-4
<PAGE> 69
---------------------
AIM SUMMIT FUND, INC.
---------------------
OTHER INFORMATION
- --------------------------------------------------------------------------------
DIVIDENDS AND DISTRIBUTIONS
The fund expects that its distributions will consist primarily of capital gains.
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, if any,
annually.
SUBMISSION OF MATTERS TO SHAREHOLDERS
At a meeting held on February 3, 2000, the Board of Directors of the fund voted
to request shareholders to approve the following items that will affect the
fund:
- - A Plan of Recapitalization pursuant to which the Class II shares of the fund
will be reclassified as Class I shares of the fund;
- - An Agreement and Plan of Reorganization which provides for the reorganization
of the fund, which is currently a Maryland corporation, as a Delaware business
trust;
- - A new advisory agreement between the fund and A I M Advisors, Inc. (AIM). The
principal changes to the advisory agreement are (i) the deletion of references
to the provision of administrative services and certain expense limitations
that are no longer applicable, and (ii) the clarification of provisions
relating to delegations of responsibilities and the non-exclusive nature of
AIM's services. The revised advisory agreement does not change the fees paid
by the fund (except that the agreement permits the fund to pay a fee to AIM in
connection with any new securities lending program implemented in the future);
and
- - Changing the fund's fundamental investment restrictions. The proposed
revisions to the fund's fundamental investment restrictions are described in
the fund's statement of additional information.
The Board of Directors of the fund has called a meeting of the fund's
shareholders to be held on or about May 3, 2000 to vote on these and other
proposals. Only shareholders of record as of February 18, 2000 will be entitled
to vote at the meeting. Proposals that are approved are currently expected to
become effective on or about June 30, 2000.
A-5
<PAGE> 70
---------------------
AIM SUMMIT FUND, INC.
---------------------
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 II
-----------------
JULY 19, 1999
(DATE SALES
COMMENCED) TO
OCTOBER 31, 1999
- -------------------------------------------------------------------------------
<S> <C>
Net asset value, beginning of period $20.68
Income from investment operations:
Net investment income --
Net gains (losses) on securities (both realized and
unrealized) (0.56)
Total from investment operations (0.56)
Less distributions:
Dividends from net investment income --
Distributions from net realized gains --
Total distributions --
Net asset value, end of period $20.12
Total return(a) (2.71)%
- -------------------------------------------------------------------------------
Ratios/supplemental data:
- -------------------------------------------------------------------------------
Net assets, end of period (000s omitted) $ 714
Ratio of expenses to average net assets 1.46%(b)
Ratio of net investment income (loss) to average net assets (0.80)%(b)
Portfolio turnover rate 92%
- -------------------------------------------------------------------------------
</TABLE>
(a) Does not deduct sales charges and is not annualized for periods less than
one year.
(b) Ratios are annualized and based on average net assets of $227,867.
A-6
<PAGE> 71
---------------------
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 customary trading session 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
customary trading session 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 a Plan.
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.
The transfer agent requires 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 of the customary trading
session of the NYSE is open for business in order to effect the redemption at
that day's closing price.
The transfer agent normally will send out checks within one business day, and
in any event no more than seven days, after it accepts 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 the transfer agent a request in good order to redeem your shares,
it will mail you a check in the amount of the redemption proceeds to the address
on record. If your request is not in good order, you may have to provide the
transfer
A-7
<PAGE> 72
---------------------
AIM SUMMIT FUND, INC.
---------------------
agent with additional documentation in order to redeem your shares.
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. The transfer agent uses
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. The transfer agent 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.
OTHER INFORMATION
The fund currently offers two classes of shares each of which share a common
investment objective and portfolio of investments. The two classes differ only
with respect to distribution arrangements for different categories of investors.
A-8
<PAGE> 73
---------------------
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 review and obtain copies of the fund's SAI, reports and other
information at the SEC's Public Reference Room in Washington, DC; on the EDGAR
database on the SEC's Internet website (http://www.sec.gov); or, after paying a
duplication fee, by sending a letter to the SEC's Public Reference Section,
Washington, DC 20549-0102 or by sending an electronic mail request to
[email protected]. Please call the SEC at 1-202-942-8090 for information about
the Public Reference Room.
- -----------------------------------
AIM Summit Fund, Inc.
SEC 1940 Act file number: 811-3443
- -----------------------------------
[AIM LOGO APPEARS HERE] SUM2-PRO-1 INVEST WITH DISCIPLINE
--Registered Trademark--
<PAGE> 74
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 FUND SERVICES, INC., P.O. BOX 4739,
HOUSTON, TEXAS 77210-4739.
------------------
STATEMENT OF ADDITIONAL INFORMATION DATED FEBRUARY 28, 2000
RELATING TO THE CLASS II SHARES PROSPECTUS DATED FEBRUARY 28, 2000
<PAGE> 75
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
<S> <C>
INTRODUCTION......................................................................................................1
Submission of Matters to Shareholders....................................................................1
PERFORMANCE INFORMATION...........................................................................................3
Total Return Quotations..................................................................................4
GENERAL INFORMATION ABOUT THE FUND................................................................................5
The Fund and its Capital Stock...........................................................................5
MANAGEMENT OF THE FUND............................................................................................6
Directors and Officers...................................................................................6
The Investment Advisor..................................................................................12
Expenses................................................................................................13
Transfer Agent and Custodian............................................................................14
Reports.................................................................................................14
DIVIDENDS, DISTRIBUTIONS AND TAX MATTERS.........................................................................14
Reinvestment of Dividends and Distributions.............................................................14
Qualification as a Regulated Investment Company.........................................................15
Determination of Taxable Income of a Regulated Investment Company.......................................15
Excise Tax on Regulated Investment Companies............................................................16
Fund Distributions......................................................................................17
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 Plan...................................................................................20
The Distribution Agreement..............................................................................22
INVESTMENT STRATEGIES AND RISKS..................................................................................23
Investment Program......................................................................................23
Common Stocks...........................................................................................24
Preferred Stocks........................................................................................24
Convertible Securities..................................................................................24
Corporate Debt Securities...............................................................................24
U.S. Government Securities..............................................................................25
Real Estate Investment Trusts ("REITs").................................................................25
Warrants................................................................................................25
Foreign Securities......................................................................................25
Foreign Exchange Transactions...........................................................................27
Repurchase Agreements...................................................................................27
Rule 144A Securities....................................................................................27
Illiquid Securities.....................................................................................27
Equity-Linked Derivatives...............................................................................28
Investment in Other Investment Companies................................................................28
Temporary Defensive Investments.........................................................................28
Lending of Fund Securities..............................................................................28
Portfolio Turnover......................................................................................28
</TABLE>
i
<PAGE> 76
<TABLE>
<S> <C>
OPTIONS, FUTURES AND CURRENCY STRATEGIES.........................................................................29
Introduction............................................................................................29
General Risks of Options, Futures and Currency Strategies...............................................29
Cover...................................................................................................30
Writing Call Options....................................................................................30
Over-The-Counter Options................................................................................30
Index Options...........................................................................................31
Limitations on Options..................................................................................31
Interest Rate, Currency and Stock Index Futures Contracts...............................................31
Options on Futures Contracts............................................................................32
Forward Contracts.......................................................................................32
Limitations on Use of Futures, Call Options on Futures and Certain Call Options on Currencies...........33
PORTFOLIO TRANSACTIONS AND BROKERAGE.............................................................................33
INVESTMENT RESTRICTIONS..........................................................................................36
MISCELLANEOUS INFORMATION........................................................................................37
Shareholder Inquiries...................................................................................37
Legal Matters...........................................................................................37
FINANCIAL STATEMENTS.............................................................................................FS
</TABLE>
ii
<PAGE> 77
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 II Shares (the "Class"), of the Fund is included in a Prospectus dated
February 28, 2000, which may be obtained without charge by written request to
A I M Distributors, Inc. ("AIM Distributors"). Investors may also call A I M
Fund Services, Inc. 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.
SUBMISSION OF MATTERS TO SHAREHOLDERS
At a meeting held on February 3, 2000, the Board of Directors of the
Fund, on behalf of Class II Shares, voted to request shareholder approval to
amend the Fund's fundamental investment restrictions. The Board of Directors has
called a meeting of the Fund's shareholders to be held on or about May 3, 2000.
Only shareholders of record as of February 18, 2000 are entitled to vote at the
meeting. Proposals that are approved are currently expected to become effective
on or about June 30, 2000.
If shareholders approve the proposal to amend the Fund's fundamental
investment restrictions, the Fund will operate under the following fundamental
investment restrictions:
The Fund is subject to the following investment restrictions, which may
be changed only by a vote of a majority of the Fund's outstanding shares:
(a) the Fund is a "diversified company" as defined in the 1940 Act. The
Fund will not purchase the securities of any issuer if, as a result, the
Fund would fail to be a diversified company within the meaning of the 1940
Act, and the rules and regulations promulgated thereunder, as such statute,
rules and regulations are amended from time to time or are interpreted from
time to time by the SEC staff (collectively, the 1940 Act laws and
interpretations) or except to the extent that the Fund may be permitted to
do so by exemptive order or similar relief (collectively, with the 1940 Act
laws and interpretations, the 1940 Act laws, interpretations and
exemptions). In complying with this restriction, however, the Fund may
purchase securities of other investment companies to the extent permitted
by the 1940 Act laws, interpretations and exemptions.
(b) the Fund may not borrow money or issue senior securities, except as
permitted by the 1940 Act laws, interpretations and exemptions.
(c) the Fund may not underwrite the securities of other issuers. This
restriction does not prevent the Fund from engaging in transactions
involving the acquisition, disposition or resale of its portfolio
securities, regardless of whether the Fund may be considered to be an
underwriter under the Securities Act of 1933.
(d) the Fund will not make investments that will result in the
concentration (as that term may be defined or interpreted by the 1940 Act
laws, interpretations and exemptions) of its investments in the securities
of issuers primarily engaged in the same industry. This restriction does
not limit the Fund's investments in (i) obligations issued or guaranteed by
the U.S. Government, its agencies or instrumentalities, or (ii) tax-exempt
obligations issued by governments or political subdivisions of
1
<PAGE> 78
governments. In complying with this restriction, the Fund will not consider
a bank-issued guaranty or financial guaranty insurance as a separate
security.
(e) the Fund may not purchase real estate or sell real estate unless
acquired as a result of ownership of securities or other instruments. This
restriction does not prevent the Fund from investing in issuers that
invest, deal, or otherwise engage in transactions in real estate or
interests therein, or investing in securities that are secured by real
estate or interests therein.
(f) the Fund may not purchase physical commodities or sell physical
commodities unless acquired as a result of ownership of securities or other
instruments. This restriction does not prevent the Fund from engaging in
transactions involving futures contracts and options thereon or investing
in securities that are secured by physical commodities.
(g) the Fund may not make personal loans or loans of its assets to
persons who control or are under common control with the fund, except to
the extent permitted by 1940 Act laws, interpretations and exemptions. This
restriction does not prevent the Fund from, among other things, purchasing
debt obligations, entering into repurchase agreements, loaning its assets
to broker-dealers or institutional investors, or investing in loans,
including assignments and participation interests.
The investment restrictions set forth above provide the Fund with the
ability to operate under new interpretations of the 1940 Act or pursuant to
exemptive relief from the SEC without receiving prior shareholder approval of
the change. Even though the Fund has this flexibility, the Board of Directors
has adopted internal guidelines for the Fund relating to certain of these
restrictions which the adviser must follow in managing the Fund. Any changes to
these guidelines, which are set forth below, require the approval of the Board
of Directors.
1. In complying with the fundamental restriction regarding issuer
diversification, the Fund will not, with respect to 75% of its total
assets, purchase the securities of any issuer (other than securities
issued or guaranteed by the U.S. Government or any of its agencies or
instrumentalities), if, as a result, (i) more than 5% of the Fund's
total assets would be invested in the securities of that issuer, or
(ii) the Fund would hold more than 10% of the outstanding voting
securities of that issuer. The Fund may (i) purchase securities of
other investment companies as permitted by Section 12(d)(1) of the 1940
Act and (ii) invest its assets in securities of other money market
funds and lend money to other investment companies or their series
portfolios that have AIM or an affiliate of AIM as an investment
adviser (an AIM Fund), subject to the terms and conditions of any
exemptive orders issued by the SEC.
2. In complying with the fundamental restriction regarding borrowing money
and issuing senior securities, the Fund may borrow money in an amount
not exceeding 33 1/3% of its total assets (including the amount
borrowed) less liabilities (other than borrowings). The Fund may borrow
from banks, broker-dealers or an AIM Fund. The Fund may not borrow for
leveraging, but may borrow for temporary or emergency purposes, in
anticipation of or in response to adverse market conditions, or for
cash management purposes. The Fund may not purchase additional
securities when any borrowings from banks exceed 5% of the fund's total
assets.
3. In complying with the fundamental restriction regarding industry
concentration, the Fund may invest up to 25% of its total assets in the
securities of issuers whose principal business activities are in the
same industry.
4. In complying with the fundamental restriction with regard to making
loans, the Fund may lend up to 33 1/3% of its total assets and may lend
money to another AIM fund, on such terms and conditions as the SEC may
require in an exemptive order.
If a percentage restriction is adhered to at the time of investment, a
later change in percentage resulting from changes in values of assets will not
be considered a violation of the restriction.
2
<PAGE> 79
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, 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 or amended to the
Funds' detriment during the period stated in the agreement between AIM and the
Fund. Fee waivers or reductions or commitments to reduce expenses will have the
effect of increasing that Fund's yield and total return.
The performance of the Fund will vary from time to time and past
results are not necessarily indicative of future results. The 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 the Class is not insured or
guaranteed. These factors should be carefully considered by the investor before
making an investment in the 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.
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>
3
<PAGE> 80
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 Treasury Notes
30 year Treasury Bond
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.
The Fund may participate in the initial public offering ("IPO") market,
and a significant portion of the Fund's returns may be attributable to its
investment in IPOs. Investments in IPOs could have a magnified impact on a fund
with a small asset base. There is no guarantee that as a fund's assets grow, it
will continue to experience substantially similar performance by investing in
IPOs.
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.
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).
4
<PAGE> 81
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.
Class II Shares commenced operations on July 19, 1999.
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.
The cumulative total return for the Class for the period July 19, 1999
(date sales commenced) through October 31, 1999, was -11.37%.
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 1,760,000,000 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 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.
5
<PAGE> 82
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, 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.
6
<PAGE> 83
<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 (80) Chairman and Director Director and Chairman, A I M 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 Executive
Vice Chairman of AMVESCAP PLC.
- --------------------------------------------------------------------------------------------------------------------
Bruce L. Crockett, (55) Director Director, ACE Limited (insurance company). Formerly
906 Frome Lane Director, President and Chief Executive Officer, COMSAT
McLean, VA 22102 Corporation; and Chairman, Board of Governors of
INTELSAT (international communications company).
- --------------------------------------------------------------------------------------------------------------------
Owen Daly II (75) Director Formerly, Director, Cortland Trust Inc. (investment
Six Blythewood Road company), CF & I Steel Corp., Monumental Life Insurance
Baltimore, MD 21210 Company and Monumental General Insurance Company; and
Chairman of the Board of Equitable Bancorporation
- --------------------------------------------------------------------------------------------------------------------
Edward K. Dunn, Jr. (64) Director Chairman of the Board of Directors, Mercantile Mortgage
2 Hopkins Plaza, 8th Floor, Corp. Formerly, Vice Chairman of the Board of
Suite 805 Directors, President and Chief Operating Officer,
Baltimore, MD 21201 Mercantile - Safe Deposit & Trust Co.; and President,
Mercantile Bankshares.
- --------------------------------------------------------------------------------------------------------------------
Jack Fields (48) Director Chief Executive Officer, Texana Global, Inc. (foreign
Jetero Plaza, Suite E trading company) and Twenty-First Century Group, Inc.
8810 Will Clayton Parkway (governmental affairs company) and Director, Telscape
Humble, TX 77338 International and Administaff. Formerly, Member of the
U.S. House of Representatives.
- --------------------------------------------------------------------------------------------------------------------
**Carl Frischling (63) 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 (53) Director and Director, President and Chief Executive Officer, A I M
President Management Group Inc.; Director and President, A I M
Advisors, Inc.; Director and Senior Vice President,
A I M Capital Management, Inc., A I M Distributors,
Inc., A I M Fund Services, Inc. and Fund Management
Company; and Director and CEO, Managed Products,
AMVESCAP PLC.
- --------------------------------------------------------------------------------------------------------------------
Prema Mathai-Davis (49) Director Chief Executive Officer YWCA of the USA.
350 Fifth Avenue, Suite 301
New York, NY 10118
- --------------------------------------------------------------------------------------------------------------------
</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.
7
<PAGE> 84
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------------------
Position(s) Held Principal Occupation(s) During,
Name, Address and Age with Registrant At Least, the Past 5 years
- --------------------- --------------- --------------------------
- --------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Lewis F. Pennock (57) Director Partner, Pennock & Cooper (law firm).
6363 Woodway, Suite 825
Houston, Texas 77057
- --------------------------------------------------------------------------------------------------------------------
Louis S. Sklar (60) Director Executive Vice President, Development and Operations,
The Williams Tower, Hines Interests Limited Partnership (real estate
50th Floor development).
2800 Post Oak Blvd.
Houston, Texas 77056
- --------------------------------------------------------------------------------------------------------------------
Gary T. Crum (52) Senior Vice Director and President, A I M Capital Management, Inc.;
President Director and Executive Vice President, A I M Management
Group Inc.; Director and Senior Vice President, A I M
Advisors, Inc.; and Director, A I M Distributors, Inc.
and AMVESCAP PLC.
- --------------------------------------------------------------------------------------------------------------------
Carol F. Relihan (45) Senior Vice Director, Senior Vice President, General Counsel and
President and Secretary, A I M Advisors, Inc.; Senior Vice President,
Secretary 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 (41) Vice President and Vice President and Fund Controller, A I M Advisors,
Treasurer Inc.; and Assistant Vice President and Assistant
Treasurer, Fund Management Company.
- --------------------------------------------------------------------------------------------------------------------
Melville B. Cox (56) Vice President Vice President and Chief Compliance Officer, A I M
Advisors, Inc., A I M Capital Management, Inc.,
A I M Distributors, Inc., A I M Fund Services, Inc.
and Fund Management Company.
- --------------------------------------------------------------------------------------------------------------------
Edgar M. Larsen (59) Vice President Vice President, A I M Capital Management, Inc.
- --------------------------------------------------------------------------------------------------------------------
</TABLE>
The Board of Directors has an Audit Committee, a Capitalization
Committee, an Investments Committee and a Nominating and Compensation Committee.
The members of the Audit Committee are Messrs. Crockett, Daly, Dunn
(Chairman), Fields, Frischling, Pennock and Sklar and Dr. Mathai-Davis. The
Audit Committee is responsible for: (i) considering management's recommendations
of independent accountants for the Fund and evaluating such accountants'
performance, costs and financial stability; (ii) with AIM, reviewing and
coordinating audit plans prepared by the Fund's independent accountants and
management's internal audit staff; and (iii) reviewing financial statements
contained in periodic reports to shareholders with the Fund's independent
accountants and management.
The members of the Capitalization Committee are Messrs. Bauer, Graham
(Chairman) and Pennock. The Capitalization Committee is responsible for: (i)
increasing or decreasing the aggregate number of shares of any class of the
Fund's common stock by classifying and reclassifying the Fund's authorized but
unissued shares of common stock, up to the Fund's authorized capital; (ii)
fixing the terms of such classified or
8
<PAGE> 85
reclassified shares of common stock; and (iii) issuing such classified or
reclassified shares of common stock upon the terms set forth in the Fund's
prospectus, up to the Fund's authorized capital.
The members of the Investments Committee are Messrs. Bauer, Crockett,
Daly, Dunn, Fields, Frischling, Pennock and Sklar (Chairman) and Dr.
Mathai-Davis. The Investments Committee is responsible for: (i) overseeing AIM's
investment related compliance systems and procedures to ensure their continued
adequacy; and (ii) considering and acting, on an interim basis between meetings
of the full Board, on investment related matters requiring Board consideration,
including dividends and distributions, brokerage policies and pricing matters.
The members of the Nominating and Compensation Committee are Messrs.
Crockett (Chairman), Daly, Dunn, Fields, Pennock and Sklar and Dr. Mathai-Davis.
The Nominating and Compensation Committee is responsible for: (i) considering
and nominating individuals to stand for election as independent directors as
long as the Fund maintains a distribution plan pursuant to Rule 12b-1 under the
1940 Act; (ii) reviewing from time to time the compensation payable to the
independent directors; and (iii) making recommendations to the Board regarding
matters related to compensation, including deferred compensation plans and
retirement plans for the independent directors.
The Nominating and Compensation Committee will consider nominees
recommended by a shareholder to serve as directors, provided (i) that such
person is a shareholder of record at the time he or she submits such names and
is entitled to vote at the meeting of shareholders at which directors will be
elected, and (ii) that the Nominating and Compensation Committee or the Board,
as applicable, shall make the final determination of persons to be nominated.
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.
9
<PAGE> 86
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 2,045 37,485 103,500
- ------------------------------------------------------------------------------------------------
Owen Daly II 2,045 122,898 103,500
- ------------------------------------------------------------------------------------------------
Edward K. Dunn 2,045 55,565 103,500
- ------------------------------------------------------------------------------------------------
Jack Fields 2,004 15,826 101,500
- ------------------------------------------------------------------------------------------------
Carl Frischling(4) 2,035 97,791 103,500
- ------------------------------------------------------------------------------------------------
Robert H. Graham 0 0 0
- ------------------------------------------------------------------------------------------------
John F. Kroeger (5) 0 40,461 0
- ------------------------------------------------------------------------------------------------
Prema Mathai-Davis 2,045 11,870 101,500
- ------------------------------------------------------------------------------------------------
Lewis F. Pennock 2,035 45,755 103,500
- ------------------------------------------------------------------------------------------------
Ian Robinson(6) 858 94,442 25,000
- ------------------------------------------------------------------------------------------------
Louis S. Sklar 2,035 90,232 101,500
================================================================================================
</TABLE>
- ---------------
(1) The total amount of compensation deferred by all Directors of the Fund
during the fiscal year ended October 31, 1999, including interest earned
thereon, was $13,529.
(2) During the fiscal year ended October 31, 1999, the total amount of expenses
allocated to the Fund in respect of such retirement benefits was $13,895. Data
reflects compensation for the calendar year ended December 31, 1999.
(3) Each Director serves as director or trustee of a total of 12 registered
investment companies advised by AIM. Data reflects compensation earned during
the calendar year ended December 31, 1999.
(4) During the fiscal year ended October 31, 1999, the Fund paid $8,316 in legal
fees to Mr. Frischling's law firm, Kramer Levin Naftalis & Frankel LLP, for
services rendered to the independent directors of the fund.
(5) Mr. Kroeger was a director until June 11, 1998. Mr. Kroeger's widow will
receive his pension as described below under "AIM Fund Retirement Plan for
Eligible Directors/Trustees".
(6) Mr. Robinson was a director until March 12, 1999, when he retired.
10
<PAGE> 87
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. ("AIM Management"), or any of its
affiliates) 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 affiliates (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 or her date of retirement
equal to a maximum of 75% of the annual 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 Applicable AIM Funds and the director)
and based on 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 Applicable AIM
Fund.
