<PAGE> 1
As filed with the Securities and Exchange Commission on July 12, 2000
1933 Act Reg. No. 2-87377
1940 Act Reg. No. 811-3886
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-1A
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 X
---
Pre-Effective Amendment No.
----- ---
Post-Effective Amendment No. 38 X
----- ---
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 X
---
Amendment No. 39 X
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AIM ADVISOR FUNDS
----------------------
(Exact Name of Registrant as Specified in Charter)
11 Greenway Plaza, Suite 100, Houston, Texas 77046
-------------------------------------------------------
(Address of Principal Executive Offices)
Registrant's Telephone Number, including Area Code: (713) 626-1919
----------------
Charles T. Bauer
11 Greenway Plaza, Suite 100, Houston, Texas 77046
------------------------------------------------------
(Name and Address of Agent for Service)
--------------------------
Copies to:
Ofelia M. Mayo, 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 Philadelphia, Pennsylvania 19103-7599
--------------------------
Approximate Date of Proposed Public Offering: As soon as practicable after this
post-effective amendment becomes effective.
It is proposed that this filing will become effective (check appropriate box)
___ immediately upon filing pursuant to paragraph (b)
___ on (date) pursuant to paragraph (b)
___ 60 days after filing pursuant to paragraph (a)(1)
_X_ on September 11, 2000, pursuant to paragraph (a)(1)
___ 75 days after filing pursuant to paragraph (a)(2)
___ on (date) pursuant to paragraph (a)(2) of rule 485.
If appropriate, check the following box:
____ this post-effective amendment designates a new effective date for a
previously filed post-effective amendment.
Title of Securities Being Registered: Shares of beneficial interest
THE REGISTRANT IS THE SUCCESSOR ISSUER TO AIM ADVISOR FUNDS, INC. (THE
"PREDECESSOR FUND"). BY FILING THIS POST-EFFECTIVE AMENDMENT TO CURRENTLY
EFFECTIVE REGISTRATION STATEMENT NO. 2-87377 OF THE PREDECESSOR FUND, THE
REGISTRANT EXPRESSLY ADOPTS THE REGISTRATION STATEMENT OF THE PREDECESSOR FUND
AS ITS OWN REGISTRATION STATEMENT FOR ALL PURPOSES OF THE SECURITIES ACT OF
1933, AS AMENDED, THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED, AND THE
INVESTMENT COMPANY ACT OF 1940, AS AMENDED.
<PAGE> 2
AIM ADVISOR FLEX FUND
-------------------------------------------------------------------------
AIM Advisor Flex Fund seeks to achieve high total return.
PROSPECTUS AIM--Registered Trademark--
SEPTEMBER 11, 2000
This prospectus contains important
information about the Class A, B and C
shares of the fund. Please read it
before investing and keep it for
future reference.
As with all other mutual fund
securities, the Securities and
Exchange Commission has not approved
or disapproved these securities or
determined whether the information
in this prospectus is adequate or
accurate. Anyone who tells you
otherwise is committing a crime.
An investment in the fund:
- is not FDIC insured;
- may lose value; and
- is not guaranteed by a bank.
[AIM LOGO APPEARS HERE] INVEST WITH DISCIPLINE
--Registered Trademark-- --Registered Trademark--
<PAGE> 3
---------------------
AIM ADVISOR FLEX FUND
---------------------
TABLE OF CONTENTS
--------------------------------------------------------------------------------
<TABLE>
<S> <C>
INVESTMENT OBJECTIVE AND STRATEGIES 1
- - - - - - - - - - - - - - - - - - - - - - - -
PRINCIPAL RISKS OF INVESTING IN THE FUND 1
- - - - - - - - - - - - - - - - - - - - - - - -
PERFORMANCE INFORMATION 2
- - - - - - - - - - - - - - - - - - - - - - - -
Annual Total Returns 2
Performance Table 2
FEE TABLE AND EXPENSE EXAMPLE 3
- - - - - - - - - - - - - - - - - - - - - - - -
Fee Table 3
Expense Example 3
FUND MANAGEMENT 4
- - - - - - - - - - - - - - - - - - - - - - - -
The Advisors 4
Advisor Compensation 4
Portfolio Managers 4
OTHER INFORMATION 4
- - - - - - - - - - - - - - - - - - - - - - - -
Sales Charges 4
Dividends and Distributions 4
FINANCIAL HIGHLIGHTS 5
- - - - - - - - - - - - - - - - - - - - - - - -
SHAREHOLDER INFORMATION A-1
- - - - - - - - - - - - - - - - - - - - - - - -
Choosing a Share Class A-1
Purchasing Shares A-3
Redeeming Shares A-4
Exchanging Shares A-6
Pricing of Shares A-8
Taxes A-8
OBTAINING ADDITIONAL INFORMATION Back Cover
- - - - - - - - - - - - - - - - - - - - - - - -
</TABLE>
The AIM Family of Funds, The AIM Family of Funds and Design (i.e., the AIM
logo), AIM and Design, AIM, AIM Funds, AIM Funds and Design, AIM LINK, AIM
Institutional Funds, aimfunds.com, La Familia AIM de Fondos, La Familia AIM de
Fondos and Design, Invierta con DISCIPLINA and Invest with DISCIPLINE are
registered service marks and AIM Bank Connection, AIM Investor and AIM Internet
Connect 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> 4
---------------------
AIM ADVISOR FLEX FUND
---------------------
INVESTMENT OBJECTIVE AND STRATEGIES
--------------------------------------------------------------------------------
The fund's investment objective is to achieve high total return. The investment
objective of the fund may be changed by the Board of Trustees without
shareholder approval.
The fund seeks to meet its objective by investing in a combination of equity
securities and fixed- and variable-income securities. The fund normally invests
at least 20% of its total assets in equity securities and at least 20% of its
total assets in fixed- and variable-income securities. The fund's equity
investments will consist primarily of common stocks, and to a lesser extent
convertible securities, of selected companies from a list of companies with
market capitalizations among the largest 800 publicly traded U.S. corporations.
The fund's fixed-income investments will consist primarily of U.S. government
obligations and corporate obligations that have been rated investment-grade, or
securities deemed by the portfolio managers to be of comparable quality.
The fund may invest in mortgage-backed securities, including mortgage
pass-through securities and collateralized mortgage obligations, that are
guaranteed as to timely payment of principal and interest by an agency of the
U.S. government or a private issuer. The fund may invest up to 25% of its total
assets in foreign securities. Any percentage limitations with respect to assets
of the fund are applied at the time of purchase.
The portion of the fund's assets that can be invested in either equity
securities or income securities will be allocated according to the portfolio
managers' assessment of current business, economic and market conditions. The
fund seeks reasonably consistent returns over a variety of market cycles. In
order to identify the equity securities having the best relative values, the
portfolio managers start with a list of the 800 largest publicly traded U.S.
corporations, which they reduce to a list of 100 eligible stocks by utilizing a
proprietary database system and fundamental analysis. The portfolio managers
usually sell a particular equity security when it no longer qualifies for the
list of eligible securities. The portfolio managers will purchase fixed- and
variable-income obligations that they believe are undervalued and may offer
superior yields. The portfolio managers consider whether to sell a particular
income security when any of those factors materially changes.
In anticipation of or in response to adverse market conditions, for cash
management purposes, or for defensive purposes, the 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 and that the income you may receive from the fund may vary. 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.
Debt securities are particularly vulnerable to credit risk and interest rate
fluctuations. Interest rate increases can cause the price of a debt security to
decrease. The longer a debt security's duration, the more sensitive it is to
this risk. The issuer of a security may default or otherwise be unable to honor
a financial obligation. A faster than expected principal prepayment rate on U.S.
Government agency mortgage-backed securities will reduce both the market value
of, and income from, such securities.
Foreign securities have additional risks, including exchange rate changes,
political and economic upheaval, the relative lack of information about these
companies, relatively low market liquidity and the potential lack of strict
financial and accounting controls and standards.
An investment in the fund is not a deposit of a bank and is not insured or
guaranteed by the Federal Deposit Insurance Corporation or any other government
agency.
1
<PAGE> 5
---------------------
AIM ADVISOR FLEX FUND
---------------------
PERFORMANCE INFORMATION
--------------------------------------------------------------------------------
The bar chart and table shown below provide an indication of the risks of
investing in the fund. The fund's past performance is not necessarily an
indication of its future performance.
ANNUAL TOTAL RETURNS
--------------------------------------------------------------------------------
The following bar chart shows changes in the performance of the fund's Class C
shares from year to year. The bar chart does not reflect sales loads. If it did,
the annual total returns shown would be lower.
[GRAPH]
<TABLE>
<CAPTION>
ANNUAL
YEAR ENDED TOTAL
DECEMBER 31 RETURNS
----------- -------
<S> <C>
1990 .............................. -1.67%
1991 .............................. 24.79%
1992 .............................. 7.73%
1993 .............................. 10.48%
1994 .............................. 0.65%
1995 .............................. 27.30%
1996 .............................. 13.62%
1997 .............................. 23.63%
1998 .............................. 12.41%
1999 .............................. -1.56%
</TABLE>
The Class C shares' year-to-date total return as of June 30, 2000 was -4.30%.
During the periods shown in the bar chart, the highest quarterly return was
12.12% (quarter ended March 31, 1991) and the lowest quarterly return was -9.19%
(quarter ended September 30, 1999).
PERFORMANCE TABLE
The following performance table compares the fund's performance to that of a
broad-based securities market index. The fund's performance reflects payment of
sales loads.
<TABLE>
<CAPTION>
AVERAGE ANNUAL TOTAL RETURNS
----------------------------------------------------------------------------------------------------
(for the periods ended SINCE INCEPTION
December 31, 1999) 1 YEAR 5 YEARS 10 Years INCEPTION DATE
----------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Class A -6.32% -- -- 9.76% 12/31/96
Class B -5.89% -- -- 1.22% 03/03/98
Class C -2.44% 14.63% 11.27% 11.23% 02/24/88
S&P 500(1) 21.03% 28.54% 18.19% 18.55%(2) 02/29/88(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 the class with the longest performance history.
2
<PAGE> 6
---------------------
AIM ADVISOR FLEX FUND
---------------------
FEE TABLE AND EXPENSE EXAMPLE
--------------------------------------------------------------------------------
FEE TABLE
This table describes the fees and expenses that you may pay if you buy and hold
shares of the fund:
<TABLE>
<CAPTION>
SHAREHOLDER FEES
- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -
(fees paid directly from
your investment) CLASS A CLASS B CLASS C
--------------------------------------------------------------------------------
<S> <C> <C> <C>
Maximum Sales Charge (Load)
Imposed on Purchases
(as a percentage of
offering price) 5.50% None None
Maximum Deferred
Sales Charge (Load)
(as a percentage of
original purchase
price or redemption
proceeds, whichever is less) None(1) 5.00% 1.00%
--------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
ANNUAL FUND OPERATING EXPENSES
-------------------------------------------------------
(expenses that are deducted
from fund assets) CLASS A CLASS B CLASS C
-------------------------------------------------------
<S> <C> <C> <C>
Management Fees 0.75% 0.75% 0.75%
Distribution and/or
Service (12b-1) Fees 0.35 1.00 1.00
Other(2) 0.13 0.11 0.11
Total Annual Fund
Operating Expenses 1.23 1.86 1.86
Fee Waiver(3) 0.10 0.00 0.00
Net Expenses 1.13% 1.86% 1.86%
-------------------------------------------------------
</TABLE>
(1) If you buy $1,000,000 or more of Class A shares and redeem these shares
within 18 months from the date of purchase, you may pay a 1% contingent
deferred sales charge (CDSC) at the time of redemption.
(2) Other expenses have been restated to reflect current agreements.
(3) The distributor has contractually agreed to limit the Class A shares'
Rule 12b-1 distribution plan payments to 0.25%.
As a result of 12b-1 fees, long-term shareholders in the fund may pay more than
the maximum permitted initial sales charge.
EXPENSE EXAMPLE
This example is intended to help you compare the costs of investing in different
classes of the fund with the cost of investing in other mutual funds.
The example assumes that you invest $10,000 in the fund for the time periods
indicated and then redeem all of your shares at the end of those periods. The
example also assumes that your investment has a 5% return each year and that the
fund's gross operating expenses remain the same. To the extent fees are waived,
the expenses will be lower. Although your actual returns and costs may be higher
or lower, based on these assumptions your costs would be:
<TABLE>
<CAPTION>
1 YEAR 3 YEARS 5 YEARS 10 YEARS
----------------------------------------------
<S> <C> <C> <C> <C>
Class A $668 $919 $1,188 $1,957
Class B 689 885 1,206 2,015
Class C 289 585 1,006 2,180
----------------------------------------------
</TABLE>
You would pay the following expenses if you did not redeem your shares:
<TABLE>
<CAPTION>
1 YEAR 3 YEARS 5 YEARS 10 YEARS
----------------------------------------------
<S> <C> <C> <C> <C>
Class A $668 $919 $1,188 $1,957
Class B 189 585 1,006 2,015
Class C 189 585 1,006 2,180
----------------------------------------------
</TABLE>
3
<PAGE> 7
---------------------
AIM ADVISOR FLEX FUND
---------------------
FUND MANAGEMENT
--------------------------------------------------------------------------------
THE ADVISORS
A I M Advisors, Inc. (the advisor) serves as the fund's investment advisor and
manages the investment operations of the fund and has agreed to perform or
arrange for the performance of the fund's day-to-day management. The advisor is
located at 11 Greenway Plaza, Suite 100, Houston, Texas 77046-1173. INVESCO,
Inc. (the subadvisor), the fund's subadvisor, is located at 1315 Peachtree
Street, N.E., Atlanta, GA 30309. The subadvisor is responsible for the fund's
day-to-day management, including the fund's investment decisions and the
execution of securities transactions with respect to the fund.
The advisor has acted as an investment advisor since its organization in 1976,
and the subadvisor (formerly known as INVESCO Capital Management, Inc.) has
acted as an investment advisor since 1979. Today, the advisor, 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 December 31, 1999, the advisor received
compensation of 0.75% 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 are
- James O. Baker, C.F.A., Senior Portfolio Manager, who has been responsible for
the fund and has been associated with the subadvisor and/or its affiliates
since 1992.
- David S. Griffin, C.F.A., Assistant Portfolio Manager, who has been
responsible for the fund since 1993 and has been associated with the
subadvisor and/or its affiliates since 1991.
- Margaret (Peg) Durkes Hoogs, C.F.A., Assistant Portfolio Manager, who has been
responsible for the fund since 1997 and has been associated with the
subadvisor and/or its affiliates since 1993.
OTHER INFORMATION
--------------------------------------------------------------------------------
SALES CHARGES
Purchases of Class A shares of AIM Advisor Flex Fund are subject to the maximum
5.50% initial sales charge as listed under the heading "CATEGORY I Initial Sales
Charges" in the "Shareholder Information--Choosing a Share Class" section of
this prospectus. Purchases of Class B and Class C shares are subject to the
contingent deferred sales charges listed in that section.
DIVIDENDS AND DISTRIBUTIONS
The fund expects that its distributions, if any, will consist primarily of
capital gains.
DIVIDENDS
The fund generally declares and pays dividends, if any, quarterly.
CAPITAL GAINS DISTRIBUTIONS
The fund generally distributes long-term gains, if any, annually and short-term
capital gains, if any, quarterly.
4
<PAGE> 8
---------------------
AIM ADVISOR FLEX FUND
---------------------
FINANCIAL HIGHLIGHTS
--------------------------------------------------------------------------------
The financial highlights table is intended to help you understand the fund's
financial performance. Certain information reflects financial results for a
single fund share.
The total returns in the table represent the rate that an investor would have
earned (or lost) on an investment in the fund (assuming reinvestment of all
dividends and distributions).
The information for the fiscal years or periods ended since December 31, 1998,
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. Information for prior years was audited by other public accountants.
<TABLE>
<CAPTION>
CLASS A(a)
-------------------------------------
YEAR ENDED
DECEMBER 31,
-------------------------------------
1999 1998 1997(b)
--------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Net asset value, beginning of period $ 20.06 $ 19.74 $ 16.63
Income from investment operations:
Net investment income 0.46 0.39 0.41
Net gains (losses) on securities (both realized and
unrealized) (0.68) 2.16 3.63
Total from investment operations (0.22) 2.55 4.04
Less distributions:
Dividends from net investment income (0.48) (0.39) (0.43)
Distributions from net realized gains (1.79) (1.84) (0.50)
Total distributions (2.27) (2.23) (0.93)
Net asset value, end of period $ 17.57 $ 20.06 $ 19.74
Total return(c) (0.85)% 13.26% 24.60%
--------------------------------------------------------------------------------------------------
Ratios/supplemental data:
--------------------------------------------------------------------------------------------------
Net assets, end of period (000s omitted) $39,195 $46,286 $25,151
Ratio of expenses to average net assets(d) 1.13%(e) 1.23% 1.45%
Ratio of net investment income to average net assets(f) 2.30%(e) 1.99% 2.34%
Portfolio turnover rate 55% 34% 17%
--------------------------------------------------------------------------------------------------
</TABLE>
(a) Per share information and shares have been restated to reflect a 4 for 1
stock split, effected in the form of a 300% stock dividend, on November 7,
1997.
(b) Calculated using average shares outstanding.
(c) Does not deduct sales charges.
(d) After fee waivers and/or expense reimbursements. Ratio of expenses to
average net assets prior to fee waivers and/or expense reimbursements were
1.39%, 1.52% and 1.55% for 1999-1997.
(e) Ratios are based on average net asset of $45,548,558.
(f) After fee waivers and/or expense reimbursements. Ratio of net investment
income to average net assets prior to fee waivers and/or expense
reimbursements were 2.04%, 1.70% and 2.24% for 1999-1997.
5
<PAGE> 9
---------------------
AIM ADVISOR FLEX FUND
---------------------
FINANCIAL HIGHLIGHTS (CONTINUED)
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
CLASS B
-------------------------------------------------------------------------------------------------
MARCH 3,
YEAR ENDED THROUGH
DECEMBER 31, DECEMBER 31,
1999 1998
<S> <C> <C>
-----------------------------------------------------------------------------------------
Net asset value, beginning of period $ 20.06 $20.69
Income from investment operations:
Net investment income 0.31 0.22
Net gains (losses) on securities (both realized and
unrealized) (0.66) 1.22
Total from investment operations (0.35) 1.44
Less distributions:
Dividends from net investment income (0.33) (0.23)
Distributions from net realized gains (1.79) (1.84)
Total distributions (2.12) (2.07)
Net asset value, end of period $ 17.59 $20.06
Total return(a) (1.50)% 7.25%
-----------------------------------------------------------------------------------------
Ratios/supplemental data:
-----------------------------------------------------------------------------------------
Net assets, end of period (000s omitted) $10,076 $3,592
Ratio of expenses to average net assets(b) 1.86%(c) 2.00%(d)
Ratio of net investment income to average net assets(e) 1.57%(c) 1.22%(d)
Portfolio turnover rate 55% 34%
-------------------------------------------------------------------------------------------------
</TABLE>
(a) Does not deduct contingent deferred sales charges and for periods less than
one year is not annualized.
(b) After fee waivers and/or expense reimbursements. Ratios of expenses to
average net assets prior to fee waivers and/or expense reimbursements were
2.02% and 2.19% (annualized) for 1999-1998.
(c) Ratios are based on average net assets of $9,130,498.
(d) Annualized.
(e) After fee waivers and/or expense reimbursements. Ratio of net investment
income to average net assets prior to fee waivers and/or expense
reimbursements were 1.41% and 1.03% (annualized) for 1999-1998.
<TABLE>
<CAPTION>
CLASS C(a)
-----------------------------------------------------------
YEAR ENDED DECEMBER 31,
-----------------------------------------------------------
1999 1998 1997(b) 1996 1995
-------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of period $ 20.06 $ 19.74 $ 16.63 $ 15.66 $ 12.63
Income from investment operations:
Net investment income 0.32 0.25 0.30 0.30 0.32
Net gains (losses) on securities (both
realized and unrealized) (0.68) 2.14 3.60 1.81 3.09
Total from investment operations (0.36) 2.39 3.90 2.11 3.41
Less distributions:
Dividends from net investment income (0.33) (0.23) (0.29) (0.29) (0.32)
Distributions from net realized gains (1.79) (1.84) (0.50) (0.85) (0.06)
Total distributions (2.12) (2.07) (0.79) (1.14) (0.38)
Net asset value, end of period $ 17.58 $ 20.06 $ 19.74 $ 16.63 $ 15.66
Total return(c) (1.56)% 12.41% 23.64% 13.61% 27.30%
-------------------------------------------------------------------------------------------------------
Ratios/supplemental data:
-------------------------------------------------------------------------------------------------------
Net assets, end of period (000s omitted) $610,041 $670,256 $603,179 $489,918 $399,162
Ratio of expenses to average net assets(d) 1.86%(e) 2.00% 2.20% 2.26% 2.28%
Ratio of net investment income to average
net assets(f) 1.57%(e) 1.22% 1.59% 1.81% 2.28%
Portfolio turnover rate 55% 34% 17% 26% 5%
-------------------------------------------------------------------------------------------------------
</TABLE>
(a) Per share information and shares have been restated to reflect a 4 for 1
stock split, effected in the form of a 300% stock dividend, on November 7,
1997.
(b) Calculated using average shares outstanding.
(c) Does not deduct contingent deferred sales charges.
(d) After fee waivers and/or expense reimbursements. Ratios of expenses to
average net assets prior to fee waivers and/or expense reimbursements were
2.02% and 2.19% for 1999-1998.
(e) Ratios are based on average net assets of $696,773,444.
(f) After fee waivers and/or expense reimbursements. Ratios of net investment
income to average net assets prior to fee waivers and/or expense
reimbursements were 1.41% and 1.03% for 1999-1998.
6
<PAGE> 10
-------------
THE AIM FUNDS
-------------
SHAREHOLDER INFORMATION
--------------------------------------------------------------------------------
In addition to the fund, A I M Advisors, Inc. serves as investment advisor to
many other mutual funds (the AIM Funds). The following information is about all
the AIM Funds.
CHOOSING A SHARE CLASS
Many of the AIM Funds have multiple classes of shares, each class representing
an interest in the same portfolio of investments. When choosing a share class,
you should consider the factors below:
<TABLE>
<CAPTION>
CLASS A CLASS B CLASS C
---------------------------------------------------------------------------------------------------------
<S> <C> <C>
- Initial sales charge - No initial sales charge - No initial sales charge
- Reduced or waived initial sales - Contingent deferred sales - Contingent deferred sales
charge for certain purchases charge on redemptions within charge on redemptions within
six years one year
- Lower distribution and service - 12b-1 fee of 1.00% - 12b-1 fee of 1.00%
(12b-1) fee than Class B or
Class C shares (See "Fee Table
and Expense Example")
- Converts to Class A shares - Does not convert to Class A
eight years after the end of shares
the month in which shares
were purchased along with a
pro rata portion of its
reinvested dividends and
distributions(1)
- Generally more appropriate for - Purchase orders limited to - Generally more appropriate
long-term investors amounts less than $250,000 for short-term investors
</TABLE>
(1) AIM Money Market Fund: Class B shares convert to AIM Cash Reserve
Shares.
AIM Global Trends Fund: If you held Class B shares on May 29, 1998 and
continue to hold them, those shares will convert to Class A shares of
that fund seven years after the end of the month in which shares were
purchased. If you exchange those shares for Class B shares of another
AIM Fund, the shares into which you exchanged will not convert to
Class A shares until eight years after the end of the month in which
you purchased your original shares.
--------------------------------------------------------------------------------
DISTRIBUTION AND SERVICE (12B-1) FEES
Each AIM Fund (except AIM Tax-Free Intermediate Fund) has adopted 12b-1 plans
that allow the AIM Fund to pay distribution fees to A I M Distributors, Inc.
(the distributor) for the sale and distribution of its shares and fees for
services provided to shareholders, all or a substantial portion of which are
paid to the dealer of record. Because the AIM Fund pays these fees out of its
assets on an ongoing basis, over time these fees will increase the cost of your
investment and may cost you more than paying other types of sales charges.
SALES CHARGES
Generally, you will not pay a sales charge on purchases or redemptions of Class
A shares of AIM Tax-Exempt Cash Fund and AIM Cash Reserve Shares of AIM Money
Market Fund. You may be charged a contingent deferred sales charge if you redeem
AIM Cash Reserve Shares of AIM Money Market Fund acquired through certain
exchanges. Sales charges on all other AIM Funds and classes of those Funds are
detailed below. As used below, the term "offering price" with respect to all
categories of Class A shares includes the initial sales charge.
INITIAL SALES CHARGES
The AIM Funds are grouped into three categories with respect to initial sales
charges. The "Other Information" section of your prospectus will tell you in
what category your particular AIM Fund is classified.
<TABLE>
<CAPTION>
CATEGORY I INITIAL SALES CHARGES
------------------------------------------------------------
INVESTOR'S
SALES CHARGE
----------------------------
AMOUNT OF INVESTMENT AS A % OF AS A % OF
IN SINGLE TRANSACTION OFFERING PRICE INVESTMENT
-------------------------------------------------------------
<S> <C> <C>
Less than $ 25,000 5.50% 5.82%
$ 25,000 but less than $ 50,000 5.25 5.54
$ 50,000 but less than $ 100,000 4.75 4.99
$100,000 but less than $ 250,000 3.75 3.90
$250,000 but less than $ 500,000 3.00 3.09
$500,000 but less than $1,000,000 2.00 2.04
-------------------------------------------------------------
</TABLE>
A-1 MCF--06/00
<PAGE> 11
-------------
THE AIM FUNDS
-------------
<TABLE>
<CAPTION>
CATEGORY II INITIAL SALES CHARGES
------------------------------------------------------------
INVESTOR'S
SALES CHARGE
----------------------------
AMOUNT OF INVESTMENT AS A % OF AS A % OF
IN SINGLE TRANSACTION OFFERING PRICE INVESTMENT
-------------------------------------------------------------
<S> <C> <C>
Less than $ 50,000 4.75% 4.99%
$ 50,000 but less than $ 100,000 4.00 4.17
$100,000 but less than $ 250,000 3.75 3.90
$250,000 but less than $ 500,000 2.50 2.56
$500,000 but less than $1,000,000 2.00 2.04
-------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
CATEGORY III INITIAL SALES CHARGES
-------------------------------------------------------------
INVESTOR'S
SALES CHARGE
----------------------------
AMOUNT OF INVESTMENT AS A % OF AS A % OF
IN SINGLE TRANSACTION OFFERING PRICE INVESTMENT
-------------------------------------------------------------
<S> <C> <C>
Less than $ 100,000 1.00% 1.01%
$100,000 but less than $ 250,000 0.75 0.76
$250,000 but less than $1,000,000 0.50 0.50
-------------------------------------------------------------
</TABLE>
CONTINGENT DEFERRED SALES CHARGES FOR CLASS A SHARES
You can purchase $1,000,000 or more of Class A shares at net asset value.
However, if you purchase shares of that amount in Categories I or II, they will
be subject to a contingent deferred sales charge (CDSC) of 1% if you redeem them
prior to 18 months after the date of purchase. The distributor may pay a dealer
concession and/or a service fee for purchases of $1,000,000 or more.
CONTINGENT DEFERRED SALES CHARGES FOR
CLASS B AND CLASS C SHARES
You can purchase Class B and Class C shares at their net asset value per share.