Set forth below is a table that shows the estimated annual benefits
payable to an eligible director upon retirement assuming a specified level of
compensation and years of service classifications. The estimated credited years
of service for Messrs. Crockett, Daly, Dunn, Fields, Frischling, Kroeger,
Pennock, Robinson, and Sklar and Dr. Mathai-Davis are 13, 13, 2, 3, 23, 20, 18,
11, 10 and 1 years, respectively.
ESTIMATED ANNUAL BENEFITS UPON RETIREMENT
<TABLE>
<CAPTION>
=============================================================
Annual Retirement
Number of Years of Service With Compensation Paid By All
the Applicable AIM Funds Applicable AIM Funds
=============================================================
<S> <C>
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 and Sklar and Dr. Mathai-Davis
(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
11
<PAGE> 88
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 or her
deferral account, the balance of the deferral account will be distributed to his
or her 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 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
120 investment 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 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.
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.
12
<PAGE> 89
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 or amended to the Fund's detriment during the
period stated in the agreement between AIM and the Fund.
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 (the "Sub-Contract"). 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. Effective March 13, 2000, the
Sub-Contract will be terminated.
During the fiscal years ended October 31, 1999, 1998 and 1997, AIM
received management and advisory fees from the Fund of $15,096,393, $11,372,220
and $9,353,715, respectively. See "Expenses".
For the fiscal years ended October 31, 1999, 1998 and 1997, AIM was
reimbursed $114,068, $72,766 and $67,450, respectively, for costs associated
with performing administrative services.
Prior to July 1, 1999, TradeStreet Investment Associates, Inc.
("TradeStreet"), 101 South Tryon Street, Suite 1000, Charlotte, North Carolina
28255, served as Sub-Advisor. TradeStreet is a wholly owned subsidiary of
NationsBank, N.A. and a registered investment advisor.
For the period November 1, 1998 through July 1, 1999 and the fiscal year
ended October 31, 1998 and 1997, TradeStreet received fees from AIM of
$2,774,130, $3,405,833 and $2,921,391, 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
13
<PAGE> 90
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
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, Boston Financial Data Services, Inc. ("BFDS"), and AFS such
compensation as may be agreed 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, 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 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.
14
<PAGE> 91
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 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.
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<PAGE> 92
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.
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).
16
<PAGE> 93
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.
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.
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").
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<PAGE> 94
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.
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.
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<PAGE> 95
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 the customary
trading session 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 the
customary trading session 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.
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<PAGE> 96
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, prior to the determination of net asset value.
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 customary trading
session 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
customary trading session 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 customary trading session 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 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 Plan are subject to any applicable
limitations imposed by rules of the National Association of Securities Dealers,
Inc.
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<PAGE> 97
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.
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 or amended to the Fund's detriment during the period stated in the
agreement between AIM Distributors and the Fund.
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.
For the period July 19, 1999 (date sales commenced) to October 31, 1999,
the Class paid AIM Distributors under the Distribution Plan $195, or an amount
equal to 0.30%, of the Class' average daily net assets on an annualized basis.
An estimate by category of actual fees paid by the Class during the
period July 19, 1999 (date sales commenced) through October 31, 1999, were
allocated as follows:
21
<PAGE> 98
CLASS II SHARES
<TABLE>
<S> <C>
Advertising $24
Printing and mailing prospectuses, semi-annual 2
reports and annual reports (other than to current
shareholders)
Seminars 0
Compensation to Underwriters to partially 0
offset other marketing expenses
Compensation to Dealers including 6
finder's fees
Compensation to Sales Personnel 0
Annual Report Total 32
</TABLE>
As required by Rule 12b-1, the Distribution Plan and related form of
Shareholder Service Agreement 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.
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, as custodian for the Plan. 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
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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 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
capabilities than is the case with other types of securities in which
the Fund may invest.
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, 2000, 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, 2000, 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
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<PAGE> 100
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 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.
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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 25% of the total assets of the Fund.
REITs are trusts which sell equity or debt securities to investors and
use the proceeds to invest 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 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)
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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
Depositary Receipts ("ADRs"), European Depositary 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 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.
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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 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 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
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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.
EQUITY-LINKED DERIVATIVES
The Fund may invest in equity-linked derivative products designed to
replicate the composition and performance of particular indices. Examples of
such products include S&P Depositary Receipts ("SPDRs"), World Equity Benchmark
Series ("WEBs"), NASDAQ 100 tracking shares ("QQQs"), Dow Jones Industrial
Average Instruments ("DIAMONDS") and Optomised Portfolios as Listed Securities
("OPALS"). Investments in equity-linked derivatives involve the same risks
associated with a direct investment in the types of securities included in the
indices such products are designed to track. There can be no assurance that the
trading price of the equity-linked derivatives will equal the underlying value
of the basket of securities purchased to replicate a particular index or that
such basket will replicate the index. Investments in equity-linked derivatives
may constitute investment in other investment companies. See "Investment in
Other Investment Companies".
INVESTMENT IN OTHER INVESTMENT COMPANIES
The Fund may invest in other investment companies to the extent
permitted by the 1940 Act, and rules and regulations thereunder, and if
applicable, exemptive orders granted by the SEC. The following restrictions
apply to investments in other investment companies other than Affiliated Money
Market Funds (defined below): (i) the Fund may not purchase more than 3% of the
total outstanding voting stock of another investment company; (ii) the Fund may
not invest more than 5% of its total assets in securities issued by another
investment company; and (iii) the Fund may not invest more than 10% of its total
assets in securities issued by other investment companies other than Affiliated
Money Market Funds. With respect to the Fund's purchase of shares of another
investment company, including Affiliated Money Market Funds, the Fund will
indirectly bear its proportionate share of the advisory fees and other operating
expenses of such investment company. The Fund has obtained an exemptive order
from the SEC allowing it to invest in money market funds that have AIM or an
affiliate of AIM as an investment adviser (the "Affiliated Money Market Funds"),
provided that investments in Affiliated Money Market Funds do not exceed 25% of
the total assets of the fund. With respect to the fund's purchase of shares of
the Affiliated Money Market Funds, the Fund will indirectly pay the advisory
fees and other operating expenses of the Affiliated Money Market Funds.
TEMPORARY DEFENSIVE INVESTMENTS
In anticipation of or in response to adverse market conditions, for
cash management purposes, or for defensive purposes, the Fund may temporarily
hold all or a portion of its assets in cash, money market instruments, bonds, or
other debt securities. The Fund may also invest up to 25% of its total assets in
Affiliated Money Market Funds for these purposes. 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.
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.
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
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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.
OPTIONS, FUTURES AND CURRENCY STRATEGIES
INTRODUCTION
The Fund may use forward contracts, futures contracts, call options on
securities, call options on indices, call options on currencies, and call
options on futures contracts to attempt to hedge against the overall level of
investment and currency risk normally associated with the Fund's Investments.
These instruments are often referred to as "derivatives", which may be defined
as financial instruments whose performance is derived, at least in part, from
the performance of another asset (such as a security, currency or an index of
securities).
GENERAL RISKS OF OPTIONS, FUTURES AND CURRENCY STRATEGIES
The use by the Fund of call options, futures contracts and forward
currency contracts involves special considerations and risks, as described
below. Risks pertaining to particular strategies are described in the sections
that follow.
(1) Successful use of hedging transactions depends upon AIM's ability to
correctly predict the direction of changes in the value of the applicable
markets and securities, contracts and/or currencies. While AIM is experienced in
the use of these instruments, there can be no assurance that any particular
hedging strategy will succeed.
(2) There might be imperfect correlation, or even no correlation,
between the price movements of an instrument (such as a call option contract)
and the price movements of the investments being hedged. Such a lack of
correlation might occur due to factors unrelated to the value of the investments
being hedged, such as changing interest rates, market liquidity, and speculative
or other pressures on the markets in which the hedging instrument is traded.
(3) Hedging strategies, if successful, can reduce risk of loss by wholly
or partially offsetting the negative effect of unfavorable price movements in
the investments being hedged. However, hedging strategies can also reduce
opportunity for gain by offsetting the positive effect of favorable price
movements in the hedged investments.
(4) There is no assurance that a liquid secondary market will exist for
any particular call option, futures contract, forward contract or call option
thereon at any particular time.
(5) As described below, the Fund is required to maintain assets as
"cover", and might be required to maintain segregated accounts or make margin
payments when it takes positions in instruments involving obligations to third
parties. If the Fund were unable to close out its positions in such instruments,
it might be required to continue to maintain such assets or accounts or make
such payments until the position expired or matured. The requirements might
impair the Fund's ability to sell a portfolio security or make an investment at
a time when it would otherwise be favorable to do so, or require that the Fund
sell a portfolio security at a disadvantageous time.
(6) There is no assurance that the Fund will use hedging transactions.
For example, if the Fund determines that the cost of hedging will exceed the
potential benefit to the Fund, the Fund will not enter into such transaction.
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COVER
Transactions using forward contracts, futures contracts and call options
expose the Fund to an obligation to another party. The Fund will not enter into
any such transactions unless it owns either (1) an offsetting ("covered")
position in securities, currencies, forward contracts or futures contracts or
(2) cash, liquid assets and/or short-term debt securities with a value
sufficient at all times to cover its potential obligations not covered as
provided in (1) above. The Fund will comply with SEC guidelines regarding cover
for these instruments and, if the guidelines so require, set aside cash or
liquid securities. To the extent that a futures contract, forward contract or
option is deemed to be illiquid, the assets used to "cover" the Fund's
obligation will also be treated as illiquid for purposes of determining the
Fund's maximum allowable investment in illiquid securities.
Assets used as cover cannot be sold while the position in the
corresponding forward contract, futures contract or call option is open, unless
they are replaced with other appropriate assets. If a large portion of the
Fund's assets is used for cover or otherwise set aside, it could affect
portfolio management or the Fund's ability to meet redemption requests or other
current obligations.
WRITING CALL OPTIONS
The Fund may write (sell) covered call options on securities, futures
contracts, forward contracts, indices and currencies. As the writer of a call
option, the Fund would have the obligation to deliver the underlying security,
cash or currency (depending on the type of derivative) to the holder (buyer) at
a specified price (the exercise price) at any time until (American style) or on
(European style) a certain date (the expiration date). So long as the obligation
of the Fund continues, it may be assigned an exercise notice, requiring it to
deliver the underlying security, cash or currency against payment of the
exercise price. This obligation terminates upon the expiration of the call
option, or such earlier time at which the Fund effects a closing purchase
transaction by purchasing an option identical to that previously sold.
When writing a call option the Fund, in return for the premium, gives up
the opportunity for profit from a price increase in the underlying security,
contract or currency above the exercise price, and retains the risk of loss
should the price of the security, contract or currency decline. Unlike one who
owns securities, contracts or currencies not subject to an option, the Fund has
no control over when it may be required to sell the underlying securities,
contracts or currencies, since most options may be exercised at any time prior
to the option's expiration. If a call option that the Fund has written expires,
it will realize a gain in the amount of the premium; however, such gain may be
offset by a decline in the market value of the underlying security, contract or
currency during the option period. If the call option is exercised, the Fund
will realize a gain or loss from the sale of the underlying security, contract
or currency, which will be increased or offset by the premium received.
Writing call options can serve as a limited hedge because declines in
the value of the hedged investment would be offset to the extent of the premium
received for writing the option.
Closing transactions may be effected in order to realize a profit on an
outstanding call option, to prevent an underlying security, contract or currency
from being called or to permit the sale of the underlying security, contract or
currency. Furthermore, effecting a closing transaction will permit the Fund to
write another call option on the underlying security, contract or currency with
either a different exercise price or expiration date, or both.
OVER-THE-COUNTER OPTIONS
Options may be either listed on an exchange or traded in
over-the-counter ("OTC") markets. Listed options are third-party contracts
(i.e., performance of the obligations of the purchaser and seller is guaranteed
by the exchange or clearing corporation) and have standardized strike prices and
expiration dates. OTC options are two-party contracts with negotiated strike
prices and expiration dates. OTC options differ from exchange-traded options in
that OTC options are transacted with dealers directly and not through a clearing
corporation (which guarantees performance). Consequently, there is a risk of
non-performance by the dealer. Since no exchange is involved, OTC options are
valued on the basis of an average of the last bid prices obtained from dealers,
unless a quotation from only one dealer is available, in which case only that
dealer's
30
<PAGE> 107
price will be used. In the case of OTC options, there can be no assurance that a
liquid secondary market will exist for any particular option at any specific
time. Although the Fund will enter into OTC options only with dealers that are
expected to be capable of entering into closing transactions with it, there is
no assurance that the Fund will in fact be able to close out an OTC option
position at a favorable price prior to expiration. In the event of insolvency of
the dealer, a Fund might be unable to close out an OTC option position at any
time prior to its expiration.
The Fund may sell OTC options and, in connection therewith, segregate
assets or cover its obligations with respect to OTC options written by it. The
assets used as cover for OTC options written by the Fund will be considered
illiquid unless the OTC options are sold to qualified dealers who agree that the
Fund may repurchase any OTC option it writes at a maximum price to be calculated
by a formula set forth in the option agreement. The cover for an OTC option
written subject to this procedure would be considered illiquid only to the
extent that the maximum repurchase price under the formula exceeds the intrinsic
value of the option.
INDEX OPTIONS
Calls on indices are similar to calls on securities or futures contracts
except that all settlements are in cash and gain or loss depends on changes in
the index in question (and thus on price movements in the securities market or a
particular market sector generally) rather than on price movements in individual
securities or futures contracts. The amount of cash is equal to the difference
between the closing price of the index and the exercise price of the call times
a specified multiple (the "multiplier"), which determines the total dollar value
for each point of such difference.
The risks of investment in index options may be greater than options on
securities. Because index options are settled in cash, when the Fund writes a
call on an index it cannot provide in advance for its potential settlement
obligations by acquiring and holding the underlying securities. The Fund can
offset some of the risk of writing a call index option position by holding a
diversified portfolio of securities similar to those on which the underlying
index is based. However, the Fund cannot, as a practical matter, acquire and
hold a portfolio containing exactly the same securities as underlie the index
and, as a result, bears a risk that the value of the securities held will not be
perfectly correlated with the value of the index.
LIMITATIONS ON OPTIONS
The Fund will not write call options if, immediately after such sale,
the aggregate value of securities or obligations underlying the outstanding
options exceeds 20% of the Fund's total assets.
INTEREST RATE, CURRENCY AND STOCK INDEX FUTURES CONTRACTS
The Fund may enter into interest rate, currency or stock index futures
contracts (collectively, "Futures" or "Futures Contracts") as a hedge against
changes in prevailing levels of interest rates, currency exchange rates or stock
price levels, respectively, in order to establish more definitely the effective
return on securities or currencies held or intended to be acquired by it. The
Fund's hedging may include sales of Futures as an offset against the effect of
expected increases in interest rates, and decreases in currency exchange rates
and stock prices, and purchases of Futures as an offset against the effect of
expected declines in interest rates, and increases in currency exchange rates or
stock prices.
A Futures Contract is a two party agreement to buy or sell a specified
amount of a specified security or currency (or delivery of a cash settlement
price, in the case of an index future) for a specified price at a designated
date, time and place. A stock index future provides for the delivery, at a
designated date, time and place, of an amount of cash equal to a specified
dollar amount times the difference between the stock index value at the close of
trading on the contract and the price agreed upon in the Futures Contract; no
physical delivery of stocks comprising the index is made. Brokerage fees are
incurred when a Futures Contract is bought or sold, and margin deposits must be
maintained at all times the Future is outstanding.
The Fund will only enter into Futures Contracts that are traded (either
domestically or internationally) on futures exchanges and are standardized as to
maturity date and underlying financial instrument. Futures exchanges and trading
thereon in the United States are regulated under the Commodity Exchange Act and
by the Commodity Futures Trading Commission ("CFTC"). Foreign futures exchanges
and trading thereon
31
<PAGE> 108
are not regulated by the CFTC and are not subject to the same regulatory
controls. For a further discussion of the risks associated with investments in
foreign securities, see "Foreign Securities" in this Statement of Additional
Information.
Closing out an open Future is effected by entering into an offsetting
Future for the same aggregate amount of the identical financial instrument or
currency and the same delivery date. There can be no assurance, however, that
the Fund will be able to enter into an offsetting transaction with respect to a
particular Future at a particular time. If the Fund is not able to enter into an
offsetting transaction, it will continue to be required to maintain the margin
deposits on the Future.
A Fund's Futures transactions will be entered into for hedging purposes
only; that is, Futures will be sold to protect against a decline in the price of
securities or currencies that the Fund owns, or Futures will be purchased to
protect the Fund against an increase in the price of securities or currencies it
has committed to purchase or expects to purchase.
"Margin" with respect to Futures is the amount of funds that must be
deposited by the Fund in order to initiate Futures trading and maintain its open
positions in Futures. A margin deposit made when the Futures Contract is entered
("initial margin") is intended to ensure the Fund's performance under the
Futures Contract. The margin required for a particular Future is set by the
exchange on which the Future is traded and may be significantly modified from
time to time by the exchange during the term of the Futures Contract.
Subsequent payments, called "variation margin", to and from the futures
commission merchant through which the Fund entered into the Futures Contract
will be made on a daily basis as the price of the underlying security, currency
or index fluctuates making the Futures more or less valuable, a process known as
marking-to-market.
If the Fund were unable to liquidate a Future or an option on a Futures
position due to the absence of a liquid secondary market or the imposition of
price limits, it could incur substantial losses. The Fund would continue to be
subject to market risk with respect to the position. In addition, except in the
case of purchased options, the Fund would continue to be required to make daily
variation margin payments and might be required to maintain the position being
hedged by the Future or option or to maintain cash or securities in a segregated
account.
OPTIONS ON FUTURES CONTRACTS
Call options on Futures Contracts are similar to options on securities
or currencies except that call options on Futures Contracts give the purchaser
the right, in return for the premium paid, to assume a long position in a
Futures Contract at a specified exercise price at any time during the period of
the option. Upon exercise of the call option, the delivery of the Futures
position by the writer of the call option (the Fund) to the holder of the option
will be accompanied by delivery of the accumulated balance in the writer's
Futures margin account.
FORWARD CONTRACTS
A forward contract is an obligation, usually arranged with a commercial
bank or other currency dealer, to purchase or sell a currency against another
currency at a future date and price as agreed upon by the parties. The Fund
either may accept or make delivery of the currency at the maturity of the
forward contract. The Fund may also, if its contra party agrees prior to
maturity, enter into a closing transaction involving the purchase or sale of an
offsetting contract. Forward contracts are traded over-the-counter, and not on
organized commodities or securities exchanges. As a result, it may be more
difficult to value such contracts, and it may be difficult to enter into closing
transactions.
The Fund may engage in forward currency transactions in anticipation of,
or to protect itself against, fluctuations in exchange rates. The Fund may enter
into forward contracts with respect to a specific purchase or sale of a
security, or with respect to its portfolio positions generally. When the Fund
purchases a security denominated in a foreign currency for settlement in the
near future, it may immediately purchase in the forward market the currency
needed to pay for and settle the purchase. By entering into a forward contract
with respect to the specific purchase or sale of a security denominated in a
foreign currency, the Fund can secure
32
<PAGE> 109
an exchange rate between the trade and settlement dates for that purchase or
sale transaction. This practice is sometimes referred to as "transaction
hedging". Position hedging is the purchase or sale of foreign currency with
respect to portfolio security positions denominated or quoted in a foreign
currency.
The cost to the Fund of engaging in forward contracts varies with
factors such as the currencies involved, the length of the contract period and
the market conditions then prevailing. Because forward contracts are usually
entered into on a principal basis, no fees or commissions are involved. The use
of forward contracts does not eliminate fluctuations in the prices of the
underlying securities the Fund owns or intends to acquire, but it does establish
a rate of exchange in advance. In addition, while forward contract sales limit
the risk of loss due to a decline in the value of the hedged currencies, they
also limit any potential gain that might result should the value of the
currencies increase.
LIMITATIONS ON USE OF FUTURES, CALL OPTIONS ON FUTURES AND CERTAIN CALL OPTIONS
ON CURRENCIES
To the extent that the Fund enters into Futures Contracts, call options
on Futures Contracts and call options on foreign currencies traded on a
CFTC-regulated exchange, in each case other than for bona fide hedging purposes
(as defined by the CFTC), the aggregate initial margin and premiums required to
establish those positions (excluding the amount by which options are
"in-the-money") will not exceed 5% of the total assets of the Fund, after taking
into account unrealized profits and unrealized losses on any contracts it has
entered into. This guideline may be modified by the Board of Directors, without
a shareholder vote. This limitation does not limit the percentage of the Fund's
assets at risk to 5%.
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.
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 or account provided the Fund follows
procedures adopted by the Boards of
33
<PAGE> 110
irectors/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.
Allocation of IPO Securities Transactions
From time to time, certain of the AIM Funds or accounts may become
interested in participating in security distributions that are available in an
IPO, and occasions may arise when purchases of such securities by one AIM Fund
or account may also be considered for purchase by one or more other AIM Funds or
accounts. In such cases, it shall be AIM's practice to specifically combine or
otherwise bunch indications of interest for IPO securities for all AIM Funds and
accounts participating in purchase transactions for that security, and to
allocate such transactions in accordance with the following procedures:
AIM will determine the eligibility of each AIM Fund and account that seeks
to participate in a particular IPO by reviewing a number of factors, including
suitability of the investment with the AIM Fund's or account's investment
objective, policies and strategies, the liquidity of the AIM Fund or account if
such investment is purchased, and whether the portfolio manager intends to hold
the security as a long-term investment. The allocation of limited supply
securities issued in IPOs will be made to eligible AIM Funds and accounts in a
manner designed to be fair and equitable for the eligible AIM Funds and
accounts, and so that there is equal allocation of IPOs over the longer term.
Where multiple funds or accounts are eligible, rotational participation may
occur, based on the extent to which an AIM Fund or account has participated in
previous IPOs as well as the size of the AIM Fund or account. Each eligible AIM
Fund and accounts with an asset level of less than $500 million, will be placed
in one of three tiers, depending upon its asset level. The AIM Funds and
accounts in the tier containing funds and accounts with the smallest asset
levels will participate first, each receiving a 40 basis point allocation
(rounded to the nearest share round lot that approximates 40 basis points) (the
"Allocation"), based on that AIM Fund's or account's net assets. This process
continues until all of the AIM Funds and accounts in the three tiers receive
their Allocations, or until the shares are all allocated. Should securities
remain after this process, eligible AIM Funds and accounts will receive their
Allocations on a straight pro rata basis. For the tier of AIM Funds and accounts
not receiving a full Allocation, the Allocation may be made only to certain AIM
Funds or accounts so that each may receive close to or exactly 40 basis points.
When any AIM Fund and/or account with substantially identical investment
objectives and policies participate in syndicates, they will do so in amounts
that are substantially proportionate to each other. In these cases, the net
assets of the largest AIM Fund will be used to determine in which tier, as
described in the paragraph above, such group of AIM Funds or accounts will be
placed. If no AIM Fund is participating, then the net assets of the largest
account will be used to determine tier placement. The price per share of
securities purchased in such syndicate transactions will be the same for each
AIM Fund and account.
34
<PAGE> 111
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, in
written form or on computer software. 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, 1999, the Fund held an amount of common stock issued
by Morgan Stanley Dean Witter & Co., Inc. and Lehman Brothers Holdings, Inc.
having a market value of $16,988,125 and $2,947,500, 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, 1999, 1998 and 1997 the Fund paid
brokerage commissions of $3,472,778, $3,027,892 and $2,573,656, respectively.
For the fiscal year ended October 31, 1999, 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
$625,053,096 and the related brokerage commissions were $536,125.
35
<PAGE> 112
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.)
(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.
36
<PAGE> 113
(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. See "Submission of Matters to Shareholders".
MISCELLANEOUS INFORMATION
SHAREHOLDER INQUIRIES
Shareholder inquiries concerning the status of an account should be
directed to A I M Fund Services, Inc. by calling (800) 995-4246.
LEGAL MATTERS
Legal matters for the Fund have been passed upon by Ballard Spahr
Andrews & Ingersoll, LLP, 1735 Market Street, Philadelphia, Pennsylvania 19103.
37
<PAGE> 114
FINANCIAL STATEMENTS
FS
<PAGE> 115
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, 1999, 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, 1999, 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, 1999, 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 LLP
KPMG LLP
December 3, 1999
Houston, Texas
FS-1
<PAGE> 116
SCHEDULE OF INVESTMENTS
October 31, 1999
<TABLE>
<CAPTION>
MARKET
SHARES VALUE
<S> <C> <C>
COMMON STOCKS & OTHER EQUITY
INTERESTS-96.11%
AUTO PARTS & EQUIPMENT-0.13%
SPX Corp.(a) 40,000 $ 3,390,000
- ---------------------------------------------------------------
AUTOMOBILES-0.99%
Ford Motor Co. 225,000 12,346,875
- ---------------------------------------------------------------
Porsche A.G., Pfd. (Germany) 5,000 13,624,047
- ---------------------------------------------------------------
25,970,922
- ---------------------------------------------------------------
BANKS (MAJOR REGIONAL)-0.80%
Fleet Boston Corp. 400,000 17,450,000
- ---------------------------------------------------------------
Northern Trust Corp. 36,000 3,476,250
- ---------------------------------------------------------------
20,926,250
- ---------------------------------------------------------------
BANKS (MONEY CENTER)-0.44%
Chase Manhattan Corp. (The) 133,500 11,664,562
- ---------------------------------------------------------------
BIOTECHNOLOGY-2.39%
Amgen, Inc.(a) 220,000 17,545,000
- ---------------------------------------------------------------
Biogen, Inc.(a) 350,000 25,943,750
- ---------------------------------------------------------------
Celera Genomics(a) 5,950 232,794
- ---------------------------------------------------------------
Genzyme Corp.(a) 500,000 19,125,000
- ---------------------------------------------------------------
62,846,544
- ---------------------------------------------------------------
BROADCASTING (TELEVISION, RADIO &
CABLE)-0.84%
AT&T Corp.-Liberty Media
Group-Class A(a) 250,000 9,921,875
- ---------------------------------------------------------------
Comcast Corp.-Class A 200,000 8,425,000
- ---------------------------------------------------------------
USA Networks, Inc.(a) 80,500 3,627,531
- ---------------------------------------------------------------
21,974,406
- ---------------------------------------------------------------
COMMUNICATIONS EQUIPMENT-11.99%
General Instrument Corp.(a) 250,000 13,453,125
- ---------------------------------------------------------------
JDS Uniphase Corp.(a) 660,000 110,137,500
- ---------------------------------------------------------------
Lucent Technologies Inc. 500,000 32,125,000
- ---------------------------------------------------------------
Motorola, Inc. 700,000 68,206,250
- ---------------------------------------------------------------
Nokia Oyj-ADR (Finland) 400,000 46,225,000
- ---------------------------------------------------------------
Telefonaktiebolaget LM
Ericsson-ADR (Sweden) 600,000 25,650,000
- ---------------------------------------------------------------
Tellabs, Inc.(a) 300,000 18,975,000
- ---------------------------------------------------------------
314,771,875
- ---------------------------------------------------------------
COMPUTERS (HARDWARE)-2.39%
International Business Machines
Corp. 475,000 46,728,125
- ---------------------------------------------------------------
Sun Microsystems, Inc.(a) 150,000 15,871,875
- ---------------------------------------------------------------
62,600,000
- ---------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
MARKET
SHARES VALUE
<S> <C> <C>
COMPUTERS (NETWORKING)-4.67%
Cisco Systems, Inc.(a) 1,200,000 $ 88,800,000
- ---------------------------------------------------------------
Exodus Communications, Inc.(a) 250,000 21,500,000
- ---------------------------------------------------------------
VeriSign, Inc.(a) 100,000 12,350,000
- ---------------------------------------------------------------
122,650,000
- ---------------------------------------------------------------
COMPUTERS (PERIPHERALS)-3.68%
Adaptec, Inc.(a) 527,000 23,715,000
- ---------------------------------------------------------------
EMC Corp.(a) 1,000,000 73,000,000
- ---------------------------------------------------------------
96,715,000
- ---------------------------------------------------------------
COMPUTERS (SOFTWARE &
SERVICES)-17.42%
America Online, Inc.(a) 860,000 111,531,250
- ---------------------------------------------------------------
Computer Associates
International, Inc. 540,000 30,510,000
- ---------------------------------------------------------------
eBay, Inc.(a) 250,000 33,781,250
- ---------------------------------------------------------------
Electronics for Imaging, Inc.(a) 300,000 12,093,750
- ---------------------------------------------------------------
Inktomi Corp.(a) 330,000 33,474,375
- ---------------------------------------------------------------
Intuit, Inc.(a) 600,000 17,475,000
- ---------------------------------------------------------------
Lycos, Inc.(a) 430,000 23,005,000
- ---------------------------------------------------------------
Microsoft Corp.(a) 1,040,000 96,265,000
- ---------------------------------------------------------------
RealNetworks, Inc.(a) 200,000 21,937,500
- ---------------------------------------------------------------
Unisys Corp.(a) 450,000 10,912,500
- ---------------------------------------------------------------
VERITAS Software Corp.(a) 200,000 21,575,000
- ---------------------------------------------------------------
Yahoo! Inc.(a) 250,000 44,765,625
- ---------------------------------------------------------------
457,326,250
- ---------------------------------------------------------------
DISTRIBUTORS (FOOD &
HEALTH)-0.54%
McKesson HBOC, Inc. 710,000 14,244,375
- ---------------------------------------------------------------
ELECTRIC COMPANIES-2.05%
Illinova Corp. 415,000 13,202,187
- ---------------------------------------------------------------
Niagara Mohawk Holdings, Inc.(a) 1,185,000 18,811,875
- ---------------------------------------------------------------
Texas Utilities Co. 560,000 21,700,000
- ---------------------------------------------------------------
53,714,062
- ---------------------------------------------------------------
ELECTRICAL EQUIPMENT-1.80%
American Power Conversion
Corp.(a) 200,000 4,487,500
- ---------------------------------------------------------------
General Electric Co. 150,000 20,334,375
- ---------------------------------------------------------------
Koninklijke (Royal) Philips
Electronics N.V.-ADR
(Netherlands) 178,000 18,500,875
- ---------------------------------------------------------------
</TABLE>
FS-2
<PAGE> 117
<TABLE>
<CAPTION>
MARKET
SHARES VALUE
<S> <C> <C>
ELECTRICAL EQUIPMENT-(CONTINUED)
Sanmina Corp.(a) 45,000 $ 4,052,812
- ---------------------------------------------------------------
47,375,562
- ---------------------------------------------------------------
ELECTRONICS
(INSTRUMENTATION)-0.70%
Alpha Industries, Inc.(a) 100,000 5,525,000
- ---------------------------------------------------------------
PE Corp-PE Biosystems Group 23,800 1,544,025
- ---------------------------------------------------------------
Waters Corp.(a) 212,000 11,262,500
- ---------------------------------------------------------------
18,331,525
- ---------------------------------------------------------------
ELECTRONICS
(SEMICONDUCTORS)-6.36%
Analog Devices, Inc.(a) 150,000 7,968,750
- ---------------------------------------------------------------
Broadcom Corp.-Class A(a) 380,000 48,568,750
- ---------------------------------------------------------------
Maxim Integrated Products,
Inc.(a) 157,000 12,393,187
- ---------------------------------------------------------------
Microchip Technology, Inc.(a) 134,300 8,947,737
- ---------------------------------------------------------------
PMC-Sierra, Inc.(a) 600,000 56,550,000
- ---------------------------------------------------------------
Texas Instruments, Inc. 260,000 23,335,000
- ---------------------------------------------------------------
Vitesse Semiconductor Corp.(a) 200,000 9,175,000
- ---------------------------------------------------------------
166,938,424
- ---------------------------------------------------------------
ENGINEERING & CONSTRUCTION-0.30%
McDermott International, Inc. 435,000 7,884,375
- ---------------------------------------------------------------
EQUIPMENT (SEMICONDUCTOR)-0.14%
KLA-Tencor Corp.(a) 45,000 3,563,437
- ---------------------------------------------------------------
FINANCIAL (DIVERSIFIED)-3.54%
American Express Co. 44,000 6,776,000
- ---------------------------------------------------------------
Associates First Capital
Corp.-Class A 117,938 4,304,737
- ---------------------------------------------------------------
Citigroup, Inc. 510,000 27,603,750
- ---------------------------------------------------------------
Fannie Mae 104,600 7,400,450
- ---------------------------------------------------------------
Freddie Mac 280,000 15,137,500
- ---------------------------------------------------------------
MGIC Investment Corp. 530,000 31,667,500
- ---------------------------------------------------------------
92,889,937
- ---------------------------------------------------------------
HEALTH CARE (DIVERSIFIED)-0.20%
Abbott Laboratories 127,000 5,127,625
- ---------------------------------------------------------------
HEALTH CARE (DRUGS-GENERIC &
OTHER)-0.24%
Watson Pharmaceuticals, Inc.(a) 200,000 6,350,000
- ---------------------------------------------------------------
HEALTH CARE (DRUGS-MAJOR
PHARMACEUTICALS)-0.90%
Lilly (Eli) & Co. 76,800 5,289,600
- ---------------------------------------------------------------
Pfizer, Inc. 270,000 10,665,000
- ---------------------------------------------------------------
Schering-Plough Corp. 155,200 7,682,400
- ---------------------------------------------------------------
23,637,000
- ---------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
MARKET
SHARES VALUE
<S> <C> <C>
HEALTH CARE (HOSPITAL
MANAGEMENT)-1.03%
Health Management Associates,
Inc.-Class A(a) 3,060,000 $ 27,157,500
- ---------------------------------------------------------------
HEALTH CARE (LONG TERM
CARE)-0.47%
Manor Care, Inc.(a) 780,000 12,285,000
- ---------------------------------------------------------------
HEALTH CARE (MANAGED CARE)-1.04%
United Healthcare Corp. 530,000 27,394,375
- ---------------------------------------------------------------
HEALTH CARE (MEDICAL PRODUCTS &
SUPPLIES)-1.74%
Beckman Coulter, Inc. 330,000 15,180,000
- ---------------------------------------------------------------
Guidant Corp. 620,000 30,612,500
- ---------------------------------------------------------------
45,792,500
- ---------------------------------------------------------------
INSURANCE (LIFE/HEALTH)-0.93%
AXA Financial, Inc. 508,000 16,287,750
- ---------------------------------------------------------------
UnumProvident Corp. 250,000 8,234,375
- ---------------------------------------------------------------
24,522,125
- ---------------------------------------------------------------
INSURANCE (MULTI-LINE)-1.03%
American International Group,
Inc. 261,937 26,963,140
- ---------------------------------------------------------------
INSURANCE
(PROPERTY-CASUALTY)-0.48%
XL Capital Ltd.-Class A 235,000 12,616,562
- ---------------------------------------------------------------
INVESTMENT
BANKING/BROKERAGE-1.74%
Lehman Brothers Holdings, Inc. 40,000 2,947,500
- ---------------------------------------------------------------
Morgan Stanley, Dean Witter,
Discover & Co. 154,000 16,988,125
- ---------------------------------------------------------------
Schwab (Charles) Corp. (The) 660,000 25,698,750
- ---------------------------------------------------------------
45,634,375
- ---------------------------------------------------------------
LEISURE TIME (PRODUCTS)-0.78%
Mattel, Inc. 1,540,000 20,597,500
- ---------------------------------------------------------------
LODGING-HOTELS-0.46%
Carnival Corp. 272,000 12,104,000
- ---------------------------------------------------------------
MANUFACTURING (DIVERSIFIED)-0.64%
Tyco International Ltd. 200,000 7,987,500
- ---------------------------------------------------------------
United Technologies Corp. 145,000 8,772,500
- ---------------------------------------------------------------
16,760,000
- ---------------------------------------------------------------
MANUFACTURING (SPECIALIZED)-0.61%
Parker Hannifin Corp. 350,000 16,034,375
- ---------------------------------------------------------------
NATURAL GAS-0.47%
Coastal Corp. (The) 293,600 12,367,900
- ---------------------------------------------------------------
OIL & GAS (DRILLING &
EQUIPMENT)-2.06%
Diamond Offshore Drilling, Inc. 380,000 12,065,000
- ---------------------------------------------------------------
</TABLE>
FS-3
<PAGE> 118
<TABLE>
<CAPTION>
MARKET
SHARES VALUE
<S> <C> <C>
OIL & GAS (DRILLING & EQUIPMENT)-(CONTINUED)
ENSCO International, Inc. 580,000 $ 11,237,500
- ---------------------------------------------------------------
Schlumberger Ltd. 260,000 15,746,250
- ---------------------------------------------------------------
Transocean Offshore, Inc. 555,000 15,089,063
- ---------------------------------------------------------------
54,137,813
- ---------------------------------------------------------------
OIL (DOMESTIC INTEGRATED)-0.70%
Atlantic Richfield Co. 142,000 13,232,625
- ---------------------------------------------------------------
USX-Marathon Group 175,500 5,111,438
- ---------------------------------------------------------------
18,344,063
- ---------------------------------------------------------------
PAPER & FOREST PRODUCTS-1.12%
Georgia Pacific Group 380,000 15,081,250
- ---------------------------------------------------------------
International Paper Co. 270,000 14,208,750
- ---------------------------------------------------------------
29,290,000
- ---------------------------------------------------------------
PUBLISHING-0.68%
Dow Jones & Co., Inc. 194,000 11,931,000
- ---------------------------------------------------------------
McGraw-Hill Cos., Inc. (The) 60,000 3,577,500
- ---------------------------------------------------------------
Reader's Digest Association,
Inc.-Class A 75,000 2,418,750
- ---------------------------------------------------------------
17,927,250
- ---------------------------------------------------------------
REAL ESTATE INVESTMENT
TRUSTS-0.50%
Starwood Hotels & Resorts
Worldwide, Inc. 575,000 13,189,063
- ---------------------------------------------------------------
RESTAURANTS-0.10%
Tricon Global Restaurants,
Inc.(a) 65,000 2,612,188
- ---------------------------------------------------------------
RETAIL (BUILDING SUPPLIES)-0.58%
Home Depot, Inc. (The) 200,000 15,100,000
- ---------------------------------------------------------------
RETAIL (COMPUTERS &
ELECTRONICS)-1.45%
Best Buy Co., Inc.(a) 544,800 30,270,450
- ---------------------------------------------------------------
Circuit City Stores-Circuit City
Group 180,000 7,683,750
- ---------------------------------------------------------------
37,954,200
- ---------------------------------------------------------------
RETAIL (DEPARTMENT STORES)-1.38%
Federated Department Stores,
Inc.(a) 440,000 18,782,500
- ---------------------------------------------------------------
Kohl's Corp.(a) 100,000 7,481,250
- ---------------------------------------------------------------
Saks, Inc.(a) 575,000 9,882,813
- ---------------------------------------------------------------
36,146,563
- ---------------------------------------------------------------
RETAIL (DISCOUNTERS)-0.18%
Family Dollar Stores, Inc. 225,000 4,640,625
- ---------------------------------------------------------------
RETAIL (FOOD CHAINS)-0.44%
Kroger Co. (The)(a) 551,000 11,467,688
- ---------------------------------------------------------------
RETAIL (GENERAL
MERCHANDISE)-1.58%
Dayton Hudson Corp. 289,000 18,676,625
- ---------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
MARKET
SHARES VALUE
<S> <C> <C>
RETAIL (GENERAL MERCHANDISE)-(CONTINUED)
Wal-Mart Stores, Inc. 400,000 $ 22,675,000
- ---------------------------------------------------------------
41,351,625
- ---------------------------------------------------------------
RETAIL (SPECIALTY)-0.44%
Bed Bath & Beyond, Inc.(a) 225,000 7,495,313
- ---------------------------------------------------------------
Linens 'n Things, Inc.(a) 100,000 3,975,000
- ---------------------------------------------------------------
11,470,313
- ---------------------------------------------------------------
RETAIL (SPECIALTY-APPAREL)-1.15%
Abercrombie & Fitch Co.-Class
A(a) 86,000 2,343,500
- ---------------------------------------------------------------
American Eagle Outfitters,
Inc.(a) 275,000 11,773,438
- ---------------------------------------------------------------
Gap, Inc. (The) 150,000 5,568,750
- ---------------------------------------------------------------
Intimate Brands, Inc. 81,270 3,332,070
- ---------------------------------------------------------------
Talbots, Inc. (The) 150,000 7,059,375
- ---------------------------------------------------------------
30,077,133
- ---------------------------------------------------------------
SERVICES
(ADVERTISING/MARKETING)-0.99%
Omnicom Group, Inc. 150,000 13,200,000
- ---------------------------------------------------------------
Outdoor Systems, Inc.(a) 300,000 12,712,500
- ---------------------------------------------------------------
25,912,500
- ---------------------------------------------------------------
SERVICES (COMMERCIAL &
CONSUMER)-0.45%
Cintas Corp. 123,700 7,452,925
- ---------------------------------------------------------------
Gartner Group, Inc.-Class B(a) 7,812 73,238
- ---------------------------------------------------------------
IMS Health, Inc. 60,000 1,740,000
- ---------------------------------------------------------------
Viad Corp. 100,000 2,456,250
- ---------------------------------------------------------------
11,722,413
- ---------------------------------------------------------------
SERVICES (COMPUTER SYSTEMS)-1.13%
Brocade Communications Systems,
Inc.(a) 110,000 29,590,000
- ---------------------------------------------------------------
SERVICES (DATA PROCESSING)-1.66%
Concord EFS, Inc.(a) 450,000 12,178,125
- ---------------------------------------------------------------
First Data Corp. 480,000 21,930,000
- ---------------------------------------------------------------
National Data Corp. 80,000 1,920,000
- ---------------------------------------------------------------
Paychex, Inc. 192,037 7,561,457
- ---------------------------------------------------------------
43,589,582
- ---------------------------------------------------------------
TELECOMMUNICATIONS (CELLULAR/
WIRELESS)-0.81%
Western Wireless Corp.-Class A(a) 400,000 21,150,000
- ---------------------------------------------------------------
TELECOMMUNICATIONS (LONG
DISTANCE)-2.65%
AT&T Corp. 355,000 16,596,250
- ---------------------------------------------------------------
Global TeleSystems Group, Inc.(a) 700,000 16,756,250
- ---------------------------------------------------------------
MCI WorldCom, Inc.(a) 422,926 36,292,337
- ---------------------------------------------------------------
69,644,837
- ---------------------------------------------------------------
</TABLE>
FS-4
<PAGE> 119
<TABLE>
<CAPTION>
MARKET
SHARES VALUE
<S> <C> <C>
TELEPHONE-1.59%
Bell Atlantic Corp. 200,000 $ 12,987,500
- ---------------------------------------------------------------
Qwest Communications
International, Inc.(a) 800,000 28,800,000
- ---------------------------------------------------------------
41,787,500
- ---------------------------------------------------------------
WASTE MANAGEMENT-0.54%
Waste Management, Inc. 778,000 14,295,750
- ---------------------------------------------------------------
Total Common Stocks & Other
Equity Interests (Cost
$1,615,087,599) 2,522,522,589
- ---------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT
<S> <C> <C>
CONVERTIBLE BONDS & NOTES-0.87%
COMPUTERS (PERIPHERALS)-0.36%
EMC Corp., Conv. Sub. Notes,
3.25%, 03/15/02 $ 1,450,000 9,348,875
- ---------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
PRINCIPAL MARKET
AMOUNT VALUE
<S> <C> <C>
TELECOMMUNICATIONS (LONG
DISTANCE)-0.51%
Level 3 Communications Inc.,
Conv. Bonds, 6.00%, 09/15/09 $11,000,000 $ 13,530,000
- ---------------------------------------------------------------
Total Convertible Bonds &
Notes (Cost $12,998,720) 22,878,875
- ---------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
SHARES
<S> <C> <C>
MONEY MARKET FUNDS-3.46%
STIC Liquid Assets Portfolio(b) 45,440,308 45,440,308
- ---------------------------------------------------------------
STIC Prime Portfolio(b) 45,440,308 45,440,308
- ---------------------------------------------------------------
Total Money Market Funds
(Cost $90,880,616) 90,880,616
- ---------------------------------------------------------------
TOTAL INVESTMENTS-100.44% 2,636,282,080
- ---------------------------------------------------------------
LIABILITIES LESS OTHER
ASSETS-(0.44%) (11,667,071)
- ---------------------------------------------------------------
NET ASSETS-100.00% $2,624,615,009
===============================================================
</TABLE>
Abbreviations:
ADR - American Depositary Receipt
Conv. - Convertible
Pfd. - Preferred
Sub. - Subordinated
Notes to Schedule of Investment:
(a)
Non-income producing security.
(b)
The security shares the same
investment advisor as the Fund.
See Notes to Financial Statements.