However, when you redeem them, they are subject to a CDSC in the following
percentages:
<TABLE>
<CAPTION>
YEAR SINCE
PURCHASE MADE CLASS B CLASS C
----------------------------------------------------------
<S> <C> <C>
First 5% 1%
Second 4 None
Third 3 None
Fourth 3 None
Fifth 2 None
Sixth 1 None
Seventh and following None None
----------------------------------------------------------
</TABLE>
COMPUTING A CDSC
The CDSC on redemptions of shares is computed based on the lower of their
original purchase price or current market value, net of reinvested dividends and
capital gains distributions. In determining whether to charge a CDSC, we will
assume that you have redeemed shares on which there is no CDSC first and, then,
shares in the order of purchase.
REDUCED SALES CHARGES
AND SALES CHARGE EXCEPTIONS
You may qualify for reduced sales charges or sales charge exceptions. To qualify
for these reductions or exceptions, you or your financial consultant must
provide sufficient information at the time of purchase to verify that your
purchase qualifies for such treatment.
REDUCED SALES CHARGES
You may be eligible to buy Class A shares at reduced initial sales charge rates
under Rights of Accumulation or Letters of Intent under certain circumstances.
Rights of Accumulation
You may combine your new purchases of Class A shares with Class A shares
currently owned for the purpose of qualifying for the lower initial sales charge
rates that apply to larger purchases. The applicable initial sales charge for
the new purchase is based on the total of your current purchase and the current
value of all Class A shares you own.
Letters of Intent
Under a Letter of Intent (LOI), you commit to purchase a specified dollar amount
of Class A shares of AIM Funds during a 13-month period. The amount you agree to
purchase determines the initial sales charge you pay. If the full face amount of
the LOI is not invested by the end of the 13-month period, your account will be
adjusted to the higher initial sales charge level for the amount actually
invested.
INITIAL SALES CHARGE EXCEPTIONS
You will not pay initial sales charges
- on shares purchased by reinvesting dividends and distributions;
- when exchanging shares among certain AIM Funds;
- when using the reinstatement privilege; and
- when a merger, consolidation, or acquisition of assets of an AIM Fund occurs.
CONTINGENT DEFERRED SALES CHARGE (CDSC) EXCEPTIONS
You will not pay a CDSC
- if you redeem Class B shares you held for more than six years;
- if you redeem Class C shares you held for more than one year;
- if you redeem shares acquired through reinvestment of dividends and
distributions; and
- on increases in the net asset value of your shares.
There may be other situations when you may be able to purchase or redeem shares
at reduced or without sales charges. Consult the fund's Statement of Additional
Information for details.
MCF--06/00 A-2
<PAGE> 12
--------------
THE AIM FUNDS
--------------
PURCHASING SHARES
MINIMUM INVESTMENTS PER AIM FUND ACCOUNT
The minimum investments for AIM Fund accounts (except for investments in AIM Mid
Cap Opportunities Fund and AIM Small Cap Opportunities Fund) are as follows:
<TABLE>
<CAPTION>
INITIAL ADDITIONAL
TYPE OF ACCOUNT INVESTMENTS INVESTMENTS
-----------------------------------------------------------------------------------------------------------
<S> <C> <C>
Savings Plans (money-purchase/profit sharing $ 0 ($25 per AIM Fund investment for $25
plans, 401(k) plans, Simplified Employee Pension salary deferrals from Savings Plans)
(SEP) accounts, Salary Reduction (SARSEP)
accounts, Savings Incentive Match Plans for
Employee IRA (Simple IRA) accounts, 403(b) or
457 plans)
Automatic Investment Plans 50 50
IRA, Education IRA or Roth IRA 250 50
All other accounts 500 50
----------------------------------------------------------------------------------------------------------
</TABLE>
HOW TO PURCHASE SHARES
You may purchase shares using one of the options below.
<TABLE>
<CAPTION>
PURCHASE OPTIONS
---------------------------------------------------------------------------------------------------------
OPENING AN ACCOUNT ADDING TO AN ACCOUNT
---------------------------------------------------------------------------------------------------------
<S> <C> <C>
Through a Financial Consultant Contact your financial consultant. Same
By Mail Mail completed account application Mail your check and the remittance
and purchase payment to the slip from your confirmation
transfer agent, statement to the transfer agent.
A I M Fund Services, Inc.,
P.O. Box 4739,
Houston, TX 77210-4739.
By Wire Mail completed account application Call the transfer agent to receive
to the transfer agent. Call the a reference number. Then, use the
transfer agent at (800) 959-4246 to wire instructions at left.
receive a reference number. Then,
use the following wire
instructions:
Beneficiary Bank ABA/Routing #:
113000609
Beneficiary Account Number:
00100366807
Beneficiary Account Name: A I M
Fund Services, Inc.
RFB: Fund Name, Reference #
OBI: Your Name, Account #
By AIM Bank Connection(SM) Open your account using one of the Mail completed AIM Bank Connection
methods described above. form to the transfer agent. Once
the transfer agent has received the
form, call the transfer agent to
place your purchase order.
By AIM Internet Connect(SM) Open your account using one of the Select the AIM Internet Connect
methods described above. option on your completed account
application or complete an AIM
Internet Connect Authorization
Form. Mail the application or form
to the transfer agent. Once your
request for this option has been
processed (which may take up to 10
days), you may place your purchase
order at www.aimfunds.com. The
maximum purchase amount per
transaction is $100,000. You may
not purchase shares in AIM
prototype retirement accounts on
the internet.
----------------------------------------------------------------------------------------------------------
</TABLE>
A-3 MCF--06/00
<PAGE> 13
-------------
THE AIM FUNDS
-------------
SPECIAL PLANS
AUTOMATIC INVESTMENT PLAN
You can arrange for periodic investments in any of the AIM Funds by authorizing
the AIM Fund to withdraw the amount of your investment from your bank account on
a day or dates you specify and in an amount of at least $50. You may stop the
Automatic Investment Plan at any time by giving the transfer agent notice ten
days prior to your next scheduled withdrawal.
DOLLAR COST AVERAGING
Dollar Cost Averaging allows you to make automatic monthly or quarterly
exchanges, if permitted, from one AIM Fund account to one or more other AIM Fund
accounts with the identical registration. The account from which exchanges are
to be made must have a minimum balance of $5,000 before you can use this option.
Exchanges will occur on (or about) the 10th or 25th day of the month, whichever
you specify, in the amount you specify. The minimum amount you can exchange to
another AIM Fund is $50.
AUTOMATIC DIVIDEND INVESTMENT
All of your dividends and distributions may be paid in cash or invested in any
AIM Fund at net asset value. Unless you specify otherwise, your dividends and
distributions will automatically be reinvested in the same AIM Fund. You may
invest your dividends and distributions (1) into another AIM Fund in the same
class of shares; or (2) from Class A shares into AIM Cash Reserve Shares of AIM
Money Market Fund, or vice versa.
You must comply with the following requirements to be eligible to invest your
dividends and distributions in shares of another AIM Fund:
(1) Your account balance (a) in the AIM Fund paying the dividend must be at
least $5,000; or (b) in the AIM Fund receiving the dividend must be at least
$500;
(2) Both accounts must have identical registration information; and
(3) You must have completed an authorization form to reinvest dividends into
another AIM Fund.
PORTFOLIO REBALANCING PROGRAM
If you have at least $5,000 in your account, you may participate in the
Portfolio Rebalancing Program. Under this Program, you can designate how the
total value of your AIM Fund holdings should be rebalanced, on a percentage
basis, between two and ten of your AIM Funds on a quarterly, semiannual or
annual basis. Your portfolio will be rebalanced through the exchange of shares
in one or more of your AIM Funds for shares of the same class of one or more
other AIM Funds in your portfolio. If you wish to participate in the Program,
make changes or cancel the Program, the transfer agent must receive your request
to participate, changes, or cancellation in good order at least five business
days prior to the next rebalancing date, which is normally the 28th day of the
last month of the period you choose. You may realize taxable gains from these
exchanges. We may modify, suspend or terminate the Program at any time on 60
days' prior written notice.
RETIREMENT PLANS
Shares of most of the AIM Funds can be purchased through tax-sheltered
retirement plans made available to corporations, individuals and employees of
non-profit organizations and public schools. A plan document must be adopted
to establish a retirement plan. You may use AIM Funds-sponsored retirement
plans, which include IRAs, Education IRAs, Roth IRAs, 403(b) plans, 401(k)
plans, SIMPLE IRA plans, SEP/SARSEP plans and Money Purchase/Profit Sharing
plans, or another sponsor's retirement plan. The plan custodian of the
AIM Funds-sponsored retirement plan assesses an annual maintenance fee of $10.
Contact your financial consultant for details.
REDEEMING SHARES
REDEMPTION FEES
Generally, we will not charge you any fees to redeem your shares. However, if
you acquired Class A shares of AIM Developing Markets Fund in connection with
the reorganization of AIM Eastern Europe Fund, you will be charged a redemption
fee of 2% of the net asset value of those shares, which will be paid to AIM
Developing Markets Fund, if you redeem your shares within the first year after
the reorganization. Your broker or financial consultant may charge service fees
for handling redemption transactions. Your shares also may be subject to a
contingent deferred sales charge (CDSC).
REDEMPTION OF AIM CASH RESERVE SHARES OF
AIM MONEY MARKET FUND ACQUIRED BY EXCHANGE
If you redeem AIM Cash Reserve Shares acquired by exchange from Class A shares
subject to a CDSC within 18 months of the purchase of the Class A shares, you
will be charged a CDSC.
REDEMPTION OF CLASS B SHARES OR CLASS C
SHARES ACQUIRED BY EXCHANGE FROM AIM CASH
RESERVE SHARES OF AIM MONEY MARKET FUND
We will begin the holding period for purposes of calculating the CDSC on Class B
shares or Class C shares acquired by exchange from AIM Cash Reserve Shares of
AIM Money Market Fund at the time of the exchange into Class B shares or Class C
shares.
REDEMPTION OF CLASS B SHARES ACQUIRED BY
EXCHANGE FROM AIM FLOATING RATE FUND
If you redeem Class B shares you acquired by exchange via a tender offer by AIM
Floating Rate Fund, the early withdrawal charge applicable to shares of AIM
Floating Rate Fund will be applied instead of the CDSC normally applicable to
Class B shares.
MCF--06/00 A-4
<PAGE> 14
-------------
THE AIM FUNDS
-------------
HOW TO REDEEM SHARES
--------------------------------------------------------------------------------
<TABLE>
<S> <C>
Through a Financial Contact your financial consultant.
Consultant
By Mail Send a written request to the transfer agent. Requests must
include (1) original signatures of all registered owners;
(2) the name of the AIM Fund and your account number; (3) if
the transfer agent does not hold your shares, endorsed share
certificates or share certificates accompanied by an
executed stock power; and (4) signature guarantees, if
necessary (see below). The transfer agent may require that
you provide additional information, such as corporate
resolutions or powers of attorney, if applicable. If you are
redeeming from an IRA account, you must include a statement
of whether or not you are at least 59 1/2 years old and
whether you wish to have federal income tax withheld from
your proceeds. The transfer agent may require certain other
information before you can redeem from an employer-sponsored
retirement plan. Contact your employer for details.
By Telephone Call the transfer agent. You will be allowed to redeem by
telephone if (1) the proceeds are to be mailed to the
address on record (if there has been no change communicated
to us within the last 30 days) or transferred electronically
to a pre-authorized checking account; (2) you do not hold
physical share certificates; (3) you can provide proper
identification information; (4) the proceeds of the
redemption do not exceed $50,000; and (5) you have not
previously declined the telephone redemption privilege.
Certain accounts, including retirement accounts and 403(b)
plans, may not be redeemed by telephone. The transfer agent
must receive your call during the hours of the customary
trading session of the New York Stock Exchange (NYSE) in
order to effect the redemption at that day's closing price.
By AIM Internet
Connect Place your redemption request at www.aimfunds.com. You will
be allowed to redeem by internet if (1) you do not hold
physical share certificates; (2) you can provide proper
identification information; (3) the proceeds of the
redemption do not exceed $50,000; and (4) you have
established the internet trading option. AIM prototype
retirement accounts may not be redeemed on the internet.
The transfer agent must confirm your transaction during the
hours of the customary trading session of the NYSE in order
to effect the redemption at that day's closing price.
</TABLE>
-------------------------------------------------------------------------------
TIMING AND METHOD OF PAYMENT
We normally will send out checks within one business day, and in any event no
more than seven days, after we accept your request to redeem. If you redeem
shares recently purchased by check, you will be required to wait up to ten
business days before we will send your redemption proceeds. This delay is
necessary to ensure that the purchase check has cleared.
REDEMPTION BY MAIL
If you mail us a request in good order to redeem your shares, we will mail you a
check in the amount of the redemption proceeds to the address on record with us.
If your request is not in good order, you may have to provide us with additional
documentation in order to redeem your shares.
REDEMPTION BY TELEPHONE
If you redeem by telephone, we will mail you a check in the amount of the
redemption proceeds to your address of record (if there has been no change
communicated to the transfer agent within the previous 30 days) or transmit them
electronically to your pre-authorized bank account. We use reasonable procedures
to confirm that instructions communicated by telephone are genuine and are not
liable for telephone instructions that are reasonably believed to be genuine.
REDEMPTION BY INTERNET
If you redeem by internet, we will transmit your redemption proceeds
electronically to your pre-authorized bank account. We use reasonable procedures
to confirm that instructions communicated by internet are genuine and are not
liable for internet instructions that are reasonably believed to be genuine.
PAYMENT FOR SYSTEMATIC WITHDRAWALS
You may arrange for regular monthly or quarterly withdrawals from your account
of at least $50. You also may make annual withdrawals if you own Class A shares.
We will redeem enough shares from your account to cover the amount withdrawn.
You must have an account balance of at least $5,000 to establish a Systematic
Withdrawal Plan. You can stop this plan at any time by giving ten days prior
notice to the transfer agent.
EXPEDITED REDEMPTIONS
(AIM Cash Reserve Shares of AIM Money Market Fund only)
If we receive your redemption order before 11:30 a.m. Eastern Time, we will try
to transmit payment of redemption proceeds on that same day. If we receive your
redemption order after 11:30 a.m. Eastern Time and before the close of the
customary trading session of the NYSE, we generally will transmit payment on the
next business day.
A-5 MCF--06/00
<PAGE> 15
--------------
THE AIM FUNDS
--------------
REDEMPTIONS BY CHECK
(Class A shares of AIM Tax-Exempt Cash Fund and AIM Cash Reserve Shares of AIM
Money Market Fund only)
You may redeem shares of these AIM Funds by writing checks in amounts of $250 or
more if you have completed an authorization form. Redemption by check is not
available for retirement accounts.
SIGNATURE GUARANTEES
We require a signature guarantee when you redeem by mail and
(1) the amount is greater than $50,000;
(2) you request that payment be made to someone other than the name registered
on the account;
(3) you request that payment be sent somewhere other than the bank of record on
the account; or
(4) you request that payment be sent to a new address or an address that changed
in the last 30 days.
The transfer agent will accept a guarantee of your signature by a number of
financial institutions. Call the transfer agent for additional information. Some
institutions have transaction amount maximums for these guarantees. Please check
with the guarantor institution.
REINSTATEMENT PRIVILEGE (Class A shares only)
You may, within 90 days after you sell Class A shares (except Class A shares of
AIM Tax-Exempt Cash Fund), reinvest all or part of your redemption proceeds in
Class A shares of any AIM Fund at net asset value in an identically registered
account. If you sold Class A shares of AIM Limited Maturity Treasury Fund or AIM
Tax-Free Intermediate Fund, you will incur an initial sales charge reflecting
the difference between the initial sales charges on those Funds and the ones in
which you will be investing. In addition, if you paid a contingent deferred
sales charge (CDSC) on any reinstated amount, you will not be subject to a CDSC
if you later redeem that amount. You must notify the transfer agent in writing
at the time you reinstate that you are exercising your reinstatement privilege.
You may exercise this privilege only once per year.
REDEMPTIONS BY THE AIM FUNDS
If your account has been open at least one year, you have not made an additional
purchase in the account during the past six calendar months, and the value of
your account falls below $500 for three consecutive months due to redemptions or
exchanges (excluding retirement accounts), the AIM Funds have the right to
redeem the account after giving you 60 days' prior written notice. You may avoid
having your account redeemed during the notice period by bringing the account
value up to $500 or by utilizing the Automatic Investment Plan.
If an AIM Fund determines that you have not provided a correct Social Security
or other tax ID number on your account application, the AIM Fund may, at its
discretion, redeem the account and distribute the proceeds to you.
EXCHANGING SHARES
You may, under certain circumstances, exchange shares in one AIM Fund for those
of another AIM Fund. Before requesting an exchange, review the prospectus of the
AIM Fund you wish to acquire. Exchange privileges also apply to holders of the
Connecticut General Guaranteed Account, established for tax-qualified group
annuities, for contracts purchased on or before June 30, 1992.
PERMITTED EXCHANGES
Except as otherwise stated below, you may exchange your shares for shares of the
same class of another AIM Fund. You may exchange AIM Cash Reserve Shares of AIM
Money Market Fund for Class A shares of another AIM Fund, or vice versa. You
also may exchange AIM Cash Reserve Shares of AIM Money Market Fund for Class B
shares or Class C shares of another AIM Fund, but only if the AIM Cash Reserve
Shares were purchased directly and not acquired by exchange. You may be required
to pay an initial sales charge when exchanging from a Fund with a lower initial
sales charge than the one into which you are exchanging. If you exchange from
Class A shares not subject to a CDSC into Class A shares subject to those
charges, you will be charged a CDSC when you redeem the exchanged shares. The
CDSC charged on redemption of those shares will be calculated starting on the
date you acquired those shares through exchange.
YOU WILL NOT PAY A SALES CHARGE WHEN EXCHANGING:
(1) Class A shares with an initial sales charge (except for Class A shares of
AIM Limited Maturity Treasury Fund and AIM Tax-Free Intermediate Fund) for
Class A shares of another AIM Fund or AIM Cash Reserve Shares of AIM Money
Market Fund;
(2) Class A shares of AIM Limited Maturity Treasury Fund and AIM Tax-Free
Intermediate Fund for
(a) one another;
(b) AIM Cash Reserve Shares of AIM Money Market Fund or Class A shares of
AIM Tax-Exempt Cash Fund; or
(c) Class A shares of another AIM Fund, but only if
(i) you acquired the original shares before May 1, 1994; or
(ii) you acquired the original shares on or after May 1, 1994 by way of
an exchange from shares with higher sales charges;
(3) AIM Cash Reserve Shares of AIM Money Market Fund or Class A shares of AIM
Tax-Exempt Cash Fund for
(a) one another;
(b) Class A shares of an AIM Fund subject to an initial sales charge (except
for Class A shares of AIM Limited Maturity Treasury Fund and AIM
Tax-Free Intermediate Fund), but only if you acquired the original
shares
(i) prior to May 1, 1994 by exchange from Class A shares subject to an
initial sales charge;
MCF--06/00 A-6
<PAGE> 16
--------------
THE AIM FUNDS
--------------
(ii) on or after May 1, 1994 by exchange from Class A shares subject to
an initial sales charge (except for Class A shares of AIM Limited
Maturity Treasury Fund and AIM Tax-Free Intermediate Fund); or
(c) Class A shares of AIM Limited Maturity Treasury Fund and AIM Tax-Free
Intermediate Fund, but only if you acquired the original shares by
exchange from Class A shares subject to an initial sales charge; or
(4) Class B shares for other Class B shares, and Class C shares for other Class
C shares.
(5) AIM Cash Reserve Shares of AIM Money Market Fund for Class B shares and
Class C shares.
EXCHANGES NOT PERMITTED
You may not exchange Class A shares subject to contingent deferred sales charges
for Class A shares of AIM Limited Maturity Treasury Fund, AIM Tax-Free
Intermediate Fund or AIM Tax-Exempt Cash Fund.
EXCHANGE CONDITIONS
The following conditions apply to all exchanges:
- You must meet the minimum purchase requirements for the AIM Fund into which
you are exchanging;
- Shares of the AIM Fund you wish to acquire must be available for sale in your
state of residence;
- Exchanges must be made between accounts with identical registration
information;
- The account you wish to exchange from must have a certified tax identification
number (or the Fund has received an appropriate Form W-8 or W-9);
- Shares must have been held for at least one day prior to the exchange;
- If you have physical share certificates, you must return them to the transfer
agent prior to the exchange; and
- You are limited to a maximum of 10 exchanges per calendar year, because
excessive short-term trading or market-timing activity can hurt fund
performance. If you exceed that limit, or if an AIM Fund or the distributor
determines, in its sole discretion, that your short-term trading is excessive
or that you are engaging in market-timing activity, it may reject any
additional exchange orders. An exchange is the movement out of (redemption)
one AIM Fund and into (purchase) another AIM Fund.
TERMS OF EXCHANGE
Under unusual market conditions, an AIM Fund may delay the purchase of shares
being acquired in an exchange for up to five business days if it determines that
it would be materially disadvantaged by the immediate transfer of exchange
proceeds. There is no fee for exchanges. The exchange privilege is not an option
or right to purchase shares. Any of the participating AIM Funds or the
distributor may modify or discontinue this privilege at any time.
BY MAIL
If you wish to make an exchange by mail, you must include original signatures of
each registered owner exactly as the shares are registered, the account
registration and account number, the dollar amount or number of shares to be
exchanged and the names of the AIM Funds from which and into which the exchange
is to be made.
BY TELEPHONE
Conditions that apply to exchanges by telephone are the same as redemptions by
telephone, including that the transfer agent must receive exchange requests
during the hours of the customary trading session of the NYSE; however, you
still will be allowed to exchange by telephone even if you have changed your
address of record within the preceding 30 days.
BY INTERNET
You will be allowed to exchange by internet if (1) you do not hold physical
share certificates; (2) you can provide proper identification information; and
(3) you have established the internet trading option.
EXCHANGING CLASS B AND CLASS C SHARES
If you make an exchange involving Class B or Class C shares, the amount of time
you held the original shares will be added to the holding period of the Class B
or Class C shares, respectively, into which you exchanged for the purpose of
calculating contingent deferred sales charges (CDSC) if you later redeem the
exchanged shares. If you redeem Class B shares acquired by exchange via a tender
offer by AIM Floating Rate Fund, you will be credited with the time period you
held the shares of AIM Floating Rate Fund for the purpose of computing the early
withdrawal charge applicable to those shares.
-------------------------------------------------------------------------------
EACH AIM FUND AND ITS AGENTS RESERVE THE RIGHT AT ANY TIME TO:
- REJECT OR CANCEL ANY PART OF ANY PURCHASE OR EXCHANGE ORDER;
- MODIFY ANY TERMS OR CONDITIONS OF PURCHASE OF SHARES OF ANY AIM FUND;
- REJECT OR CANCEL ANY REQUEST TO ESTABLISH THE AUTOMATIC INVESTMENT PLAN AND
SYSTEMATIC WITHDRAWAL PLAN OPTIONS ON THE SAME ACCOUNT; OR
- WITHDRAW ALL OR ANY PART OF THE OFFERING MADE BY THIS PROSPECTUS.
------------------------------------------------------------------------------
A-7 MCF--06/00
<PAGE> 17
--------------
THE AIM FUNDS
--------------
PRICING OF SHARES
DETERMINATION OF NET ASSET VALUE
The price of each AIM Fund's shares is the fund's net asset value per share. The
AIM Funds value portfolio securities for which market quotations are readily
available at market value. The AIM Funds value short-term investments maturing
within 60 days at amortized cost, which approximates market value. AIM Money
Market Fund and AIM Tax-Exempt Cash Fund value all of their securities at
amortized cost. AIM High Income Municipal Fund, AIM Municipal Bond Fund, AIM
Tax-Exempt Bond Fund of Connecticut and AIM Tax-Free Intermediate Fund value
variable rate securities that have an unconditional demand or put feature
exercisable within seven days or less at par, which reflects the market value of
such securities.
The AIM Funds value all other securities and assets at their fair value.
Securities and other assets quoted in foreign currencies are valued in U.S.
dollars based on the prevailing exchange rates on that day. In addition, if,
between the time trading ends on a particular security and the close of the
customary trading session of the NYSE, events occur that materially affect the
value of the security, the AIM Funds may value the security at its fair value as
determined in good faith by or under the supervision of the Board of Directors
or Trustees of the AIM Fund. The effect of using fair value pricing is that an
AIM Fund's net asset value will be subject to the judgment of the Board of
Directors or Trustees or its designee instead of being determined by the market.
Because some of the AIM Funds may invest in securities that are primarily listed
on foreign exchanges that trade on days when the AIM Funds do not price their
shares, the value of those funds' assets may change on days when you will not
be able to purchase or redeem fund shares.
Each AIM Fund determines the net asset value of its shares on each day the
NYSE is open for business, as of the close of the customary trading session, or
any earlier NYSE closing time that day. AIM Money Market Fund also determines
its net asset value as of 12:00 noon Eastern Time on each day the NYSE is open
for business.
TIMING OF ORDERS
You can purchase, exchange or redeem shares during the hours of the customary
trading session of the NYSE. The AIM Funds price purchase, exchange and
redemption orders at the net asset value calculated after the transfer agent
receives an order in good form. An AIM Fund may postpone the right of redemption
only under unusual circumstances, as allowed by the Securities and Exchange
Commission, such as when the NYSE restricts or suspends trading.
TAXES
In general, dividends and distributions you receive are taxable as ordinary
income or long-term capital gains for federal income tax purposes, whether you
reinvest them in additional shares or take them in cash. Distributions are
generally taxable to you at different rates depending on the length of time
the fund holds its assets. Different tax rates may apply to ordinary income
and long-term capital gain distributions, regardless of how long you have held
your shares. Every year, you will be sent information showing the amount of
dividends and distributions you received from each AIM Fund during the prior
year.
Any long-term or short-term capital gains realized from redemptions of AIM
Fund shares will be subject to federal income tax. Exchanges of shares for
shares of another AIM Fund are treated as a sale, and any gain realized on the
transaction will generally be subject to federal income tax.
INVESTORS IN TAX-EXEMPT FUNDS SHOULD READ THE INFORMATION UNDER THE HEADING
"OTHER INFORMATION -- SPECIAL TAX INFORMATION REGARDING THE FUND" IN THEIR
PROSPECTUS.
The foreign, state and local tax consequences of investing in AIM Fund shares
may differ materially from the federal income tax consequences described above.
You should consult your tax advisor before investing.
MCF--06/00 A-8
<PAGE> 18
---------------------
AIM ADVISOR FLEX FUND
---------------------
OBTAINING ADDITIONAL INFORMATION
--------------------------------------------------------------------------------
More information may be obtained free of charge upon request. The Statement of
Additional Information (SAI), a current version of which is on file with the
Securities and Exchange Commission (SEC), contains more details about the fund
and is incorporated by reference into the prospectus (is legally a part of this
prospectus). Annual and semiannual reports to shareholders contain additional
information about the fund's investments. The fund's annual report also
discusses the market conditions and investment strategies that significantly
affected the fund's performance during its last fiscal year.
If you have questions about this fund, another fund in The AIM Family of
Funds--Registered Trademark-- or your account, or wish to obtain free copies of
the fund's current SAI or annual or semiannual reports, please contact us
---------------------------------------------------------
<TABLE>
<S> <C>
BY MAIL: A I M Fund Services, Inc.
P.O. Box 4739
Houston, TX 77210-4739
BY TELEPHONE: (800) 347-4246
BY E-MAIL: [email protected]
ON THE INTERNET: http://www.aimfunds.com
(prospectuses and annual
and semiannual reports only)
</TABLE>
---------------------------------------------------------
You also can review and obtain copies of the fund's SAI, reports and other
information at the SEC's Public Reference Room in Washington, DC; on the EDGAR
database on the SEC's Internet website (http://www.sec.gov); or, after paying a
duplication fee, by sending a letter to the SEC's Public Reference Section,
Washington, DC 20549-0102 or by sending an electronic mail request to
[email protected]. Please call the SEC at 1-202-942-8090 for information about
the Public Reference Room.