FS-5
<PAGE> 120
STATEMENT OF ASSETS AND LIABILITIES
October 31, 1999
<TABLE>
<S> <C>
ASSETS:
Investments, at market value (cost
$1,718,966,935) $2,636,282,080
- -------------------------------------------------------------
Receivables for:
Capital stock sold 99,498
- -------------------------------------------------------------
Dividends and interest 1,053,988
- -------------------------------------------------------------
Investment for deferred compensation plan 48,076
- -------------------------------------------------------------
Other assets 12,253
- -------------------------------------------------------------
Total assets 2,637,495,895
- -------------------------------------------------------------
LIABILITIES:
Payables for:
Investments purchased 10,772,227
- -------------------------------------------------------------
Capital stock reacquired 469,021
- -------------------------------------------------------------
Deferred compensation 48,076
- -------------------------------------------------------------
Accrued advisory fees 1,342,674
- -------------------------------------------------------------
Accrued administrative services fees 10,000
- -------------------------------------------------------------
Accrued directors' fees 1,448
- -------------------------------------------------------------
Accrued operating expenses 237,440
- -------------------------------------------------------------
Total liabilities 12,880,886
- -------------------------------------------------------------
Net assets applicable to shares outstanding $2,624,615,009
=============================================================
NET ASSETS:
Class I $2,623,900,667
- -------------------------------------------------------------
Class II $ 714,342
- -------------------------------------------------------------
Capital stock, $0.01 par value per share:
Class I:
Authorized 1,000,000,000
- -------------------------------------------------------------
Outstanding 130,118,500
=============================================================
Class II
Authorized 1,000,000,000
- -------------------------------------------------------------
Outstanding 35,504
=============================================================
Class I
Net asset value and redemption price per
share $ 20.17
=============================================================
Class II
Net asset value and redemption price per
share $ 20.12
=============================================================
</TABLE>
STATEMENT OF OPERATIONS
For the year ended October 31, 1999
<TABLE>
<S> <C>
INVESTMENT INCOME:
Dividends (net of $72,416 foreign withholding
tax) $ 10,836,685
- ------------------------------------------------------------
Interest 4,978,635
- ------------------------------------------------------------
Total investment income 15,815,320
- ------------------------------------------------------------
EXPENSES:
Advisory fees 15,096,393
- ------------------------------------------------------------
Administrative services fees 114,068
- ------------------------------------------------------------
Custodian fees 231,799
- ------------------------------------------------------------
Directors' fees 22,879
- ------------------------------------------------------------
Transfer agent fees 49,863
- ------------------------------------------------------------
Other 467,498
- ------------------------------------------------------------
Total expenses 15,982,500
- ------------------------------------------------------------
Less: Expenses paid indirectly (28,145)
- ------------------------------------------------------------
Net expenses 15,954,355
- ------------------------------------------------------------
Net investment income (loss) (139,035)
- ------------------------------------------------------------
REALIZED AND UNREALIZED GAIN (LOSS) FROM
INVESTMENT SECURITIES AND FOREIGN
CURRENCIES:
Net realized gain (loss) from:
Investment securities 418,809,758
- ------------------------------------------------------------
Foreign currencies (275,578)
- ------------------------------------------------------------
418,534,180
============================================================
CHANGE IN NET UNREALIZED APPRECIATION
(DEPRECIATION) OF:
Investment securities 367,179,343
- ------------------------------------------------------------
Foreign currencies (3,322)
============================================================
367,176,021
============================================================
Net gain from investment securities and
foreign currencies 785,710,201
============================================================
Net increase in net assets resulting from
operations $785,571,166
============================================================
</TABLE>
See Notes to Financial Statements.
FS-6
<PAGE> 121
STATEMENT OF CHANGES IN NET ASSETS
For the years ended October 31, 1999 and 1998
<TABLE>
<CAPTION>
1999 1998
-------------- --------------
<S> <C> <C>
OPERATIONS:
Net investment income (loss) $ (139,035) $ 4,083,684
- ----------------------------------------------------------------------------------------------
Net realized gain from investment securities foreign
currencies, futures and options contracts 418,534,180 123,367,355
- ----------------------------------------------------------------------------------------------
Change in net unrealized appreciation of investment
securities and foreign currencies 367,176,021 30,378,725
- ----------------------------------------------------------------------------------------------
Net increase in net assets resulting from operations 785,571,166 157,829,764
- ----------------------------------------------------------------------------------------------
Distributions to shareholders from net investment
income-Class I (4,242,441) (1,659,397)
- ----------------------------------------------------------------------------------------------
Distributions to shareholders from net realized gains-Class I (112,082,098) (156,547,424)
- ----------------------------------------------------------------------------------------------
Share transactions-net:
- ----------------------------------------------------------------------------------------------
Class I 124,655,784 180,175,249
- ----------------------------------------------------------------------------------------------
Class II 680,370 --
- ----------------------------------------------------------------------------------------------
Net increase in net assets 794,582,781 179,798,192
- ----------------------------------------------------------------------------------------------
NET ASSETS:
Beginning of period 1,830,032,228 1,650,234,036
- ----------------------------------------------------------------------------------------------
End of period $2,624,615,009 $1,830,032,228
==============================================================================================
NET ASSETS CONSIST OF:
Capital (par value and additional paid-in) $1,290,320,756 $1,158,384,602
- ----------------------------------------------------------------------------------------------
Undistributed net investment income (loss) (94,294) 4,164,155
- ----------------------------------------------------------------------------------------------
Undistributed net realized gain from investment
securities, foreign currencies, futures and option
contracts 417,073,402 117,344,347
- ----------------------------------------------------------------------------------------------
Net unrealized appreciation of investment securities and
foreign currencies 917,315,145 550,139,124
- ----------------------------------------------------------------------------------------------
$2,624,615,009 $1,830,032,228
==============================================================================================
</TABLE>
See Notes to Financial Statements.
FS-7
<PAGE> 122
NOTES TO FINANCIAL STATEMENTS
October 31, 1999
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 (the "1940 Act"), as a
diversified, open-end management investment company. The Fund consists of two
classes of shares: Class I shares and Class II shares. Class II shares commenced
sales on July 19, 1999. The Fund's investment objective is growth of capital.
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities at the date of the
financial statements and the reported amounts of revenues and expenses during
the reporting period. Actual results could differ from those estimates. The
following is a summary of the significant accounting policies followed by the
Fund in the preparation of its financial statements.
A. Security Valuations -- A security listed or traded on an exchange (except
convertible bonds) is valued at its last sales price on the exchange where
the security is principally traded, or lacking any sales on a particular day,
the security is valued at the closing bid price on that day. Each security
reported on the NASDAQ National Market System is valued at the last sales
price on the valuation date or absent a last sales price, at the closing bid
price. Debt obligations (including convertible bonds) are valued on the basis
of prices provided by an independent pricing service. Prices provided by the
pricing service may be determined without exclusive reliance on quoted
prices, and may reflect appropriate factors such as yield, type of issue,
coupon rate and maturity date. Securities for which market prices are not
provided by any of the above methods are valued based upon quotes furnished
by independent sources and are valued at the last bid price in the case of
equity securities and in the case of debt obligations, the mean between the
last bid and asked prices. Securities for which market quotations are not
readily available or are questionable are valued at fair value as determined
in good faith by or under the supervision of the Company's officers in a
manner specifically authorized by the Board of Directors of the Company.
Short-term obligations having 60 days or less to maturity are valued at
amortized cost which approximates market value. For purposes of determining
net asset value per share, futures and options contracts generally will be
valued 15 minutes after the close of trading of the New York Stock Exchange
("NYSE").
Generally, trading in foreign securities is substantially completed each
day at various times prior to the close of the NYSE. The values of such
securities used in computing the net asset value of the Fund's shares are
determined as of such times. Foreign currency exchange rates are also
generally determined prior to the close of the NYSE. Occasionally, events
affecting the values of such securities and such exchange rates may occur
between the times at which they are determined and the close of the NYSE
which would not be reflected in the computation of the Fund's net asset
value. If events materially affecting the value of such securities occur
during such period, then these securities will be valued at their fair value
as determined in good faith by or under the supervision of the Board of
Directors.
B. Securities Transactions, 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 is recorded on the
ex-dividend date. The Fund may elect to use a portion of the proceeds of
capital stock redemptions as distributions for Federal income tax purposes.
Distributions from income and net realized capital gains, if any, are
generally paid annually and recorded on ex-dividend date.
On October 31, 1999, undistributed net investment income was increased by
$123,027, undistributed net realized gains decreased by $6,723,027 and
paid-in capital increased by $6,600,000 as a result of differing book/tax
treatment of foreign currency transactions, equalization credits and net
operating loss reclassifications in order to comply with the requirements of
the American Institute of Certified Public Accountants of Position 93-2. Net
assets of the Fund were unaffected by the reclassification discussed above.
C. 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.
D. Foreign Currency Translations -- Portfolio securities and other assets and
liabilities denominated in foreign currencies are translated into U.S. dollar
amounts at 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. The Fund does
not separately account for that portion of the results of operations
resulting from changes in foreign exchange rates on investments and the
fluctuations arising from changes in market prices of securities held. Such
fluctuations are included with the net realized and unrealized gain or loss
from investments.
E. 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
FS-8
<PAGE> 123
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.
F. Bond Premiums -- It is the policy of the Fund not to amortize market premiums
on bonds for financial reporting purposes.
G. Expenses -- Distribution expenses directly attributable to a class of shares
are charged to that class' operations. All other expenses which are
attributable to more than one class are allocated among the classes.
NOTE 2-ADVISORY FEES AND OTHER TRANSACTIONS WITH AFFILIATES
The Fund has entered into a master investment advisory agreement with A I M
Advisors, Inc. ("AIM"). Under the terms of the master investment advisory
agreement, the Fund pays an advisory fee to AIM at the annual rate of 1.00% of
the first $10 million of the Fund's average daily net assets, plus 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. Prior to June 30,
1999, AIM had a sub-advisory agreement with TradeStreet Investment Associates,
("TradeStreet").
The Fund, pursuant to a master administrative services agreement with AIM, has
agreed to pay AIM for certain administrative costs incurred in providing
accounting services to the Fund. During the year ended October 31, 1999, AIM was
paid $114,068 for such services.
The Fund has entered into a Distribution Agreement with A I M Distributors,
Inc. ("AIM Distributors") to serve as the distributor for the Fund. The Fund has
adopted a plan pursuant to Rule 12b-1 under the 1940 Act with respect to the
Fund's Class II shares (the "Distribution Plan"). The Fund , pursuant to the
Distribution Plan, pays AIM Distributors compensation at the annual rate of
0.30% of the Fund's average daily net assets of Class II shares. Of this amount,
the Fund may pay a service fee of 0.25% of the average daily net assets of Class
II shares to selected dealers and financial institutions who furnish continuing
personal shareholder services to their customers who purchase and own Class II
shares of the Fund. Any amounts not paid as a service fee under the Distribution
Plan would constitute an asset-based sales charge. The Distribution Plan also
imposes a cap on the total sales charges, including asset-based sales charges
that may be paid by the Class II shares. During the period July 19, 1999 (date
sales commenced) through October 31, 1999, the Class II shares paid AIM
Distributors $195 as compensation under the Plans.
During the year ended October 31, 1999, the Fund paid legal fees of $8,316 for
services rendered by Kramer, Levin, Naftalis & Frankel LLP as counsel to the
Company's directors. A member of that firm is a director of the Company.
Substantially all shares of the Fund are held of record by State Street Bank
and Trust Company as custodian for AIM Summit Investors Plans I and II, unit
investments trusts that are sponsored by AIM Distributors. Certain officers and
directors of the Fund are officers of AIM and AIM Distributors.
NOTE 3-INDIRECT EXPENSES
During the year ended October 31, 1999, the Fund received reductions in
custodian fees of $28,145 under expense offset arrangements. The effect of the
above arrangements resulted in a reduction of the Fund's total expenses of
$28,145 during the year ended October 31, 1999.
NOTE 4-DIRECTORS' FEES
Directors' fees represent remuneration paid to directors who are not an
"interested person" of AIM. The Company invests directors' fees, if so elected
by a director, in mutual fund shares in accordance with a deferred compensation
plan.
NOTE 5-BANK BORROWINGS
The Fund is a participant in a committed line of credit facility with a
syndicate administered by The Chase Manhattan Bank. The Fund may borrow up to
the lesser of (i) $1,000,000,000 or (ii) the limits set by its prospectus for
borrowings. The Fund and other funds advised by AIM which are parties to the
line of credit may borrow on a first come, first served basis. During the year
ended October 31, 1999, the Fund did not borrow under the line of credit
agreement. The funds which are party to the line of credit are charged a
commitment fee of 0.09% on the unused balance of the committed line. Prior to
May 28, 1999, the commitment fee rate was 0.05%. The commitment fee is allocated
among the funds based on their respective average net assets for the period.
NOTE 6-INVESTMENT SECURITIES
The aggregate amount of investment securities (other than short-term securities)
purchased and sold by the Fund during the year ended October 31, 1999 was
$2,104,224,796 and $2,129,918,843, respectively.
The amount of unrealized appreciation (depreciation) of investment securities,
for tax purposes, as of October 31, 1999 is as follows:
<TABLE>
<S> <C>
Aggregate unrealized appreciation of
investment securities $973,683,957
- ---------------------------------------------------------
Aggregate unrealized appreciation
(depreciation) of investment securities (65,121,247)
- ---------------------------------------------------------
Net unrealized appreciation of investment
securities $908,562,710
=========================================================
</TABLE>
* Cost of investments for tax purposes is $1,727,719,370.
FS-9
<PAGE> 124
NOTE 7-CAPITAL STOCK
Changes in capital stock outstanding during the years ended October 31, 1999 and
1998 were as follows:
<TABLE>
<CAPTION>
1999 1998
--------------------------- ---------------------------
SHARES AMOUNT SHARES AMOUNT
----------- ------------- ----------- -------------
<S> <C> <C> <C> <C>
Sold:
Class I 13,483,892 $ 237,827,156 13,962,660 $ 208,683,626
- -----------------------------------------------------------------------------------------------------------------------
Class II* 36,977 708,414 -- --
- -----------------------------------------------------------------------------------------------------------------------
Issued as reinvestment of dividends:
Class I 7,006,133 112,308,495 11,672,671 154,897,796
- -----------------------------------------------------------------------------------------------------------------------
Reacquired:
Class I (12,707,834) (225,479,867) (12,194,909) (183,406,173)
- -----------------------------------------------------------------------------------------------------------------------
Class II* (1,473) (28,044) -- --
- -----------------------------------------------------------------------------------------------------------------------
7,817,695 $ 125,336,154 13,440,422 $ 180,175,249
=======================================================================================================================
</TABLE>
* Class II shares commenced sales on July 19, 1999.
NOTE 8-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,
1999 for Class I shares and for the period July 19, 1999 (date sales commenced)
through October 31, 1999 for Class II shares.
<TABLE>
<CAPTION>
CLASS II
JULY 19, 1999
CLASS I TO
---------------------------------------------------------------- OCTOBER 31,
1999 1998 1997 1996 1995 1999
---------- ---------- ---------- ---------- ---------- -------------
<S> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of period $ 14.96 $ 15.15 $ 12.99 $ 12.14 $ 9.78 $20.68
- ----------------------------------------------- ---------- ---------- ---------- ---------- ---------- ------
Income from investment operations:
Net investment income -- 0.03 0.02 0.04 0.04 --
- ----------------------------------------------- ---------- ---------- ---------- ---------- ---------- ------
Net gains (losses) on securities (both
realized and unrealized) 6.16 1.23 3.34 1.69 2.81 (0.56)
- ----------------------------------------------- ---------- ---------- ---------- ---------- ---------- ------
Total from investment operations 6.16 1.26 3.36 1.73 2.85 (0.56)
- ----------------------------------------------- ---------- ---------- ---------- ---------- ---------- ------
Less distributions:
Dividends from net investment income (0.04) (0.02) (0.03) (0.03) (0.10) --
- ----------------------------------------------- ---------- ---------- ---------- ---------- ---------- ------
Distributions from net realized gains (0.91) (1.43) (1.17) (0.85) (0.39) --
- ----------------------------------------------- ---------- ---------- ---------- ---------- ---------- ------
Total distributions (0.95) (1.45) (1.20) (0.88) (0.49) --
- ----------------------------------------------- ---------- ---------- ---------- ---------- ---------- ------
Net asset value, end of period $ 20.17 $ 14.96 $ 15.15 $ 12.99 $ 12.14 $20.12
=============================================== ========== ========== ========== ========== ========== ======
Total return(a) 42.79% 9.49% 28.53% 15.61% 31.03% (2.71)%
=============================================== ========== ========== ========== ========== ========== ======
Ratios/supplemental data:
Net assets, end of period (000s omitted) $2,623,901 $1,830,032 $1,650,234 $1,261,008 $1,050,011 $ 714
=============================================== ========== ========== ========== ========== ========== ======
Ratio of expenses to average net assets 0.67%(b) 0.67% 0.68% 0.70% 0.71% 1.46%(c)
=============================================== ========== ========== ========== ========== ========== ======
Ratio of net investment income (loss) to
average net assets (0.01)%(b) 0.23% 0.11% 0.29% 0.33% (0.80)%(c)
=============================================== ========== ========== ========== ========== ========== ======
Portfolio turnover rate 92% 83% 88% 118% 126% 92%
=============================================== ========== ========== ========== ========== ========== ======
</TABLE>
(a) Does not deduct sales charges and is not annualized for periods less than
one year.
(b) Ratios are based on average net assets of $2,381,357,904.
(c) Ratios are annualized and based on average net assets of $227,867.
FS-10
<PAGE> 125
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.
- (g) Articles Supplementary to the Articles of Incorporation
as filed with the State of Maryland on December 29, 1999, is
filed electronically herewith.
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.
1
<PAGE> 126
(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 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.
- (b) First Amendment dated June 9, 1999 to the Amended and
Restated By-Laws of the Registrant as adopted on December 11,
1996, is filed electronically herewith.
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> 127
(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,
was filed electronically as an Exhibit with the Registrant's
Post-Effective Amendment No. 23 on February 25, 1999 and is
incorporated by reference herein.
- (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,
was filed electronically as an Exhibit with the Registrant's
Post-Effective Amendment No. 23 on February 25, 1999 and is
incorporated by reference herein.
- (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,
was filed electronically as an Exhibit with the Registrant's
Post-Effective Amendment No. 23 on February 25, 1999 and is
incorporated by reference herein.
- (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,
was filed electronically as an Exhibit with the Registrant's
Post-Effective Amendment No. 23 on February 25, 1999 and is
incorporated by reference herein.
- (g) Amendment No. 6, dated March 18, 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.
- (h) Amendment No. 7, dated November 15, 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.
3
<PAGE> 128
(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.
- (b) Amendment No. 1, dated March 1, 1999, to the 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. 23
on February 25, 1999 and is incorporated by reference herein.
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.
4
<PAGE> 129
- (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.
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 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.
(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.
5
<PAGE> 130
- (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 an Exhibit with the Registrant's
Post-Effective Amendment No. 21 on February 27, 1998, and is
incorporated by reference herein herewith.
(11) - Transfer Agency Agreement and Service Agreement, dated April
29, 1999, between Registrant and A I M Fund Services, Inc.,
is filed electronically herewith.
(12) - Memorandum of Agreement, dated March 1, 1999, between
Registrant, on behalf of Class II Shares, and A I M Advisors,
Inc. is filed electronically herewith.
(13) - Agreement and Plan of Reorganization, dated December 7, 1999,
between Registrant and AIM Summit Fund is filed
electronically herewith.
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 - Rule 18f-3 Plan, effective as of December 8, 1998, is filed
electronically herewith.
o (1) - The AIM Management Group Code of Ethics, adopted May 1, 1981,
as last amended August 17, 1999, relating to A I M Management
Group Inc. and A I M Advisors, Inc., is filed herewith
electronically.
(2) - Code of Ethics of Registrant, dated August 17, 1982, is filed
herewith electronically.
6
<PAGE> 131
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.
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.
7
<PAGE> 132
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.
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
AIM Summit Investors Plans II
8
<PAGE> 133
(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 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
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
Glenda A. Dayton Vice President None
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
Ivy B. McLemore 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
</TABLE>
- ---------------------------------
* 11 Greenway Plaza, Suite 100,
Houston, TX 77046-1173
9
<PAGE> 134
<TABLE>
<CAPTION>
Name and Principal Positions and Offices Positions and Offices
Business Address* with Underwriter with Registrant
- ------------------ --------------------- ---------------------
<S> <C> <C>
Christopher T. Simutis Vice President None
Gary K. Wendler Vice President None
Normal W. Woodson Vice President None
Luke P. Beausoleil Assistant Vice President None
Sheila R. Brown Assistant Vice President None
Scott E. Burman Assistant Vice President None
Tisha B. Christopher Assistant Vice President None
Mary E. Gentempo Assistant Vice President None
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
David B. O'Neil Assistant Vice President None
Rebecca Starling-Klatt Assistant Vice President None
Nicholas D. White Assistant Vice President None
Nancy L. Martin Assistant General Counsel & Assistant Assistant Secretary
Secretary
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.
10
<PAGE> 135
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.
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> 136
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, 2000.
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, 2000
- -------------------------------------
(Charles T. Bauer)
/s/ ROBERT H. GRAHAM Director & President
- ------------------------------------- February 25, 2000
(Robert H. Graham) (Principal Executive Officer)
/s/ BRUCE L. CROCKETT
- ------------------------------------- Director February 25, 2000
(Bruce L. Crockett)
/s/ OWEN DALY II
- ------------------------------------- Director February 25, 2000
(Owen Daly II)
/s/ EDWARD K. DUNN, JR.
- ------------------------------------- Director February 25, 2000
(Edward K. Dunn, Jr.)
/s/ JACK FIELDS
- ------------------------------------- Director February 25, 2000
(Jack Fields)
/s/ CARL FRISCHLING
- ------------------------------------- Director February 25, 2000
(Carl Frischling)
/s/ PREMA MATHAI-DAVIS
- ------------------------------------- Director February 25, 2000
(Prema Mathai-Davis)
/s/ LEWIS F. PENNOCK
- ------------------------------------- Director February 25, 2000
(Lewis F. Pennock)
/s/ LOUIS S. SKLAR
- ------------------------------------- Director February 25, 2000
(Louis S. Sklar)
Vice President &
/s/ DANA R. SUTTON Treasurer (Principal Financial
- ------------------------------------- and Accounting Officer) February 25, 2000
(Dana R. Sutton)
</TABLE>
<PAGE> 137
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
Exhibit
Number Description
- ------ -----------
<S> <C> <C>
a(1)(g) - Articles Supplementary to the Articles of Incorporation as filed with the State of Maryland
on December 29, 1999
b(3)(b) - First Amendment dated June 9, 1999 to the Amended and Restated By-Laws of the Registrant
adopted on December 11, 1996
d(9)(g) - Amendment No. 6, March 18, 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)(h) - Amendment No. 7, November 15, 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.
h(11) - Transfer Agency Agreement and Service Agreement, dated April 29, 1999, between Registrant
and A I M Fund Services, Inc.
h(12) - Memorandum of Agreement, dated March 1, 1999, between Registrant on behalf of Class II
Shares, and A I M Advisors, Inc.
h(13) - Agreement and Plan of Reorganization, dated December 7, 1999, between Registrant and AIM
Summit Fund.
j(1) - Auditor's Consent of KPMG LLP.
(2) - Consent of Ballard Spahr Andrews & Ingersoll, LLP.
o(1) - The AIM Management Group Code of Ethics, adopted May 1, 1981, as last amended August 17,
1999, relating to A I M Management Group Inc. and A I M Advisors, Inc.
(2) - Code of Ethics of Registrant, dated August 17, 1982
</TABLE>
<PAGE> 1
EXHIBIT a(1)(g)
AIM SUMMIT FUND, INC.
ARTICLES SUPPLEMENTARY
AIM SUMMIT FUND, INC., a Maryland corporation (hereinafter called the
"Corporation"), hereby certifies to the State Department of Assessments and
Taxation of Maryland that:
FIRST: The Board of Directors of the Corporation, by resolutions duly
adopted at a meeting duly called and held on December 8, 1999, has:
(a) increased the aggregate number of shares of stock that the Corporation
has authority to issue from One Billion (1,000,000,000) to One Billion
Seven Hundred Sixty Million (1,760,000,000) shares,
(b) classified and designated such newly authorized shares (collectively,
the "Shares") as follows: One Hundred Forty Million (140,000,000)
shares as shares of the Class I Shares of Common Stock and One Hundred
Twenty Million (120,000,000) shares as shares of the Class II Shares
of Common Stock, and Five Hundred Million (500,000,000) shares as
unclassified, with the preferences, conversion and other rights,
voting powers, restrictions, limitations as to dividends,
qualifications and terms and conditions of redemption of shares of
stock as set forth in ARTICLE SIXTH of the Charter of the Corporation
(the "Charter"), in any other provisions of the Charter relating to
the stock of the Corporation generally and in ARTICLE FOURTH of the
Corporation's Articles Supplementary as filed with the State
Department of Assessments and Taxation of Maryland on December 21,
1998, and
(c) ratified and confirmed the issuance of shares of Common Stock of the
Corporation, of each class of whatever portfolio, as reflected in the
records of the Corporation, and further declared and confirmed that
each such share, of whatever class of whatever portfolio, is duly
authorized, validly issued, fully paid and nonassessable.