----------------------------------
AIM Advisor Flex Fund
SEC 1940 Act file number: 811-3886
----------------------------------
[AIM LOGO APPEARS HERE] www.aimfunds.com FLX-PRO-1 INVEST WITH DISCIPLINE
--Registered Trademark-- --Registered Trademark--
<PAGE> 19
AIM ADVISOR
INTERNATIONAL VALUE FUND
--------------------------------------------------------------------------
AIM Advisor International Value Fund seeks to achieve high total return.
AIM--Registered Trademark--
PROSPECTUS
SEPTEMBER 11, 2000
This prospectus contains important
information about the Class A, B and C
shares of the fund. Please read it
before investing and keep it for
future reference.
As with all other mutual fund
securities, the Securities and
Exchange Commission has not approved
or disapproved these securities or
determined whether the information
in this prospectus is adequate or
accurate. Anyone who tells you
otherwise is committing a crime.
An investment in the fund:
- is not FDIC insured;
- may lose value; and
- is not guaranteed by a bank.
[AIM LOGO APPEARS HERE] INVEST WITH DISCIPLINE
--Registered Trademark-- --Registered Trademark--
<PAGE> 20
------------------------------------
AIM ADVISOR INTERNATIONAL VALUE FUND
------------------------------------
TABLE OF CONTENTS
--------------------------------------------------------------------------------
<TABLE>
<S> <C>
INVESTMENT OBJECTIVE AND STRATEGIES 1
- - - - - - - - - - - - - - - - - - - - - - - -
PRINCIPAL RISKS OF INVESTING IN THE FUND 1
- - - - - - - - - - - - - - - - - - - - - - - -
PERFORMANCE INFORMATION 2
- - - - - - - - - - - - - - - - - - - - - - - -
Annual Total Returns 2
Performance Table 2
FEE TABLE AND EXPENSE EXAMPLE 3
- - - - - - - - - - - - - - - - - - - - - - - -
Fee Table 3
Expense Example 3
FUND MANAGEMENT 4
- - - - - - - - - - - - - - - - - - - - - - - -
The Advisors 4
Advisor Compensation 4
Portfolio Managers 4
OTHER INFORMATION 4
- - - - - - - - - - - - - - - - - - - - - - - -
Sales Charges 4
Dividends and Distributions 4
FINANCIAL HIGHLIGHTS 5
- - - - - - - - - - - - - - - - - - - - - - - -
SHAREHOLDER INFORMATION A-1
- - - - - - - - - - - - - - - - - - - - - - - -
Choosing a Share Class A-1
Purchasing Shares A-3
Redeeming Shares A-4
Exchanging Shares A-6
Pricing of Shares A-8
Taxes A-8
OBTAINING ADDITIONAL INFORMATION Back Cover
- - - - - - - - - - - - - - - - - - - - - - - -
</TABLE>
The AIM Family of Funds, The AIM Family of Funds and Design (i.e., the AIM
logo), AIM and Design, AIM, AIM Funds, AIM Funds and Design, AIM LINK, AIM
Institutional Funds, aimfunds.com, La Familia AIM de Fondos, La Familia AIM de
Fondos and Design, Invierta con DISCIPLINA and Invest with DISCIPLINE are
registered service marks and AIM Bank Connection, AIM Investor and AIM Internet
Connect 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> 21
------------------------------------
AIM ADVISOR INTERNATIONAL VALUE FUND
------------------------------------
INVESTMENT OBJECTIVE AND STRATEGIES
--------------------------------------------------------------------------------
The fund's investment objective is to achieve high total return. The investment
objective of the fund may be changed by the Board of Trustees without
shareholder approval.
The fund seeks to meet its objective by investing at least 65% of its total
assets in a diversified portfolio of foreign equity securities. The fund will
normally invest in the securities of companies located in at least four
different countries. The fund may invest up to 20% of its total assets in equity
securities of companies located in developing countries, i.e., those that are in
the initial stages of their industrial cycle. The fund may also invest up to 35%
of its total assets in investment-grade debt securities, or securities deemed by
the portfolio managers to be of comparable quality. Any percentage limitations
with respect to assets of the fund are applied at the time of purchase.
The portfolio managers compare the price of a stock to various factors
including shareholders' equity per share, historic return on equity, and the
company's ability to reinvest earnings for future growth or to pay earnings in
the form of dividends. They focus on securities that they believe have the best
relative value and favorable prospects for continued growth. The fund's
portfolio managers consider whether to sell a particular security when any of
those factors materially changes.
In anticipation of or in response to adverse market conditions, for cash
management purposes, or for defensive purposes, the 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. In anticipation
of or in response to adverse market conditions, the fund may temporarily also
invest all or a portion of its assets in the securities of U.S. issuers. 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 and that the income you may receive from the fund may vary. 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. Debt securities are
particularly vulnerable to credit risk and interest rate fluctuations. Interest
rate increases can cause the price of a debt security to decrease. The longer a
debt security's duration, the more sensitive it is to this risk. The issuer of a
debt security may default or otherwise be unable to honor a financial
obligation.
The prices of foreign securities may be further affected by other factors,
including
- Currency exchange rates--The dollar value of the fund's foreign investments
will be affected by changes in the exchange rates between the dollar and the
currencies in which those investments are traded.
- Political and economic conditions--The value of the fund's foreign investments
may be adversely affected by political and social instability in their home
countries and by changes in economic or taxation policies in those countries.
- Regulations--Foreign companies generally are subject to less stringent
regulations, including financial and accounting controls, than are U.S.
companies. As a result, there generally is less publicly available information
about foreign companies than about U.S. companies.
- Markets--The securities markets of other countries are smaller than U.S.
securities markets. As a result, many foreign securities may be less liquid
and more volatile than U.S. securities.
An investment in the fund is not a deposit of a bank and is not insured or
guaranteed by the Federal Deposit Insurance Corporation or any other government
agency.
1
<PAGE> 22
------------------------------------
AIM ADVISOR INTERNATIONAL VALUE FUND
------------------------------------
PERFORMANCE INFORMATION
--------------------------------------------------------------------------------
The bar chart and table shown below provide an indication of the risks of
investing in the fund. The fund's past performance is not necessarily an
indication of its future performance.
ANNUAL TOTAL RETURNS
-------------------------------------------------------------------------------
The following bar chart shows changes in the performance of the fund's Class C
shares from year to year. The bar chart does not reflect sales loads. If it did,
the annual total returns shown would be lower.
[GRAPH]
<TABLE>
<CAPTION>
ANNUAL
YEAR ENDED TOTAL
DECEMBER 31 RETURNS
----------- -------
<S> <C>
1996 ................................. 20.99%
1997 ................................. 12.98%
1998 ................................. 10.38%
1999 ................................. 21.64%
</TABLE>
The Class C shares' year-to-date total return as of June 30, 2000 was -3.08%.
During the periods shown in the bar chart, the highest quarterly return was
18.48% (quarter ended December 31, 1999) and the lowest quarterly return was
-16.70% (quarter ended September 30, 1998).
PERFORMANCE TABLE
The following performance table compares the fund's performance to that of a
broad-based securities market index. The fund's performance reflects payment of
sales loads.
<TABLE>
<CAPTION>
AVERAGE ANNUAL TOTAL RETURNS
-------------------------------------------------------------------------------
(for the periods ended SINCE INCEPTION
December 31, 1999) 1 YEAR INCEPTION DATE
-------------------------------------------------------------------------------
<S> <C> <C> <C>
Class A 15.83% 13.60% 12/31/96
Class B 16.70% 10.34% 03/03/98
Class C 20.64% 16.53% 05/01/95
MSCI EAFE(1) 26.96% 12.47%(2) 04/30/95(2)
-------------------------------------------------------------------------------
</TABLE>
(1) The Morgan Stanley Capital International Europe, Australasia and Far East
Index measures performance of global stock markets in 20 developed
countries.
(2) The average annual total return given is since the date closest to the
inception date of the class with the longest performance history.
2
<PAGE> 23
------------------------------------
AIM ADVISOR INTERNATIONAL VALUE FUND
------------------------------------
FEE TABLE AND EXPENSE EXAMPLE
--------------------------------------------------------------------------------
FEE TABLE
This table describes the fees and expenses that you may pay if you buy and hold
shares of the fund:
<TABLE>
<CAPTION>
SHAREHOLDER FEES
-----------------------------------------------------------
(fees paid directly from
your investment) CLASS A CLASS B CLASS C
-----------------------------------------------------------
<S> <C> <C> <C>
Maximum Sales Charge (Load)
Imposed on Purchases
(as a percentage of
offering price) 5.50% None None
Maximum Deferred
Sales Charge (Load)
(as a percentage of
original purchase
price or redemption
proceeds, whichever is less) None(1) 5.00% 1.00%
-----------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
ANNUAL FUND OPERATING EXPENSES
-------------------------------------------------------
(expenses that are deducted
from fund assets) CLASS A CLASS B CLASS C
-------------------------------------------------------
<S> <C> <C> <C>
Management Fees 1.00% 1.00% 1.00%
Distribution and/or
Service (12b-1) Fees 0.35 1.00 1.00
Other(2) 0.26 0.27 0.27
Total Annual Fund
Operating Expenses 1.61 2.27 2.27
Fee Waiver(3) 0.10 0.00 0.00
Net Expenses 1.51% 2.27% 2.27%
-------------------------------------------------------
</TABLE>
(1) If you buy $1,000,000 or more of Class A shares and redeem these shares
within 18 months from the date of purchase, you may pay a 1% contingent
deferred sales charge (CDSC) at the time of redemption.
(2) Other expenses have been restated to reflect current agreements.
(3) The distributor has contractually agreed to limit the Class A shares' Rule
12b-1 distribution plan payments to 0.25%.
As a result of 12b-1 fees, long-term shareholders in the fund may pay more than
the maximum permitted initial sales charge.
EXPENSE EXAMPLE
This example is intended to help you compare the costs of investing in different
classes of the fund with the cost of investing in other mutual funds.
The example assumes that you invest $10,000 in the fund for the time periods
indicated and then redeem all of your shares at the end of those periods. The
example also assumes that your investment has a 5% return each year and that the
fund's gross operating expenses remain the same. To the extent fees are waived,
the expenses will be lower. Although your actual returns and costs may be higher
or lower, based on these assumptions your costs would be:
<TABLE>
<CAPTION>
1 YEAR 3 YEARS 5 YEARS 10 YEARS
----------------------------------------------
<S> <C> <C> <C> <C>
Class A $705 $1,030 $1,378 $2,356
Class B 730 1,009 1,415 2,440
Class C 330 709 1,215 2,605
----------------------------------------------
</TABLE>
You would pay the following expenses if you did not redeem your shares:
<TABLE>
<CAPTION>
1 YEAR 3 YEARS 5 YEARS 10 YEARS
----------------------------------------------
<S> <C> <C> <C> <C>
Class A $705 $1,030 $1,378 $2,356
Class B 230 709 1,215 2,440
Class C 230 709 1,215 2,605
----------------------------------------------
</TABLE>
3
<PAGE> 24
------------------------------------
AIM ADVISOR INTERNATIONAL VALUE FUND
------------------------------------
FUND MANAGEMENT
--------------------------------------------------------------------------------
THE ADVISORS
A I M Advisors, Inc. (the advisor) serves as the fund's investment advisor and
manages the investment operations of the fund and has agreed to perform or
arrange for the performance of the fund's day-to-day management. The advisor is
located at 11 Greenway Plaza, Suite 100, Houston, Texas 77046-1173. INVESCO
Global Asset Management (N.A.), Inc. (the subadvisor), the fund's subadvisor, is
located at 1315 Peachtree Street, N.E., Atlanta, Georgia 30309. The subadvisor
is responsible for the fund's day-to-day management, including the fund's
investment decisions and the execution of securities transactions with respect
to the fund.
The advisor has acted as an investment advisor since its organization in 1976
and the subadvisor has acted as an investment advisor since 1997. Today, the
advisor, 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 December 31, 1999, the advisor received
compensation of 1.00% 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 are
- W. Lindsay Davidson, Senior Portfolio Manager, who has been responsible for
the fund since 1995 and has been associated with the subadvisor and/or its
affiliates since 1984.
- Michele T. Garren, C.F.A., Portfolio Manager, who has been responsible for the
fund and has been associated with the subadvisor and/or its affiliates since
1997. From 1993 to 1996 she was a Portfolio Manager with AIG Global Investment
Corp.
- Erik B. Granade, C.F.A., Portfolio Manager, who has been responsible for the
fund since 1997 and has been associated with the subadvisor and/or its
affiliates since 1996. From 1994 to 1996 he was a Portfolio Manager at Cashman
Farrell & Associates.
OTHER INFORMATION
--------------------------------------------------------------------------------
SALES CHARGES
Purchases of Class A shares of AIM Advisor International Value Fund are subject
to the maximum 5.50% initial sales charge as listed under the heading "CATEGORY
I Initial Sales Charges" in the "Shareholder Information--Choosing a Share
Class" section of this prospectus. Purchases of Class B and Class C shares are
subject to the contingent deferred sales charges listed in that section.
DIVIDENDS AND DISTRIBUTIONS
The fund expects that its distributions, if any, 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.
4
<PAGE> 25
------------------------------------
AIM ADVISOR INTERNATIONAL VALUE FUND
------------------------------------
FINANCIAL HIGHLIGHTS
--------------------------------------------------------------------------------
The financial highlights table is intended to help you understand the fund's
financial performance. Certain information reflects financial results for a
single fund share.
The total returns in the table represent the rate that an investor would have
earned (or lost) on an investment in the fund (assuming reinvestment of all
dividends and distributions).
The information for the fiscal years or periods ended since December 31, 1998,
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. Information for prior years was audited by other public accountants.
<TABLE>
<CAPTION>
CLASS A(a)
------------------------------------------------------------
YEAR ENDED DECEMBER 31,
------------------------------------------------------------
1999 1998 1997(b)
-----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Net asset value, beginning of period $ 16.57 $ 14.99 $13.42
Income from investment operations:
Net investment income 0.13 0.09 0.17
Net gains on securities (both realized and
unrealized) 3.57 1.59 1.69
Total from investment operations 3.70 1.68 1.86
Less distributions:
Dividends from net investment income (0.28) (0.10) (0.07)
Distributions from net realized gains (0.07) -- (0.22)
Total distributions (0.35) (0.10) (0.29)
Net asset value, end of period $ 19.92 $ 16.57 $14.99
Total return(c) 22.54% 11.20% 13.84%
-----------------------------------------------------------------------------------------------------------------
Ratios/supplemental data:
-----------------------------------------------------------------------------------------------------------------
Net assets, end of period (000s omitted) $31,412 $28,281 $8,444
Ratio of expenses to average net assets(d) 1.51%(e) 1.57% 1.71%
Ratio of net investment income to average net
assets(f) 0.71%(e) 0.84% 0.83%
Portfolio turnover rate 24% 9% 9%
-----------------------------------------------------------------------------------------------------------------
</TABLE>
(a) Per share information and shares have been restated to reflect a 4 for 1
stock split, effected in the form of a 300% stock dividend, on November 7,
1997.
(b) Calculated using average shares outstanding.
(c) Does not deduct sales charges.
(d) After fee waivers and/or expense reimbursements. Ratios of expenses to
average net assets prior to fee waivers and/or expense reimbursements were
1.72%, 1.81% and 1.81% for 1999-1997.
(e) Ratios are based on average net asset of $27,054,104.
(f) After fee waivers and/or expense reimbursements. Ratios of net investment
income to average net assets prior to fee waivers and/or expense
reimbursements were 0.50%, 0.60% and 0.73% for 1999-1997.
5
<PAGE> 26
------------------------------------
AIM ADVISOR INTERNATIONAL VALUE FUND
------------------------------------
FINANCIAL HIGHLIGHTS (CONTINUED)
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
CLASS B
---------------------------------------
YEAR ENDED MARCH 3,
DECEMBER 31, THROUGH DECEMBER 31,
1999 1998
-----------------------------------------------------------------------------------------------------
<S> <C> <C>
Net asset value, beginning of period $16.48 $16.21
Income from investment operations:
Net investment income (loss) (0.01) --
Net gains on securities (both realized and unrealized) 3.56 0.27
Total from investment operations 3.55 0.27
Less distributions:
Dividends from net investment income (0.15) --
Distributions from net realized gains (0.07) --
Total distributions (0.22) --
Net asset value, end of period $19.81 $16.48
Total return(a) 21.70% 1.67%
-----------------------------------------------------------------------------------------------------
Ratios/supplemental data:
-----------------------------------------------------------------------------------------------------
Net assets, end of period (000s omitted) $5,642 $4,289
Ratio of expenses to average net assets(b) 2.27%(c) 2.32%(d)
Ratio of net investment income (loss) to average net
assets(e) (0.05)%(c) 0.09%(d)
Portfolio turnover rate 24% 9%
-----------------------------------------------------------------------------------------------------
</TABLE>
(a) Does not deduct contingent deferred sales charges and is not annualized for
periods less than one year.
(b) After fee waivers and/or expense reimbursements. Ratios of expenses to
average net assets prior to fee waivers and/or expense reimbursements were
2.38% and 2.46% (annualized) for 1999-1998.
(c) Ratios are based on average net assets of $4,255,071.
(d) Annualized.
(e) After fee waivers and/or expense reimbursements. Ratios of net investment
income (loss) to average net assets prior to fee waivers and/or expense
reimbursements were (0.16)% and (0.05%) (annualized) for 1999-1998.
<TABLE>
<CAPTION>
CLASS C(a)
--------------------------------------------------------------
MAY 1,
YEAR ENDED DECEMBER 31, THROUGH
--------------------------------------------- DECEMBER 31,
1999(b) 1998 1997(b) 1996 1995
------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of period $ 16.48 $ 14.93 $ 13.42 $ 11.13 $10.00
Income from investment operations:
Net investment income (loss) (0.01) -- 0.01 (0.01) --
Net gains on securities (both realized and
unrealized) 3.55 1.55 1.73 2.34 1.13
Total from investment operations 3.54 1.55 1.74 2.33 1.13
Less distributions:
Dividends from net investment income (0.15) -- (0.01) -- --
Distributions from net realized gains (0.07) -- (0.22) (0.04) --
Total distributions (0.22) -- (0.23) (0.04) --
Net asset value, end of period $ 19.80 $ 16.48 $ 14.93 $ 13.42 $11.13
Total return(c) 21.64% 10.38% 12.98% 20.99% 11.28%
------------------------------------------------------------------------------------------------------------
Ratios/supplemental data:
------------------------------------------------------------------------------------------------------------
Net assets, end of period (000s omitted) $108,821 $105,083 $93,162 $51,916 $9,467
Ratio of expenses to average net assets(d) 2.27%(e) 2.32% 2.46% 2.50% 2.50%(f)
Ratio of net investment income (loss) to
average net assets(g) (0.05)%(e) 0.09% 0.08% (0.16)% 0.03%(f)
Portfolio turnover rate 24% 9% 9% 5% 2%
------------------------------------------------------------------------------------------------------------
</TABLE>
(a) Per share information and shares have been restated to reflect a 4 for 1
stock split, effected in the form of a 300% stock dividend, on November 7,
1997.
(b) Calculated using average shares outstanding.
(c) Does not deduct contingent deferred sales charges and is not annualized for
periods less than one year.
(d) After fee waivers and/or expense reimbursements. Ratio of expenses to
average net assets prior to fee waivers and/or expense reimbursements were
2.38% and 2.46% for 1999-1998.
(e) Ratios are based on average net assets of $99,393,505.
(f) Annualized.
(g) After fee waivers and/or expense reimbursements. Ratios of net investment
income (loss) to average net assets prior to fee waivers and/or expense
reimbursements were (0.16)% and (0.05)% for 1999-1998.
6
<PAGE> 27
-------------
THE AIM FUNDS
-------------
SHAREHOLDER INFORMATION
--------------------------------------------------------------------------------
In addition to the fund, A I M Advisors, Inc. serves as investment advisor to
many other mutual funds (the AIM Funds). The following information is about all
the AIM Funds.
CHOOSING A SHARE CLASS
Many of the AIM Funds have multiple classes of shares, each class representing
an interest in the same portfolio of investments. When choosing a share class,
you should consider the factors below:
<TABLE>
<CAPTION>
CLASS A CLASS B CLASS C
---------------------------------------------------------------------------------------------------------
<S> <C> <C>
- Initial sales charge - No initial sales charge - No initial sales charge
- Reduced or waived initial sales - Contingent deferred sales - Contingent deferred sales
charge for certain purchases charge on redemptions within charge on redemptions within
six years one year
- Lower distribution and service - 12b-1 fee of 1.00% - 12b-1 fee of 1.00%
(12b-1) fee than Class B or
Class C shares (See "Fee Table
and Expense Example")
- Converts to Class A shares - Does not convert to Class A
eight years after the end of shares
the month in which shares
were purchased along with a
pro rata portion of its
reinvested dividends and
distributions(1)
- Generally more appropriate for - Purchase orders limited to - Generally more appropriate
long-term investors amounts less than $250,000 for short-term investors
</TABLE>
(1) AIM Money Market Fund: Class B shares convert to AIM Cash Reserve
Shares.
AIM Global Trends Fund: If you held Class B shares on May 29, 1998 and
continue to hold them, those shares will convert to Class A shares of
that fund seven years after the end of the month in which shares were
purchased. If you exchange those shares for Class B shares of another
AIM Fund, the shares into which you exchanged will not convert to
Class A shares until eight years after the end of the month in which
you purchased your original shares.
--------------------------------------------------------------------------------
DISTRIBUTION AND SERVICE (12B-1) FEES
Each AIM Fund (except AIM Tax-Free Intermediate Fund) has adopted 12b-1 plans
that allow the AIM Fund to pay distribution fees to A I M Distributors, Inc.
(the distributor) for the sale and distribution of its shares and fees for
services provided to shareholders, all or a substantial portion of which are
paid to the dealer of record. Because the AIM Fund pays these fees out of its
assets on an ongoing basis, over time these fees will increase the cost of your
investment and may cost you more than paying other types of sales charges.
SALES CHARGES
Generally, you will not pay a sales charge on purchases or redemptions of Class
A shares of AIM Tax-Exempt Cash Fund and AIM Cash Reserve Shares of AIM Money
Market Fund. You may be charged a contingent deferred sales charge if you redeem
AIM Cash Reserve Shares of AIM Money Market Fund acquired through certain
exchanges. Sales charges on all other AIM Funds and classes of those Funds are
detailed below. As used below, the term "offering price" with respect to all
categories of Class A shares includes the initial sales charge.
INITIAL SALES CHARGES
The AIM Funds are grouped into three categories with respect to initial sales
charges. The "Other Information" section of your prospectus will tell you in
what category your particular AIM Fund is classified.
<TABLE>
<CAPTION>
CATEGORY I INITIAL SALES CHARGES
------------------------------------------------------------
INVESTOR'S
SALES CHARGE
----------------------------
AMOUNT OF INVESTMENT AS A % OF AS A % OF
IN SINGLE TRANSACTION OFFERING PRICE INVESTMENT
-------------------------------------------------------------
<S> <C> <C>
Less than $ 25,000 5.50% 5.82%
$ 25,000 but less than $ 50,000 5.25 5.54
$ 50,000 but less than $ 100,000 4.75 4.99
$100,000 but less than $ 250,000 3.75 3.90
$250,000 but less than $ 500,000 3.00 3.09
$500,000 but less than $1,000,000 2.00 2.04
-------------------------------------------------------------
</TABLE>
A-1 MCF--06/00
<PAGE> 28
-------------
THE AIM FUNDS
-------------
<TABLE>
<CAPTION>
CATEGORY II INITIAL SALES CHARGES
------------------------------------------------------------
INVESTOR'S
SALES CHARGE
----------------------------
AMOUNT OF INVESTMENT AS A % OF AS A % OF
IN SINGLE TRANSACTION OFFERING PRICE INVESTMENT
-------------------------------------------------------------
<S> <C> <C>
Less than $ 50,000 4.75% 4.99%
$ 50,000 but less than $ 100,000 4.00 4.17
$100,000 but less than $ 250,000 3.75 3.90
$250,000 but less than $ 500,000 2.50 2.56
$500,000 but less than $1,000,000 2.00 2.04
-------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
CATEGORY III INITIAL SALES CHARGES
-------------------------------------------------------------
INVESTOR'S
SALES CHARGE
----------------------------
AMOUNT OF INVESTMENT AS A % OF AS A % OF
IN SINGLE TRANSACTION OFFERING PRICE INVESTMENT
-------------------------------------------------------------
<S> <C> <C>
Less than $ 100,000 1.00% 1.01%
$100,000 but less than $ 250,000 0.75 0.76
$250,000 but less than $1,000,000 0.50 0.50
-------------------------------------------------------------
</TABLE>
CONTINGENT DEFERRED SALES CHARGES FOR CLASS A SHARES
You can purchase $1,000,000 or more of Class A shares at net asset value.
However, if you purchase shares of that amount in Categories I or II, they will
be subject to a contingent deferred sales charge (CDSC) of 1% if you redeem them
prior to 18 months after the date of purchase. The distributor may pay a dealer
concession and/or a service fee for purchases of $1,000,000 or more.
CONTINGENT DEFERRED SALES CHARGES FOR
CLASS B AND CLASS C SHARES
You can purchase Class B and Class C shares at their net asset value per share.
However, when you redeem them, they are subject to a CDSC in the following
percentages:
<TABLE>
<CAPTION>
YEAR SINCE
PURCHASE MADE CLASS B CLASS C
----------------------------------------------------------
<S> <C> <C>
First 5% 1%
Second 4 None
Third 3 None
Fourth 3 None
Fifth 2 None
Sixth 1 None
Seventh and following None None
----------------------------------------------------------
</TABLE>
COMPUTING A CDSC
The CDSC on redemptions of shares is computed based on the lower of their
original purchase price or current market value, net of reinvested dividends and
capital gains distributions. In determining whether to charge a CDSC, we will
assume that you have redeemed shares on which there is no CDSC first and, then,
shares in the order of purchase.
REDUCED SALES CHARGES
AND SALES CHARGE EXCEPTIONS
You may qualify for reduced sales charges or sales charge exceptions. To qualify
for these reductions or exceptions, you or your financial consultant must
provide sufficient information at the time of purchase to verify that your
purchase qualifies for such treatment.
REDUCED SALES CHARGES
You may be eligible to buy Class A shares at reduced initial sales charge rates
under Rights of Accumulation or Letters of Intent under certain circumstances.
Rights of Accumulation
You may combine your new purchases of Class A shares with Class A shares
currently owned for the purpose of qualifying for the lower initial sales charge
rates that apply to larger purchases. The applicable initial sales charge for
the new purchase is based on the total of your current purchase and the current
value of all Class A shares you own.
Letters of Intent
Under a Letter of Intent (LOI), you commit to purchase a specified dollar amount
of Class A shares of AIM Funds during a 13-month period. The amount you agree to
purchase determines the initial sales charge you pay. If the full face amount of
the LOI is not invested by the end of the 13-month period, your account will be
adjusted to the higher initial sales charge level for the amount actually
invested.
INITIAL SALES CHARGE EXCEPTIONS
You will not pay initial sales charges
- on shares purchased by reinvesting dividends and distributions;
- when exchanging shares among certain AIM Funds;
- when using the reinstatement privilege; and
- when a merger, consolidation, or acquisition of assets of an AIM Fund occurs.