SECOND: Immediately prior to the filing of these Articles Supplementary,
the Corporation had authority to issue One Billion (1,000,000,000) shares, $.01
par value per share, having an aggregate par value of $10,000,000, of which Four
Hundred Million (400,000,000) shares are classified as Class I Shares of Common
Stock, and Six Hundred Million (600,000,000) shares are classified as Class II
Shares of Common Stock.
THIRD: As of the filing of these Articles Supplementary, the Corporation
shall have authority to issue One Billion Seven Hundred Sixty Million
(1,760,000,000) shares, $.01 par value per share, having an aggregate par value
of $17,600,000, of which:
(a) Five Hundred Forty Million (540,000,000) shares are classified as
Class I Shares of Common Stock, and
Seven Hundred Twenty Million (720,000,000) shares are classified
as Class II Shares of Common Stock; and
(b) Five Hundred Million (500,000,000) shares are unclassified.
FOURTH: The Corporation is registered as an open-end company under the
Investment Company Act of 1940.
FIFTH: The total number of shares of capital stock that the Corporation had
authority to issue immediately prior to the filing of these Articles
Supplementary was increased and such additional shares were classified by the
Board of Directors of the Corporation in accordance with section 2-105(c) of the
Maryland General Corporation Law.
SIXTH: The Shares were classified by the Board of Directors of the
Corporation under authority granted to it in ARTICLE EIGHTH, paragraph (b) of
the Charter.
<PAGE> 2
The undersigned Vice President acknowledges these Articles Supplementary to
be the corporate act of the Corporation and states that to the best of his or
her knowledge, information and belief, the matters and facts set forth in these
Articles with respect to authorization and approval are true in all material
respects and that this statement is made under the penalties for perjury.
2
<PAGE> 3
IN WITNESS WHEREOF, AIM SUMMIT FUND, INC. has caused these Articles
Supplementary to be executed in its name and on its behalf by its Vice President
and witnessed by its Assistant Secretary on December 23, 1999.
AIM SUMMIT FUND, INC.
Witness:
/s/ KATHLEEN J. PFLUEGER By: /s/ MELVILLE B. COX
- -------------------------- ------------------------
Assistant Secretary Vice President
3
<PAGE> 1
EXHIBIT b(3)b
FIRST AMENDMENT TO AMENDED AND RESTATED
BYLAWS OF AIM SUMMIT FUND, INC.
(A MARYLAND CORPORATION)
ADOPTED JUNE 9, 1999
The Bylaws of AIM Summit Fund, Inc. are hereby amended as follows:
WHEREAS, the Board of Directors of the Fund desires to modify the
manner in which a chairman is appointed to preside at each shareholder
meeting;
NOW THEREFORE BE IT RESOLVED, that paragraph (a) of Article I, Section
8 of each Funds Bylaws be, and it hereby is, amended by deleting
paragraph (a) of Article I, Section 8 in its entirety and replacing it
with the following:
Section 8. Conduct of Stockholders Meetings.
(a) The meetings of the stockholders shall
be presided over by the Chairman of the Board, or if the
Chairman shall not be present or if there is no Chairman, by
the President, or if the President shall not be present, by a
Vice President, or if no Vice President is present, by a
chairman appointed for such purpose by the Board of Directors
or, if not so appointed, by a chairman appointed for such
purpose by the officers and Directors present at the meeting.
The Secretary of the Corporation, if present, shall act as
Secretary of such meetings, or if the Secretary is not
present, an Assistant Secretary of the Corporation shall so
act, and if no Assistant Secretary is present, then a person
designated by the Secretary of the Corporation shall so act,
and if the Secretary has not designated a person, then the
meeting shall elect a secretary for the meeting.
<PAGE> 1
EXHIBIT d(9)(g)
AMENDMENT NO. 6
TO
FOREIGN COUNTRY SELECTION
AND MANDATORY SECURITIES DEPOSITORY RESPONSIBILITIES
DELEGATION AGREEMENT
This Amendment No. 6, dated as of March 18, 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 portfolios of AIM Equity Funds,
Inc.:
AIM Dent Demographic Trends Fund
AIM Growth and Income Fund
The list of Investment Companies and Funds covered by the Agreement is
hereby amended to delete the following portfolio of AIM Investment
Funds:
AIM Emerging Markets Fund
The list of Investment Companies and Funds covered by the Agreement is
hereby amended to delete the following portfolios of AIM Growth Series:
AIM International Growth Fund
AIM Worldwide 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: /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 Dent Demographic Trends Fund AIM V.I. Diversified Income Fund
AIM Growth and Income Fund AIM V.I. Global Growth and Income Fund
AIM Large Cap Growth Fund AIM V.I. Global Utilities Fund
AIM Weingarten Fund AIM V.I. Government Securities Fund
AIM V.I. Growth Fund
AIM FUNDS GROUP AIM V.I. Growth & Income Fund
AIM Balanced Fund AIM V.I. High Yield Fund
AIM Global Utilities Fund AIM V.I. International Equity Fund
AIM High Yield Fund AIM V.I. Money Market Fund
AIM Income Fund AIM V.I. Telecommunications Fund
AIM Money Market Fund AIM V.I. Value Fund
AIM Select Growth Fund
AIM Value Fund EMERGING MARKETS DEBT PORTFOLIO
AIM INVESTMENT SECURITIES FUNDS GROWTH PORTFOLIO
AIM High Yield Fund II Small Cap Portfolio
Value Portfolio
AIM SPECIAL OPPORTUNITIES FUNDS
AIM Small Cap Opportunities Fund
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 Mid Cap Equity Fund
Global Natural Resources Portfolio AIM Small Cap Growth Fund
AIM Basic Value Fund
GT GLOBAL FLOATING RATE FUND, INC.
(doing business as AIM Floating Rate GT GLOBAL VARIABLE INVESTMENT TRUST
Fund) GT Global Variable Latin America Fund
AIM SERIES TRUST GT Global Variable Telecommunications
AIM Global Trends Fund Fund
GT Global Variable Growth & Income Fund
FLOATING RATE PORTFOLIO GT Global Variable Strategic Income Fund
GT Global Variable Emerging Markets Fund
AIM EASTERN EUROPE FUND GT Global Variable Government Income
Fund
AIM INVESTMENT FUNDS GT Global Variable U.S. Government
AIM Global Government Income Fund Income Fund
AIM Strategic Income Fund GT Global Variable Infrastructure Fund
AIM Emerging Markets Debt Fund GT Global Variable Natural Resources
AIM Global Growth & Income Fund Fund
AIM Developing Markets Fund
AIM Latin American Growth Fund GT GLOBAL VARIABLE INVESTMENT SERIES
AIM Global Financial Services Fund GT Global Variable New Pacific Fund
AIM Global Health Care Fund GT Global Variable Europe Fund
AIM Global Telecommunications Fund GT Global Variable America Fund
AIM Global Consumer Products and GT Global Variable International Fund
Services Fund GT Global Variable Money Market Fund
AIM Global Infrastructure Fund
AIM Global Resources Fund
Attest: /s/ OFELIA M. MAYO By: /s/ ROBERT H. GRAHAM
-------------------------- ------------------------------------
Assistant Secretary President
<PAGE> 1
EXHIBIT d(9)(h)
AMENDMENT NO. 7
TO
FOREIGN COUNTRY SELECTION
AND MANDATORY SECURITIES DEPOSITORY RESPONSIBILITIES
DELEGATION AGREEMENT
This Amendment No. 7, dated as of November 15, 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 Mid Cap Growth Fund
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 Large Cap Opportunities Fund
The list of Investment Companies and Funds covered by the Agreement
is hereby amended to include the following portfolios of AIM
Variable Insurance Funds, Inc.:
AIM V.I. Blue Chip Fund
AIM V.I. Dent Demographic Trends Fund
The list of Investment Companies and Funds covered by the Agreement
is hereby amended to delete the following portfolio of AIM Advisor
Funds, Inc.:
AIM Advisor MultiFlex Fund
The list of Investment Companies and Funds covered by the Agreement
is hereby amended to delete the following fund:
AIM Eastern Europe Fund
The list of Investment Companies and Funds covered by the Agreement
is hereby amended to delete the following fund and portfolios
thereunder:
1
<PAGE> 2
GT Global Variable Investment Trust
-----------------------------------
GT Global Variable Emerging Markets Fund
GT Global Variable Government Income Fund
GT Global Variable Growth & Income Fund
GT Global Variable Infrastructure Fund
GT Global Variable Latin America Fund
GT Global Variable Natural Resources Fund
GT Global Variable Strategic Income Fund
GT Global Variable Telecommunications Fund
GT Global Variable U.S. Government Income Fund
The list of Investment Companies and Funds covered by the Agreement
is hereby amended to delete the following fund and portfolios
thereunder:
GT Global Variable Investment Series
------------------------------------
GT Global Variable America Fund
GT Global Variable Europe Fund
GT Global Variable International Fund
GT Global Variable Money Market Fund
GT Global Variable New Pacific Fund
The list of Investment Companies and Funds covered by the Agreement
is hereby amended to rename the following portfolio of AIM Equity
Funds, Inc.:
AIM Growth and Income Fund, renamed as AIM Large Cap Basic
Value Fund
The list of Investment Companies and Funds covered by the Agreement
is hereby amended to rename the following portfolio of AIM Growth
Series:
AIM Europe Growth Fund, renamed as AIM Euroland Growth Fund
The list of Investment Companies and Funds covered by the Agreement
is hereby amended to rename the following portfolio of AIM
Investment Funds:
AIM Global Telecommunications Fund, renamed as AIM Global
Telecommunications and Technology Fund
In all other respects, the Agreement is hereby confirmed and remains
in full force and effect.
2
<PAGE> 3
IN WITNESS WHEREOF, the parties have caused this Amendment No. 7
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/ROBERT H. GRAHAM
------------------------------ ----------------------------
Assistant Secretary 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 Real Estate Fund AIM Global Aggressive Growth Fund
AIM Global Growth Fund
AIM EQUITY FUNDS, INC. AIM Global Income Fund
AIM Aggressive Growth Fund
AIM Blue Chip Fund AIM VARIABLE INSURANCE FUNDS, INC.
AIM Capital Development Fund AIM V.I. Aggressive Growth Fund
AIM Charter Fund AIM V.I. Balanced Fund
AIM Constellation Fund AIM V.I. Blue Chip Fund
AIM Dent Demographic Trends Fund AIM V.I. Capital Appreciation Fund
AIM Large Cap Basic Value Fund AIM V.I. Capital Development Fund
AIM Large Cap Growth Fund AIM V.I. Dent Demographic Trends Fund
AIM Mid 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 Large Cap Opportunities Fund Value Portfolio
AIM Mid Cap Opportunities Fund
AIM Small Cap Opportunities Fund
AIM SUMMIT FUND, INC.
3
<PAGE> 4
GLOBAL INVESTMENT PORTFOLIO AIM INVESTMENT FUNDS
Global Consumer Products and AIM Developing Markets Fund
Services Portfolio AIM Emerging Markets Debt Fund
Global Financial Services Portfolio AIM Global Consumer Products and
Global Infrastructure Portfolio Services Fund
Global Natural Resources Portfolio AIM Global Financial Services Fund
AIM Global Government Income Fund
GT GLOBAL FLOATING RATE FUND, INC. AIM Global Growth & Income Fund
(doing business as AIM Floating AIM Global Health Care Fund
Rate Fund) AIM Global Infrastructure Fund
AIM Global Resources Fund
AIM SERIES TRUST AIM Global Telecommunications and
AIM Global Trends Fund Technology Fund
AIM Latin American Growth Fund
FLOATING RATE PORTFOLIO AIM Strategic Income Fund
AIM GROWTH SERIES
AIM Basic Value Fund
AIM Euroland Growth Fund
AIM Japan Growth Fund
AIM Mid Cap Equity Fund
AIM New Pacific Growth Fund
AIM Small Cap Growth Fund
Attest: /s/OFELIA M. MAYO By: /s/ROBERT H. GRAHAM
------------------------------ ----------------------------
Assistant Secretary President
4
<PAGE> 1
EXHIBIT h(11)
TRANSFER AGENCY AND SERVICE AGREEMENT
BETWEEN
AIM SUMMIT FUND, INC.
(CLASS II SHARES)
AND
A I M FUND SERVICES, INC.
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
<S> <C>
ARTICLE 1
TERMS OF APPOINTMENT; DUTIES OF THE TRANSFER AGENT..................1
ARTICLE 2
FEES AND EXPENSES...................................................2
ARTICLE 3
REPRESENTATIONS AND WARRANTIES OF THE TRANSFER AGENT................3
ARTICLE 4
REPRESENTATIONS AND WARRANTIES OF THE FUND..........................3
ARTICLE 5
INDEMNIFICATION.....................................................4
ARTICLE 6
COVENANTS OF THE FUND AND THE TRANSFER AGENT........................5
ARTICLE 7
TERMINATION OF AGREEMENT............................................6
ARTICLE 8
ADDITIONAL FUNDS....................................................6
ARTICLE 9
ASSIGNMENT..........................................................6
ARTICLE 10
AMENDMENT...........................................................7
ARTICLE 11
TEXAS LAW TO APPLY..................................................7
ARTICLE 12
MERGER OF AGREEMENT.................................................7
ARTICLE 13
COUNTERPARTS........................................................7
</TABLE>
<PAGE> 3
TRANSFER AGENCY AND SERVICE AGREEMENT
AGREEMENT made as of the 29th day of April, 1999, by and between AIM
SUMMIT FUND, INC., a Maryland corporation, having its principal office and place
of business at 11 Greenway Plaza, Suite 100, Houston, Texas 77046 (the "Fund"),
and A I M Fund Services, Inc., a Delaware corporation having its principal
office and place of business at 11 Greenway Plaza, Suite 100, Houston, Texas
77046 (the "Transfer Agent").
WHEREAS, the Transfer Agent is registered as such with the Securities
and Exchange Commission (the "SEC"); and
WHEREAS, the Fund is authorized to issue shares in separate classes and
each such class having different distribution arrangements; and
WHEREAS, the Fund on behalf of Class II Shares (the "Class") desires to
appoint the Transfer Agent as its transfer agent, and agent in connection with
certain other activities, with respect to the Class, and the Transfer Agent
desires to accept such appointment;
NOW, THEREFORE, in consideration of the mutual covenants herein
contained, the parties hereto agree as follows:
ARTICLE 1
TERMS OF APPOINTMENT; DUTIES OF THE TRANSFER AGENT
1.01 Subject to the terms and conditions set forth in this Agreement,
the Fund hereby employs and appoints the Transfer Agent to act as, and the
Transfer Agent agrees to act as, its transfer agent for the authorized and
issued Class II Shares of common stock of the Fund representing interests of the
Fund ("Shares"), dividend disbursing agent, and paying agent in connection with
any accumulation or similar plans provided to shareholders of the Class (the
"Shareholders"), including without limitation any periodic investment plan or
periodic withdrawal program, as provided in the currently effective prospectus
and statement of additional information (the "Prospectus") of the Fund on behalf
of the Class or Summit Investors Plans II, a unit investment trust.
1.02 The Transfer Agent agrees that it will perform the following
services:
(a) The Transfer Agent shall, in accordance with procedures established
from time to time by agreement between the Fund on behalf of the Class, and the
Transfer Agent:
(i) receive for acceptance, orders for the purchase of Shares,
and promptly deliver payment and appropriate documentation
thereof to the Custodian of the Fund authorized pursuant
to the Charter of the Fund (the "Custodian");
(ii) pursuant to purchase orders, issue the appropriate number
of Shares and hold such Shares in the appropriate
Shareholder account;
(iii) receive for acceptance redemption requests and redemption
directions and deliver the appropriate documentation
thereof to the Custodian;
1
<PAGE> 4
(iv) at the appropriate time as and when it receives monies paid
to it by the Custodian with respect to any redemption, pay
over or cause to be paid over in the appropriate manner
such monies as instructed by the Fund;
(v) effect transfers of Shares by the registered owners thereof
upon receipt of appropriate instructions;
(vi) prepare and transmit payments for dividends and
distributions declared by the Fund on behalf of the Shares;
(vii) maintain records of account for and advise the Fund and its
Shareholders as to the foregoing; and
(viii) record the issuance of Shares of the Fund and maintain
pursuant to SEC Rule 17Ad-10(e) a record of the total
number of Shares which are authorized, based upon data
provided to it by the Fund, and issued and outstanding.
The Transfer Agent shall also provide the Fund on a regular basis with
the total number of Shares which are authorized and issued and outstanding and
shall have no obligation, when recording the issuance of Shares, to monitor the
issuance of such Shares or to take cognizance of any laws relating to the issue
or sale of such Shares, which function shall be the sole responsibility of the
Fund.
(b) In addition to the services set forth in the above paragraph (a),
the Transfer Agent shall: (i) perform the customary services of a transfer
agent, including but not limited to: maintaining all Shareholder accounts,
mailing Shareholder reports and prospectuses to current Shareholders, preparing
and mailing confirmation forms and statements of accounts to Shareholders for
all purchases and redemptions of Shares and other confirmable transactions in
Shareholder accounts, preparing and mailing activity statements for
Shareholders, and providing Shareholder account information.
(c) Procedures as to who shall provide certain of these services in
Article 1 may be established from time to time by agreement between the Fund on
behalf of the Class and the Transfer Agent. The Transfer Agent may at times
perform only a portion of these services and the Fund or its agent may perform
these services on the Fund's behalf.
ARTICLE 2
FEES AND EXPENSES
2.01 For performance by the Transfer Agent pursuant to this Agreement,
the Fund agrees on behalf of the Class to pay the Transfer Agent fees as set out
in the initial Schedule A attached hereto. Such fees and out-of-pocket expenses
and advances identified under Section 2.02 below may be changed from time to
time subject to mutual written agreement between the Fund and the Transfer
Agent.
2.02 In addition to the fee paid under Section 2.01 above, the Fund
agrees to reimburse the Transfer Agent for out-of-pocket expenses or advances
incurred by the Transfer Agent for the items set out in Schedule A attached
hereto. In addition, any other expenses incurred by the
2
<PAGE> 5
Transfer Agent at the request or with the consent of the Fund, will be
reimbursed by the Fund on behalf of the applicable Shares.
2.03 The Fund agrees on behalf of the Class to pay all fees and
reimbursable expenses following the mailing of the respective billing notice.
Postage for mailing of dividends, proxies, Fund reports and other mailings to
all Shareholder accounts shall be advanced to the Transfer Agent by the Fund at
least seven (7) days prior to the mailing date of such materials.
2.04 The Transfer Agent shall pay unless and until instructed by the
Fund to the contrary, those fees and account maintenance charges of State Street
Bank and Trust Company under the Custodian Agreement for the creation of AIM
Summit Investors Plans II dated April 29, 1999 and as more specifically set
forth on Schedule B hereto which may be amended from time to time by the Fund
with the approval of its Board of Directors.
ARTICLE 3
REPRESENTATIONS AND WARRANTIES OF THE TRANSFER AGENT
The Transfer Agent represents and warrants to the Fund that:
3.01 It is a corporation duly organized and existing and in good
standing under the laws of the state of Delaware.
3.02 It is duly qualified to carry on its business in Delaware and in
Texas.
3.03 It is empowered under applicable laws and by its Charter and
By-Laws to enter into and perform this Agreement.
3.04 All requisite corporate proceedings have been taken to authorize
it to enter into and perform this Agreement.
3.05 It has and will continue to have access to the necessary
facilities, equipment and personnel to perform its duties and obligations under
this Agreement.
3.06 It is registered as a Transfer Agent as required by the federal
securities laws.
3.07 This Agreement is a legal, valid and binding obligation to it.
ARTICLE 4
REPRESENTATIONS AND WARRANTIES OF THE FUND
The Fund represents and warrants to the Transfer Agent that:
4.01 It is a business corporation duly organized and existing and in
good standing under the laws of Maryland.
4.02 It is empowered under applicable laws and by its Charter and
Bylaws to enter into and perform this Agreement.
3
<PAGE> 6
4.03 All corporate proceedings required by said Charter and Bylaws have
been taken to authorize it to enter into and perform this Agreement.
4.04 It is an open-end, diversified management investment company
registered under the Investment Company Act of 1940, as amended.
4.05 A registration statement under the Securities Act of 1933, as
amended on behalf of each of the Classes is currently effective and will remain
effective, with respect to all Shares of the Fund being offered for sale.
ARTICLE 5
INDEMNIFICATION
5.01 The Transfer Agent shall not be responsible for, and the Fund
shall on behalf of the applicable Class, indemnify and hold the Transfer Agent
harmless from and against, any and all losses, damages, costs, charges, counsel
fees, payments, expenses and liability arising out of or attributable to:
(a) all actions of the Transfer Agent or its agents or subcontractors
required to be taken pursuant to this Agreement, provided that such actions are
taken in good faith and without negligence or willful misconduct;
(b) the Fund's lack of good faith, negligence or willful misconduct
which arise out of the breach of any representation or warranty of the Fund
hereunder;
(c) the reliance on or use by the Transfer Agent or its agents or
subcontractors of information, records and documents or services which (i) are
received or relied upon by the Transfer Agent or its agents or subcontractors
and/or furnished to it or performed by on behalf of the Fund, and (ii) have been
prepared, maintained and/or performed by the Fund or any other person or firm on
behalf of the Fund; provided such actions are taken in good faith and without
negligence or willful misconduct;
(d) the reliance on, or the carrying out by the Transfer Agent or its
agents or subcontractors of any instructions or requests of the Fund on behalf
of the applicable Class; provided such actions are taken in good faith and
without negligence or willful misconduct; or
(e) the offer or sale of Shares in violation of any requirement under
the federal securities laws or regulations or the securities laws or regulations
of any state that such Shares be registered in such state or in violation of any
stop order or other determination or ruling by any federal agency or any state
with respect to the offer or sale of such Shares in such state.
5.02 The Transfer Agent shall indemnify and hold the Fund harmless from
and against any and all losses, damages, costs, charges, counsel fees, payments,
expenses and liability arising out of or attributable to any action or failure
or omission to act by the Transfer Agent as result of the Transfer Agent's lack
of good faith, negligence or willful misconduct.
5.03 At any time the Transfer Agent may apply to any officer of the
Fund for instructions, and may consult with legal counsel with respect to any
matter arising in connection with the services to be performed by the Transfer
Agent under this Agreement, and the Transfer Agent and its agents
4
<PAGE> 7
or subcontractors shall not be liable to and shall be indemnified by the Fund on
behalf of the applicable Class for any action taken or omitted by it in reliance
upon such instructions or upon the opinion of such counsel. The Transfer Agent
shall be protected and indemnified in acting upon any paper or document
furnished by or on behalf of the Fund, reasonably believed to be genuine and to
have been signed by the proper person or persons, or upon any instruction,
information, data, records or documents provided to the Transfer Agent or its
agents or subcontractors by machine readable input, telex, CRT data entry or
other similar means authorized by the Fund, and shall not be held to have notice
of any change of authority of any person, until receipt of written notice
thereof from the Fund.
5.04 In the event either party is unable to perform its obligations
under the terms of this Agreement because of acts of God, strikes, equipment or
transmission failure or damage reasonably beyond its control, or other causes
reasonably beyond its control, such party shall not be liable for damages to the
other for any damages resulting from such failure to perform or otherwise from
such causes.
5.05 Neither party to this Agreement shall be liable to the other party
for consequential damages under any provision of this Agreement or for any
consequential damages arising out of any act or failure to act hereunder.
5.06 In order that the indemnification provisions contained in this
Article 5 shall apply, upon the assertion of a claim for which either party may
be required to indemnify the other, the party seeking indemnification shall
promptly notify the other party of such assertion, and shall keep the other
party advised with respect to all developments concerning such claim. The party
who may be required to indemnify shall have the option to participate with the
party seeking indemnification in the defense of such claim. The party seeking
indemnification shall in no case confess any claim or make any compromise in any
case in which the other party may be required to indemnify it except with the
other party's prior written consent.
ARTICLE 6
COVENANTS OF THE FUND AND THE TRANSFER AGENT
6.01 The Fund shall, upon request, on behalf of the Class promptly
furnish to the Transfer Agent the following:
(a) a certified copy of the resolution of the Board of Directors of the
Fund authorizing the appointment of the Transfer Agent and the execution and
delivery of this Agreement; and
(b) a copy of the Charter and Bylaws of the Fund and all amendments
thereto.
6.02 The Transfer Agent shall keep records relating to the services to
be performed hereunder, in the form and manner as it may deem advisable. To the
extent required by Section 31 of the Investment Company Act of 1940, as amended,
and the Rules thereunder, the Transfer Agent agrees that all such records
prepared or maintained by the Transfer Agent relating to the services to be
performed by the Transfer Agent hereunder are the property of the Fund and will
be preserved, maintained and made available in accordance with such Section and
Rules, and will be surrendered promptly to the Fund on and in accordance with
its request.
5
<PAGE> 8
6.03 The Transfer Agent and the Fund agree that all books, records,
information and data pertaining to the business of the other party which are
exchanged or received pursuant to the negotiation or the carrying out of this
Agreement shall remain confidential, and shall not be voluntarily disclosed to
any other person, except as may be required by law.
6.04 In case of any requests or demands for the inspection of the
Shareholder records of the Fund, the Transfer Agent will endeavor to notify the
Fund and to secure instructions from an authorized officer of the Fund as to
such inspection. The Transfer Agent reserves the right, however, to exhibit the
Shareholder records to any person whenever it is advised by its counsel that it
may be held liable for the failure to exhibit the Shareholder records to such
person.
ARTICLE 7
TERMINATION OF AGREEMENT
7.01 This Agreement may be terminated by either party upon sixty (60)
days written notice to the other.
7.02 Should the Fund exercise its right to terminate this Agreement,
all out-of-pocket expenses associated with the movement of records and material
will be borne by the Fund on behalf of the applicable Class. Additionally, the
Transfer Agent reserves the right to charge for any other reasonable expenses
associated with such termination and/or a charge equivalent to the average of
three (3) months' fees.
ARTICLE 8
ADDITIONAL FUNDS
8.01 In the event that the Fund establishes one or more classes of
Shares in addition to the Class with respect to which it desires to have the
Transfer Agent render services as transfer agent under the terms hereof, it
shall so notify the Transfer Agent in writing, and if the Transfer Agent agrees
in writing to provide such services, such series of Shares shall become a
Portfolio hereunder.
ARTICLE 9
ASSIGNMENT
9.01 Except as provided in Section 9.03 below, neither this Agreement
nor any rights or obligations hereunder may be assigned by either party without
the written consent of the other party.
9.02 This Agreement shall inure to the benefit of and be binding upon
the parties and their respective permitted successors and assigns.
9.03 The Transfer Agent may, without further consent on the part of the
Fund, subcontract for the performance hereof with any entity which is duly
registered as a transfer agent pursuant to Section 17A(c)(1) of the Securities
Exchange Act of 1934 as amended ("Section 17A(c)(1)"); provided, however, that
the Transfer Agent shall be as fully responsible to the Fund for the acts and
omissions of any subcontractor as it is for its own acts and omissions.
6
<PAGE> 9
ARTICLE 10
AMENDMENT
10.01 This Agreement may be amended or modified by a written agreement
executed by both parties and authorized or approved by a resolution of the Board
of Directors of the Fund.
ARTICLE 11
TEXAS LAW TO APPLY
11.01 This Agreement shall be construed and the provisions thereof
interpreted under and in accordance with the laws of the State of Texas.
ARTICLE 12
MERGER OF AGREEMENT
12.01 This Agreement constitutes the entire agreement between the
parties hereto and supersedes any prior agreement with respect to the subject
matter hereof whether oral or written.
ARTICLE 13
COUNTERPARTS
13.01 This Agreement may be executed by the parties hereto on any
number of counterparts, and all of said counterparts taken together shall be
deemed to constitute one and the same instrument.
7
<PAGE> 10
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed in their names and on their behalf by and through their duly authorized
officers, as of the day and year first above written.
AIM SUMMIT FUND, INC.
By: /s/ CAROL F. RELIHAN
---------------------------
Senior Vice President
ATTEST:
/s/ STEPHEN I. WINER
- -------------------------------
Assistant Secretary
A I M FUND SERVICES, INC.
By: /s/ JOHN CALDWELL
---------------------------
President
ATTEST:
/s/ STEPHEN I. WINER
- -------------------------------
Assistant Secretary
8
<PAGE> 11
SCHEDULE A
1. For performance by the Transfer Agent pursuant to this Agreement, the
Fund agrees on behalf of the Class to pay the Transfer Agent an
annualized fee for shareholder accounts that are open during any
monthly period as set forth below, and an annualized fee of $.70 per
shareholder account that is closed during any monthly period. Both fees
shall be billed by the Transfer Agent monthly in arrears on a prorated
basis of 1/12 of the annualized fee for all such accounts.
Per Account Fee
Fund Type Annualized
--------- ----------
Class II Shares $15.15
2. The Transfer Agent shall provide the various mutual funds that are
advised by A I M Advisors, Inc. or its affiliates and distributed by
A I M Distributors, Inc. (the "AIM Funds") with an annualized credit to
the monthly billings of (a) $1.50 for each open account in excess of
100,000 open AIM Funds Accounts up to and including 125,000 open AIM
Funds Accounts; (b) $1.75 for each open account in excess of 125,000
open AIM Funds Accounts up to and including 150,000 open AIM Funds
Accounts; (c) $2.00 for each open AIM Funds Account in excess of
150,000 open AIM Funds Accounts up to and including 200,000 open AIM
Funds Accounts; (d) $2.25 for each open AIM Funds Account in excess of
200,000 open AIM Funds Accounts up to and including 500,000 open AIM
Funds Accounts; (e) $2.50 for each open AIM Funds Account in excess of
500,000 open AIM Funds Accounts up to and including 1,000,000 open AIM
Funds Accounts; and (f) $3.00 for each open AIM Funds Account in excess
of 1,000,000 open AIM Funds Accounts.
3. In addition, beginning on the anniversary date of the execution of the
Remote Services Agreement with First Data Investor Services Group, Inc.
(formerly, The Shareholder Services Group, Inc.) and on each subsequent
anniversary date, the per account fees shall each be increased by a
percentage amount equal to the percentage increase in the then current
Consumer Price Index (all urban consumers) or its successor index,
though in no event shall such increase be greater than a 7% increase
over the previous fees.
4. Other Fees
<TABLE>
<S> <C>
IRA Annual Maintenance Fee $10 per IRA account per year (paid by
investor per tax I.D. number).
Balance Credit The total fees due to the Transfer Agent from
all funds affiliated with the Fund shall be
reduced by an amount equal to one half of
investment income earned by the Transfer
Agent on the DDA balances of the disbursement
accounts for those funds.
Remote Services Fee $3.60 per open account per year,
payable monthly and $1.80 per closed
account per year, payable monthly.
</TABLE>
9
<PAGE> 12
5. OUT-OF-POCKET EXPENSES
The Fund shall reimburse the Transfer Agent monthly for applicable
out-of-pocket expenses, including, but not limited to the following
items:
- Microfiche/microfilm production & equipment
- Magnetic media tapes and freight
- Printing costs, including, without limitation, certificates,
envelopes, checks, stationery, confirmations and statements
- Postage (bulk, pre-sort, ZIP+4, bar coding, first class)
direct pass through to the Fund
- Due diligence mailings
- Telephone and telecommunication costs, including all lease,
maintenance and line costs
- Ad hoc reports
- Proxy solicitations, mailings and tabulations
- Daily & Distribution advice mailings
- Shipping, Certified and Overnight mail and insurance
- Year-end form production and mailings
- Terminals, communication lines, printers and other equipment
and any expenses incurred in connection with such terminals
and lines
- Duplicating services
- Courier services
- Banking charges, including without limitation incoming and
outgoing wire charges @ $8.00 per wire
- Rendering fees as billed
- Federal Reserve charges for check clearance
- Record retention, retrieval and destruction costs, including,
but not limited to exit fees charged by third party record
keeping vendors
- Third party audit reviews
- All client specific Systems enhancements will be at the Funds'
cost.
- Certificate Insurance
- Such other miscellaneous expenses reasonably incurred by the
Transfer Agent in performing its duties and responsibilities
under this Agreement
- Check writing fee of $.75 per check redemption.
The Fund agrees that postage and mailing expenses will be paid on the
day of or prior to mailing. In addition, the Fund will promptly
reimburse the Transfer Agent for any other unscheduled expenses
incurred by the Transfer Agent whenever the Fund and the Transfer Agent
mutually agree that such expenses are not otherwise properly borne by
the Transfer Agent as part of its duties and obligations under the
Agreement.
10
<PAGE> 13
SCHEDULE B
Fees payable to State Street Bank and Trust Company
The following fees and charges will be deducted from the Fund, Plans or
from Planholder accounts and paid to the Custodian in accordance with the terms
of the Prospectus.
General
Account Services fees are based on an annual per shareholder account
charge for account maintenance plus transaction and out-of-pocket expenses.
There is a minimum charge of $1,500 per month. Fees are billable on a monthly
basis at the rate of 1/12 of the annual fee. A charge is made for an account in
the month that an account opens or closes.
Annual Account Service Fees
Open Account - active $19.00/year (1)
Activity Based Fees
Telephone Calls $ 2.50/each (1)
Correspondence $ 3.00/each (1)
New Account and Setup Kits $ 2.50/each (1)
Planholder Fees
IRA Annual Maintenance (3) $10.00/year
Bounced Checks $ 5.00/each
Transcripts $ 5.00/each year researched
Terminations $ 2.50/each
Inactive Accounts (2) $12.00/year
Out-of-Pocket Expenses (1)
Out-of-Pocket expenses include but are not limited to: Confirmation
statements, checks, postage, forms, telephone, microfilm, microfiche, year-end
forms and expenses incurred at the specific direction of A I M Distributors,
Inc.
- ------------------------------
(1) These are fees that the Fund has voluntarily elected to pay to the
Custodian on behalf of the Plans.
(2) A Plan that is not current and to which no investments have been made
for a 12-month period but does not include completed plans. This fee
will be paid annually to the Sponsor or its designee.
(3) The Custodian will receive $6.00 and A I M Distributors, Inc. will
receive $4.00.
11
<PAGE> 1
EXHIBIT h(12)
MEMORANDUM OF AGREEMENT
This Memorandum of Agreement is entered into as of this 1st day of
March, 1999 between AIM Summit Fund, Inc. (the "Company"), on behalf of the
funds listed on Exhibit "A" to this Memorandum of Agreement (the "Funds"), and
A I M Advisors, Inc. ("AIM").
For and in consideration of the mutual terms and agreements set forth
herein and other good and valuable consideration, the receipt and sufficiency of
which is hereby acknowledged, the Company and AIM agree as follows:
The Company and AIM agree until the date set forth on the attached
Exhibit "A" that AIM will limit expenses at the rates set forth on Exhibit "A"
of the average daily net assets allocable to such class. Neither the Company nor
AIM may remove or amend the expense limitations to the Company's detriment prior
to the date set forth on Exhibit "A" AIM will not have any right to
reimbursement of any amount so limited.
The Company and AIM agree to review the then-current expense
limitations for each class of each Fund listed on Exhibit "A" on a date prior to
the date listed on that Exhibit to determine whether such expense limitations
should be amended, continued or terminated. Unless the Company, by vote of its
Board of Directors, or AIM terminates the expense limitations, or the Company
and AIM are unable to reach an agreement on the amount of the expense
limitations to which the Company and AIM desire to be bound, the expense
limitations will continue for additional one-year terms at the rate to which the
Company and AIM mutually agree. Exhibit "A" will be amended to reflect that rate
and the new date through which the Company and AIM agree to be bound.
IN WITNESS WHEREOF, the Company and AIM have entered into this
Memorandum of Agreement as of the date first above written.
AIM Summit Fund, Inc.,
on behalf of each Fund listed in Exhibit "A"
to this Memorandum of Agreement
By: /s/ ROBERT H. GRAHAM
----------------------------------------
Title: President
-------------------------------------
A I M Advisors, Inc.
By: /s/ ROBERT H. GRAHAM
----------------------------------------
Title: President
-------------------------------------
<PAGE> 2
EXHIBIT "A"
AIM SUMMIT FUND, INC.
<TABLE>
<CAPTION>
FUND EXPENSE LIMITATION COMMITTED UNTIL
- ---- ------------------ ---------------
<S> <C> <C>
AIM Summit Fund
Class II 1.50% June 30, 2000
</TABLE>
<PAGE> 1
EXHIBIT h(13)
AIM SUMMIT FUND, INC.
AGREEMENT AND PLAN OF REORGANIZATION
AGREEMENT AND PLAN OF REORGANIZATION (the "Agreement"), dated as of
December 7, 1999, is entered into by and between AIM Summit Fund, Inc., a
Maryland corporation (the "Company"), and AIM Summit Fund, a Delaware business
trust (the "Trust"), acting on its own behalf and on behalf of its series
portfolio AIM Summit Fund.
BACKGROUND
The Company is organized as a management investment company and is
registered with the Securities and Exchange Commission under the Investment
Company Act of 1940. The Company currently publicly offers shares of its common
stock through AIM Summit Investors Plans I and AIM Summit Investors Plans II,
each a unit investment trust.
The Company desires to change its form and place of organization by
reorganizing as the Trust. In anticipation of such reorganization (the
"Reorganization"), the Board of Trustees of the Trust has designated shares of
beneficial interest in the Trust as an investment portfolio called AIM Summit
Fund (the "Portfolio").
The Reorganization will occur through the transfer of all of the assets of
the Company to the Portfolio. In consideration of its receipt of these assets,
the Portfolio will assume all of the liabilities of the Company, and the Trust
will issue to the Company shares of beneficial interest in the Portfolio (the
"Portfolio Shares"). The Company will then distribute the Portfolio Shares it
has received to its shareholders.
The Board of Directors of the Company has designated two classes of shares
of the common stock of the Company: Class I shares and Class II shares. At the
meeting of the Company's shareholders convened to consider the transactions
contemplated by this Agreement, the shareholders will be asked to approve a Plan
of Recapitalization pursuant to which the Company's Class II shares will be
reclassified as Class I shares of the Company's common stock (the
"Recapitalization"). If approved by shareholders, the Plan of Recapitalization
will be effected prior to the Reorganization contemplated by this Agreement.
The Reorganization is subject to, and shall be effected in accordance with,
the terms of this Agreement. This Agreement is intended to be and is adopted by
the Company and by the Trust, on its own behalf and on behalf of the Portfolio,
as a Plan of Reorganization within the meaning of Section 368(a) of the Internal
Revenue Code of 1986, as amended (the "Code").
<PAGE> 2
NOW THEREFORE, the parties hereto, intending to be legally bound, hereby
agree as follows:
1. DEFINITIONS.
Any capitalized terms used herein and not otherwise defined shall have the
meanings set forth in the preamble or background to this Agreement. In addition,
the following terms shall have the following meanings:
1.1 "Assets" shall mean all assets including, without limitation, all
cash, cash equivalents, securities, receivables (including interest and
dividends receivable), claims and rights of action, rights to register shares
under applicable securities laws, books and records, deferred and prepaid
expenses shown as assets on the Company's books, and other property owned by the
Company at the Effective Time.
1.2 "Closing" shall mean the consummation of the transfer of assets,
assumption of liabilities and issuance of shares described in Sections 2.1, 2.2
and 2.3 of this Agreement, together with the related acts necessary to
consummate the Reorganization, to occur on the date set forth in Section 3.1.
1.3 "Code" shall mean the Internal Revenue Code of 1986, as amended.
1.4 "Company Share Class" shall mean each of the Class I and Class II
shares of the common stock of the Company, if any such classes of Company Shares
exist at the Effective Time.
1.5 "Company Shares" shall mean the shares of the Company outstanding
immediately prior to the Reorganization.
1.6 "Effective Time" shall have the meaning set forth in Section 3.1.
1.7 "Liabilities" shall mean all liabilities of the Company including,
without limitation, all debts, obligations, and duties of whatever kind or
nature, whether absolute, accrued, contingent, or otherwise, whether or not
determinable at the Effective Time, and whether or not specifically referred to
herein.
1.8 "Portfolio" shall mean the AIM Summit Fund series of shares of
beneficial interest of the Trust
1.9 "Portfolio Share Class" shall mean each class of shares representing
an interest in the Portfolio, one of which shall correspond to one of the
Company Share Classes. The Trust will designate Portfolio Share Classes only if
Company Share Classes exist at the Effective Time.
1.10 "Portfolio Shares" shall mean those shares of beneficial interest in
the Portfolio, issued by the Trust to the Company in consideration of the
Portfolio's receipt of the Company's Assets.
1.11 "Recapitalization" shall mean the reclassification of the Class II
shares of the Company as Class I shares of the Company's common stock
2
<PAGE> 3
pursuant to a Plan of Recapitalization adopted by the Board of Directors of the
Company and approved by the holders of the Class II shares.
1.12 "Registration Statement" shall have the meaning set forth in Section
5.4
1.13 "RIC" shall mean a regulated investment company under Subchapter M of
the Code.
1.14 "SEC" shall mean the Securities and Exchange Commission.
1.15 "Shareholder(s)" shall mean the Company's shareholder(s) of record,
determined as of the Effective Time.
1.16 "Shareholders' Meeting" shall have the meaning set forth in Section
5.1.
1.17 "Transfer Agent" shall have the meaning set forth in Section 2.3
1.18 "1940 Act" shall mean the Investment Company Act of 1940, as amended.
2. PLAN OF REORGANIZATION.
2.1 In the event the Recapitalization is approved by the Class II
shareholders at the Shareholders' Meeting, the Reorganization shall be
consummated as follows. The Company shall assign, sell convey, transfer and
deliver all of the Assets to the Trust on behalf of the Portfolio. The Trust, on
behalf of the Portfolio, in exchange therefor:
(a) shall issue and deliver to the Company the number of full and
fractional (rounded to the third decimal place) Portfolio Shares equal to
the number of full and fractional Company Shares; and
(b) shall assume all of the Company 's Liabilities.
Such transactions shall take place at the Closing.
2.2 In the event that the Recapitalization is not approved by shareholders
at the Shareholders meeting, the Reorganization will be consummated as follows:
(a) The Trust shall designate the Portfolio Share Classes.
(b) The Company shall assign, sell, convey and deliver all of the
Assets to the Trust on behalf of the Portfolio. Those Assets attributed to
the Company's Class I shares shall be attributed to the Portfolio's Class I
shares and the Assets attributed to the Company's Class II shares shall be
attributed to the Portfolio's Class II shares.
3
<PAGE> 4
(c) The Trust, on behalf of the Portfolio, in exchange therefor:
(i) shall issue and deliver to the Company the number of full and
fractional (rounded to the third decimal place) Portfolio Shares of each
Portfolio Share Class equal to the number of full and fractional Company
Shares for each corresponding Company Share Class; and
(ii) shall assume all of the Company's Liabilities; all of the
Liabilities attributed to the Company's Class I shares will be
attributed to the Portfolio's Class I shares and all of the Liabilities
attributable to the Company's Class II shares shall be attributed to the
Portfolio's Class II shares.
Such transactions shall take place at the Closing.
2.3 At the Effective Time (or as soon thereafter as is reasonably
practicable), (a) the Portfolio Shares issued pursuant to paragraph 5.2 shall be
redeemed by the Trust for $1.00 and (b) the Company shall distribute the
Portfolio Shares received by it pursuant to paragraph 2.1 or 2.2 to the
Company's Shareholders in exchange for such Shareholders' Company Shares. Such
distribution shall be accomplished through opening accounts, by the transfer
agent for the Trust (the "Transfer Agent"), on the Trust's share transfer books
in the Shareholders' names and transferring Portfolio Shares to such accounts.
Each Shareholder's account shall be credited with the respective pro rata number
of full and fractional (rounded to the third decimal place) Portfolio Shares (of
each Portfolio Share Class if Company Share Classes exist at the Effective Time)
due that Shareholder. All outstanding Company Shares, including those
represented by certificates, shall simultaneously be canceled on the Company's
share transfer books. The Trust shall not issue certificates representing the
Portfolio Shares in connection with the Reorganization. However, certificates
representing Company Shares shall represent Portfolio Shares after the
Reorganization.
2.4 As soon as reasonably practicable after distribution of the Portfolio
Shares pursuant to paragraph 2.3, the Company shall dissolve its existence as
corporation under Maryland law.
2.5 Any transfer taxes payable on issuance of Portfolio Shares in a name
other than that of the registered holder of the Company Shares exchanged
therefor shall be paid by the person to whom such Portfolio Shares are to be
issued, as a condition of such transfer.
2.6 Any reporting responsibility of the Company to a public authority is,
and shall remain its responsibility up to and including the date on which it is
terminated.
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3. CLOSING.
3.1 The Closing shall occur at the principal office of the Company on June
30, 2000, or on such other date and at such other place upon which the parties
may agree. All acts taking place at the Closing shall be deemed to take place
simultaneously as of the Company's and the Trust's close of business on the date
of the Closing or at such other time as the parties may agree (the "Effective
Time").
3.2 The Company shall deliver to the Trust at the Closing a schedule of
its Assets as of the Effective Time, which shall set forth all portfolio
securities included therein, their adjusted tax basis and holding period by lot.
The Company shall cause its custodian to deliver at the Closing a certificate of
an authorized officer of the custodian stating that (a) the Assets held by the
custodian will be transferred to the Portfolio at the Effective Time and (b) all
necessary taxes in conjunction with the delivery of the Assets, including all
applicable federal and state stock transfer stamps, if any, have been paid or
provision for payment has been made.
3.3 The Company shall deliver to the Trust at the Closing a list of the
names and addresses of its Shareholders and the number of outstanding Company
Shares owned by each Shareholder, all as of the Effective Time, certified by the
Company's Secretary or Assistant Secretary. The Trust shall cause the Transfer
Agent to deliver at the Closing a certificate as to the opening on the Trust's
transfer books of accounts in the Shareholders' names. The Trust shall issue and
deliver a confirmation to the Company evidencing the Portfolio Shares to be
credited to the Company at the Effective Time or provide evidence satisfactory
to the Company that such shares have been credited to the Company's account on
such books. At the Closing, each party shall deliver to the other such bills of
sale, checks, assignments, stock certificates, receipts, or other documents as
the other party or its counsel may reasonably request.