CONTINGENT DEFERRED SALES CHARGE (CDSC) EXCEPTIONS
You will not pay a CDSC
- if you redeem Class B shares you held for more than six years;
- if you redeem Class C shares you held for more than one year;
- if you redeem shares acquired through reinvestment of dividends and
distributions; and
- on increases in the net asset value of your shares.
There may be other situations when you may be able to purchase or redeem shares
at reduced or without sales charges. Consult the fund's Statement of Additional
Information for details.
MCF--06/00 A-2
<PAGE> 29
--------------
THE AIM FUNDS
--------------
PURCHASING SHARES
MINIMUM INVESTMENTS PER AIM FUND ACCOUNT
The minimum investments for AIM Fund accounts (except for investments in AIM Mid
Cap Opportunities Fund and AIM Small Cap Opportunities Fund) are as follows:
<TABLE>
<CAPTION>
INITIAL ADDITIONAL
TYPE OF ACCOUNT INVESTMENTS INVESTMENTS
-----------------------------------------------------------------------------------------------------------
<S> <C> <C>
Savings Plans (money-purchase/profit sharing $ 0 ($25 per AIM Fund investment for $25
plans, 401(k) plans, Simplified Employee Pension salary deferrals from Savings Plans)
(SEP) accounts, Salary Reduction (SARSEP)
accounts, Savings Incentive Match Plans for
Employee IRA (Simple IRA) accounts, 403(b) or
457 plans)
Automatic Investment Plans 50 50
IRA, Education IRA or Roth IRA 250 50
All other accounts 500 50
----------------------------------------------------------------------------------------------------------
</TABLE>
HOW TO PURCHASE SHARES
You may purchase shares using one of the options below.
<TABLE>
<CAPTION>
PURCHASE OPTIONS
---------------------------------------------------------------------------------------------------------
OPENING AN ACCOUNT ADDING TO AN ACCOUNT
---------------------------------------------------------------------------------------------------------
<S> <C> <C>
Through a Financial Consultant Contact your financial consultant. Same
By Mail Mail completed account application Mail your check and the remittance
and purchase payment to the slip from your confirmation
transfer agent, statement to the transfer agent.
A I M Fund Services, Inc.,
P.O. Box 4739,
Houston, TX 77210-4739.
By Wire Mail completed account application Call the transfer agent to receive
to the transfer agent. Call the a reference number. Then, use the
transfer agent at (800) 959-4246 to wire instructions at left.
receive a reference number. Then,
use the following wire
instructions:
Beneficiary Bank ABA/Routing #:
113000609
Beneficiary Account Number:
00100366807
Beneficiary Account Name: A I M
Fund Services, Inc.
RFB: Fund Name, Reference #
OBI: Your Name, Account #
By AIM Bank Connection(SM) Open your account using one of the Mail completed AIM Bank Connection
methods described above. form to the transfer agent. Once
the transfer agent has received the
form, call the transfer agent to
place your purchase order.
By AIM Internet Connect(SM) Open your account using one of the Select the AIM Internet Connect
methods described above. option on your completed account
application or complete an AIM
Internet Connect Authorization
Form. Mail the application or form
to the transfer agent. Once your
request for this option has been
processed (which may take up to 10
days), you may place your purchase
order at www.aimfunds.com. The
maximum purchase amount per
transaction is $100,000. You may
not purchase shares in AIM
prototype retirement accounts on
the internet.
----------------------------------------------------------------------------------------------------------
</TABLE>
A-3 MCF--06/00
<PAGE> 30
-------------
THE AIM FUNDS
-------------
SPECIAL PLANS
AUTOMATIC INVESTMENT PLAN
You can arrange for periodic investments in any of the AIM Funds by authorizing
the AIM Fund to withdraw the amount of your investment from your bank account on
a day or dates you specify and in an amount of at least $50. You may stop the
Automatic Investment Plan at any time by giving the transfer agent notice ten
days prior to your next scheduled withdrawal.
DOLLAR COST AVERAGING
Dollar Cost Averaging allows you to make automatic monthly or quarterly
exchanges, if permitted, from one AIM Fund account to one or more other AIM Fund
accounts with the identical registration. The account from which exchanges are
to be made must have a minimum balance of $5,000 before you can use this option.
Exchanges will occur on (or about) the 10th or 25th day of the month, whichever
you specify, in the amount you specify. The minimum amount you can exchange to
another AIM Fund is $50.
AUTOMATIC DIVIDEND INVESTMENT
All of your dividends and distributions may be paid in cash or invested in any
AIM Fund at net asset value. Unless you specify otherwise, your dividends and
distributions will automatically be reinvested in the same AIM Fund. You may
invest your dividends and distributions (1) into another AIM Fund in the same
class of shares; or (2) from Class A shares into AIM Cash Reserve Shares of AIM
Money Market Fund, or vice versa.
You must comply with the following requirements to be eligible to invest your
dividends and distributions in shares of another AIM Fund:
(1) Your account balance (a) in the AIM Fund paying the dividend must be at
least $5,000; or (b) in the AIM Fund receiving the dividend must be at least
$500;
(2) Both accounts must have identical registration information; and
(3) You must have completed an authorization form to reinvest dividends into
another AIM Fund.
PORTFOLIO REBALANCING PROGRAM
If you have at least $5,000 in your account, you may participate in the
Portfolio Rebalancing Program. Under this Program, you can designate how the
total value of your AIM Fund holdings should be rebalanced, on a percentage
basis, between two and ten of your AIM Funds on a quarterly, semiannual or
annual basis. Your portfolio will be rebalanced through the exchange of shares
in one or more of your AIM Funds for shares of the same class of one or more
other AIM Funds in your portfolio. If you wish to participate in the Program,
make changes or cancel the Program, the transfer agent must receive your request
to participate, changes, or cancellation in good order at least five business
days prior to the next rebalancing date, which is normally the 28th day of the
last month of the period you choose. You may realize taxable gains from these
exchanges. We may modify, suspend or terminate the Program at any time on 60
days' prior written notice.
RETIREMENT PLANS
Shares of most of the AIM Funds can be purchased through tax-sheltered
retirement plans made available to corporations, individuals and employees of
non-profit organizations and public schools. A plan document must be adopted
to establish a retirement plan. You may use AIM Funds-sponsored retirement
plans, which include IRAs, Education IRAs, Roth IRAs, 403(b) plans, 401(k)
plans, SIMPLE IRA plans, SEP/SARSEP plans and Money Purchase/Profit Sharing
plans, or another sponsor's retirement plan. The plan custodian of the
AIM Funds-sponsored retirement plan assesses an annual maintenance fee of $10.
Contact your financial consultant for details.
REDEEMING SHARES
REDEMPTION FEES
Generally, we will not charge you any fees to redeem your shares. However, if
you acquired Class A shares of AIM Developing Markets Fund in connection with
the reorganization of AIM Eastern Europe Fund, you will be charged a redemption
fee of 2% of the net asset value of those shares, which will be paid to AIM
Developing Markets Fund, if you redeem your shares within the first year after
the reorganization. Your broker or financial consultant may charge service fees
for handling redemption transactions. Your shares also may be subject to a
contingent deferred sales charge (CDSC).
REDEMPTION OF AIM CASH RESERVE SHARES OF
AIM MONEY MARKET FUND ACQUIRED BY EXCHANGE
If you redeem AIM Cash Reserve Shares acquired by exchange from Class A shares
subject to a CDSC within 18 months of the purchase of the Class A shares, you
will be charged a CDSC.
REDEMPTION OF CLASS B SHARES OR CLASS C
SHARES ACQUIRED BY EXCHANGE FROM AIM CASH
RESERVE SHARES OF AIM MONEY MARKET FUND
We will begin the holding period for purposes of calculating the CDSC on Class B
shares or Class C shares acquired by exchange from AIM Cash Reserve Shares of
AIM Money Market Fund at the time of the exchange into Class B shares or Class C
shares.
REDEMPTION OF CLASS B SHARES ACQUIRED BY
EXCHANGE FROM AIM FLOATING RATE FUND
If you redeem Class B shares you acquired by exchange via a tender offer by AIM
Floating Rate Fund, the early withdrawal charge applicable to shares of AIM
Floating Rate Fund will be applied instead of the CDSC normally applicable to
Class B shares.
MCF--06/00 A-4
<PAGE> 31
-------------
THE AIM FUNDS
-------------
HOW TO REDEEM SHARES
--------------------------------------------------------------------------------
<TABLE>
<S> <C>
Through a Financial Contact your financial consultant.
Consultant
By Mail Send a written request to the transfer agent. Requests must
include (1) original signatures of all registered owners;
(2) the name of the AIM Fund and your account number; (3) if
the transfer agent does not hold your shares, endorsed share
certificates or share certificates accompanied by an
executed stock power; and (4) signature guarantees, if
necessary (see below). The transfer agent may require that
you provide additional information, such as corporate
resolutions or powers of attorney, if applicable. If you are
redeeming from an IRA account, you must include a statement
of whether or not you are at least 59 1/2 years old and
whether you wish to have federal income tax withheld from
your proceeds. The transfer agent may require certain other
information before you can redeem from an employer-sponsored
retirement plan. Contact your employer for details.
By Telephone Call the transfer agent. You will be allowed to redeem by
telephone if (1) the proceeds are to be mailed to the
address on record (if there has been no change communicated
to us within the last 30 days) or transferred electronically
to a pre-authorized checking account; (2) you do not hold
physical share certificates; (3) you can provide proper
identification information; (4) the proceeds of the
redemption do not exceed $50,000; and (5) you have not
previously declined the telephone redemption privilege.
Certain accounts, including retirement accounts and 403(b)
plans, may not be redeemed by telephone. The transfer agent
must receive your call during the hours of the customary
trading session of the New York Stock Exchange (NYSE) in
order to effect the redemption at that day's closing price.
By AIM Internet
Connect Place your redemption request at www.aimfunds.com. You will
be allowed to redeem by internet if (1) you do not hold
physical share certificates; (2) you can provide proper
identification information; (3) the proceeds of the
redemption do not exceed $50,000; and (4) you have
established the internet trading option. AIM prototype
retirement accounts may not be redeemed on the internet.
The transfer agent must confirm your transaction during the
hours of the customary trading session of the NYSE in order
to effect the redemption at that day's closing price.
</TABLE>
-------------------------------------------------------------------------------
TIMING AND METHOD OF PAYMENT
We normally will send out checks within one business day, and in any event no
more than seven days, after we accept your request to redeem. If you redeem
shares recently purchased by check, you will be required to wait up to ten
business days before we will send your redemption proceeds. This delay is
necessary to ensure that the purchase check has cleared.
REDEMPTION BY MAIL
If you mail us a request in good order to redeem your shares, we will mail you a
check in the amount of the redemption proceeds to the address on record with us.
If your request is not in good order, you may have to provide us with additional
documentation in order to redeem your shares.
REDEMPTION BY TELEPHONE
If you redeem by telephone, we will mail you a check in the amount of the
redemption proceeds to your address of record (if there has been no change
communicated to the transfer agent within the previous 30 days) or transmit them
electronically to your pre-authorized bank account. We use reasonable procedures
to confirm that instructions communicated by telephone are genuine and are not
liable for telephone instructions that are reasonably believed to be genuine.
REDEMPTION BY INTERNET
If you redeem by internet, we will transmit your redemption proceeds
electronically to your pre-authorized bank account. We use reasonable procedures
to confirm that instructions communicated by internet are genuine and are not
liable for internet instructions that are reasonably believed to be genuine.
PAYMENT FOR SYSTEMATIC WITHDRAWALS
You may arrange for regular monthly or quarterly withdrawals from your account
of at least $50. You also may make annual withdrawals if you own Class A shares.
We will redeem enough shares from your account to cover the amount withdrawn.
You must have an account balance of at least $5,000 to establish a Systematic
Withdrawal Plan. You can stop this plan at any time by giving ten days prior
notice to the transfer agent.
EXPEDITED REDEMPTIONS
(AIM Cash Reserve Shares of AIM Money Market Fund only)
If we receive your redemption order before 11:30 a.m. Eastern Time, we will try
to transmit payment of redemption proceeds on that same day. If we receive your
redemption order after 11:30 a.m. Eastern Time and before the close of the
customary trading session of the NYSE, we generally will transmit payment on the
next business day.
A-5 MCF--06/00
<PAGE> 32
--------------
THE AIM FUNDS
--------------
REDEMPTIONS BY CHECK
(Class A shares of AIM Tax-Exempt Cash Fund and AIM Cash Reserve Shares of AIM
Money Market Fund only)
You may redeem shares of these AIM Funds by writing checks in amounts of $250 or
more if you have completed an authorization form. Redemption by check is not
available for retirement accounts.
SIGNATURE GUARANTEES
We require a signature guarantee when you redeem by mail and
(1) the amount is greater than $50,000;
(2) you request that payment be made to someone other than the name registered
on the account;
(3) you request that payment be sent somewhere other than the bank of record on
the account; or
(4) you request that payment be sent to a new address or an address that changed
in the last 30 days.
The transfer agent will accept a guarantee of your signature by a number of
financial institutions. Call the transfer agent for additional information. Some
institutions have transaction amount maximums for these guarantees. Please check
with the guarantor institution.
REINSTATEMENT PRIVILEGE (Class A shares only)
You may, within 90 days after you sell Class A shares (except Class A shares of
AIM Tax-Exempt Cash Fund), reinvest all or part of your redemption proceeds in
Class A shares of any AIM Fund at net asset value in an identically registered
account. If you sold Class A shares of AIM Limited Maturity Treasury Fund or AIM
Tax-Free Intermediate Fund, you will incur an initial sales charge reflecting
the difference between the initial sales charges on those Funds and the ones in
which you will be investing. In addition, if you paid a contingent deferred
sales charge (CDSC) on any reinstated amount, you will not be subject to a CDSC
if you later redeem that amount. You must notify the transfer agent in writing
at the time you reinstate that you are exercising your reinstatement privilege.
You may exercise this privilege only once per year.
REDEMPTIONS BY THE AIM FUNDS
If your account has been open at least one year, you have not made an additional
purchase in the account during the past six calendar months, and the value of
your account falls below $500 for three consecutive months due to redemptions or
exchanges (excluding retirement accounts), the AIM Funds have the right to
redeem the account after giving you 60 days' prior written notice. You may avoid
having your account redeemed during the notice period by bringing the account
value up to $500 or by utilizing the Automatic Investment Plan.
If an AIM Fund determines that you have not provided a correct Social Security
or other tax ID number on your account application, the AIM Fund may, at its
discretion, redeem the account and distribute the proceeds to you.
EXCHANGING SHARES
You may, under certain circumstances, exchange shares in one AIM Fund for those
of another AIM Fund. Before requesting an exchange, review the prospectus of the
AIM Fund you wish to acquire. Exchange privileges also apply to holders of the
Connecticut General Guaranteed Account, established for tax-qualified group
annuities, for contracts purchased on or before June 30, 1992.
PERMITTED EXCHANGES
Except as otherwise stated below, you may exchange your shares for shares of the
same class of another AIM Fund. You may exchange AIM Cash Reserve Shares of AIM
Money Market Fund for Class A shares of another AIM Fund, or vice versa. You
also may exchange AIM Cash Reserve Shares of AIM Money Market Fund for Class B
shares or Class C shares of another AIM Fund, but only if the AIM Cash Reserve
Shares were purchased directly and not acquired by exchange. You may be required
to pay an initial sales charge when exchanging from a Fund with a lower initial
sales charge than the one into which you are exchanging. If you exchange from
Class A shares not subject to a CDSC into Class A shares subject to those
charges, you will be charged a CDSC when you redeem the exchanged shares. The
CDSC charged on redemption of those shares will be calculated starting on the
date you acquired those shares through exchange.
YOU WILL NOT PAY A SALES CHARGE WHEN EXCHANGING:
(1) Class A shares with an initial sales charge (except for Class A shares of
AIM Limited Maturity Treasury Fund and AIM Tax-Free Intermediate Fund) for
Class A shares of another AIM Fund or AIM Cash Reserve Shares of AIM Money
Market Fund;
(2) Class A shares of AIM Limited Maturity Treasury Fund and AIM Tax-Free
Intermediate Fund for
(a) one another;
(b) AIM Cash Reserve Shares of AIM Money Market Fund or Class A shares of
AIM Tax-Exempt Cash Fund; or
(c) Class A shares of another AIM Fund, but only if
(i) you acquired the original shares before May 1, 1994; or
(ii) you acquired the original shares on or after May 1, 1994 by way of
an exchange from shares with higher sales charges;
(3) AIM Cash Reserve Shares of AIM Money Market Fund or Class A shares of AIM
Tax-Exempt Cash Fund for
(a) one another;
(b) Class A shares of an AIM Fund subject to an initial sales charge (except
for Class A shares of AIM Limited Maturity Treasury Fund and AIM
Tax-Free Intermediate Fund), but only if you acquired the original
shares
(i) prior to May 1, 1994 by exchange from Class A shares subject to an
initial sales charge;
MCF--06/00 A-6
<PAGE> 33
--------------
THE AIM FUNDS
--------------
(ii) on or after May 1, 1994 by exchange from Class A shares subject to
an initial sales charge (except for Class A shares of AIM Limited
Maturity Treasury Fund and AIM Tax-Free Intermediate Fund); or
(c) Class A shares of AIM Limited Maturity Treasury Fund and AIM Tax-Free
Intermediate Fund, but only if you acquired the original shares by
exchange from Class A shares subject to an initial sales charge; or
(4) Class B shares for other Class B shares, and Class C shares for other Class
C shares.
(5) AIM Cash Reserve Shares of AIM Money Market Fund for Class B shares and
Class C shares.
EXCHANGES NOT PERMITTED
You may not exchange Class A shares subject to contingent deferred sales charges
for Class A shares of AIM Limited Maturity Treasury Fund, AIM Tax-Free
Intermediate Fund or AIM Tax-Exempt Cash Fund.
EXCHANGE CONDITIONS
The following conditions apply to all exchanges:
- You must meet the minimum purchase requirements for the AIM Fund into which
you are exchanging;
- Shares of the AIM Fund you wish to acquire must be available for sale in your
state of residence;
- Exchanges must be made between accounts with identical registration
information;
- The account you wish to exchange from must have a certified tax identification
number (or the Fund has received an appropriate Form W-8 or W-9);
- Shares must have been held for at least one day prior to the exchange;
- If you have physical share certificates, you must return them to the transfer
agent prior to the exchange; and
- You are limited to a maximum of 10 exchanges per calendar year, because
excessive short-term trading or market-timing activity can hurt fund
performance. If you exceed that limit, or if an AIM Fund or the distributor
determines, in its sole discretion, that your short-term trading is excessive
or that you are engaging in market-timing activity, it may reject any
additional exchange orders. An exchange is the movement out of (redemption)
one AIM Fund and into (purchase) another AIM Fund.
TERMS OF EXCHANGE
Under unusual market conditions, an AIM Fund may delay the purchase of shares
being acquired in an exchange for up to five business days if it determines that
it would be materially disadvantaged by the immediate transfer of exchange
proceeds. There is no fee for exchanges. The exchange privilege is not an option
or right to purchase shares. Any of the participating AIM Funds or the
distributor may modify or discontinue this privilege at any time.
BY MAIL
If you wish to make an exchange by mail, you must include original signatures of
each registered owner exactly as the shares are registered, the account
registration and account number, the dollar amount or number of shares to be
exchanged and the names of the AIM Funds from which and into which the exchange
is to be made.
BY TELEPHONE
Conditions that apply to exchanges by telephone are the same as redemptions by
telephone, including that the transfer agent must receive exchange requests
during the hours of the customary trading session of the NYSE; however, you
still will be allowed to exchange by telephone even if you have changed your
address of record within the preceding 30 days.
BY INTERNET
You will be allowed to exchange by internet if (1) you do not hold physical
share certificates; (2) you can provide proper identification information; and
(3) you have established the internet trading option.
EXCHANGING CLASS B AND CLASS C SHARES
If you make an exchange involving Class B or Class C shares, the amount of time
you held the original shares will be added to the holding period of the Class B
or Class C shares, respectively, into which you exchanged for the purpose of
calculating contingent deferred sales charges (CDSC) if you later redeem the
exchanged shares. If you redeem Class B shares acquired by exchange via a tender
offer by AIM Floating Rate Fund, you will be credited with the time period you
held the shares of AIM Floating Rate Fund for the purpose of computing the early
withdrawal charge applicable to those shares.
-------------------------------------------------------------------------------
EACH AIM FUND AND ITS AGENTS RESERVE THE RIGHT AT ANY TIME TO:
- REJECT OR CANCEL ANY PART OF ANY PURCHASE OR EXCHANGE ORDER;
- MODIFY ANY TERMS OR CONDITIONS OF PURCHASE OF SHARES OF ANY AIM FUND;
- REJECT OR CANCEL ANY REQUEST TO ESTABLISH THE AUTOMATIC INVESTMENT PLAN AND
SYSTEMATIC WITHDRAWAL PLAN OPTIONS ON THE SAME ACCOUNT; OR
- WITHDRAW ALL OR ANY PART OF THE OFFERING MADE BY THIS PROSPECTUS.
------------------------------------------------------------------------------
A-7 MCF--06/00
<PAGE> 34
--------------
THE AIM FUNDS
--------------
PRICING OF SHARES
DETERMINATION OF NET ASSET VALUE
The price of each AIM Fund's shares is the fund's net asset value per share. The
AIM Funds value portfolio securities for which market quotations are readily
available at market value. The AIM Funds value short-term investments maturing
within 60 days at amortized cost, which approximates market value. AIM Money
Market Fund and AIM Tax-Exempt Cash Fund value all of their securities at
amortized cost. AIM High Income Municipal Fund, AIM Municipal Bond Fund, AIM
Tax-Exempt Bond Fund of Connecticut and AIM Tax-Free Intermediate Fund value
variable rate securities that have an unconditional demand or put feature
exercisable within seven days or less at par, which reflects the market value of
such securities.
The AIM Funds value all other securities and assets at their fair value.
Securities and other assets quoted in foreign currencies are valued in U.S.
dollars based on the prevailing exchange rates on that day. In addition, if,
between the time trading ends on a particular security and the close of the
customary trading session of the NYSE, events occur that materially affect the
value of the security, the AIM Funds may value the security at its fair value as
determined in good faith by or under the supervision of the Board of Directors
or Trustees of the AIM Fund. The effect of using fair value pricing is that an
AIM Fund's net asset value will be subject to the judgment of the Board of
Directors or Trustees or its designee instead of being determined by the market.
Because some of the AIM Funds may invest in securities that are primarily listed
on foreign exchanges that trade on days when the AIM Funds do not price their
shares, the value of those funds' assets may change on days when you will not
be able to purchase or redeem fund shares.
Each AIM Fund determines the net asset value of its shares on each day the
NYSE is open for business, as of the close of the customary trading session, or
any earlier NYSE closing time that day. AIM Money Market Fund also determines
its net asset value as of 12:00 noon Eastern Time on each day the NYSE is open
for business.
TIMING OF ORDERS
You can purchase, exchange or redeem shares during the hours of the customary
trading session of the NYSE. The AIM Funds price purchase, exchange and
redemption orders at the net asset value calculated after the transfer agent
receives an order in good form. An AIM Fund may postpone the right of redemption
only under unusual circumstances, as allowed by the Securities and Exchange
Commission, such as when the NYSE restricts or suspends trading.
TAXES
In general, dividends and distributions you receive are taxable as ordinary
income or long-term capital gains for federal income tax purposes, whether you
reinvest them in additional shares or take them in cash. Distributions are
generally taxable to you at different rates depending on the length of time
the fund holds its assets. Different tax rates may apply to ordinary income
and long-term capital gain distributions, regardless of how long you have held
your shares. Every year, you will be sent information showing the amount of
dividends and distributions you received from each AIM Fund during the prior
year.
Any long-term or short-term capital gains realized from redemptions of AIM
Fund shares will be subject to federal income tax. Exchanges of shares for
shares of another AIM Fund are treated as a sale, and any gain realized on the
transaction will generally be subject to federal income tax.
INVESTORS IN TAX-EXEMPT FUNDS SHOULD READ THE INFORMATION UNDER THE HEADING
"OTHER INFORMATION -- SPECIAL TAX INFORMATION REGARDING THE FUND" IN THEIR
PROSPECTUS.
The foreign, state and local tax consequences of investing in AIM Fund shares
may differ materially from the federal income tax consequences described above.
You should consult your tax advisor before investing.
MCF--06/00 A-8
<PAGE> 35
------------------------------------
AIM ADVISOR INTERNATIONAL VALUE FUND
------------------------------------
OBTAINING ADDITIONAL INFORMATION
--------------------------------------------------------------------------------
More information may be obtained free of charge upon request. The Statement of
Additional Information (SAI), a current version of which is on file with the
Securities and Exchange Commission (SEC), contains more details about the fund
and is incorporated by reference into the prospectus (is legally a part of this
prospectus). Annual and semiannual reports to shareholders contain additional
information about the fund's investments. The fund's annual report also
discusses the market conditions and investment strategies that significantly
affected the fund's performance during its last fiscal year.
If you have questions about this fund, another fund in The AIM Family of
Funds--Registered Trademark-- or your account, or wish to obtain free copies of
the fund's current SAI or annual or semiannual reports, please contact us
--------------------------------------------------------------------------------
<TABLE>
<S> <C>
BY MAIL: A I M Fund Services, Inc.
P.O. Box 4739
Houston, TX 77210-4739
BY TELEPHONE: (800) 347-4246
BY E-MAIL: [email protected]
ON THE INTERNET: http://www.aimfunds.com
(prospectuses and annual
and semiannual reports
only)
</TABLE>
--------------------------------------------------------------------------------
You also can review and obtain copies of the fund's SAI, reports and other
information at the SEC's Public Reference Room in Washington, DC; on the EDGAR
database on the SEC's Internet website (http://www.sec.gov); or, after paying a
duplication fee, by sending a letter to the SEC's Public Reference Section,
Washington, DC 20549-0102 or by sending an electronic mail request to
[email protected]. Please call the SEC at 1-202-942-8090 for information about
the Public Reference Room.
------------------------------------
AIM Advisor International Value Fund
SEC 1940 Act file number: 811-3886
------------------------------------
[AIM LOGO APPEARS HERE] www.aimfunds.com IVAL-PRO-1 INVEST WITH DISCIPLINE
--Registered Trademark-- --Registered Trademark--
<PAGE> 36
AIM ADVISOR
REAL ESTATE FUND
-------------------------------------------------------------------------
AIM Advisor Real Estate Fund seeks to achieve high total return.
PROSPECTUS AIM--Registered Trademark--
SEPTEMBER 11, 2000
This prospectus contains important
information about the Class A, B and C
shares of the funds. Please read it
before investing and keep it for
future reference.
As with all other mutual fund
securities, the Securities and
Exchange Commission has not approved
or disapproved these securities or
determined whether the information
in this prospectus is adequate or
accurate. Anyone who tells you
otherwise is committing a crime.
An investment in the fund:
- is not FDIC insured;
- may lose value; and
- is not guaranteed by a bank.