3.4 The Company and the Trust shall deliver to the other at the Closing a
certificate executed in its name by its President or a Vice President in form
and substance satisfactory to the recipient and dated the Effective Time, to the
effect that the representations and warranties it made in this Agreement are
true and correct at the Effective Time except as they may be affected by the
transactions contemplated by this Agreement.
4. REPRESENTATIONS AND WARRANTIES.
4.1 The Company represents and warrants as follows:
(a) The Company is a corporation duly organized, validly existing, and
in good standing under the laws of the State of Maryland, and its Charter
is on file with the Maryland Department of Assessments and Taxation;
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<PAGE> 6
(b) The Company is duly registered as an open-end series management
investment company under the 1940 Act, and such registration is in full
force and effect;
(c) At the Closing, the Company will have good and marketable title to
its Assets and full right, power, and authority to sell, assign, transfer,
and deliver its Assets free of any liens or other encumbrances; and upon
delivery and payment for the Assets, the Portfolio will acquire good and
marketable title to the Assets;
(d) The Portfolio Shares are not being acquired for the purpose of
making any distribution thereof, other than in accordance with the terms
hereof;
(e) The Company qualified for treatment as a RIC for each past taxable
year since it commenced operations and will continue to meet all the
requirements for such qualification for its current taxable year (and the
Assets will be invested at all times through the Effective Time in a manner
that ensures compliance with the foregoing); the Company has no earnings
and profits accumulated in any taxable year in which the provisions of
Subchapter M did not apply to it; and the Company has made all
distributions for each such past taxable year that are necessary to avoid
the imposition of federal excise tax or has paid or provided for the
payment of any excise tax imposed for any such year;
(f) There is no plan or intention of the Shareholders who individually
own 5% or more of any Company Shares and, to the best of the Company's
knowledge, there is no plan or intention of the remaining Shareholders to
redeem or otherwise dispose of any Portfolio Shares to be received by them
in the Reorganization. The Company does not anticipate dispositions of
those shares at the time of or soon after the Reorganization to exceed the
usual rate and frequency of redemptions of shares of the Company as a
series of an open-end investment company. Consequently, the Company expects
that the percentage of Shareholder interests, if any, that will be disposed
of as a result of or at the time of the Reorganization will be less than
one percent (1%) of the shares of the Company outstanding as of the
Effective Time;
(g) The Liabilities were incurred by the Company in the ordinary
course of its business and are associated with the Assets;
(h) The Company is not under the jurisdiction of a court in a
proceeding under Title 11 of the United States Code or similar case within
the meaning of Section 368(a)(3)(A) of the Code;
(i) As of the Effective Time, the Company will not have outstanding
any warrants, options, convertible securities, or any other type of rights
pursuant to which any person could acquire Company Shares except for the
6
<PAGE> 7
right of investors to acquire its shares at net asset value in the normal
course of its business as an open-end diversified management investment
company operating under the 1940 Act;
(j) At the Effective Time, the performance of this Agreement shall
have been duly authorized by all necessary action by the Company's
shareholders; and
(k) Throughout the five-year period ending on the date of the Closing,
the Company will have conducted its historic business within the meaning of
Section 1.368-1(d) of the Income Tax Regulations under the Code in a
substantially unchanged manner;
(l) The fair market value of the Assets of the Company transferred to
the Portfolio will equal or exceed the sum of the Liabilities assumed by
the Portfolio plus the amount of Liabilities, if any, to which the
transferred Assets are subject.
4.2 The Trust represents and warrants, on its own behalf and on behalf of
the Portfolio, to the Company as follows:
(a) The Trust is a business trust duly organized, validly existing and
in good standing under the laws of the State of Delaware, and its
Certificate of Trust has been duly filed in the office of the Secretary of
State of Delaware;
(b) At the Effective Time, the Trust will succeed to the Company's
registration statement filed under the 1940 Act with the SEC and thus will
become duly registered as an open-end management investment company under
the 1940 Act;
(c) At the Effective Time, the Portfolio will be a duly established
and designated series of the Trust and any Portfolio Share Classes existing
at the Effective Time will have been duly established and designated
classes of Portfolio Shares.
(d) The Portfolio has not commenced operations and nor will it
commence operations until after the Closing;
(e) Prior to the Effective Time, there will be no issued and
outstanding shares of the Portfolio or any other securities issued by the
Trust on behalf of the Portfolio, except as provided in paragraph 5.2;
(f) No consideration other than Portfolio Shares (and the Portfolio's
assumption of the Liabilities) will be issued in exchange for the Assets in
the Reorganization;
(g) The Portfolio Shares to be issued and delivered to the Company
hereunder will, at the Effective Time, have been duly authorized and, when
issued and delivered as provided herein, will be duly and validly issued
and outstanding shares of the Trust, fully paid and non-assessable;
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<PAGE> 8
(h) The Portfolio will meet all the requirements to qualify for
treatment as a RIC for its taxable year in which the Reorganization occurs;
(i) The Trust, on behalf of the Portfolio, has no plan or intention to
issue additional Portfolio Shares following the Reorganization except for
shares issued in the ordinary course of its business as a series of an
open-end investment company; nor does the Trust, on behalf of the
Portfolio, have any plan or intention to redeem or otherwise reacquire any
Portfolio Shares issued pursuant to the Reorganization, other than in the
ordinary course of its business or to the extent necessary to comply with
its legal obligation under section 22(e) of the 1940 Act;
(j) The Portfolio will actively continue the Company's business in
substantially the same manner that the Company conducted that business
immediately before the Reorganization; and the Portfolio has no plan or
intention to sell or otherwise dispose of any of the Assets, except for
dispositions made in the ordinary course of its business each dispositions
necessary to maintain its qualification as a RIC, although in the ordinary
course of its business the Portfolio will continuously review its
investment portfolio (as the Company did before the Reorganization) to
determine whether to retain or dispose of particular stocks or securities,
including those included in the Assets;
(k) There is no plan or intention for the Portfolio to be dissolved or
merged into another corporation or business trust or "fund" thereof (within
the meaning of section 851(g)(2) of the Code) following the Reorganization;
and
4.3 Each of the Company and the Trust, on its own behalf and on behalf of
the Portfolio, as appropriate, represents and warrants as follows:
(a) The fair market value of the Portfolio Shares received by each
Shareholder will be approximately equal to the fair market value of the
Company Shares surrendered in exchange therefor;
(b) Immediately following consummation of the Reorganization, the
Shareholders will own all the shares of the Portfolio and will own such
shares solely by reason of their ownership of the Company Shares
immediately before the Reorganization;
(c) The Shareholders will pay their own expenses, if any, incurred in
connection with the Reorganization;
(d) There is no intercompany indebtedness between the Company and the
Portfolio that was issued or acquired, or will be settled, at a discount;
and
(e) Immediately following consummation of the Reorganization, the
Portfolio will hold the same assets, except for assets distributed to
shareholders in the course of its business as a RIC and assets used to pay
8
<PAGE> 9
expenses incurred in connection with the Reorganization, and be subject to
the same liabilities that the Company held or was subject to immediately
prior to the Reorganization. Assets used to pay expenses, all redemptions
and distributions (other than regular, normal dividends) made by the
Company after the date of this Agreement will, in the aggregate, constitute
less than one percent (1%) of its net assets.
5. COVENANTS.
5.1 As soon as practicable after the date of this Agreement, the Company
shall call a meeting of its shareholders (the "Shareholders Meeting") to
consider and act on this Agreement. The Board of Directors of the Company shall
recommend that shareholders approve this Agreement and the transactions
contemplated by this Agreement. Approval by shareholders of this Agreement will
authorize the Company, and the Company hereby agrees, to vote on the matters
referred to in paragraphs 5.2 and 5.3.
5.2 The Trust's trustees shall authorize the issuance of, and the Trust
shall issue, prior to the Closing, one Portfolio Share (in each Portfolio Share
Class if so designated) to the Company in consideration of the payment of $1.00
per share for the purpose of enabling the Company to elect the Company's
directors as the Trust's trustees (to serve without limit in time, except as
they may resign or be removed by action of the Trust's trustees or
shareholders), to ratify the selection of the Trust's independent accountants,
and to vote on the matters referred to in paragraph 5.3;
5.3 Immediately prior to the Closing, the Trust (on its own behalf and
with respect to the Portfolio or each Portfolio Share Class, as appropriate)
shall enter into a Master Investment Advisory Agreement, a Master Sub-Advisory
Agreement, a Master Administrative Services Agreement, Master Distribution
Agreements, a Custodian Agreement and a Transfer Agency and Servicing Agreement;
shall adopt plans of distribution pursuant to Rule 12b-1 of the 1940 Act, a
multiple class plan pursuant to Rule 18f-3 of the 1940 Act and shall enter into
or adopt, as appropriate, such other agreements and plans as are necessary for
the Portfolio's operation as a series of an open-end investment company. Each
such agreement and plan shall have been approved by the Trust's trustees and, to
the extent required by law, by such of those trustees who are not "interested
persons" of the Trust (as defined in the 1940 Act) and by the Company as the
sole shareholder of the Portfolio.
5.4 The Company or the Trust, as appropriate, shall file with the SEC one
or more post-effective amendments to the Company's Registration Statement on
Form N-1A under the Securities Act of 1933, as amended, and the 1940 Act, as
amended (the "Registration Statement"), (i) which contain such amendments to
such Registration Statement as are determined by the Company to be necessary and
appropriate to effect the Reorganization and (ii) pursuant to which the Trust
adopts such Registration Statement, as so amended, as its own,
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<PAGE> 10
and shall use its best efforts to have such post-effective amendment or
amendments to the Registration Statement become effective as of the Closing.
6. CONDITIONS PRECEDENT.
The obligations of the Company and the Trust, on its own behalf and on
behalf of the Portfolio, will be subject to (a) performance by the other party
of all its obligations to be performed hereunder at or before the Effective
Time, (b) all representations and warranties of the other party contained herein
being true and correct in all material respects as of the date hereof and,
except as they may be affected by the transactions contemplated hereby, as of
the Effective Time, with the same force and effect as if made on and as of the
Effective Time, and (c) the further conditions that, at or before the Effective
Time:
6.1 The shareholders of the Company shall have approved this Agreement and
the transactions contemplated by this Agreement in accordance with applicable
law.
6.2 All necessary filings shall have been made with the SEC and state
securities authorities, and no order or directive shall have been received that
any other or further action is required to permit the parties to carry out the
transactions contemplated hereby. All consents, orders, and permits of federal,
state, and local regulatory authorities (including the SEC and state securities
authorities) deemed necessary by either the Company or the Trust to permit
consummation, in all material respects, of the transactions contemplated hereby
shall have been obtained, except where failure to obtain such consults, orders,
and permits would not involve a risk of a material adverse effect on the assets
or properties of either the Company or the Portfolio, provided that either the
Company or the Trust may for itself waive any of such conditions;
6.3 Each of the Company and the Trust shall have received an opinion from
Ballard Spahr Andrews & Ingersoll, LLP as to the federal income tax consequences
mentioned below. In rendering such opinion, such counsel may rely as to factual
matters, exclusively and without independent verification, on the
representations made in this Agreement (or in separate letters of representation
that the Company and the Trust shall use their best efforts to deliver to such
counsel) and the certificates delivered pursuant to paragraph 3.4. Such opinion
shall be substantially to the effect that, based on the facts and assumptions
stated therein and conditioned on consummation of the Reorganization in
accordance with this Agreement, for federal income tax purposes:
(a) The Reorganization will constitute a reorganization within the
meaning of section 368(a) of the Code, and the Company and the Portfolio
will be "a party to a reorganization" within the meaning of section 368(b)
of the Code;
(b) No gain or loss will be recognized to the Company on the transfer
of the Assets to the Portfolio in exchange solely for Portfolio Shares and
the
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<PAGE> 11
Portfolio 's assumption of the Liabilities or on the subsequent
distribution of Portfolio Shares to the Shareholders, in constructive
exchange for their Company Shares, in liquidation of the Company;
(c) No gain or loss will be recognized to the Portfolio on its receipt
of the Assets in exchange for Portfolio Shares and its assumption of the
Liabilities;
(d) The Portfolio's basis for the Assets will be the same as the basis
thereof in the Company's hands immediately before the Reorganization, and
the Portfolio's holding period for the Assets will include the Company's
holding period therefor;
(e) A Shareholder will recognize no gain or loss on the constructive
exchange of Company Shares solely for Portfolio Shares pursuant to the
Reorganization; and
(f) A Shareholder's basis for the shares of the Portfolio to be
received in the Reorganization will be the same as the basis for the
Company Shares to be constructively surrendered in exchange for such
Portfolio Shares, and a Shareholder's holding period for such Portfolio
Shares will include its holding period for the Company Shares
constructively surrendered, provided that the Portfolio Shares are held as
capital assets by the Shareholder at the Effective Time.
6.4 No stop-order suspending the effectiveness of the Registration
Statement shall have been issued, and no proceeding for that purpose shall have
been initiated or threatened by the SEC (and not withdrawn or terminated).
At any time prior to the Closing, any of the foregoing conditions (except
those set forth in paragraph 6.1) may be waived by the directors/trustees of
either the Company or the Trust if, in their judgment, such waiver will not have
a material adverse effect on the interests of the Company's shareholders.
7. EXPENSES.
Except as otherwise provided in subparagraph 4.3(c), all expenses incurred
in connection with the transactions contemplated by this Agreement (regardless
of whether they are consummated) will be borne by the parties as they mutually
agree.
8. ENTIRE AGREEMENT.
Neither party has made any representation, warranty, or covenant not set
forth herein, and this Agreement constitutes the entire agreement between the
parties.
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<PAGE> 12
9. AMENDMENT.
This Agreement may be amended, modified, or supplemented at any time,
notwithstanding its approval by the Company's shareholders, in such manner as
may be mutually agreed upon in writing by the parties; provided that following
such approval no such amendment shall have a material adverse effect on the
Shareholders' interests.
10. TERMINATION.
This Agreement may be terminated at any time at or prior to the Effective
Time, whether before or after approval by the Company's shareholders:
10.1 By either the Company or the Trust (a) in the event of the other
party's material breach of any representation, warranty, or covenant contained
herein to be performed at or prior to the Effective Time, (b) if a condition to
its obligations has not been met and it reasonably appears that such condition
will not or cannot be met, or (c) if the Closing has not occurred on or before
September 30, 2000; or
10.2 By the parties' mutual agreement.
Except as otherwise provided in Section 7, in the event of termination
under paragraphs 10.1(c) or 10.2, there shall be no liability for damages on the
part of either the Company or the Trust or Portfolio to the other.
11. MISCELLANEOUS.
11.1 This Agreement shall be governed by and construed in accordance with
the internal laws of the State of Delaware; provided that, in the case of any
conflict between such laws and the federal securities laws, the latter shall
govern.
11.2 Nothing expressed or implied herein is intended or shall be construed
to confer upon or give any person, firm, trust, or corporation other than the
parties and their respective successors and assigns any rights or remedies under
or by reason of this Agreement.
11.3 The execution and delivery of this Agreement have been authorized by
the Trust's trustees, and this Agreement has been executed and delivered by
authorized officers of the Trust acting as such; neither such authorization by
such trustees nor such execution and delivery by such officers shall be deemed
to have been made by any of them individually or to impose any liability on any
of them or any shareholder of the Trust personally, but shall bind only the
assets and property of the Company, as provided in the Trust's Agreement and
Declaration of Trust.
12
<PAGE> 13
IN WITNESS WHEREOF, each party has caused this Agreement to be executed and
delivered by its duly authorized officers as of the day and year first written
above.
<TABLE>
<S> <C>
Attest: AIM SUMMIT FUND, INC.
By:
- ------------------------------------ ---------------------------------
Title:
---------------------------------
Attest: AIM SUMMIT FUND
By:
- ------------------------------------ ---------------------------------
Title:
---------------------------------
</TABLE>
13
<PAGE> 1
EXHIBIT j(1)
INDEPENDENT AUDITORS' CONSENT
-----------------------------
The Board of Directors and Shareholders
AIM Summit Fund Inc.:
We consent to the use of our report on AIM Summit Fund, Inc. dated December 3,
1999 included herein and the reference to our firm under the heading "Financial
Highlights" in the Prospectuses and "Reports" in the Statement of Additional
Information.
/s/ KPMG LLP
- ------------
KPMG LLP
Houston, Texas
February 23, 2000
<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 "Miscellaneous Information - Legal
Matters" in each of the AIM Summit Fund, Inc. Class I Shares Statement of
Additional Information and the AIM Summit Fund, Inc. Class II Shares Statement
of Additional Information which are included in Post-Effective Amendment No. 24
to the Registration Statement under the Securities Act of 1933 (No. 2-76909)
and Amendment No. 25 to the Registration Statement under the Investment Company
Act of 1940 (No. 811-3443) on Form N-1A of AIM Summit Fund, Inc.
BALLARD SPAHR ANDREWS & INGERSOLL, LLP
--------------------------------------
Ballard Spahr Andrews & Ingersoll, LLP
February 22, 2000
<PAGE> 1
EXHIBIT o(1)
THE AIM MANAGEMENT GROUP
CODE OF ETHICS
(ADOPTED MAY 1, 1981)
(AS LAST AMENDED AUGUST 17, 1999)
WHEREAS, the members of the AIM Management Group are A I M Management
Group Inc. ("AIM Management") and A I M Advisors, Inc. ("AIM Advisors") and
its wholly owned and indirect subsidiaries (individually and collectively
referred to as "AIM"); and
WHEREAS, certain members of AIM provide investment advisory services to
AIM's investment companies and other clients; and
WHEREAS, certain members of AIM provide distribution services as
principal underwriters for AIM's investment company clients; and
WHEREAS, certain members of AIM provide shareholder services as the
transfer agent, dividend disbursing agent and shareholder processing agent for
AIM's investment company clients; and
WHEREAS, the investment advisory business involves decisions and
information which may have at least a temporary impact on the market price of
securities, thus creating a potential for conflicts of interest between the
persons engaged in such business and their clients; and
WHEREAS, the members of AIM have a fiduciary relationship with respect
to each portfolio under management and the interests of the client accounts and
of the shareholders of AIM's investment company clients must take precedence
over the personal interests of the employees of AIM, thus requiring a rigid
adherence to the highest standards of conduct by such employees; and
WHEREAS, every practical step must be taken to ensure that no
intentional or inadvertent action is taken by an employee of AIM which is, or
appears to be, adverse to the interests of AIM or any of its client accounts,
including the defining of standards of behavior for such employees, while at
the same time avoiding unnecessary interference with the privacy or personal
freedom of such employees; and
WHEREAS, the members of AIM originally adopted a Code of Ethics ("the
Code") on May 1, 1981, and adopted amendments thereto in January 1989, October
1989, April 1991, December 6, 1994 and December 5, 1995, December 10, 1996, and
now deem it advisable to update and revise said Code in light of new investment
company products developed by AIM and changing circumstances in the securities
markets in which AIM conducts business; and
NOW, THEREFORE, the Boards of Directors of AIM Management and AIM
Advisors hereby adopt the following revised Code pursuant to the provisions of
Rule 17j-1 under the Investment Company Act of 1940 ("1940 Act"), with the
intention that certain provisions of the Code shall become applicable to the
officers, directors and employees of AIM.
I. APPLICABILITY
A. The provisions of AIM's Code shall apply to certain officers,
directors and employees (as hereinafter designated) of AIM. Unless
otherwise indicated, the term "employee" as used herein means: (i)
all officers, directors and employees of AIM Advisors and its
wholly owned and indirect subsidiaries and (ii) officers,
directors and employees of AIM Management who
-1-
<PAGE> 2
have an active part in the management, portfolio selection,
underwriting or shareholder functions with respect to
AIM's investment company clients or provide one or more similar
services for AIM's non-investment company clients. The term
"employee" does not include directors of AIM Management who do not
maintain an office at the home office of AIM Management and who do
not regularly obtain information concerning the investment
recommendations or decisions made by AIM on behalf of client
accounts ("independent directors").
B. The Code shall also apply to any person or entity appointed as a
sub-advisor for an AIM investment company client account unless
such person or entity has adopted a code of ethics in compliance
with Section 17(j) of the 1940 Act; or, in the event that such
person or entity is domiciled outside of the United States, has
adopted employee standards of conduct that provide equivalent
protections to AIM's client accounts. In performing sub-advisory
services, such person or entity will be subject to the direction
and supervision of AIM, and subject to the policies and control of
the Boards of Directors/Trustees of the respective AIM investment
company client(s).
II. INTERPRETATION AND ENFORCEMENT
A. The Chief Executive Officer of AIM Management shall appoint a
Code of Ethics Committee ("Committee"). The Committee shall have
the responsibility for interpreting the provisions of the Code, for
adopting and implementing Procedures for the enforcement of the
provisions of the Code, and for determining whether a violation of
the provisions of the Code, or of any such related Procedures has
occurred. The Committee will appoint an officer to monitor
personal investment activity by "Covered Persons" (as defined in
the Procedures adopted hereunder), both before and after any trade
occurs and to prepare periodic and annual reports, conduct
education seminars and obtain employee certifications as deemed
appropriate. In the event of a finding that a violation has
occurred requiring significant remedial action, the Committee
shall take such action as it deems appropriate on the imposition
of sanctions or initiation of disgorgement proceedings. The
Committee shall also make recommendations and submit reports to
the Boards of Directors/Trustees of AIM's investment company
clients.
B. If a sub-advisor has adopted a code of ethics in accordance with
Section 17(j) of the 1940 Act, then pursuant to a sub-advisory
agreement with AIM, it shall be the duty of such sub-advisor to
furnish AIM with a copy of the following:
o code of ethics and related procedures of the sub-advisor,
and a statement as to its employees' compliance therewith;
o any statement or policy on insider trading adopted pursuant
to Section 204A under the 1940 Act; and the procedures
designed to prevent the misuse of material non-public
information by any person associated with such sub-advisor;
and
o such other information as may reasonably be necessary for
AIM to report to the Boards of Directors/Trustees of its
investment company client account(s) as to such
sub-advisor's adherence to the Boards' policies and controls
referenced in Section I.B. above.
III. PROCEDURES ADOPTED UNDER THE CODE
From time to time, AIM's Committee shall adopt Procedures to carry out
the intent of the Code. Among other things, the Procedures require
certain new employees to complete an Asset Disclosure Form, a Brokerage
Accounts Listing Form and such other forms as deemed appropriate by the
Committee. Such Procedures are hereby incorporated into the Code and are
made a part of the Code. Therefore, a violation of the Procedures shall
be deemed a violation of the Code itself.
-2-
<PAGE> 3
IV. COMPLIANCE WITH GOVERNING LAWS, REGULATIONS AND PROCEDURES
A. Each employee shall have and maintain knowledge of and shall
comply strictly with all applicable federal and state laws and all
rules and regulations of any governmental agency or
self-regulatory organization governing his/her actions as an
employee.
B. Each employee shall comply with all laws and regulations, and
AIM's prohibition against insider trading. Trading on or
communicating material non-public information, or "inside
information", of any sort, whether obtained in the course of
research activities, through a client relationship or otherwise,
is strictly prohibited.