[AIM LOGO APPEARS HERE] INVEST WITH DISCIPLINE
--Registered Trademark-- --Registered Trademark--
<PAGE> 37
----------------------------
AIM ADVISOR REAL ESTATE FUND
----------------------------
TABLE OF CONTENTS
--------------------------------------------------------------------------------
<TABLE>
<S> <C>
INVESTMENT OBJECTIVE AND STRATEGIES 1
- - - - - - - - - - - - - - - - - - - - - - - - -
PRINCIPAL RISKS OF INVESTING IN THE FUND 1
- - - - - - - - - - - - - - - - - - - - - - - - -
PERFORMANCE INFORMATION 2
- - - - - - - - - - - - - - - - - - - - - - - - -
Annual Total Returns 2
Performance Table 2
FEE TABLE AND EXPENSE EXAMPLE 3
- - - - - - - - - - - - - - - - - - - - - - - - -
Fee Table 3
Expense Example 3
FUND MANAGEMENT 4
- - - - - - - - - - - - - - - - - - - - - - - - -
The Advisors 4
Advisor Compensation 4
Portfolio Managers 4
OTHER INFORMATION 4
- - - - - - - - - - - - - - - - - - - - - - - - -
Sales Charges 4
Dividends and Distributions 4
FINANCIAL HIGHLIGHTS 5
- - - - - - - - - - - - - - - - - - - - - - - - -
SHAREHOLDER INFORMATION A-1
- - - - - - - - - - - - - - - - - - - - - - - - -
Choosing a Share Class A-1
Purchasing Shares A-3
Redeeming Shares A-4
Exchanging Shares A-6
Pricing of Shares A-8
Taxes A-8
OBTAINING ADDITIONAL INFORMATION Back Cover
- - - - - - - - - - - - - - - - - - - - - - - - -
</TABLE>
AIM ADVISOR REAL ESTATE FUND
The AIM Family of Funds, The AIM Family of Funds and Design (i.e., the AIM
logo), AIM and Design, AIM, AIM Funds, AIM Funds and Design, AIM LINK, AIM
Institutional Funds, aimfunds.com, La Familia AIM de Fondos, La Familia AIM de
Fondos and Design, Invierta con DISCIPLINA and Invest with DISCIPLINE are
registered service marks and AIM Bank Connection, AIM Investor and AIM Internet
Connect 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> 38
----------------------------
AIM ADVISOR REAL ESTATE FUND
----------------------------
INVESTMENT OBJECTIVE AND STRATEGIES
--------------------------------------------------------------------------------
The fund's investment objective is to achieve high total return. The investment
objective of the fund may be changed by the Board of Trustees without
shareholder approval.
The fund seeks to meet its objective by investing, normally, at least 65% of
its total assets in equity securities of companies that are principally engaged
in the real estate industry and are listed on a U.S. exchange or the National
Association of Securities Dealers Automated Quotation System (NASDAQ). The fund
considers a company to be "principally engaged in the real estate industry" if
at least 50% of its assets, gross income or net profits are attributable to
ownership, construction, management or sale of residential, commercial or
industrial real estate. These companies include equity real estate investment
trusts (REITs) that own property and mortgage REITs which make short-term
construction and development mortgage loans or which invest in long-term
mortgages or mortgage pools, or the products and services of which are related
to the real estate industry, such as manufacturers and distributors of building
supplies and financial institutions which issue or service mortgages. The fund
will not invest directly in private real estate assets.
The fund may invest up to 35% of its total assets in equity, debt or
convertible securities of companies whose products and services are related to
the real estate industry or in securities of companies unrelated to the real
estate industry that the portfolio managers believe are undervalued and have
potential for growth of capital. The fund may invest up to 100% of its assets in
debt securities of companies related to the real estate industry. The fund will
limit its investment in debt securities to those that are investment-grade or
deemed by the fund's portfolio manager to be of comparable quality. The fund may
invest up to 25% of its total assets in foreign securities. Any percentage
limitations with respect to assets of the fund are applied at the time of
purchase.
The portfolio managers utilize fundamental real estate analysis and numerical
securities analysis to select investments for the fund, including analyzing a
company's management and strategic focus, evaluating the location, physical
attributes and cash flow generating capacity of a company's properties and
calculating expected returns, among other things. The portfolio managers
consider whether to sell a particular security when any of those factors
materially changes.
In anticipation of or in response to adverse market conditions, for cash
management purposes, or for defensive purposes, the 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 and that the income you may receive from your investment may vary. 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. Debt securities are
particularly vulnerable to credit risk and interest rate fluctuations. Interest
rate increases can cause the price of a debt security to decrease. The longer a
debt security's duration, the more sensitive it is to this risk. The issuer of a
debt security may default or otherwise be unable to honor a financial
obligation.
Foreign securities have additional risks, including exchange rate changes,
political and economic upheaval, the relative lack of information about these
companies, relatively low market liquidity and the potential lack of strict
financial and accounting controls and standards.
Because the fund focuses its investments in companies related to the real
estate industry, the value of your shares may rise and fall more than the value
of shares of a fund that invests in a broader range of companies.
The fund could conceivably hold real estate directly if a company defaults on
debt securities the fund owns. In that event, an investment in the fund may have
additional risks relating to direct ownership in real estate, including
difficulties in valuing and trading real estate, declines in value of the
properties, risks relating to general and local economic conditions, changes in
the climate for real estate, increases in taxes, expenses and costs, changes in
laws, casualty and condemnation losses, rent control limitations and increases
in interest rates.
The value of the fund's investment in REITs is affected by the factors listed
above, as well as the management skill of the persons managing the REIT. REITs
also are not diversified and, therefore, their value may fluctuate more widely,
and they may be subject to greater risks, than if they invested more broadly.
Since REITs have expenses of their own, you will bear a proportionate share of
those expenses in addition to those of the fund.
An investment in the fund is not a deposit of a bank and is not insured or
guaranteed by the Federal Deposit Insurance Corporation or any other government
agency.
1
<PAGE> 39
----------------------------
AIM ADVISOR REAL ESTATE FUND
----------------------------
PERFORMANCE INFORMATION
--------------------------------------------------------------------------------
The bar chart and table shown below provide an indication of the risks of
investing in the fund. The fund's past performance is not necessarily an
indication of its future performance.
ANNUAL TOTAL RETURNS
--------------------------------------------------------------------------------
The following bar chart shows changes in the performance of the fund's Class C
shares from year to year. The bar chart does not reflect sales loads. If it did,
the annual total returns shown would be lower.
[GRAPH]
<TABLE>
<CAPTION>
ANNUAL
YEAR ENDED TOTAL
DECEMBER 31 RETURNS
------------ -------
<S> <C>
1996 ................................. 36.44%
1997 ................................. 18.88%
1998 ................................. -23.16%
1999 ................................. -3.54%
</TABLE>
The Class C shares' year-to-date total return as of June 30, 2000 was 16.11%.
During the period shown in the bar chart, the highest quarterly return was
19.39% (quarter ended December 31, 1996) and the lowest quarterly return was
-15.54% (quarter ended September 30, 1998).
PERFORMANCE TABLE
The following performance table compares the fund's performance to that of a
broad-based securities market index. The fund's performance reflects payment of
sales loads.
<TABLE>
<CAPTION>
AVERAGE ANNUAL TOTAL RETURNS
--------------------------------------------------------------------------------
(for the periods ended SINCE INCEPTION
December 31, 1999) 1 YEAR INCEPTION DATE
--------------------------------------------------------------------------------
<S> <C> <C> <C>
Class A -7.48% -4.96% 12/31/96
Class B -8.17% -15.54% 03/03/98
Class C -4.47% 5.99% 05/01/95
S&P 500(1) 21.03% 27.50%(2) 04/30/95(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 the class with the longest performance history.
2
<PAGE> 40
----------------------------
AIM ADVISOR REAL ESTATE FUND
----------------------------
FEE TABLE AND EXPENSE EXAMPLE
--------------------------------------------------------------------------------
FEE TABLE
This table describes the fees and expenses that you may pay if you buy and hold
shares of the fund:
<TABLE>
<CAPTION>
SHAREHOLDER FEES
----------------------------------------------------------
(fees paid directly from
your investment) CLASS A CLASS B CLASS C
----------------------------------------------------------
<S> <C> <C> <C>
Maximum Sales Charge (Load)
Imposed on Purchases
(as a percentage of
offering price) 4.75% None None
Maximum Deferred
Sales Charge (Load)
(as a percentage of
original purchase
price or redemption
proceeds, whichever is less) None(1) 5.00% 1.00%
----------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
ANNUAL FUND OPERATING EXPENSES
----------------------------------------------------------
(expenses that are deducted
from fund assets) CLASS A CLASS B CLASS C
----------------------------------------------------------
<S> <C> <C> <C>
Management Fees 0.90% 0.90% 0.90%
Distribution and/or
Service (12b-1) Fees 0.35 1.00 1.00
Other 0.48 0.47 0.47
Total Annual Fund
Operating Expenses 1.73 2.37 2.37
Fee Waiver(2) 0.12 0.02 0.02
Net Expenses 1.61% 2.35% 2.35%
---------------------------------------------------------
</TABLE>
(1) If you buy $1,000,000 or more of Class A shares and redeem these shares
within 18 months from the date of purchase, you may pay a 1% contingent
deferred sales charge (CDSC) at the time of redemption.
(2) The distributor has contractually agreed to limit the Class A shares' Rule
12b-1 distribution plan payments to 0.25%. The advisor has contractually
agreed to limit Total Annual Fund Operating Expenses, excluding management
fees, Rule 12b-1 distribution fees, interest expense and extraordinary
items, to 0.45%.
As a result of 12b-1 fees, long-term shareholders in the fund may pay more than
the maximum permitted initial sales charge.
EXPENSE EXAMPLE
This example is intended to help you compare the costs of investing in different
classes of the fund with the cost of investing in other mutual funds.
The example assumes that you invest $10,000 in the fund for the time periods
indicated and then redeem all of your shares at the end of those periods. The
example also assumes that your investment has a 5% return each year and that the
fund's gross operating expenses remain the same. To the extent fees are waived,
the expenses will be lower. Although your actual returns and costs may be higher
or lower, based on these assumptions your costs would be:
<TABLE>
<CAPTION>
1 YEAR 3 YEARS 5 YEARS 10 YEARS
----------------------------------------------
<S> <C> <C> <C> <C>
Class A $642 $ 994 $1,369 $2,419
Class B 740 1,039 1,465 2,547
Class C 340 739 1,265 2,706
----------------------------------------------
</TABLE>
You would pay the following expenses if you did not redeem your shares:
<TABLE>
<CAPTION>
1 YEAR 3 YEARS 5 YEARS 10 YEARS
----------------------------------------------
<S> <C> <C> <C> <C>
Class A $642 $994 $1,369 $2,419
Class B 240 739 1,265 2,547
Class C 240 739 1,265 2,706
----------------------------------------------
</TABLE>
3
<PAGE> 41
----------------------------
AIM ADVISOR REAL ESTATE FUND
----------------------------
FUND MANAGEMENT
--------------------------------------------------------------------------------
THE ADVISORS
A I M Advisors, Inc. (the advisor) serves as the fund's investment advisor and
manages the investment operations of the fund and has agreed to perform or
arrange for the performance of the fund's day-to-day management. The advisor is
located at 11 Greenway Plaza, Suite 100, Houston, Texas 77046-1173. INVESCO,
Inc. (the subadvisor), the fund's subadvisor, is located at 1315 Peachtree
Street, N.E., Atlanta, Georgia 30309. The subadvisor is responsible for the
fund's day-to-day management, including the fund's investment decisions and the
execution of securities transactions with respect to the fund.
The advisor has acted as an investment advisor since its organization in 1976
and the subadvisor has acted as an investment advisor and qualified professional
asset manager since 1979. Today, the advisor, 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 December 31, 1999, the advisor received
compensation of 0.90% 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 are
- Mark Blackburn, Portfolio Manager, who has been responsible for the fund since
2000 and has been associated with the subadvisor and/or its affiliates since
1998. From 1995 to 1997, he was Senior Analyst and Associate Director of
Research for Southwest Securities.
- Joe V. Rodriguez, Jr., Senior Portfolio Manager, who has been responsible for
the fund since 1995 and has been associated with the subadvisor and/or its
affiliates since 1990.
- James W. Trowbridge, Senior Portfolio Manager, who has been responsible for
the fund since 1995 and has been associated with the subadvisor and/or its
affiliates since 1989.
OTHER INFORMATION
--------------------------------------------------------------------------------
SALES CHARGES
Purchases of Class A shares of AIM Advisor Real Estate Fund are subject to the
maximum 4.75% initial sales charge as listed under the heading "CATEGORY II
Initial Sales Charges" in the "Shareholder Information--Choosing a Share Class"
section of this prospectus. Purchases of Class B and Class C shares are subject
to the contingent deferred sales charges listed in that section.
DIVIDENDS AND DISTRIBUTIONS
The fund expects that its distributions, if any, will consist primarily of
capital gains.
DIVIDENDS
The fund generally declares and pays dividends, if any, quarterly.
CAPITAL GAINS DISTRIBUTIONS
The fund generally distributes long-term gains, if any, annually and short-term
capital gains, if any, quarterly.
4
<PAGE> 42
----------------------------
AIM ADVISOR REAL ESTATE FUND
----------------------------
FINANCIAL HIGHLIGHTS
--------------------------------------------------------------------------------
The financial highlights table is intended to help you understand the fund's
financial performance. Certain information reflects financial results for a
single fund share.
The total returns in the table represent the rate that an investor would have
earned (or lost) on an investment in the fund (assuming reinvestment of all
dividends and distributions).
The information for the fiscal years or periods ended since December 31, 1998,
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. Information for prior years was audited by other public accountants.
<TABLE>
<CAPTION>
CLASS A(a)
-----------------------------------------------------
YEAR ENDED DECEMBER 31,
-----------------------------------------------------
1999 1998(b) 1997(b)
------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Net asset value, beginning of period $ 11.46 $ 15.74 $14.19
Income from investment operations:
Net investment income 0.42 0.58 0.34
Net gains (losses) on securities (both realized and
unrealized) (0.75) (4.11) 2.39
Total from investment operations (0.33) (3.53) 2.73
Less distributions:
Dividends from net investment income (0.52) (0.50) (0.44)
Distributions from capital gains -- (0.25) (0.74)
Total distributions (0.52) (0.75) (1.18)
Net asset value, end of period $ 10.61 $ 11.46 $15.74
Total return(c) (2.88)% (22.54)% 19.78%
------------------------------------------------------------------------------------------------------------------
Ratios/supplemental data:
------------------------------------------------------------------------------------------------------------------
Net assets, end of period (000s omitted) $16,279 $20,087 $16,507
Ratio of expenses to average net assets(d) 1.61%(e) 1.55% 1.60%
Ratio of net investment income to average net assets(f) 3.70%(e) 4.37% 3.26%
Portfolio turnover rate 52% 69% 57%
------------------------------------------------------------------------------------------------------------------
</TABLE>
(a) Per share information and shares have been restated to reflect a 4 for 1
stock split, effective in the form of a 300% stock dividend, on November 7,
1997.
(b) Calculated using average shares outstanding.
(c) Does not deduct sales charges.
(d) After fee waivers and/or expense reimbursements. Ratios of expenses to
average net assets prior to fee waivers and/or expense reimbursements were
1.73%, 1.71% and 1.70% for 1999-1997.
(e) Ratios are based on average net assets of $18,904,818.
(f) After fee waivers and/or expense reimbursements. Ratios of net investment
income to average net assets prior to fee waivers and/or expense
reimbursements were 3.58%, 4.21% and 3.16% for 1999-1997.
5
<PAGE> 43
----------------------------
AIM ADVISOR REAL ESTATE FUND
----------------------------
FINANCIAL HIGHLIGHTS (CONTINUED)
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
CLASS B
-------------------------------------------------------------
MARCH 3,
YEAR ENDED THROUGH
DECEMBER 31, DECEMBER 31,
1999 1998(a)
---------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Net asset value, beginning of period $11.48 $ 15.34
Income from investment operations:
Net investment income 0.32 0.37
Net gains (losses) on securities (both
realized and unrealized) (0.72) (3.58)
Total from investment operations (0.40) (3.21)
Less distributions:
Dividends from net investment income (0.44) (0.40)
Distributions from capital gains -- (0.25)
Total distributions (0.44) (0.65)
Net asset value, end of period $10.64 $ 11.48
Total return(b) (3.53)% (21.02)%
---------------------------------------------------------------------------------------------------------------
Ratios/supplemental data:
---------------------------------------------------------------------------------------------------------------
Net assets, end of period (000s omitted) $9,839 $ 6,901
Ratio of expenses to average net assets(c) 2.35%(d) 2.31%(e)
Ratio of net investment income to average net
assets(f) 2.96%(d) 3.62%(e)
Portfolio turnover rate 52% 69%
---------------------------------------------------------------------------------------------------------------
</TABLE>
(a) Calculated using average shares outstanding.
(b) Does not deduct contingent deferred sales charges and are not annualized
for periods less than one year.
(c) After fee waivers and/or expense reimbursements. Ratios of expenses to
average net assets prior to fee waivers and/or expense reimbursements were
2.37 and 2.35% (annualized) for 1999-1998.
(d) Ratios are based on average net assets of $7,379,172.
(e) Annualized.
(f) After fee waivers and/or expense reimbursements. Ratios of net investment
income to average net assets prior to fee waivers and/or expense
reimbursements were 2.94% and 3.56% (annualized) for 1999-1998.
<TABLE>
<CAPTION>
CLASS C(a)
---------------------------------------------------------------
MAY 1,
YEAR ENDED DECEMBER 31, THROUGH
---------------------------------------- DECEMBER 31,
1999(b) 1998(b) 1997(b) 1996 1995
-------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of period $ 11.46 $ 15.74 $ 14.19 $ 10.76 $ 10.00
Income from investment operations:
Net investment income 0.33 0.50 0.36 0.33 0.16
Net gains (losses) on securities (both realized and
unrealized) (0.73) (4.13) 2.26 3.51 0.75
Total from investment operations (0.40) (3.63) 2.62 3.84 0.91
Less distributions:
Dividends from net investment income (0.44) (0.40) (0.33) (0.31) (0.15)
Distributions from capital gains -- (0.25) (0.74) (0.10) --
Total distributions (0.44) (0.65) (1.07) (0.41) (0.15)
Net asset value, end of period $ 10.62 $ 11.46 $ 15.74 $ 14.19 $ 10.76
Total return(c) (3.54)% (23.16)% 18.88% 36.43% 9.12%
-------------------------------------------------------------------------------------------------------------------------
Ratios/supplemental data:
-------------------------------------------------------------------------------------------------------------------------
Net assets, end of period (000s omitted) $19,992 $32,921 $43,934 $20,566 $ 5,565
Ratio of expenses to average net assets(d) 2.35%(e) 2.31% 2.35% 2.40% 2.40%(f)
Ratio of net investment income (loss) to average net
assets(g) 2.96%(e) 3.62% 2.54% 3.21% 4.68%(f)
Portfolio turnover rate 52% 69% 57% 25% 7%
-------------------------------------------------------------------------------------------------------------------------
</TABLE>
(a) Per share information and shares have been restated to reflect a 4 for 1
stock split, effective in the form of a 300% stock dividend, on November 7,
1997.
(b) Calculated using average shares outstanding.
(c) Does not deduct contingent deferred sales charges and is not annualized for
periods less than one year.
(d) After fee waivers and/or expense reimbursements. Ratio of expenses to
average net assets prior to fee waivers and/or expense reimbursements were
2.37% and 2.37% for 1999-1998.
(e) Ratios are based on average net asset of $26,349,554.
(f) Annualized.
(g) After fee waivers and/or expense reimbursements. Ratio of net investment
income to average net assets prior to fee waivers and/or expense
reimbursements were 2.94% and 3.56% for 1999-1998.
6
<PAGE> 44
-------------
THE AIM FUNDS
-------------
SHAREHOLDER INFORMATION
--------------------------------------------------------------------------------
In addition to the fund, A I M Advisors, Inc. serves as investment advisor to
many other mutual funds (the AIM Funds). The following information is about all
the AIM Funds.
CHOOSING A SHARE CLASS
Many of the AIM Funds have multiple classes of shares, each class representing
an interest in the same portfolio of investments. When choosing a share class,
you should consider the factors below:
<TABLE>
<CAPTION>
CLASS A CLASS B CLASS C
---------------------------------------------------------------------------------------------------------
<S> <C> <C>
- Initial sales charge - No initial sales charge - No initial sales charge
- Reduced or waived initial sales - Contingent deferred sales - Contingent deferred sales
charge for certain purchases charge on redemptions within charge on redemptions within
six years one year
- Lower distribution and service - 12b-1 fee of 1.00% - 12b-1 fee of 1.00%
(12b-1) fee than Class B or
Class C shares (See "Fee Table
and Expense Example")
- Converts to Class A shares - Does not convert to Class A
eight years after the end of shares
the month in which shares
were purchased along with a
pro rata portion of its
reinvested dividends and
distributions(1)
- Generally more appropriate for - Purchase orders limited to - Generally more appropriate
long-term investors amounts less than $250,000 for short-term investors
</TABLE>
(1) AIM Money Market Fund: Class B shares convert to AIM Cash Reserve
Shares.
AIM Global Trends Fund: If you held Class B shares on May 29, 1998 and
continue to hold them, those shares will convert to Class A shares of
that fund seven years after the end of the month in which shares were
purchased. If you exchange those shares for Class B shares of another
AIM Fund, the shares into which you exchanged will not convert to
Class A shares until eight years after the end of the month in which
you purchased your original shares.
--------------------------------------------------------------------------------
DISTRIBUTION AND SERVICE (12B-1) FEES
Each AIM Fund (except AIM Tax-Free Intermediate Fund) has adopted 12b-1 plans
that allow the AIM Fund to pay distribution fees to A I M Distributors, Inc.
(the distributor) for the sale and distribution of its shares and fees for
services provided to shareholders, all or a substantial portion of which are
paid to the dealer of record. Because the AIM Fund pays these fees out of its
assets on an ongoing basis, over time these fees will increase the cost of your
investment and may cost you more than paying other types of sales charges.
SALES CHARGES
Generally, you will not pay a sales charge on purchases or redemptions of Class
A shares of AIM Tax-Exempt Cash Fund and AIM Cash Reserve Shares of AIM Money
Market Fund. You may be charged a contingent deferred sales charge if you redeem
AIM Cash Reserve Shares of AIM Money Market Fund acquired through certain
exchanges. Sales charges on all other AIM Funds and classes of those Funds are
detailed below. As used below, the term "offering price" with respect to all
categories of Class A shares includes the initial sales charge.
INITIAL SALES CHARGES
The AIM Funds are grouped into three categories with respect to initial sales
charges. The "Other Information" section of your prospectus will tell you in
what category your particular AIM Fund is classified.
<TABLE>
<CAPTION>
CATEGORY I INITIAL SALES CHARGES
------------------------------------------------------------
INVESTOR'S
SALES CHARGE
----------------------------
AMOUNT OF INVESTMENT AS A % OF AS A % OF
IN SINGLE TRANSACTION OFFERING PRICE INVESTMENT
-------------------------------------------------------------
<S> <C> <C>
Less than $ 25,000 5.50% 5.82%
$ 25,000 but less than $ 50,000 5.25 5.54
$ 50,000 but less than $ 100,000 4.75 4.99
$100,000 but less than $ 250,000 3.75 3.90
$250,000 but less than $ 500,000 3.00 3.09
$500,000 but less than $1,000,000 2.00 2.04
-------------------------------------------------------------
</TABLE>
A-1 MCF--06/00
<PAGE> 45
-------------
THE AIM FUNDS
-------------
<TABLE>
<CAPTION>
CATEGORY II INITIAL SALES CHARGES
------------------------------------------------------------
INVESTOR'S
SALES CHARGE
----------------------------
AMOUNT OF INVESTMENT AS A % OF AS A % OF
IN SINGLE TRANSACTION OFFERING PRICE INVESTMENT
-------------------------------------------------------------
<S> <C> <C>
Less than $ 50,000 4.75% 4.99%
$ 50,000 but less than $ 100,000 4.00 4.17
$100,000 but less than $ 250,000 3.75 3.90
$250,000 but less than $ 500,000 2.50 2.56
$500,000 but less than $1,000,000 2.00 2.04
-------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
CATEGORY III INITIAL SALES CHARGES
-------------------------------------------------------------
INVESTOR'S
SALES CHARGE
----------------------------
AMOUNT OF INVESTMENT AS A % OF AS A % OF
IN SINGLE TRANSACTION OFFERING PRICE INVESTMENT
-------------------------------------------------------------
<S> <C> <C>
Less than $ 100,000 1.00% 1.01%
$100,000 but less than $ 250,000 0.75 0.76
$250,000 but less than $1,000,000 0.50 0.50
-------------------------------------------------------------
</TABLE>
CONTINGENT DEFERRED SALES CHARGES FOR CLASS A SHARES
You can purchase $1,000,000 or more of Class A shares at net asset value.
However, if you purchase shares of that amount in Categories I or II, they will
be subject to a contingent deferred sales charge (CDSC) of 1% if you redeem them
prior to 18 months after the date of purchase. The distributor may pay a dealer
concession and/or a service fee for purchases of $1,000,000 or more.
CONTINGENT DEFERRED SALES CHARGES FOR
CLASS B AND CLASS C SHARES
You can purchase Class B and Class C shares at their net asset value per share.
However, when you redeem them, they are subject to a CDSC in the following
percentages:
<TABLE>
<CAPTION>
YEAR SINCE
PURCHASE MADE CLASS B CLASS C
----------------------------------------------------------
<S> <C> <C>
First 5% 1%
Second 4 None
Third 3 None
Fourth 3 None
Fifth 2 None
Sixth 1 None
Seventh and following None None
----------------------------------------------------------
</TABLE>
COMPUTING A CDSC
The CDSC on redemptions of shares is computed based on the lower of their
original purchase price or current market value, net of reinvested dividends and
capital gains distributions. In determining whether to charge a CDSC, we will
assume that you have redeemed shares on which there is no CDSC first and, then,
shares in the order of purchase.
REDUCED SALES CHARGES
AND SALES CHARGE EXCEPTIONS
You may qualify for reduced sales charges or sales charge exceptions. To qualify
for these reductions or exceptions, you or your financial consultant must
provide sufficient information at the time of purchase to verify that your
purchase qualifies for such treatment.
REDUCED SALES CHARGES
You may be eligible to buy Class A shares at reduced initial sales charge rates
under Rights of Accumulation or Letters of Intent under certain circumstances.
Rights of Accumulation
You may combine your new purchases of Class A shares with Class A shares
currently owned for the purpose of qualifying for the lower initial sales charge
rates that apply to larger purchases. The applicable initial sales charge for
the new purchase is based on the total of your current purchase and the current
value of all Class A shares you own.
Letters of Intent
Under a Letter of Intent (LOI), you commit to purchase a specified dollar amount
of Class A shares of AIM Funds during a 13-month period. The amount you agree to
purchase determines the initial sales charge you pay. If the full face amount of
the LOI is not invested by the end of the 13-month period, your account will be
adjusted to the higher initial sales charge level for the amount actually
invested.
INITIAL SALES CHARGE EXCEPTIONS
You will not pay initial sales charges
- on shares purchased by reinvesting dividends and distributions;
- when exchanging shares among certain AIM Funds;
- when using the reinstatement privilege; and
- when a merger, consolidation, or acquisition of assets of an AIM Fund occurs.
CONTINGENT DEFERRED SALES CHARGE (CDSC) EXCEPTIONS
You will not pay a CDSC
- if you redeem Class B shares you held for more than six years;
- if you redeem Class C shares you held for more than one year;
- if you redeem shares acquired through reinvestment of dividends and
distributions; and
- on increases in the net asset value of your shares.
There may be other situations when you may be able to purchase or redeem shares
at reduced or without sales charges. Consult the fund's Statement of Additional
Information for details.