C. Each employee shall comply with the procedures and guidelines
established by AIM to ensure compliance with applicable federal
and state laws and regulations of governmental agencies and
self-regulatory organizations. No employee shall knowingly
participate in, assist, or condone any act in violation of any
statute or regulation governing AIM or any act that would violate
any provision of this Code, or of the Procedures adopted
hereunder.
D. Each employee shall have and maintain knowledge of and shall
comply with the provisions of this Code and any Procedures adopted
hereunder.
E. Each employee having supervisory responsibility shall exercise
reasonable supervision over employees subject to his/her control,
with a view to preventing any violation by such persons of
applicable statutes or regulations, AIM's corporate procedures, or
the provisions of the Code, or the Procedures adopted hereunder.
F. Any employee obtaining evidence that an act in violation of
applicable statutes, regulations or provisions of the Code or of
any Procedures adopted hereunder has occurred shall immediately
report such evidence to the Chief Compliance Officer of AIM. Such
action by the employee will remain confidential, unless the
employee waives confidentiality or federal or state authorities
compel disclosure. Failure to report such evidence may result in
disciplinary proceedings and may include sanctions as set forth in
Section VI hereof.
V. ETHICAL STANDARDS
A. Employees shall conduct themselves in a manner consistent with the
highest ethical and fiduciary standards. They shall avoid any
action, whether for personal profit or otherwise, that results in
an actual or potential conflict of interest with AIM or its client
accounts, or which may be otherwise detrimental to the interests
of the members of AIM or its client accounts.(1)
B. Employees shall act in a manner consistent with their fiduciary
obligation to clients of AIM, and shall not deprive any client
account of an investment opportunity in order to personally
benefit from that opportunity.
- --------------------------
(1) Conflicts of interest generally result from a situation in which an
individual has a personal interest in a matter that is or may be competitive
with his or her responsibilities to other persons or entities (such as AIM or
its client accounts) or where an individual has or may have competing
obligations or responsibilities to two or more persons or entities. In the case
of the relationship between a client account on the one hand, and AIM, its
officers, directors and employees, on the other hand, such conflict may result
from the purchase or sale of securities for a client account and for the
personal account of the individual involved or the account of any "affiliate"
of such individual, as such term is defined in the 1940 Act. Such conflict may
also arise from the purchase or sale for a client account of securities in
which an officer, director or employee of AIM has an economic interest.
Moreover, such conflict may arise in connection with vendor relationships in
which such employee has any direct or indirect financial interest, family
interests or other personal interest. To the extent of conflicts of interest
between AIM and a vendor, such conflicts must be resolved in a manner that is
not disadvantageous to AIM. In any such case, potential or actual conflicts
must be disclosed to AIM and the first preference and priority must be to avoid
such conflicts of interest wherever possible and, where they unavoidably occur,
to resolve them in a manner that is not disadvantageous to a client.
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C. Without the knowledge and approval of the Chief Executive Officer
of AIM Management, employees shall not engage in a
business activity or practice for compensation in competition with
the members of AIM. Each employee, who is deemed to be a "Covered
Person" as defined in the Procedures adopted hereunder, shall
obtain the written approval of AIM Management's Chief Executive
Officer to participate on a board of directors/trustees of any of
the following organizations:
o publicly traded company, partnership or trust;
o hospital or philanthropic institution;*
o local or state municipal authority;* and/or
o charitable organization.*
* These restrictions relate to organizations that have or intend
to raise proceeds in a public securities offering.
In the relatively small number of instances in which board
approval is authorized, investment personnel serving as directors
shall be isolated from those making investment decisions through
AIM's "Chinese Wall" Procedures.
D. Each employee, in making an investment recommendation or taking
any investment action, shall exercise diligence and thoroughness,
and shall have a reasonable and adequate basis for any such
recommendation or action.
E. Each employee shall not attempt to improperly influence for such
person's personal benefit any investment strategy to be followed
or investment action to be taken by the members of AIM for its
client accounts.
F. Each employee shall not improperly use for such person's personal
benefit any knowledge, whether obtained through such person's
relationship with AIM or otherwise, of any investment
recommendation made or to be made, or of any investment action
taken or to be taken by AIM for its client accounts.
G. Employees shall not disclose any non-public information relating
to a client account's portfolio or transactions or to the
investment recommendations of AIM, nor shall any employee disclose
any non-public information relating to the business or operations
of the members of AIM, unless properly authorized to do so.
H. Employees shall not accept, directly or indirectly, from a
broker/dealer or other vendor who transacts business with AIM or
its client accounts, any gifts, gratuities or other things of more
than de minimis value or significance that their acceptance might
reasonably be expected to interfere with or influence the exercise
of independent and objective judgment in carrying out such
person's duties or otherwise gives the appearance of a possible
impropriety. For this purpose, gifts, gratuities and other things
of value shall not include unsolicited entertainment so long as
such unsolicited entertainment is not so frequent or extensive as
to raise any question of impropriety.
I. Employees who are registered representatives and/or principals of
AIM shall not acquire securities for an account for which he/she
has a direct or indirect beneficial interest in an initial public
offering ("IPO") or on behalf of any person, entity or
organization that is not an AIM client. All other employees shall
not acquire securities for an account for which he/she has a
direct or indirect beneficial interest offered in an IPO or on
behalf of any person, entity or organization that is not an AIM
client account except in those circumstances where different
amounts of such offerings are specified for different investor
types (e.g., private investors and institutional investors) and
such transaction has been pre-cleared by the Compliance Office.
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J. All personal securities transactions by employees must be
conducted consistent with this Code and the Procedures adopted
hereunder, and in such a manner as to avoid any actual or
potential conflicts of interest or any abuse of such employee's
position of trust and responsibility. Unless an exemption is
available, employees who are deemed to be "Covered Persons" as
defined in the Procedures adopted hereunder, shall pre-clear all
personal securities transactions in securities in accordance with
the Procedures adopted hereunder.
K. Each employee, who is deemed to be a "Covered Person" as defined
in the Procedures adopted hereunder, (or registered representative
and/or principal of AIM), shall refrain from engaging in personal
securities transactions in connection with a security that is not
registered under Section 12 of the Securities Act of 1933 (i.e., a
private placement security) unless such transaction has been
pre-approved by the Chief Compliance Officer or the Director of
Investments (or their designees).
L. Employees, who are deemed to be "Covered Persons" as defined in
the Procedures adopted hereunder, may not engage in a transaction
in connection with the purchase or sale of a security within seven
calendar days before and after an AIM investment company client
trades in that same (or equivalent) security unless the de minimis
exemption is available.
M. Each employee, who is deemed to be a "Covered Person" as defined
in the Procedures adopted hereunder, may not purchase and
voluntarily sell, or sell and voluntarily purchase the same (or
equivalent) securities of the same issuer within 60 calendar days
unless such employee complies with the disgorgement procedures
adopted by the Code of Ethics Committee. Subject to certain
limited exceptions set forth in the related Procedures, any
transaction under this provision may result in disgorgement
proceedings for any profits received in connection with such
transaction by such employee.
VI. SANCTIONS
Employees violating the provisions of AIM's Code or any Procedures
adopted hereunder may be subject to sanctions, which may include, among
other things, restrictions on such person's personal securities
transactions; a letter of admonition, education or formal censure;
fines, suspension, re-assignment, demotion or termination of employment;
or other significant remedial action. Employees may also be subject to
disgorgement proceedings for transactions in securities that are
inconsistent with Sections V.L. and V.M. above.
VII. ADDITIONAL DISCLOSURE
This Code and the related Procedures cannot, and do not, cover every
situation in which choices and decisions must be made, because other
company policies, practices and procedures (as well as good common
sense) and good business judgment also apply. Every person subject to
this Code should read and understand these documents thoroughly. They
present important rules of conduct and operating controls for all
employees. Employees are also expected to present questions to the
attention of their supervisors and to the Chief Compliance Officer (or
designee) and to report suspected violations as specified in these
documents.
For the Boards of Directors:
The AIM Management Group
by: /s/CHARLES T. BAUER
-------------------------------------------------
Charles T. Bauer
AUGUST 17, 1999
-------------------------------------------------
Date
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EXHIBIT o(2)
CODE OF ETHICS
WHEREAS, Summit Investors Fund, Inc. (the "Company") is a registered
investment company under the Investment Company Act of 1940, as amended (the
"ICA"); and
WHEREAS, Rule 17j-1 under the ICA requires the company to adopt a Code
of Ethics.
NOW, THEREFORE, the Company hereby adopts the following Code of Ethics
as of the 17th day of August, 1982.
DEFINITIONS
For purposes of this Code of Ethics the following terms shall have the
meanings set forth below:
(a) "Access Person" means any director, officer, or advisory person of
the Company; provided, however, that any persons who are access persons of any
investment advisor of, or principal underwriter for, any registered investment
company and who reports his or her securities transactions to such investment
advisor or principal underwriter in accordance with Rule 17j-1 of the ICA, shall
not be deemed an access person of the Company. The Board of Directors of the
Company will maintain a list of all access persons, and will notify each access
person in writing that such person is an access person. Once a person has been
so identified he or she shall continue to be an access person until otherwise
notified in writing by the Board of Directors; provided, however, if such person
is an access person solely because he or she is a director of the Company, such
person shall cease to be an access person at the time such person ceases to be a
director.
(b) "Advisory Person" means
(i) any employee of the Company, its investment advisor or
administrator (or of any entity in a control relationship with the Company,
its investment advisor or administrator, as defined in (d) hereof) who, in
connection with his or her regular
<PAGE> 2
functions or duties, makes, participates in, or obtains information (other
than publicly available information) regarding the purchase or sale of a
security by the Company, or whose functions relate to the making of any
recommendations with respect to such purchases or sales; and
(ii) any natural person directly or indirectly owning,
controlling, or holding with power to vote, 25% or more of the outstanding
voting securities of any of the Company, its investment advisor or
administrator who obtains information (other than publicly available
information) concerning recommendations made by the Company, its investment
advisor or administrator with regard to the purchase or sale of a security.
(c) "Affiliated Persons" or "Affiliates" means
(i) any employee or access person of the Company, and any
member of the immediate family (defined as spouse, child, mother, father,
brother, sister, in-law or any other relative) of any such person who lives
in the same household as such person or who is financially dependent upon
such person;
(ii) any account for which any of the persons described in
(c)(i) hereof is a custodian, trustee or otherwise acting in a fiduciary
capacity, or with respect to which any such person either has the authority
to make investment decisions or from time to time gives investment advice;
and
(iii) any partnership, corporation, joint venture, trust or
other entity in which any employee of the Company or access person of the
Company directly or indirectly, in the aggregate, has a 10% or more
beneficial interest or for which any such person is a general partner or an
executive officer.
(d) "Control" means the power to exercise a controlling influence over
the management or policies of a corporation. Any person who owns beneficially,
either directly or through one or more controlled corporations, more than 25% of
the voting securities of a corporation shall be presumed to control such
corporation.
(e) "Security" means any note, stock, treasury stock, bond, debenture,
evidence of indebtedness, certificate
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of interest or participation in any profit-sharing agreement, collateral-trust
certificate, preorganization certificate or subscription, transferable share,
investment contract, voting-trust certificate, certificate of deposit for a
security, fractional undivided interest in oil, gas, or other mineral rights,
or, in general, any interest or instrument commonly known as a "security", or
any certificate of interest or participation in, temporary or interim
certificate for, receipt for, guarantee of, or warrant or right to subscribe to
or purchase, any of the foregoing; provided, however, that "security" shall not
mean securities issued or guaranteed by the Government of the United States, its
agencies or instrumentalities, bankers' acceptances, bank certificates of
deposit, commercial paper and shares of registered open-end investment
companies.
(f) "Purchase or sale of a security" includes the writing of an option
to purchase or sell a security.
(g) "Security held or to be acquired" by the Company means any security
which, within the most recent fifteen (15) days, (i) is or has been held by
the Company, or (ii) is being or has been considered by the Company for purchase
by the Company.
(h) "Beneficial ownership of a security" by any person includes
securities held by: (a) a spouse, minor children or relatives who share the same
home with such person; (b) an estate for such person's benefit; (c) a trust, of
which (i) such person is a trustee or such person or members of such person's
immediate family have a vested interest in the income or corpus of the trust, or
(ii) such person owns a vested beneficial interest, or (iii) such person is the
settlor and such person has the power to revoke the trust without the consent of
all the beneficiaries; (d) a partnership in which such person is a partner; (e)
a corporation (other than with respect to treasury shares of the corporation) of
which such person is an officer, director or 10% stockholder; (f) any other
person if, by reason of contract, understanding, relationship agreement or other
arrangement, such person obtains therefrom benefits substantially equivalent to
those of ownership; or (g) such person's spouse or minor children or any other
person, if, even though such person does not obtain therefrom the
above-mentioned benefits of ownership, such person can vest or revest title in
himself at once or at some future time. A beneficial owner of a security also
includes any person who, directly or indirectly, through any contract,
arrangement, understanding, relationship or otherwise, has or
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<PAGE> 4
shares voting power and/or investment power with respect to such security.
Voting power includes the power to vote, or to direct the voting of such
security, and investment power includes the power to dispose, or to direct the
disposition of such security. A person is the beneficial owner of a security if
he has the right to acquire beneficial ownership of such security at any time
within sixty (60) days.
I. COMPLIANCE WITH GOVERNING LAWS,
REGULATIONS AND PROCEDURES
All employees shall have and maintain knowledge of and shall comply
strictly with all applicable Federal and state laws and all rules and
regulations of any governmental agency or self-regulatory organization
governing his or her activities.
Each employee will be given a copy of the Code of Ethics at the time of
his or her employment and each access person is required to submit a statement
at least annually that he or she has reviewed the Code of Ethics.
All employees shall comply strictly with procedures established by the
Company to ensure compliance with applicable Federal and state laws and
regulations of governmental agencies and self-regulatory organizations. The
employees shall not knowingly participate in, assist, or condone any acts in
violation of any statute or regulation governing securities matters, nor any act
which would violate any provision of this Code of Ethics, or any rules adopted
thereunder.
Each employee having supervisory responsibility shall exercise
reasonable supervision over employees subject to his or her control, with a view
to preventing any violation by such persons of applicable statutes or
regulations, the Company procedures or the provisions of the Code of Ethics.
Any employee encountering evidence that acts in violation of applicable
statutes or regulations or provisions of the Code of Ethics have occurred shall
report such evidence to the Board of Directors of the Company.
II. CONFIDENTIALITY OF TRANSACTIONS
Information relating to the Company's Portfolio and research and
studies activities is confidential until publicly
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<PAGE> 5
available. Whenever statistical information or research is supplied to or
requested by the Company, such information must not be disclosed to any persons
other than as duly authorized by the President or the Board of Directors of the
Company. If the Company is considering a particular purchase or sale of a
security, this must not be disclosed except to such duly authorized persons.
Any employee authorized to place orders for the purchase or sale of
securities on behalf of the Company shall take all steps reasonably necessary to
provide that all brokerage orders for the purchase and sale of securities for
the account of the Company will be so executed as to ensure that the nature of
the transactions shall be kept confidential until the information is reported to
the Securities and Exchange Commission or the Company's shareholders in the
normal course of business.
If any employee of the Company or access person should obtain
information concerning the Company's portfolio (including, the consideration by
the Company of acquiring, or recommending any security for the Company's
portfolio), whether in the course of such person's duties or otherwise, such
person shall respect the confidential nature of this information and shall not
divulge it to anyone unless it is properly part of such person's services to the
Company to do so or such person is specifically authorized to do so by the
President of the Company.
III. ETHICAL STANDARDS
Every employee, in making any investment recommendation or taking any
investment action, shall exercise diligence and thoroughness, and shall have a
reasonable and adequate basis for any such recommendations or action.
The employees of the Company and access persons and their respective
affiliates, shall conduct themselves in a manner consistent with the highest
ethical standards. They shall avoid any action, whether for personal profit or
otherwise, that results in an actual or potential conflict of interest, or the
appearance of a conflict of interest,
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<PAGE> 6
with the Company or which may be otherwise detrimental to the interests of the
Company.
An employee having discretion as to the selection of broker-dealers to
execute securities transactions for the Company shall select broker-dealers
solely on the basis of the services provided directly or indirectly by such
broker-dealers to the Company. An employee shall not, directly or indirectly,
receive a fee or commission from any source in connection with the sale or
purchase of any security for the Company.
Every employee or access person of the Company who owns beneficially,
directly or indirectly, 1/2% or more of the stock of any corporation is required
to report such holdings to the Board of Directors.
In addition, the Company shall take all actions reasonably calculated
to ensure that it engages broker-dealers to transact business with the Company
whose partners, officers and employees, and their respective affiliates, will
conduct themselves in a manner consistent with the provisions of this Section
III.
Conflicts of interest generally result from a situation in which an
individual has personal interests in a matter that is or may be competitive with
his responsibilities to another person or entity (such as the Company) or where
an individual has or may have competing obligations or responsibilities to two
or more persons or entities. In the case of the relationship between the Company
on the one hand, and its employees and access persons and their respective
affiliates, on the other hand, such conflicts may result from the purchase or
sale of securities for the account of the Company and for the account of any
affiliated person or from the purchase or sale for the account of the Company of
securities in which an access person or employee of the Company, or his or her
affiliates has an interest. In these cases, all potential or actual conflicts
must be disclosed and the first preference and priority must be to avoid such
conflicts of interest wherever possible and, where they unavoidably occur, to
resolve them in a manner not disadvantageous to the Company.
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IV. ACTIVITIES AND TRANSACTIONS OF ACCESS PERSONS
(a) No access person shall recommend to, or cause or attempt to cause,
the Company to acquire, dispose of, or hold any security (including, any option,
warrant or other right or interest relating to such security) which such access
person or an affiliate of such access person has direct or indirect beneficial
ownership, unless the access person shall first disclose in writing to the Board
of Directors all facts reasonably necessary to identify the nature of the
ownership of such access person or his or her affiliate in such security.
(b) No access person or affiliate of such access person shall engage in
a purchase or sale of a security (including, any option, warrant or other right
or interest relating to such security), other than on behalf of the Company,
with respect to any security held or to be acquired by the Company, unless such
transaction is:
(i) only remotely potentially harmful to the Company because
it would be unlikely to affect trading in or the market value of the
security; or
(ii) non-volitional an the part of the access person; or
(iii) clearly not related economically to the securities to
be acquired, disposed of or held by the Company; or
(iv) in light of all relevant facts and circumstances,
otherwise not disadvantageous to the Company.
(c) In order to ensure compliance with Section IV(b) hereof, but
subject to the exceptions set forth in Section IV(e) hereof, no access person or
affiliate of an access person shall engage in a purchase or sale of a security
held or to be acquired by the Company (other than on behalf of the Company)
without first obtaining the written authorization of the Board of Directors.
Such transactions shall not be authorized by the Board of Directors, unless it
shall determine, in its discretion, that such transactions are not
disadvantageous to the Company.
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(d) If, in compliance with the limitations and procedures set forth in
this Section IV, any access person or an affiliate of such person shall engage
in a purchase or sale of a security held or to be acquired by the Company, first
preference and priority must be given to any transactions which involve the
Company, and the Company must have the benefit of the best price obtainable on
acquisition and the best price obtainable on disposition of such securities.
(e) If, as a result of fiduciary obligations to other persons or
entities, an access person believes that such person or an affiliate of such
person is unable to comply with certain provisions of the Code, such access
person shall so advise the Board of Directors in writing, setting forth with
reasonable specificity the nature of such fiduciary obligations and the reasons
why such access person believes such person is unable to comply with any such
provisions. The Board of Directors may, in its discretion, exempt such access
person or an affiliate of such person from any such provisions, if the Board of
Directors shall determine that the services of such access person are valuable
to the Company and the failure to grant such exemption is likely to cause such
access person to be unable to render services to the Company. Any access person
granted an exemption (including, an exception for an affiliate of such person),
pursuant to this Section IV(e) shall, within three business days after engaging
in a purchase or sale of a security held or to be acquired by a client, furnish
the Board of Directors with a written report concerning such transaction,
setting forth the information specified in Section V(b) hereof.
V. REPORTING PROCEDURES
(a) Except as provided by Section V(c) hereof, every access person
shall report to the Board of Directors the information described in Section V(b)
hereof with respect to transactions in any security in which such access person
has, or by reason of such transaction acquires, any direct or indirect
beneficial ownership in the security (whether or not such security is a security
held or to be acquired by a client); provided, however, that any such report may
contain a statement that the report shall not be construed as an admission by
the person making such report that he has any direct or indirect beneficial
ownership in the security to which the report relates; and, provided, however,
that no
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<PAGE> 9
report is required if such person is not an "interested person" of the Company
within the meaning of Section 2(a) (19) of the ICA, and would be required to
make such report solely by reason of being a director and except where such
director knew or, in the ordinary course of fulfilling his official duties as a
director of the Company, should have known that during the 15-day period
immediately preceding or after the date of the transaction in a security by the
director, such security is or was purchased or sold, or considered for
purchase or sale by the Company.
(b) Every report required to be made pursuant to Section V(a) hereof
shall be made not later than ten days after the end of the calendar quarter in
which the transaction to which the report relates was effected, shall be in the
form of Appendix A hereto, and shall contain the following information:
(i) The date of transaction, the title and the number of
shares, and the principal amount of each security involved;
(ii) The nature of the transaction (i.e., purchase, sale or
any other type of acquisition or disposition);
(iii) The price at which the transaction was effected; and
(iv) The name of the broker, dealer or bank with or through
whom the transaction was effected.
(c) Notwithstanding the provisions of Sections V(a) and (b) hereof, no
person shall be required to make a report with respect to transactions effected
for any account over which such person does not have any direct or indirect
influence or control.
(d) All access persons but excluding directors of the Company (except a
director Company who in the ordinary course of fulfilling his official duties as
director, should have known that during the 15-day period immediately preceding
or after the date of the transaction in a security by the director, such
security is or was purchased or sold, or considered for purchase or sale by the
Company) and such other persons as the Board of Directors shall determine shall
supply the Board of Directors with a list, to be updated on a regular basis,
identifying (i) all of their brokerage accounts and all of their affiliated
brokerage accounts at any brokerage firm, bank or other concern, and (ii) their
beneficial ownership, directly or indirectly, of 1/2% or more of the stock of
any corporation.
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VI. REVIEW PROCEDURES
(a) The reports submitted by access persons pursuant to Section V(b)
hereof shall be reviewed at least quarterly by the Board of Directors, or such
other persons or committees as shall be designated by the Board of Directors, in
order to monitor compliance with this Code of Ethics.
(b) If it is determined by the Board of Directors that a violation of
this Code of Ethics has occurred and that the person violating this Code of
Ethics has purchased or sold a security at a more advantageous price than that
obtained by the Company, such person shall be required to offer to sell to or
purchase from the Company, as the case may be, such security at the more
advantageous price. If this cannot be consummated, then the Board of Directors
shall take such other course of action at it may deem appropriate. With respect
to any violation of this Code of Ethics, the Board of Directors may take any
preventive, remedial or other action which it may deem appropriate. In
determining whether or not there has been, or may be, a conflict of interest
between the Company and any person subject to this Code of Ethics, the Board of
Directors shall consider all of the relevant facts and circumstances.
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