MCF--06/00 A-2
<PAGE> 46
--------------
THE AIM FUNDS
--------------
PURCHASING SHARES
MINIMUM INVESTMENTS PER AIM FUND ACCOUNT
The minimum investments for AIM Fund accounts (except for investments in AIM Mid
Cap Opportunities Fund and AIM Small Cap Opportunities Fund) are as follows:
<TABLE>
<CAPTION>
INITIAL ADDITIONAL
TYPE OF ACCOUNT INVESTMENTS INVESTMENTS
-----------------------------------------------------------------------------------------------------------
<S> <C> <C>
Savings Plans (money-purchase/profit sharing $ 0 ($25 per AIM Fund investment for $25
plans, 401(k) plans, Simplified Employee Pension salary deferrals from Savings Plans)
(SEP) accounts, Salary Reduction (SARSEP)
accounts, Savings Incentive Match Plans for
Employee IRA (Simple IRA) accounts, 403(b) or
457 plans)
Automatic Investment Plans 50 50
IRA, Education IRA or Roth IRA 250 50
All other accounts 500 50
----------------------------------------------------------------------------------------------------------
</TABLE>
HOW TO PURCHASE SHARES
You may purchase shares using one of the options below.
<TABLE>
<CAPTION>
PURCHASE OPTIONS
---------------------------------------------------------------------------------------------------------
OPENING AN ACCOUNT ADDING TO AN ACCOUNT
---------------------------------------------------------------------------------------------------------
<S> <C> <C>
Through a Financial Consultant Contact your financial consultant. Same
By Mail Mail completed account application Mail your check and the remittance
and purchase payment to the slip from your confirmation
transfer agent, statement to the transfer agent.
A I M Fund Services, Inc.,
P.O. Box 4739,
Houston, TX 77210-4739.
By Wire Mail completed account application Call the transfer agent to receive
to the transfer agent. Call the a reference number. Then, use the
transfer agent at (800) 959-4246 to wire instructions at left.
receive a reference number. Then,
use the following wire
instructions:
Beneficiary Bank ABA/Routing #:
113000609
Beneficiary Account Number:
00100366807
Beneficiary Account Name: A I M
Fund Services, Inc.
RFB: Fund Name, Reference #
OBI: Your Name, Account #
By AIM Bank Connection(SM) Open your account using one of the Mail completed AIM Bank Connection
methods described above. form to the transfer agent. Once
the transfer agent has received the
form, call the transfer agent to
place your purchase order.
By AIM Internet Connect(SM) Open your account using one of the Select the AIM Internet Connect
methods described above. option on your completed account
application or complete an AIM
Internet Connect Authorization
Form. Mail the application or form
to the transfer agent. Once your
request for this option has been
processed (which may take up to 10
days), you may place your purchase
order at www.aimfunds.com. The
maximum purchase amount per
transaction is $100,000. You may
not purchase shares in AIM
prototype retirement accounts on
the internet.
----------------------------------------------------------------------------------------------------------
</TABLE>
A-3 MCF--06/00
<PAGE> 47
-------------
THE AIM FUNDS
-------------
SPECIAL PLANS
AUTOMATIC INVESTMENT PLAN
You can arrange for periodic investments in any of the AIM Funds by authorizing
the AIM Fund to withdraw the amount of your investment from your bank account on
a day or dates you specify and in an amount of at least $50. You may stop the
Automatic Investment Plan at any time by giving the transfer agent notice ten
days prior to your next scheduled withdrawal.
DOLLAR COST AVERAGING
Dollar Cost Averaging allows you to make automatic monthly or quarterly
exchanges, if permitted, from one AIM Fund account to one or more other AIM Fund
accounts with the identical registration. The account from which exchanges are
to be made must have a minimum balance of $5,000 before you can use this option.
Exchanges will occur on (or about) the 10th or 25th day of the month, whichever
you specify, in the amount you specify. The minimum amount you can exchange to
another AIM Fund is $50.
AUTOMATIC DIVIDEND INVESTMENT
All of your dividends and distributions may be paid in cash or invested in any
AIM Fund at net asset value. Unless you specify otherwise, your dividends and
distributions will automatically be reinvested in the same AIM Fund. You may
invest your dividends and distributions (1) into another AIM Fund in the same
class of shares; or (2) from Class A shares into AIM Cash Reserve Shares of AIM
Money Market Fund, or vice versa.
You must comply with the following requirements to be eligible to invest your
dividends and distributions in shares of another AIM Fund:
(1) Your account balance (a) in the AIM Fund paying the dividend must be at
least $5,000; or (b) in the AIM Fund receiving the dividend must be at least
$500;
(2) Both accounts must have identical registration information; and
(3) You must have completed an authorization form to reinvest dividends into
another AIM Fund.
PORTFOLIO REBALANCING PROGRAM
If you have at least $5,000 in your account, you may participate in the
Portfolio Rebalancing Program. Under this Program, you can designate how the
total value of your AIM Fund holdings should be rebalanced, on a percentage
basis, between two and ten of your AIM Funds on a quarterly, semiannual or
annual basis. Your portfolio will be rebalanced through the exchange of shares
in one or more of your AIM Funds for shares of the same class of one or more
other AIM Funds in your portfolio. If you wish to participate in the Program,
make changes or cancel the Program, the transfer agent must receive your request
to participate, changes, or cancellation in good order at least five business
days prior to the next rebalancing date, which is normally the 28th day of the
last month of the period you choose. You may realize taxable gains from these
exchanges. We may modify, suspend or terminate the Program at any time on 60
days' prior written notice.
RETIREMENT PLANS
Shares of most of the AIM Funds can be purchased through tax-sheltered
retirement plans made available to corporations, individuals and employees of
non-profit organizations and public schools. A plan document must be adopted
to establish a retirement plan. You may use AIM Funds-sponsored retirement
plans, which include IRAs, Education IRAs, Roth IRAs, 403(b) plans, 401(k)
plans, SIMPLE IRA plans, SEP/SARSEP plans and Money Purchase/Profit Sharing
plans, or another sponsor's retirement plan. The plan custodian of the
AIM Funds-sponsored retirement plan assesses an annual maintenance fee of $10.
Contact your financial consultant for details.
REDEEMING SHARES
REDEMPTION FEES
Generally, we will not charge you any fees to redeem your shares. However, if
you acquired Class A shares of AIM Developing Markets Fund in connection with
the reorganization of AIM Eastern Europe Fund, you will be charged a redemption
fee of 2% of the net asset value of those shares, which will be paid to AIM
Developing Markets Fund, if you redeem your shares within the first year after
the reorganization. Your broker or financial consultant may charge service fees
for handling redemption transactions. Your shares also may be subject to a
contingent deferred sales charge (CDSC).
REDEMPTION OF AIM CASH RESERVE SHARES OF
AIM MONEY MARKET FUND ACQUIRED BY EXCHANGE
If you redeem AIM Cash Reserve Shares acquired by exchange from Class A shares
subject to a CDSC within 18 months of the purchase of the Class A shares, you
will be charged a CDSC.
REDEMPTION OF CLASS B SHARES OR CLASS C
SHARES ACQUIRED BY EXCHANGE FROM AIM CASH
RESERVE SHARES OF AIM MONEY MARKET FUND
We will begin the holding period for purposes of calculating the CDSC on Class B
shares or Class C shares acquired by exchange from AIM Cash Reserve Shares of
AIM Money Market Fund at the time of the exchange into Class B shares or Class C
shares.
REDEMPTION OF CLASS B SHARES ACQUIRED BY
EXCHANGE FROM AIM FLOATING RATE FUND
If you redeem Class B shares you acquired by exchange via a tender offer by AIM
Floating Rate Fund, the early withdrawal charge applicable to shares of AIM
Floating Rate Fund will be applied instead of the CDSC normally applicable to
Class B shares.
MCF--06/00 A-4
<PAGE> 48
-------------
THE AIM FUNDS
-------------
HOW TO REDEEM SHARES
--------------------------------------------------------------------------------
<TABLE>
<S> <C>
Through a Financial Contact your financial consultant.
Consultant
By Mail Send a written request to the transfer agent. Requests must
include (1) original signatures of all registered owners;
(2) the name of the AIM Fund and your account number; (3) if
the transfer agent does not hold your shares, endorsed share
certificates or share certificates accompanied by an
executed stock power; and (4) signature guarantees, if
necessary (see below). The transfer agent may require that
you provide additional information, such as corporate
resolutions or powers of attorney, if applicable. If you are
redeeming from an IRA account, you must include a statement
of whether or not you are at least 59 1/2 years old and
whether you wish to have federal income tax withheld from
your proceeds. The transfer agent may require certain other
information before you can redeem from an employer-sponsored
retirement plan. Contact your employer for details.
By Telephone Call the transfer agent. You will be allowed to redeem by
telephone if (1) the proceeds are to be mailed to the
address on record (if there has been no change communicated
to us within the last 30 days) or transferred electronically
to a pre-authorized checking account; (2) you do not hold
physical share certificates; (3) you can provide proper
identification information; (4) the proceeds of the
redemption do not exceed $50,000; and (5) you have not
previously declined the telephone redemption privilege.
Certain accounts, including retirement accounts and 403(b)
plans, may not be redeemed by telephone. The transfer agent
must receive your call during the hours of the customary
trading session of the New York Stock Exchange (NYSE) in
order to effect the redemption at that day's closing price.
By AIM Internet
Connect Place your redemption request at www.aimfunds.com. You will
be allowed to redeem by internet if (1) you do not hold
physical share certificates; (2) you can provide proper
identification information; (3) the proceeds of the
redemption do not exceed $50,000; and (4) you have
established the internet trading option. AIM prototype
retirement accounts may not be redeemed on the internet.
The transfer agent must confirm your transaction during the
hours of the customary trading session of the NYSE in order
to effect the redemption at that day's closing price.
</TABLE>
-------------------------------------------------------------------------------
TIMING AND METHOD OF PAYMENT
We normally will send out checks within one business day, and in any event no
more than seven days, after we accept your request to redeem. If you redeem
shares recently purchased by check, you will be required to wait up to ten
business days before we will send your redemption proceeds. This delay is
necessary to ensure that the purchase check has cleared.
REDEMPTION BY MAIL
If you mail us a request in good order to redeem your shares, we will mail you a
check in the amount of the redemption proceeds to the address on record with us.
If your request is not in good order, you may have to provide us with additional
documentation in order to redeem your shares.
REDEMPTION BY TELEPHONE
If you redeem by telephone, we will mail you a check in the amount of the
redemption proceeds to your address of record (if there has been no change
communicated to the transfer agent within the previous 30 days) or transmit them
electronically to your pre-authorized bank account. We use reasonable procedures
to confirm that instructions communicated by telephone are genuine and are not
liable for telephone instructions that are reasonably believed to be genuine.
REDEMPTION BY INTERNET
If you redeem by internet, we will transmit your redemption proceeds
electronically to your pre-authorized bank account. We use reasonable procedures
to confirm that instructions communicated by internet are genuine and are not
liable for internet instructions that are reasonably believed to be genuine.
PAYMENT FOR SYSTEMATIC WITHDRAWALS
You may arrange for regular monthly or quarterly withdrawals from your account
of at least $50. You also may make annual withdrawals if you own Class A shares.
We will redeem enough shares from your account to cover the amount withdrawn.
You must have an account balance of at least $5,000 to establish a Systematic
Withdrawal Plan. You can stop this plan at any time by giving ten days prior
notice to the transfer agent.
EXPEDITED REDEMPTIONS
(AIM Cash Reserve Shares of AIM Money Market Fund only)
If we receive your redemption order before 11:30 a.m. Eastern Time, we will try
to transmit payment of redemption proceeds on that same day. If we receive your
redemption order after 11:30 a.m. Eastern Time and before the close of the
customary trading session of the NYSE, we generally will transmit payment on the
next business day.
A-5 MCF--06/00
<PAGE> 49
--------------
THE AIM FUNDS
--------------
REDEMPTIONS BY CHECK
(Class A shares of AIM Tax-Exempt Cash Fund and AIM Cash Reserve Shares of AIM
Money Market Fund only)
You may redeem shares of these AIM Funds by writing checks in amounts of $250 or
more if you have completed an authorization form. Redemption by check is not
available for retirement accounts.
SIGNATURE GUARANTEES
We require a signature guarantee when you redeem by mail and
(1) the amount is greater than $50,000;
(2) you request that payment be made to someone other than the name registered
on the account;
(3) you request that payment be sent somewhere other than the bank of record on
the account; or
(4) you request that payment be sent to a new address or an address that changed
in the last 30 days.
The transfer agent will accept a guarantee of your signature by a number of
financial institutions. Call the transfer agent for additional information. Some
institutions have transaction amount maximums for these guarantees. Please check
with the guarantor institution.
REINSTATEMENT PRIVILEGE (Class A shares only)
You may, within 90 days after you sell Class A shares (except Class A shares of
AIM Tax-Exempt Cash Fund), reinvest all or part of your redemption proceeds in
Class A shares of any AIM Fund at net asset value in an identically registered
account. If you sold Class A shares of AIM Limited Maturity Treasury Fund or AIM
Tax-Free Intermediate Fund, you will incur an initial sales charge reflecting
the difference between the initial sales charges on those Funds and the ones in
which you will be investing. In addition, if you paid a contingent deferred
sales charge (CDSC) on any reinstated amount, you will not be subject to a CDSC
if you later redeem that amount. You must notify the transfer agent in writing
at the time you reinstate that you are exercising your reinstatement privilege.
You may exercise this privilege only once per year.
REDEMPTIONS BY THE AIM FUNDS
If your account has been open at least one year, you have not made an additional
purchase in the account during the past six calendar months, and the value of
your account falls below $500 for three consecutive months due to redemptions or
exchanges (excluding retirement accounts), the AIM Funds have the right to
redeem the account after giving you 60 days' prior written notice. You may avoid
having your account redeemed during the notice period by bringing the account
value up to $500 or by utilizing the Automatic Investment Plan.
If an AIM Fund determines that you have not provided a correct Social Security
or other tax ID number on your account application, the AIM Fund may, at its
discretion, redeem the account and distribute the proceeds to you.
EXCHANGING SHARES
You may, under certain circumstances, exchange shares in one AIM Fund for those
of another AIM Fund. Before requesting an exchange, review the prospectus of the
AIM Fund you wish to acquire. Exchange privileges also apply to holders of the
Connecticut General Guaranteed Account, established for tax-qualified group
annuities, for contracts purchased on or before June 30, 1992.
PERMITTED EXCHANGES
Except as otherwise stated below, you may exchange your shares for shares of the
same class of another AIM Fund. You may exchange AIM Cash Reserve Shares of AIM
Money Market Fund for Class A shares of another AIM Fund, or vice versa. You
also may exchange AIM Cash Reserve Shares of AIM Money Market Fund for Class B
shares or Class C shares of another AIM Fund, but only if the AIM Cash Reserve
Shares were purchased directly and not acquired by exchange. You may be required
to pay an initial sales charge when exchanging from a Fund with a lower initial
sales charge than the one into which you are exchanging. If you exchange from
Class A shares not subject to a CDSC into Class A shares subject to those
charges, you will be charged a CDSC when you redeem the exchanged shares. The
CDSC charged on redemption of those shares will be calculated starting on the
date you acquired those shares through exchange.
YOU WILL NOT PAY A SALES CHARGE WHEN EXCHANGING:
(1) Class A shares with an initial sales charge (except for Class A shares of
AIM Limited Maturity Treasury Fund and AIM Tax-Free Intermediate Fund) for
Class A shares of another AIM Fund or AIM Cash Reserve Shares of AIM Money
Market Fund;
(2) Class A shares of AIM Limited Maturity Treasury Fund and AIM Tax-Free
Intermediate Fund for
(a) one another;
(b) AIM Cash Reserve Shares of AIM Money Market Fund or Class A shares of
AIM Tax-Exempt Cash Fund; or
(c) Class A shares of another AIM Fund, but only if
(i) you acquired the original shares before May 1, 1994; or
(ii) you acquired the original shares on or after May 1, 1994 by way of
an exchange from shares with higher sales charges;
(3) AIM Cash Reserve Shares of AIM Money Market Fund or Class A shares of AIM
Tax-Exempt Cash Fund for
(a) one another;
(b) Class A shares of an AIM Fund subject to an initial sales charge (except
for Class A shares of AIM Limited Maturity Treasury Fund and AIM
Tax-Free Intermediate Fund), but only if you acquired the original
shares
(i) prior to May 1, 1994 by exchange from Class A shares subject to an
initial sales charge;
MCF--06/00 A-6
<PAGE> 50
--------------
THE AIM FUNDS
--------------
(ii) on or after May 1, 1994 by exchange from Class A shares subject to
an initial sales charge (except for Class A shares of AIM Limited
Maturity Treasury Fund and AIM Tax-Free Intermediate Fund); or
(c) Class A shares of AIM Limited Maturity Treasury Fund and AIM Tax-Free
Intermediate Fund, but only if you acquired the original shares by
exchange from Class A shares subject to an initial sales charge; or
(4) Class B shares for other Class B shares, and Class C shares for other Class
C shares.
(5) AIM Cash Reserve Shares of AIM Money Market Fund for Class B shares and
Class C shares.
EXCHANGES NOT PERMITTED
You may not exchange Class A shares subject to contingent deferred sales charges
for Class A shares of AIM Limited Maturity Treasury Fund, AIM Tax-Free
Intermediate Fund or AIM Tax-Exempt Cash Fund.
EXCHANGE CONDITIONS
The following conditions apply to all exchanges:
- You must meet the minimum purchase requirements for the AIM Fund into which
you are exchanging;
- Shares of the AIM Fund you wish to acquire must be available for sale in your
state of residence;
- Exchanges must be made between accounts with identical registration
information;
- The account you wish to exchange from must have a certified tax identification
number (or the Fund has received an appropriate Form W-8 or W-9);
- Shares must have been held for at least one day prior to the exchange;
- If you have physical share certificates, you must return them to the transfer
agent prior to the exchange; and
- You are limited to a maximum of 10 exchanges per calendar year, because
excessive short-term trading or market-timing activity can hurt fund
performance. If you exceed that limit, or if an AIM Fund or the distributor
determines, in its sole discretion, that your short-term trading is excessive
or that you are engaging in market-timing activity, it may reject any
additional exchange orders. An exchange is the movement out of (redemption)
one AIM Fund and into (purchase) another AIM Fund.
TERMS OF EXCHANGE
Under unusual market conditions, an AIM Fund may delay the purchase of shares
being acquired in an exchange for up to five business days if it determines that
it would be materially disadvantaged by the immediate transfer of exchange
proceeds. There is no fee for exchanges. The exchange privilege is not an option
or right to purchase shares. Any of the participating AIM Funds or the
distributor may modify or discontinue this privilege at any time.
BY MAIL
If you wish to make an exchange by mail, you must include original signatures of
each registered owner exactly as the shares are registered, the account
registration and account number, the dollar amount or number of shares to be
exchanged and the names of the AIM Funds from which and into which the exchange
is to be made.
BY TELEPHONE
Conditions that apply to exchanges by telephone are the same as redemptions by
telephone, including that the transfer agent must receive exchange requests
during the hours of the customary trading session of the NYSE; however, you
still will be allowed to exchange by telephone even if you have changed your
address of record within the preceding 30 days.
BY INTERNET
You will be allowed to exchange by internet if (1) you do not hold physical
share certificates; (2) you can provide proper identification information; and
(3) you have established the internet trading option.
EXCHANGING CLASS B AND CLASS C SHARES
If you make an exchange involving Class B or Class C shares, the amount of time
you held the original shares will be added to the holding period of the Class B
or Class C shares, respectively, into which you exchanged for the purpose of
calculating contingent deferred sales charges (CDSC) if you later redeem the
exchanged shares. If you redeem Class B shares acquired by exchange via a tender
offer by AIM Floating Rate Fund, you will be credited with the time period you
held the shares of AIM Floating Rate Fund for the purpose of computing the early
withdrawal charge applicable to those shares.
-------------------------------------------------------------------------------
EACH AIM FUND AND ITS AGENTS RESERVE THE RIGHT AT ANY TIME TO:
- REJECT OR CANCEL ANY PART OF ANY PURCHASE OR EXCHANGE ORDER;
- MODIFY ANY TERMS OR CONDITIONS OF PURCHASE OF SHARES OF ANY AIM FUND;
- REJECT OR CANCEL ANY REQUEST TO ESTABLISH THE AUTOMATIC INVESTMENT PLAN AND
SYSTEMATIC WITHDRAWAL PLAN OPTIONS ON THE SAME ACCOUNT; OR
- WITHDRAW ALL OR ANY PART OF THE OFFERING MADE BY THIS PROSPECTUS.
------------------------------------------------------------------------------
A-7 MCF--06/00
<PAGE> 51
--------------
THE AIM FUNDS
--------------
PRICING OF SHARES
DETERMINATION OF NET ASSET VALUE
The price of each AIM Fund's shares is the fund's net asset value per share. The
AIM Funds value portfolio securities for which market quotations are readily
available at market value. The AIM Funds value short-term investments maturing
within 60 days at amortized cost, which approximates market value. AIM Money
Market Fund and AIM Tax-Exempt Cash Fund value all of their securities at
amortized cost. AIM High Income Municipal Fund, AIM Municipal Bond Fund, AIM
Tax-Exempt Bond Fund of Connecticut and AIM Tax-Free Intermediate Fund value
variable rate securities that have an unconditional demand or put feature
exercisable within seven days or less at par, which reflects the market value of
such securities.
The AIM Funds value all other securities and assets at their fair value.
Securities and other assets quoted in foreign currencies are valued in U.S.
dollars based on the prevailing exchange rates on that day. In addition, if,
between the time trading ends on a particular security and the close of the
customary trading session of the NYSE, events occur that materially affect the
value of the security, the AIM Funds may value the security at its fair value as
determined in good faith by or under the supervision of the Board of Directors
or Trustees of the AIM Fund. The effect of using fair value pricing is that an
AIM Fund's net asset value will be subject to the judgment of the Board of
Directors or Trustees or its designee instead of being determined by the market.
Because some of the AIM Funds may invest in securities that are primarily listed
on foreign exchanges that trade on days when the AIM Funds do not price their
shares, the value of those funds' assets may change on days when you will not
be able to purchase or redeem fund shares.
Each AIM Fund determines the net asset value of its shares on each day the
NYSE is open for business, as of the close of the customary trading session, or
any earlier NYSE closing time that day. AIM Money Market Fund also determines
its net asset value as of 12:00 noon Eastern Time on each day the NYSE is open
for business.
TIMING OF ORDERS
You can purchase, exchange or redeem shares during the hours of the customary
trading session of the NYSE. The AIM Funds price purchase, exchange and
redemption orders at the net asset value calculated after the transfer agent
receives an order in good form. An AIM Fund may postpone the right of redemption
only under unusual circumstances, as allowed by the Securities and Exchange
Commission, such as when the NYSE restricts or suspends trading.
TAXES
In general, dividends and distributions you receive are taxable as ordinary
income or long-term capital gains for federal income tax purposes, whether you
reinvest them in additional shares or take them in cash. Distributions are
generally taxable to you at different rates depending on the length of time
the fund holds its assets. Different tax rates may apply to ordinary income
and long-term capital gain distributions, regardless of how long you have held
your shares. Every year, you will be sent information showing the amount of
dividends and distributions you received from each AIM Fund during the prior
year.
Any long-term or short-term capital gains realized from redemptions of AIM
Fund shares will be subject to federal income tax. Exchanges of shares for
shares of another AIM Fund are treated as a sale, and any gain realized on the
transaction will generally be subject to federal income tax.
INVESTORS IN TAX-EXEMPT FUNDS SHOULD READ THE INFORMATION UNDER THE HEADING
"OTHER INFORMATION -- SPECIAL TAX INFORMATION REGARDING THE FUND" IN THEIR
PROSPECTUS.
The foreign, state and local tax consequences of investing in AIM Fund shares
may differ materially from the federal income tax consequences described above.
You should consult your tax advisor before investing.
MCF--06/00 A-8
<PAGE> 52
----------------------------
AIM ADVISOR REAL ESTATE FUND
----------------------------
OBTAINING ADDITIONAL INFORMATION
--------------------------------------------------------------------------------
More information may be obtained free of charge upon request. The Statement of
Additional Information (SAI), a current version of which is on file with the
Securities and Exchange Commission (SEC), contains more details about the fund
and is incorporated by reference into the prospectus (is legally a part of this
prospectus). Annual and semiannual reports to shareholders contain additional
information about the fund's investments. The fund's annual report also
discusses the market conditions and investment strategies that significantly
affected the fund's performance during its last fiscal year.
If you have questions about this fund, another fund in The AIM Family of
Funds--Registered Trademark-- or your account, or wish to obtain free copies of
the fund's current SAI or annual or semiannual reports, please contact us
--------------------------------------------------------------------------------
<TABLE>
<S> <C>
BY MAIL: A I M Fund Services, Inc.
P.O. Box 4739
Houston, TX 77210-4739
BY TELEPHONE: (800) 347-4246
BY E-MAIL: [email protected]
ON THE INTERNET: http://www.aimfunds.com
(prospectuses and annual
and semiannual reports only)
--------------------------------------------------------------------------------
</TABLE>
You also can review and obtain copies of the fund's SAI, reports and other
information at the SEC's Public Reference Room in Washington, DC; on the EDGAR
database on the SEC's Internet website (http://www.sec.gov); or, after paying a
duplication fee, by sending a letter to the SEC's Public Reference Section,
Washington, DC 20549-0102 or by sending an electronic mail request to
[email protected]. Please call the SEC at 1-202-942-8090 for information about
the Public Reference Room.
----------------------------------
AIM Advisor Real Estate Fund
SEC 1940 Act file number: 811-3886
----------------------------------
[AIM LOGO APPEARS HERE] www.aimfunds.com REA-PRO-1 INVEST WITH DISCIPLINE
--Registered Trademark-- --Registered Trademark--
<PAGE> 53
STATEMENT OF
ADDITIONAL INFORMATION
AIM ADVISOR FLEX FUND
AIM ADVISOR INTERNATIONAL VALUE FUND
AIM ADVISOR REAL ESTATE FUND
(SERIES PORTFOLIOS OF AIM ADVISOR FUNDS)
11 GREENWAY PLAZA
SUITE 100
HOUSTON, TEXAS 77046-1173
(713) 626-1919
----------
THIS STATEMENT OF ADDITIONAL INFORMATION IS NOT A PROSPECTUS
AND IT SHOULD BE READ IN CONJUNCTION WITH
A PROSPECTUS OF THE ABOVE-NAMED FUNDS,
A COPY OF WHICH MAY BE OBTAINED
FROM AUTHORIZED DEALERS OR BY WRITING
A I M DISTRIBUTORS, INC.,
P.O. BOX 4739, HOUSTON, TX 77210-4739
OR BY CALLING (800) 347-4246
----------
STATEMENT OF ADDITIONAL INFORMATION DATED SEPTEMBER 11, 2000,
RELATING TO THE AIM ADVISOR FLEX FUND PROSPECTUS DATED SEPTEMBER 11, 2000,
THE AIM ADVISOR INTERNATIONAL VALUE FUND PROSPECTUS DATED SEPTEMBER 11, 2000,
AND THE AIM ADVISOR REAL ESTATE FUND DATED SEPTEMBER 11, 2000
<PAGE> 54
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
<S> <C>
INTRODUCTION......................................................................................................1
GENERAL INFORMATION ABOUT THE TRUST...............................................................................1
The Trust and its Shares.................................................................................1
ADDITIONAL INFORMATION ABOUT THE FUNDS............................................................................3
Flex Fund................................................................................................3
Real Estate Fund.........................................................................................5
International Value Fund.................................................................................5
INVESTMENT STRATEGIES AND RISKS...................................................................................6
Convertible Securities...................................................................................7
Foreign Securities.......................................................................................7
Developing Countries.....................................................................................8
Options..................................................................................................8
Combined Option Positions................................................................................9
Futures Contracts........................................................................................9
Options on Futures Contracts............................................................................10
Risks as to Futures Contracts and Related Options.......................................................11
Forward Foreign Currency Exchange Contracts.............................................................12
Securities Issued on a When-Issued or Delayed Delivery Basis............................................12
Swap Agreements.........................................................................................12
Short Sales.............................................................................................13
Mortgage-Related Securities.............................................................................13
Risks of Mortgage-Related Securities....................................................................16
Real-Estate Industry Securities.........................................................................16
Repurchase Agreements...................................................................................16
Lending of Portfolio Securities.........................................................................17
Interfund Loans.........................................................................................17
Equity-Linked Derivatives...............................................................................17
Investment in Other Investment Companies................................................................18
Temporary Defensive Investments.........................................................................18
INVESTMENT RESTRICTIONS..........................................................................................18
Fundamental Restrictions................................................................................18
Non-Fundamental Restrictions............................................................................19
PORTFOLIO SECURITIES LOANS.......................................................................................20
MANAGEMENT OF THE TRUST..........................................................................................21
Trustees and Officers...................................................................................21
Remuneration of Trustees................................................................................24
AIM Funds Retirement Plan for Eligible Directors/Trustees...............................................26
INVESTMENT ADVISORY AND OTHER SERVICES...........................................................................27
THE DISTRIBUTION PLANS...........................................................................................31
The Class A and C Plan..................................................................................31
The Class B Plan........................................................................................32
Both Plans..............................................................................................32
THE DISTRIBUTOR..................................................................................................38
</TABLE>
i
<PAGE> 55
<TABLE>
<S> <C>
REDUCTIONS IN INITIAL SALES CHARGES..............................................................................42
CONTINGENT DEFERRED SALES CHARGE EXCEPTIONS......................................................................46
HOW TO PURCHASE AND REDEEM SHARES................................................................................48
Backup Withholding......................................................................................49
NET ASSET VALUE DETERMINATION....................................................................................50
DIVIDENDS, DISTRIBUTIONS AND TAX MATTERS.........................................................................51
Reinvestment of Dividends and Distributions.............................................................51
Tax Matters.............................................................................................52
Special Tax Information.................................................................................52
Qualification as a Regulated Investment Company.........................................................52
Determination of Taxable Income of a Regulated Investment Company.......................................53
Excise Tax on Regulated Investment Companies............................................................54
Swap Agreements.........................................................................................54
Investment in Passive Foreign Investment Companies......................................................55
Debt Securities Acquired at a Discount..................................................................55
Distributions...........................................................................................56
Disposition of Shares...................................................................................56
Other Taxation..........................................................................................57
PORTFOLIO TRANSACTIONS AND BROKERAGE.............................................................................57
General Brokerage Policy................................................................................57
Allocation of Portfolio Transactions....................................................................58
Section 28(e) Standards.................................................................................58
Transactions with Regular Brokers.......................................................................59
Brokerage Commissions Paid..............................................................................59
Portfolio Turnover......................................................................................60
REDEMPTIONS......................................................................................................60
PERFORMANCE INFORMATION..........................................................................................60
SHAREHOLDER INFORMATION..........................................................................................63
MISCELLANEOUS INFORMATION........................................................................................66
Charges for Certain Account Information.................................................................66
Audit Reports...........................................................................................66
Legal Matters...........................................................................................66
Custodian and Transfer Agent............................................................................66
Principal Holders of Securities.........................................................................67
APPENDIX.........................................................................................................70
FINANCIAL STATEMENTS.............................................................................................FS
</TABLE>
ii
<PAGE> 56
INTRODUCTION
AIM Advisor Funds (the "Trust") is a series mutual fund. The rules and
regulations of the United States 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 AIM ADVISOR FLEX FUND (formerly, INVESCO Advisor Flex
Portfolio) (the "Flex Fund") is included in a Prospectus dated September 11,
2000. The information for the AIM ADVISOR INTERNATIONAL VALUE FUND (formerly,
INVESCO Advisor International Value Portfolio) (the "International Value Fund")
is included in a Prospectus dated September 11, 2000. The information for the
AIM ADVISOR REAL ESTATE FUND (formerly, INVESCO Advisor Real Estate Portfolio)
(the "Real Estate Fund") is included in a Prospectus dated September 11, 2000.
Additional copies of the Prospectuses and Statement of Additional Information
may be obtained without charge by writing the principal distributor of the
Trust's shares, A I M Distributors, Inc. ("AIM Distributors"), P.O. Box 4739,
Houston, Texas 77210-4739, or by calling (800) 347-4246. Investors must receive
a Prospectus before they invest in the Funds.
This Statement of Additional Information is intended to furnish
prospective investors with additional information concerning the Funds. Some of
the information required to be in this Statement of Additional Information is
also included in the Prospectus, and in order to avoid repetition, reference
will be made to sections of the Prospectus. Additionally, the Prospectus and
this Statement of Additional Information omit certain information contained in
the Trust's Registration Statement filed with the SEC. Copies of the
Registration Statement, including items omitted from the Prospectus and this
Statement of Additional Information, may be obtained from the SEC by paying the
charges prescribed under its rules and regulations.
GENERAL INFORMATION ABOUT THE TRUST
THE TRUST AND ITS SHARES
The Trust is currently organized as a Delaware business trust under an
Agreement and Declaration of Trust, dated December 6, 1999, as amended (the
"Trust Agreement"). The Trust was organized in 1989 as AIM Advisor Funds, Inc.,
a Maryland corporation, pursuant to Amended and Restated Articles of
Incorporation. Pursuant to an Agreement and Plan of Reorganization, the Funds
were reorganized on [September 11, 2000] as portfolios of the Trust, which is
registered under the Investment Company Act of 1940, as amended (the "1940
Act"), as an open-end series, management investment company. Each Fund is a
series of the Trust. The Trust currently consists of three separate portfolios:
AIM ADVISOR FLEX FUND , AIM ADVISOR INTERNATIONAL VALUE FUND and AIM ADVISOR
REAL ESTATE FUND (individually, a "Fund" and collectively, the "Funds"). Each
portfolio of the Trust offers Class A, Class B and Class C shares. This
Statement of Additional Information and the associated Prospectuses relate
solely to each Fund. Prior to August 4, 1997 and January 16, 1996, the Trust was
known as INVESCO Advisor Funds, Inc. and the EBI Funds, Inc., respectively.
Effective August 4, 1997, A I M Advisors, Inc. ("AIM" or "Advisor")
became the investment advisor for the Funds pursuant to an investment advisory
agreement with terms substantially identical to those of the Trust's prior
investment advisory contracts with INVESCO Services, Inc. INVESCO Global Asset
Management (N.A.), Inc. is the sub-advisor for INTERNATIONAL VALUE FUND.
INVESCO, Inc. (formerly known as INVESCO Capital Management, Inc.) is the
sub-advisor for FLEX FUND and REAL ESTATE FUND.
Pursuant to the Agreement and Plan of Reorganization, the Funds
succeeded to the assets and assumed the liabilities of the series portfolios
with corresponding names (the "Predecessor Funds") of AIM Advisor Funds, Inc.
All historical financial and other information contained in this Statement of
Additional Information for periods prior to [September 11, 2000] relating to the
Funds (or a class thereof) is that of the Predecessor Funds (or the
corresponding class thereof.) Shares of beneficial interest of the Trust are
redeemable at their net asset value (subject, in certain circumstances, to a
contingent deferred sales charge) at the option of the shareholder or at the
option of the Trust in certain circumstances. For information concerning the
methods of redemption, investors should consult the Prospectuses under the
caption "Redeeming Shares."
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<PAGE> 57
The assets received by the Trust from the issue or sale of shares of
each of its series of shares, and all income, earnings, profits and proceeds
thereof, subject only to the rights of creditors, are specifically allocated to
the appropriate Fund. They constitute the underlying assets of each Fund, are
required to be segregated on the Trust's books of account, and are to be charged
with the expenses with respect to such Fund and its respective classes. Any
general expenses of the Trust not readily identifiable as belonging to a
particular Fund are allocated by or under the direction of the Board of
Trustees, primarily on the basis of relative net assets, or other relevant
factors.
Each share of each Fund represents an equal proportionate interest in
that Fund with each other share and is entitled to such dividends and
distributions out of the income belonging to such Fund as are declared by the
Board. Each such class represents interests in the same portfolio of investments
but, as further described in the Prospectuses, each such class is subject to
differing sales charges and expenses, which differences will result in differing
net asset values and dividends and distributions. Upon any liquidation of the
Trust, shareholders of each class are entitled to share pro rata in the net
assets belonging to the applicable Fund allocable to such class available for
distribution after satisfaction of outstanding liabilities of the Fund allocable
to such class.
The Trust is not required to hold annual or regular meetings of
shareholders. Meetings of shareholders of a Fund will be held from time to time
to consider matters requiring a vote of such shareholders in accordance with the
requirements of the 1940 Act, state law or the provisions of the Trust
Agreement. It is not expected that shareholder meetings will be held annually.
Each share of a Fund is entitled to one vote, to participate equally in
dividends and distributions declared by the Board of Trustees with respect to
the class of such Fund and, upon liquidation of the Fund, to participate
proportionately in the net assets of the Fund allocable to such class remaining
after satisfaction of the outstanding liabilities of the Fund allocable to such
class. Fund shares are fully paid, non-assessable and fully transferable when
issued and have no preemptive rights and have such conversion and exchange
rights as set forth in the Prospectuses and Statement of Additional Information.
Fractional shares have proportionately the same rights, including voting rights,
as are provided for full shares.
Class B shares automatically convert to Class A shares at the end of
the month which is eight years after the date of purchase. A pro rata portion of
shares from reinvested dividends and distributions convert at the same time. No
other shares have conversion rights. Because Class B shares convert into Class A
shares, the holders of Class B shares (as well as the holders of Class A shares)
of each Fund must approve any material increase in fees payable with respect to
that Fund under the Class A and C Plan or a new class of shares into which the
Class B shares will convert must be created which will be identical in all
material respects to the Class A shares prior to the material increase in fees.
Except as specifically noted above, shareholders of each Fund are
entitled to one vote per share (with proportionate voting for fractional
shares), irrespective of the relative net asset value of the different classes
of shares, where applicable, of a Fund. However, on matters affecting one
portfolio of the Company or one class of shares, a separate vote of shareholders
of that portfolio or class is required. Shareholders of a portfolio or class are
not entitled to vote on any matter which does not affect that portfolio or class
but which requires a separate vote of another portfolio or class. An example of
a matter which would be voted on separately by shareholders of a portfolio is
the approval of an advisory agreement, and an example of a matter which would be
voted on separately by shareholders of a class of shares is approval of a
distribution plan. Shareholders of the Funds do not have cumulative voting
rights, and therefore the holders of more than 50% of the outstanding shares of
all Funds voting together for election of trustees may elect all of the members
of the Board of Trustees of the Trust. In such event, the remaining holders
cannot elect any trustees of the Trust.
The Trust Agreement provides that the trustees of the Trust shall hold
office during the existence of the Trust, except as follows: (a) any trustee may
resign or retire; (b) any trustee may be removed by a vote of at least
two-thirds of the outstanding shares of the Trust, or at any time by written
instrument signed by at least two-thirds of the trustees and specifying when
such removal becomes effective; or (c) any trustee who has died
2
<PAGE> 58
or become incapacitated and is unable to serve may be retired by a written
instrument signed by a majority of the trustees and specifying the date of his
or her retirement.
Under Delaware law, shareholders of a Delaware business trust shall be
entitled to the same limitations of liability extended to shareholders of
private for-profit corporations, however, there is a remote possibility that
shareholders could, under certain circumstances, be held liable for the
obligations of the Trust to the extent the courts of another state which does
not recognize such limited liability were to apply the laws of such state to a
controversy involving such obligations. However, the Trust Agreement disclaims
shareholder liability for acts or obligations of the Trust and requires that
notice of such disclaimer be given in each agreement, obligation or instrument
entered into or executed by the Trust or the trustees to all parties, and each
party thereto must expressly waive all rights of action directly against
shareholders of the Trust. The Trust Agreement provides for indemnification out
of the property of a Fund for all losses and expenses of any shareholder of such
Fund held liable on account of being or having been a shareholder. Thus, the
risk of a shareholder incurring financial loss due to shareholder liability is
limited to circumstances in which a Fund would be unable to meet its obligations
and wherein the complaining party was held not to be bound by the disclaimer.
The Trust Agreement further provides that the trustees and officers will
not be liable for any act, omission or obligation of the Trust or any trustee or
officer. However, nothing in the Trust Agreement protects a trustee or officer
against any liability to the Trust or to the shareholders to which a trustee or
officer would otherwise be subject by reason of willful misfeasance, bad faith,
gross negligence, or reckless disregard of the duties involved in the conduct of
his or her office with the Trust. The Trust Agreement provides for
indemnification by the Trust of the trustees, officers, employees and agents of
the Trust, if it is determined that such person acted in good faith and
reasonably believed: (1) in the case of conduct in his or her official capacity
for the Trust, that his conduct was in the Trust's best interests, (2) in all
other cases, that his or her conduct was at least not opposed to the Trust's
best interests and (3) in a criminal proceeding, that he or she had no reason to
believe that his or her conduct was unlawful. The Trust Agreement also
authorizes the purchase of liability insurance on behalf of trustees and
officers.
ADDITIONAL INFORMATION ABOUT THE FUNDS
FLEX FUND
The FLEX FUND invests in a combination of equity securities and fixed
and variable income securities. It is possible that the ability of the Fund to
achieve its objective of high total return could be diminished by its
restriction on the use of non-investment grade corporate obligations in the
income securities portion of its portfolio.
Typically a minimum of 20% of the total assets of the FLEX FUND will be
invested in equity securities and a minimum of 20% of total assets will be
invested in fixed and variable income securities. The remaining 60% of its
portfolio will vary in asset allocation according to INVESCO, Inc.'s assessment
of business, economic, and market conditions. INVESCO, Inc.'s analytical
processes associated with making allocation decisions are based upon a
combination of historical financial results and current prices for stocks and
the current yield to maturity available in the market for bonds. The premium
return available from one category relative to the other determines the actual
asset deployment. INVESCO, Inc.'s asset allocation processes are systematic and
are based on current information rather than forecasted change. The FLEX FUND
seeks reasonably consistent returns over a variety of market cycles.
The FLEX FUND has established minimum investment standards with respect
to its investment in common stocks which are identical to those established by
INVESCO, Inc., the Fund's sub-advisor, with respect to the management of large
capitalization value portfolios for its private advisory clients. These
standards include utilization of a proprietary database consisting of 800 of the
largest companies in the United States, each of which is required to have 10
years of financial history in order to be included in the database. The database
relates the current price of each stock to each company's historical record and
ranks the 800
3
<PAGE> 59
stocks based on the best relative value. The top 250 stocks are then subjected
to fundamental investment analysis, resulting in a purchase list of 100 stocks
from which investments are selected. The fixed income securities in which FLEX
FUND will invest will consist of those fixed income obligations which INVESCO,
Inc., the Fund's sub-advisor, believes are of a higher quality than has been
generally recognized by the marketplace. If INVESCO, Inc.'s analysis is correct
in these cases, the value of these obligations should increase as the
marketplace recognizes the higher quality of the obligations. INVESCO, Inc.
intends to identify investments which it believes to be undervalued (and
therefore higher yielding) in light of, among other things, historic and current
financial condition of the issuer, current and anticipated cash flow and
borrowing requirement, strength of management, responsiveness to business
conditions, credit standing and historic and current results of operations.
Fixed-income securities in which the FLEX FUND invests consist
primarily of U.S. government obligations and carefully selected fixed income
corporate obligations which INVESCO, Inc. considers to be of investment grade
quality. The FLEX FUND invests only in those corporate obligations which in
INVESCO, Inc.'s opinion have the investment characteristics described by Moody's
Investors Service, Inc. ("Moody's") in rating corporate obligations within its
four highest ratings of Aaa, Aa, A and Baa and by Standard & Poor's, a division
of McGraw-Hill Companies Inc. ("S&P") in rating corporate obligations within its
four highest ratings of AAA, AA, A and BBB. It is possible that the ability of
the Fund to achieve its objective of high total return could be diminished by
its restriction on the use of non-investment grade corporate obligations. For a
description of these ratings, see the Appendix. Investments in government
obligations will include direct obligations of the U.S. government, such as U.S.
Treasury Bills, Notes and Bonds, obligations guaranteed by the U.S. government,
such as Government National Mortgage Association obligations, and obligations of
U.S. government authorities, agencies and instrumentalities, such as Fannie Mae
(formerly, the Federal National Mortgage Association), Federal Home Loan Bank,
Federal Financing Bank and Federal Farm Credit Bank obligations.
The FLEX FUND may invest in mortgage-backed securities, including
mortgage pass-through securities and collateralized mortgage obligations
("CMOs"), which carry a guarantee from an agency of the U.S. government or a
private issuer of the timely payment of principal and interest or, in the case
of unrated securities, are considered by the sub-advisor to be investment grade
quality. For a description of the risks associated with these securities, see
"Investment Strategies and Risks."
The FLEX FUND does not require that its investments in corporate
obligations actually be rated by Moody's or S&P, and it may acquire such unrated
obligations which in the opinion of INVESCO, Inc. are of quality at least equal
to a rating of Baa by Moody's or BBB by S&P. With respect to investments in
unrated obligations, the Fund will be more reliant on INVESCO, Inc.'s judgement
and experience than would be the case if the FLEX FUND invested solely in rated
obligations. Obligations rated Baa Moody's or BBB by S&P may have speculative
characteristics. A rating of Baa by Moody's indicates that the obligation is of
"medium grade," neither highly protected nor poorly secured. Interest payments
and principal security appear adequate for the present, but certain protective
elements may be lacking or may be characteristically unreliable over any great
length of time. A rating of BBB by S&P indicates that the obligation is in the
lowest "investment grade" security rating. Obligations rated BBB are regarded as
having an adequate capacity to pay principal and interest. Although such
obligations normally exhibit adequate protection parameters, adverse economic
conditions or changing circumstances are more likely to lead to a weakened
capacity to pay principal and interest than obligations in the top three
"investment grade" categories. Investors should note that investments in fixed
income obligations will generally be subject to both credit risk and market
risk. Credit risk relates to the ability of the issuer to meet interest or
principal payments, or both, as they come due. Market risk relates to the fact
that the market values of fixed income obligations in which the Fund invests
generally will be affected changes in the level of interest rates. An increase
in interest rates will generally reduce the value of portfolio investments, and
a decline in interest rates will generally increase the value of portfolio
investments. Both credit and market risks as described above are increased by
investing in fixed income obligations rated Baa by Moody's and BBB by S&P. For a
more detailed description of these ratings, see the Appendix.
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<PAGE> 60
REAL ESTATE FUND
The Fund seeks to achieve its objective by investing primarily in
publicly traded securities of companies related to the real estate industry. The
Fund will not invest directly in private real estate assets.
Under normal circumstances, the Fund will invest at least 65% of its
total assets in equity securities of companies which are principally engaged in
the real estate industry and are listed on U.S. securities exchanges or the
National Association of Securities Dealers Automated Quotation System
("NASDAQ"). Companies listed on NASDAQ are generally smaller-capitalization
companies whose securities may be subject to large price fluctuations which
could increase the potential for short-term gains or losses. For purposes of the
Fund's fundamental restriction regarding industry concentration, real estate and
real-estate related companies shall consist of companies (i) at least 50% of the
assets, gross income or net profits of which are attributable to ownership,
construction, management, or sale of residential, commercial or industrial real
estate, including listed equity real estate investment trusts ("REIT") which own
properties, and listed mortgage REITs which make short-term construction and
development mortgage loans or which invest in long-term mortgages or mortgage
pools, or (ii) the products and services of which are related to the real estate
industry, such as manufacturers and distributors of building supplies and
financial institutions which issue or service mortgages. By concentration, the
Fund will invest 25% or more of its total assets in one or more of the
industries within the sectors enumerated in the sentence immediately before. By
investing in REITs indirectly through the Fund, a shareholder will bear not only
his proportionate share of the expenses of the Fund, but also, indirectly,
similar expenses of the REIT.
The Fund may also invest up to 35% of its total assets in equity, debt,
or convertible securities of companies whose products and services are related
to the real estate industry, such as manufacturers and distributors of building
supplies and financial institutions which issue or service mortgages. The Fund
also may invest up to 35% of its total assets in securities of companies
unrelated to real estate industry which are believed by the sub-advisor to be
undervalued and to have capital appreciation potential. Moreover, consistent
with its objective of current income, the Fund may invest all or part of its
assets in debt securities of companies related to the real estate industry. Debt
securities purchased by the Fund will be limited to those rated at the time of
the investment as investment grade by Moody's or S&P or, if unrated, determined
by the sub-advisor to be of comparable quality. For a description of these
ratings and a discussion of factors relevant to a determination that an unrated
security is of comparable quality, see the Appendix.
INVESCO, Inc., the Fund's sub-advisor, utilizes both fundamental real
estate analysis and quantitative securities analysis to select investments for
the Fund. The fundamental real estate characteristics of securities included in
the qualifying universe are determined by analysis of a company's management and
strategic focus and an evaluation of the location, physical attributes and cash
flow generating capacity of a company's properties. Each component of the
analysis is assigned a weight and each company is systematically ranked to
determine which company's securities are to be emphasized in the selection of
Fund investments.
INVESCO, Inc.'s quantitative analysis applies a proprietary database
and multi-factor regression model to rank individual securities in the
qualifying universe from highest to lowest expected returns. Investment
consideration is limited to those actively traded securities which are expected
to outperform the NAREIT Equity Index over the subsequent three-month period.
The NAREIT Equity Index is composed of common stocks of all tax-qualified equity
REITS listed on the New York Stock Exchange, American Stock Exchange and the
NASDAQ National Market System.
After ranking each security fundamentally and quantitatively, a
diversified portfolio is created through a statistical optimization process.
This technique incorporates such factors as expected return, volatility,
correlation to other stocks already held in the portfolio, and turnover costs.
INTERNATIONAL VALUE FUND
The Fund seeks to achieve its objective by investing at least 65% of
its total assets in a diversified portfolio of foreign equity securities,
consisting of common stocks, preferred stocks, warrants, and securities
5
<PAGE> 61
convertible into common stock. INVESCO Global Asset Management (N.A.), Inc.
("IGAM"), the Fund's sub-advisor, intends to hold securities in its portfolio of
companies domiciled in at least four countries. Moreover, consistent with its
objective of current income, the Fund may invest up to 35% of its total assets
in debt securities rated at the time of investment as investment grade or, if
unrated, determined by the sub-advisor to be of comparable quality.
Although the Fund intends to invest principally in securities of
companies in developed nations, including Europe and the Pacific Rim, it may
also invest up to 20% of its total assets in equity securities of companies
domiciled in emerging market countries.
IGAM has access to the data and research of the Global Asset Allocation
Committee of its parent company, AMVESCAP PLC (formerly INVESCO PLC). See
"Management of the Trust." This worldwide data and research from the parent
company, together with the sub-advisor's proprietary database consisting
primarily of large and medium capitalization non-U.S. companies, provide
investment research and information which aid IGAM in determining which stocks
are selected for the Fund.
Stocks within the sub-advisor's database are subjected to proprietary
computer analytical systems designed to compare the price of each stock to
various factors which include shareholders' equity per share, historic return on
equity, and the company's ability to reinvest earnings for future growth or to
pay earnings in the form of dividends. The results of this analysis are then
used to assist IGAM in determining the relative value of each stock. Each
stock's final selection is based primarily upon IGAM's opinion of the relative
value of the stock and takes into account the company's historic and current
operating results combined with an analysis of the likelihood of favorable
operating results being extended into future years. The final selection of a
stock for the Fund may also take into account the sub-advisor's opinion of the
attractiveness of the stock to the Fund as a whole based on diversification and
risk considerations.
IGAM does not make country or industry allocation decisions based on
worldwide market or industry forecasts. Consequently, the industry and country
weightings in the Fund tend to be a by-product of the stock selection process
and Fund construction. Given the difficulty of profitably applying aggressive
currency management over long periods of time, IGAM tends to incorporate
currency hedging strategies only at the extremes of relative valuation ranges.
INVESTMENT STRATEGIES AND RISKS
Information concerning each Fund's non-fundamental investment
objective(s) is set forth in the Prospectuses under the heading "Investment
Objective and Strategies." There can be no assurance that any Fund will achieve
its objective. The principal features of each Fund's investment program and the
principal risks associated with that investment program are discussed in the
Prospectuses under the heading "Investment Objective and Strategies" and
"Principal Risks of Investing in the Fund."
Set forth in this section is a description of each Fund's investment
policies, strategies and practices. The investment objective(s) of each Fund are
non-fundamental policies and may be changed by the Board of Trustees without
shareholder approval. Each Fund's investment policies, strategies and practices
are also non-fundamental. The Board of Trustees of the Trust reserves the right
to change any of these non-fundamental investment policies, strategies or
practices without shareholder approval. However, shareholders will be notified
before any material change in the investment policies becomes effective. Each
Fund has adopted certain investment restrictions, some of which are fundamental
and cannot be changed without shareholder approval. See "Investment
Restrictions" in this Statement of Additional Information. Individuals
considering the purchase of shares of any Fund should recognize that there are
risks in the ownership of any security.
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<PAGE> 62
Any percentage limitations with respect to assets of a Fund will be
applied at the time of purchase. A later change in percentage resulting from
changes in asset values will not be considered a violation of the percentage
limitations. The percentage limitations applicable to borrowings [and reverse
repurchase agreements] will be applied in accordance with applicable provisions
of the 1940 Act and the rules and regulations promulgated thereunder which
specifically limit each Fund's borrowing abilities.
CONVERTIBLE SECURITIES
Although the equity investments of the INTERNATIONAL VALUE FUND consist
primarily of common and preferred stocks, the Fund may buy securities
convertible into common stock if, for example, the sub-adviser believes that a
company's convertible securities are undervalued in the market. Convertible
securities eligible for purchase by the Fund include convertible bonds,
convertible preferred stocks, and warrants. A warrant is an instrument issued by
a corporation which gives the holder the right to subscribe to a specific amount
of the corporation's capital stock at a set price for a specified period of
time. Warrants do not represent ownership of the securities, but only the right
to buy the securities. The prices of warrants do not necessarily move parallel
to the prices of underlying securities. Warrants may be considered speculative
in that they have no voting rights, pay no dividends, and have no rights with
respect to the assets of a corporation issuing them. Warrant positions will not
be used to increase the leverage of the Fund; consequently, warrant positions
are generally accompanied by cash positions equivalent to the required exercise
amount.
FOREIGN SECURITIES
FLEX FUND and REAL ESTATE FUND may invest up to 25% of total assets
directly in foreign securities and ADRs. INTERNATIONAL VALUE FUND and REAL
ESTATE FUND may also invest in foreign currency-denominated fixed income
securities. Foreign securities are securities issued by companies whose
principal business activities are outside the United States. These foreign
securities may be registered and traded in U.S. markets, traded in foreign
markets or evidenced by ADRs. [Securities of Canadian issuers and sponsored ADRs
are not included within the limitations applicable to foreign securities.]
Investing in foreign securities may involve significant risks not present in
domestic investments. For example, there is generally less publicly available
information about foreign companies, particularly those not subject to the
disclosure and reporting requirements of the U.S. securities laws. Foreign
issuers are generally not bound by uniform accounting, auditing, and financial
reporting requirements and standards of practice comparable to those applicable
to domestic issuers. Investments in foreign securities also involve the risk of
possible adverse changes in investment or exchange control regulations,
expropriation or confiscatory taxation, limitations on the removal of cash or
other assets of a Fund, political or financial instability, or diplomatic and
other developments which could affect such investments. Further, economies of
particular countries or areas of the world may differ favorably or unfavorably
from the economy of the United States. Foreign securities often trade with less
frequency and volume than domestic securities and therefore may exhibit greater
price volatility. Additional costs associated with an investment in foreign
securities may include higher custodial fees than apply to domestic custodial
arrangements, and transaction costs of foreign currency conversions.
ADRs provide a method whereby the Funds may invest in securities issued
by companies whose principal business activities are outside the United States.
These securities will not be denominated in the same currency as the securities
into which they may be converted. Generally, ADRs, in registered form, are
designed for use in U.S. securities markets.
ADRs are receipts typically issued by a U.S. bank or trust company
evidencing ownership of the underlying securities, and may be issued as
sponsored or unsponsored programs. In sponsored programs, an issuer has made
arrangements to have its securities trade in the form of ADRs. In unsponsored
programs, the issuer may not be directly involved in the creation of the
program. Although regulatory requirements with respect to sponsored and
unsponsored programs are generally similar, in some cases it may be easier to
obtain financial information from an issuer that has participated in the
creation of a sponsored program. The FLEX FUND intends to invest only in
sponsored ADRs. The INTERNATIONAL VALUE FUND and REAL ESTATE FUND may invest in
both sponsored and unsponsored ADRs.
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Since certain Funds are authorized to invest in securities denominated
or quoted in currencies other than the U.S. dollar, as well as ADRs with respect
to such securities, changes in foreign currency exchange rates relative to the
U.S. dollar will affect the value of such ADRs and securities in the Funds and
the unrealized appreciation or depreciation of such investments. Changes in
foreign currency exchange rates relative to the U.S. dollar will also affect a
Fund's yield on assets denominated in currencies other than the U.S. dollar and
ADRs.
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 a Fund.
DEVELOPING COUNTRIES
The INTERNATIONAL VALUE FUND may invest in securities of companies
domiciled in developing countries. Investment in developing countries presents
risks greater in degree than, and in addition to, those presented by investment
in foreign issuers in general. A number of developing countries restrict, to
varying degrees, foreign investment in stocks. Repatriation of investment
income, capital, and the proceeds of sales by foreign investors may require
governmental registration and/or approval in some developing countries. A number
of the currencies of developing countries have experienced significant declines
against the U.S. dollar in recent years, and devaluation may occur subsequent to
investments in these currencies by the INTERNATIONAL VALUE FUND. Inflation and
rapid fluctuations in inflation rates have had and may continue to have negative
effects on the economies and securities markets of certain emerging market
countries. Many of the developing securities markets are relatively small, have
low trading volumes, suffer periods of relative illiquidity, and are
characterized by significant price volatility. There is a risk in developing
countries that a future economic or political crisis could lead to price
controls, forced mergers of companies, expropriation or confiscatory taxation,
seizure, nationalization, or creation of government monopolies, any of which may
have a detrimental effect on the Fund's investments.
OPTIONS
The purpose of engaging in put and call transactions is to hedge
against changes in the market value of the Funds' portfolio securities caused by
fluctuating interest rates, fluctuating currency exchange rates and changing
market conditions, and to close out or offset existing positions in such options
or futures contracts as described below. The Funds will not engage in such
transactions for speculative purposes and will engage in such transaction only
for hedging purposes and only when the benefits to be gained outweigh the cost
of entering into such transaction. Each of the Funds is authorized to write
(sell) covered call options on the securities in which it may invest and to
enter into closing purchase transactions with respect to such options. A Fund
may write a call or put option only if the option is "covered" by the Fund
holding a position in the underlying securities or by other means which would
permit immediate satisfaction of the Fund's obligation as writer of the option.
The purchase and writing of options involve certain risks. Writing a call option
obligates a Fund to sell or deliver the option's underlying security, in return
for the strike price, upon exercise of the option. By writing a call option, the
Fund receives an option premium from the purchaser of the call option. Writing
covered call options is generally a profitable strategy if prices remain the
same or fall. Through receipt of the option premium, a Fund would seek to
mitigate the effects of a price decline. By writing covered call options,
however, a Fund gives up the opportunity, while the option is in effect, to
profit from any price increase in the underlying security above the option
exercise price. The writer of an option has no control over the time when it may
be required to fulfill its obligation as a writer of the option. Once an option
writer has received an exercise notice, it cannot effect a closing purchase
transaction in order to terminate its obligation under the option and must
deliver the underlying securities at the exercise price. In addition, a Fund's
ability to sell the
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underlying security will be limited while the option is in effect unless the
Fund effects a closing purchase transaction.
Each Fund may purchase put options. A put purchased by a Fund
constitutes a hedge against a decline in the price of a security owned by the
Fund. It may be sold at a profit or loss depending upon changes in the price of
the underlying security. It may be exercised at a profit provided that the
amount of the decline in the price of the underlying security below the exercise
price during the option period exceeds the option premium, or it may expire
without value. A call constitutes a hedge against an increase in the price of a
security which the Fund has sold short. It may be sold at a profit or loss
depending upon changes in the price of the underlying security, it may be
exercised at a profit provided that the amount of the increase in the price of
the underlying security over the exercise price during the option period exceeds
the option premium, or it may expire without value. The maximum loss exposure
involved in the purchase of an option is the cost of the option contract. A Fund
may engage in strategies employing combinations of covered put and call options.
There can be no assurance that a liquid market will exist when a Fund seeks to
close out an option position. Furthermore, if trading restrictions or
suspensions are imposed on the options markets, a Fund may be unable to close
out a position.
Each Fund may also buy or sell put and call options on foreign
securities and foreign currencies. Currency options traded on U.S. or other
exchanges may be subject to position limits which may limit the ability of the
Funds to reduce foreign currency risk using such options. Over-the-counter
options differ from traded options in that they are two-party contracts with
price and other terms negotiated between buyer and seller and generally do not
have as much market liquidity as exchange-traded options.
COMBINED OPTION POSITIONS
Each Fund, for hedging purposes, may purchase and write options in
combination with each other to adjust the risk and return characteristics of the
Fund's overall position. For example, a Fund may purchase a put option and write
a covered call option on the same underlying instrument, in order to construct a
combined position whose risk and return characteristics are similar to selling a
futures contract. This technique, called a "straddle," enables the Fund to
offset the cost of purchasing a put option with the premium received from
writing the call option. However, by selling the call option, the Fund gives up
the ability for potentially unlimited profit from the put option. Another
possible combined position would involve writing a covered call option at one
strike price and buying a call option at a lower price, in order to reduce the
risk of the written covered call option in the event of a substantial price
increase. Because combined options positions involve multiple trades, they
result in higher transaction costs and may be more difficult to open and close
out.
FUTURES CONTRACTS
Each of the Funds may purchase and sell futures contracts in order to
hedge the value of its portfolio against changes in market conditions. In cases
of purchases of futures contracts, an amount of liquid assets, equal to the cost
of the futures contracts (less any related margin deposits), will be segregated
to collateralize the position and ensure that the use of such futures contracts
is unleveraged. Unlike when a Fund purchases or sells a security, no price is
paid or received by a Fund upon the purchase or sale of a futures contract.
Initially, a Fund will be required to deposit with its custodian for the account
of the broker a stated amount, as called for by the particular contract, of cash
or U.S. Treasury bills. This amount is known as "initial margin." The nature of
initial margin in futures transactions is different from that of margin in
securities transactions in that futures contract margin does not involve the
borrowing of funds by the customer to finance the transactions. Rather, the
initial margin is in the nature of a performance bond or good faith deposit on
the contract which is returned to the Fund upon termination of the futures
contract assuming all contractual obligations have been satisfied. Subsequent
payments, called "variation margin," to and from the broker will be made on a
daily basis as the price of the futures contract fluctuates making the long and
short positions in the futures contract more or less valuable, a process known
as "marking-to-market." For example, when a Fund has purchased a stock index
futures contract and the price of the underlying stock index has risen, that
position will have increased in value and the Fund will receive from the broker
a variation margin payment with respect to that increase in value. Conversely,
where a Fund has purchased a stock index futures contract and
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the price of the underlying stock index has declined, that position would be
less valuable and the Fund would be required to make a variation margin payment
to the broker. Variation margin payments would be made in a similar fashion when
a Fund has purchased an interest rate futures contract. At any time prior to
expiration of the futures contract, a Fund may elect to close the position by
taking an opposite position which will operate to terminate the Fund's position
in the futures contract. A final determination of variation margin is then made,
additional cash is required to be paid by or released to the Fund and the Fund
realizes a loss or gain.
A description of the various types of futures contracts that may be
utilized by the Funds is as follows:
Stock Index Futures Contracts
A stock index assigns relative values to the common stocks included in
the index and the index fluctuates with changes in the market values of the
common stocks so included. A stock index futures contract is an agreement
pursuant to which two parties agree to take or make delivery of an amount of
cash equal to a specified dollar amount times the difference between the stock
index value at the close of the last trading day of the contract and the price
at which the futures contract is originally struck. No physical delivery of the
underlying stocks in the index is made. Currently, stock index futures contracts
can be purchased or sold primarily with respect to broad based stock indices
such as the Standard & Poor's 500 Stock Index, the New York Stock Exchange
Composite Index, the American Stock Exchange Major Market Index, the NASDAQ -100
Stock Index and the Value Line Stock Index. The stock indices listed above
consist of a spectrum of stocks not limited to any one industry. The Funds will
only enter into stock index futures contracts in order to hedge the value of its
portfolio against changes in market conditions. When a Fund anticipates a
significant market or market sector advance, the purchase of a stock index
futures contract affords a hedge against not participating in such advance.
Conversely, in anticipation of or in a general market or market sector decline
that adversely affects the market values of a Fund's portfolio of securities,
the Fund may sell stock index futures contracts. The Funds are subject to
certain restrictions on their use of financial futures contracts and options. A
Fund will not enter into financial futures contracts or purchase options on
financial futures contracts if, after such a transaction, the sum of initial
margin deposits on the open financial futures contracts and of premiums paid on
open options on financial futures contracts would exceed 5% of the Fund's total
assets. [Subject to the provisions of the Trust's fundamental investment
policies, a Fund will not enter into financial futures contracts or write
options (except to close out open positions) if, after such a transaction, the
aggregate principal amount of all open financial futures contract and all
options under which the Fund is obligated would exceed 100% of the Fund's total
assets. A Fund will not purchase put and call options on debt securities if,
after such a transaction, the sum invested for premiums in such options exceeds
2% of the Fund's total assets.]
The Funds will only enter into futures contracts or futures options
which are standardized and traded on a U.S. or foreign exchange or board of
trade, or similar entity, or quoted on an automated quotation system. A Fund
will use financial futures contracts and related options only for "bona fide
hedging" purposes, as such term is defined in applicable regulations of the
Commodity Futures Trading Commission, or, with respect to positions in financial
futures and related options that do not qualify as "bona fide hedging"
positions, will enter into such non-hedging positions only to the extent that
aggregate initial margin deposits plus premiums paid by it for open futures
option positions, less the amount by which any such positions are
"in-the-money," would not exceed 5% of the Fund's total assets.
Foreign Currency Futures Contracts
A Fund may also use futures contracts to hedge the risk of changes in
the exchange rate of foreign currencies. A foreign currency futures contract
provides for the future sale by one party and purchase by another party of a
specified quantity of a foreign currency at a specified price and time.
OPTIONS ON FUTURES CONTRACTS
Each Fund may purchase options on futures contracts. An option on a
futures contract gives the purchaser the right, in return for the premium paid,
to assume a position in a futures contract (a long position if the option is a
call and a short position if the option is a put) at a specified exercise price
at any time during
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the option exercise period. The writer of the option is required upon exercise
to assume an offsetting futures position (a short position if the option is a
call and a long position if the option is a put) at a specified exercise price
at any time during the period of the option. Upon exercise of the option, the
assumption of offsetting futures positions by the writer and holder of the
option will be accompanied by delivery of the accumulated cash balance in the
writer's futures margin account which represents the amount by which the market
price of the futures contract, at exercise, exceeds, in the case of a call, or
is less than, in the case of a put, the exercise price of the option on the
futures contract. If an option on a futures contract is exercised on the last
trading date prior to the expiration date of the option, the settlement will be
made entirely in cash equal to the difference between the exercise price of the
option and the closing price of the futures contract on the expiration date.
A Fund will purchase put options on futures contracts to hedge against
the risk of falling prices for its respective portfolio securities. A Fund will
purchase call options on futures contracts as a hedge against a rise in the
price of securities which it intends to purchase. Options on futures contracts
may also be used to hedge the risks of changes in the exchange rate of foreign
currencies. The purchase of a put option on a futures contract is similar to the
purchase of protective put options on a portfolio security or a foreign
currency. The purchase of a call option on a futures contract is similar in some
respects to the purchase of a call option on an individual security or a foreign
currency. Depending on the pricing of the option compared to either the price of
the futures contract upon which it is based or the price of the underlying
securities or currency, it may or may not be less risky than ownership of the
futures contract or underlying securities or currency.
RISKS AS TO FUTURES CONTRACTS AND RELATED OPTIONS
There are several risks in connection with the use of futures contracts
and related options as hedging devices. One risk arises because of the imperfect
correlation between movements in the price of hedging instruments and movements
in the price of the stock, debt security or foreign currency which are the
subject of the hedge. If the price of a hedging instrument moves less than the
price of the stock, debt security or foreign currency which is the subject of
the hedge, the hedge will not be fully effective. If the price of a hedging
instrument moves more than the price of the stock, debt security or foreign
currency, a Fund will experience either a loss or gain on the hedging instrument
which will not be completely offset by movements in the price of the stock, debt
security or foreign currency which is the subject of the hedge. The use of
options on futures contracts involves the additional risk that changes in the
value of the underlying futures contract will not be fully reflected in the
value of the option.
Successful use of hedging instruments by the Funds is also subject to
AIM's ability to predict correctly movements in the direction of the stock
market, of interest rates or of foreign exchange rates. Because of possible
price distortions in the futures and options markets and because of the
imperfect correlation between movements in the prices of hedging instruments and
the investments being hedged, even a correct forecast by AIM of general market
trends may not result in a completely successful hedging transaction.
It is also possible that where a Fund has sold futures contracts to
hedge its portfolio against a decline in the market, the market may advance and
the value of stocks or debt securities held in its portfolio may decline. If
this occurred, a Fund would lose money on the futures contracts and also
experience a decline in the value of its portfolio securities. Similar risks
exist with respect to foreign currency hedges.
Positions in futures contracts or options may be closed out only on an
exchange on which such contracts are traded. Although the Funds intend to
purchase or sell futures contracts, there is no assurance that a liquid market
on an exchange or a board of trade will exist for any particular contract at any
particular time. If there is not a liquid market, it may not be possible to
close a futures position or purchase an option at such time. In the event of
adverse price movements under those circumstances, a Fund would continue to be
required to make daily cash payments of maintenance margin on its futures
positions. The extent to which a Fund may engage in futures contracts or related
options will be limited by Internal Revenue Code requirements for qualification
as a regulated investment company and a Fund's intent to continue to qualify as
such. The result of a hedging program cannot be foreseen and may cause a Fund to
suffer losses which it would not otherwise sustain.
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FORWARD FOREIGN CURRENCY EXCHANGE CONTRACTS
Each Fund may enter into forward foreign currency exchange contracts
("forward contracts") to attempt to minimize the risk to the Fund from adverse
changes in the relationship between the U.S. dollar and foreign currencies. A
forward contract is an obligation to purchase or sell a specific currency for an
agreed price at a future date which is individually negotiated and privately
traded by currency traders and their customers. Such contracts may not be
entered into for speculative purposes. A Fund will not enter into forward
contracts if, as a result, more than 10% of the value of its total assets would
be committed to the consummation of such contracts, and will segregate assets or
"cover" its positions consistent with requirements under the 1940 Act to avoid
any potential leveraging of the Fund.
SECURITIES ISSUED ON A WHEN-ISSUED OR DELAYED DELIVERY BASIS
The REAL ESTATE FUND and INTERNATIONAL VALUE FUND may purchase or sell
securities on a when-issued or delayed delivery basis. These transactions
involve a commitment by the Fund to purchase or sell securities for a
predetermined price or yield, with payment and delivery taking place more than
three days in the future, or after a period longer than the customary settlement
period for that type of security. Investment in securities on a when-issued or
delayed delivery basis may increase a Fund's exposure to market fluctuation and
may increase the possibility that the Fund will incur short-term gains subject
to federal taxation or short-term losses if the Fund must engage in portfolio
transactions in order to honor a when-issued or delayed delivery commitment. In
a delayed delivery transaction, a Fund relies on the other party to complete the
transaction. If the transaction is not completed, the Fund may miss a price or
yield considered to be advantageous. A Fund will employ techniques designed to
reduce such risks. If a Fund purchases a when-issued security, the Fund's
custodian bank will segregate liquid assets in an amount equal to the
when-issued commitment. If the market value of such segregated assets declines,
additional liquid assets will be segregated on a daily basis so that the market
value of the segregated liquid assets will equal the amount of the Fund's
when-issued commitments. To the extent liquid assets are segregated, they will
not be available for new investments or to meet redemptions. Securities
purchased on a delayed delivery basis may require a similar segregation of
liquid assets.
Typically, no income accrues on securities purchased on a delayed
delivery basis prior to the time delivery of the securities is made, although a
Fund may earn income on securities it has segregated. When purchasing a security
on a delayed delivery basis, a Fund assumes the rights and risks of ownership of
the security, including the risk of price and yield fluctuations, and takes such
fluctuations into account when determining its net asset value. Because a Fund
is not required to pay for the security until the delivery date, these risks are
in addition to the risks associated with the Fund's other investments. If a Fund
remains substantially fully invested at a time when delayed delivery purchases
are outstanding, the delayed delivery purchases may result in a form of
leverage. When a Fund has sold a security on a delayed delivery basis, the Fund
does not participate in future gains or losses with respect to the security. If
the other party to a delayed delivery transaction fails to deliver or pay for
the securities, the Fund could miss a favorable price or yield opportunity or
could suffer a loss. A Fund may dispose of or renegotiate a delayed delivery
transaction after it is entered into, and may sell when-issued securities before
they are delivered, which may result in a capital gain or loss.
SWAP AGREEMENTS
Each Fund may enter into interest rate, index and currency exchange
rate swap agreements for purposes of attempting to obtain a particular desired
return at a lower cost to the Fund than if it had invested directly in an
instrument that yielded that desired return. Swap agreements are two-party
contracts entered into primarily by institutional investors for periods ranging
from a few weeks to more than one year. In a standard "swap" transaction, two
parties agree to exchange the returns (or differentials in rates of return)
earned or realized on particular predetermined investments or instruments. The
gross returns to be exchanged or "swapped" between the parties are calculated
with respect to a "notional amount," i.e., the return on or increase in value of
a particular dollar amount invested at a particular interest rate, in a
particular foreign currency, or in a "basket" of securities representing a
particular index. Commonly used swap agreements
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include interest rate caps, under which, in return for a premium, one party
agrees to make payments to the other to the extent that interest rates exceed a
specified rate, or "cap"; interest rate floors, under which, in return for a
premium, one party agrees to make payments to the other to the extent that
interest rates fall below a specified level, or "floor"; and interest rate
collars, under which a party sells a cap and purchases a floor or vice versa in
an attempt to protect itself against interest rate movements exceeding given
minimum or maximum levels.
The "notional amount" of the swap agreement is only a fictive basis on
which to calculate the obligations which the parties to a swap agreement have
agreed to exchange. Most swap agreements entered into by a Fund would calculate
the obligations of the parties to the agreement on a "net basis." Consequently,
a Fund's obligations (or rights) under a swap agreement will generally be equal
only to the net amount to be paid or received under the agreement based on the
relative values of the positions held by each party to the agreement (the "net
amount"). Obligations under a swap agreement will be accrued daily (offset
against amounts owing to the Fund) and any accrued but unpaid net amounts owed
to a swap counterparty will be covered by segregating liquid assets, to avoid
any potential leveraging of the Fund. A Fund will not enter into a swap
agreement with any single party if the net amount owed or to be received under
existing contracts with that party would exceed 5% of the Fund's total assets.
For a discussion of the tax considerations relating to swap agreements, see
"Dividends, Distributions and Tax Matters-Swap Agreements."
SHORT SALES
None of the Funds will make short sales of securities or maintain a
short position unless at all times when a short position is open, the Fund owns
an equal amount of such securities or securities convertible into or
exchangeable for, without payment of any further consideration, securities of
the same issue as, and equal in amount to, the securities sold short. In no
event may more than 10% of a Fund's total assets be deposited or pledged as
collateral for such sales at any one time.
MORTGAGE-RELATED SECURITIES
Mortgage-related securities are interests in pools of mortgage loans
made to residential home buyers, including mortgage loans made by savings and
loan institutions, mortgage bankers, commercial banks and others. Pools of
mortgage loans are assembled as securities for sale to investors by various
governmental, government-related and private organizations (see "Mortgage
Pass-Through Securities" below). The Funds may also invest in debt securities
which are secured with collateral consisting of mortgage-related securities (see
"Collateralized Mortgage Obligations ("CMO")"), and in other types of
mortgage-related securities.
MORTGAGE PASS-THROUGH SECURITIES. The FLEX FUND may invest in mortgage
pass-through securities. Interests in pools of mortgage-related securities
differ from other forms of debt securities, which normally provide for periodic
payment of interest in fixed amounts with principal payments at maturity or
specified call dates. Instead, these securities provide a monthly payment which
consists of both interest and principal payments. In effect, these payments are
a "pass-through" of the monthly payments made by the individual borrowers on
their residential or commercial mortgage loans, net of any fees paid to the
issuer or guarantor of such securities. Additional payments are caused by
repayments of principal resulting from the sale of the underlying property,
refinancing or foreclosure, net of fees or costs which may be incurred. Some
mortgage-related securities (such as securities issued by the Government
National Mortgage Association ("GNMA")) are described as "modified
pass-through." These securities entitle the holder to receive all interest and
principal payments owed on the mortgage pool, net of certain fees, at the
scheduled payment dates regardless of whether or not the mortgagor actually
makes the payment.
GNMA is the principal governmental guarantor of mortgage-related
securities. GNMA is a wholly owned U.S. government corporation within the
Department of Housing and Urban Development. GNMA is authorized to guarantee,
with the full faith and credit of the U.S. government, the timely payment of
principal and interest on securities issued by institutions approved by GNMA
(such as savings and loan institutions, commercial banks and mortgage bankers)
and backed by pools of FHA-insured or VA-guaranteed mortgages.
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Government-related guarantors (i.e., not backed by the full faith and
credit of the U.S. government) include the Fannie Mae (formerly, the Federal
National Mortgage Association ("FNMA") and the Federal Home Loan Mortgage
Corporation ("FHLMC")). Fannie Mae is a government-sponsored corporation owned
entirely by private stockholders. It is subject to general regulation by the
Secretary of Housing and Urban Development. Fannie Mae purchases conventional
(i.e., not insured or guaranteed by any government agency) residential mortgages
from a list of approved seller/servicers which include state and federally
chartered savings and loan associations, mutual savings banks, commercial banks
and credit unions and mortgage bankers. Pass-through securities issued by Fannie
Mae are guaranteed as to timely payment of principal and interest by Fannie Mae
but are not backed by the full faith and credit of the U.S. government.
FHLMC was created by Congress in 1970 for the purpose of increasing the
availability of mortgage credit for residential housing. It is a
government-sponsored corporation formerly owned by the 12 Federal Home Loan
Banks and now owned entirely by private stockholders. FHLMC issues Participation
Certificates ("PCs") which represent interests in conventional mortgages from
FHLMC's national portfolio. FHLMC guarantees the timely payment of interest and
ultimate collection of principal, but PCs are not backed by the full faith and
credit of the U.S. government.
Commercial banks, savings and loan institutions, private mortgage
insurance companies, mortgage bankers and other secondary market issuers also
create pass-through pools of conventional residential mortgage loans. Such
issuers may, in addition, be the originators and/or servicers of the underlying
mortgage loans as well as the guarantors of the mortgage-related securities.
Pools created by such non-governmental issuers generally offer a higher rate of
interest than government and government-related pools because there are no
direct or indirect government or agency guarantees of payments in the former
pools. However, timely payment of interest and principal of these pools may be
supported by various forms of insurance or guarantees, including individual
loan, title, pool and hazard insurance and letters of credit. The insurance and
guarantees are issued by governmental entities, private insurers and the
mortgage poolers. Such insurance and guarantees and the creditworthiness of the
issuers thereof will be considered in determining whether a mortgage-related
security meets a Fund's investment quality standards. There can be no assurance
that the private insurers or guarantors can meet their obligations under the
insurance policies or guarantee arrangements. Although the market for such
securities is becoming increasingly liquid, securities issued by certain private
organizations may not be readily marketable. A Fund will not purchase
mortgage-related securities or other assets which in the sub-adviser's opinion
are illiquid if, as a result, more than 15% of the value of the Fund's total
assets will be illiquid.
Mortgage-backed securities that are issued or guaranteed by the U.S.
government, its agencies or instrumentalities, are not subject to a Fund's
industry concentration restrictions, by virtue of the exclusion from that test
available to all U.S. Government securities. In the case of privately issued
mortgage-related securities, the Funds take the position that mortgage-related
securities do not represent interests in any particular "industry" or group of
industries. The assets underlying such securities may be represented by a
portfolio of first lien residential mortgages (including both whole mortgage
loans and mortgage participation interests) or portfolios of mortgage
pass-through securities issued or guaranteed by GNMA, Fannie Mae or FHLMC.
Mortgage loans underlying a mortgage-related security may in turn be insured or
guaranteed by the Federal Housing Administration or the Department of Veterans
Affairs. In the case of private issue mortgage-related securities whose
underlying assets are neither U.S. government securities nor U.S.
government-insured mortgages, to the extent that real properties securing such
assets may be located in the same geographical region, the security may be
subject to a greater risk of default than other comparable securities in the
event of adverse economic, political or business developments that may affect
such region and, ultimately, the ability of residential homeowners to make
payments of principal and interest on the underlying mortgages.
COLLATERALIZED MORTGAGE OBLIGATIONS ("CMOs"). The FLEX FUND and the
REAL ESTATE FUND may invest in CMOs. The REAL ESTATE FUND can also invest in
mortgage-backed bonds and asset-backed securities. A CMO is a hybrid between a
mortgage-backed bond and a mortgage pass-through security. Similar to a bond,
interest and prepaid principal is paid, in most cases, semiannually. CMOs may be
14
<PAGE> 70
collateralized by whole mortgage loans, but are more typically collateralized by
portfolios of mortgage pass-through securities guaranteed by GNMA, FHLMC, or
FNMA, and their income streams.
CMOs are structured into multiple classes, each bearing a different
stated maturity. Actual maturity and average life will depend upon the
prepayment experience of the collateral. CMOs provide for a modified form of
call protection through a de facto breakdown of the underlying pool of mortgages
according to how quickly the loans are repaid. Monthly payment of principal
received from the pool of underlying mortgages, including prepayments, is first
returned to investors holding the shortest maturity class. Investors holding the
longer maturity classes receive principal only after the first class has been
retired. An investor is partially guarded against a sooner than desired return
of principal because of the sequential payments.
In a typical CMO transaction, a corporation ("issuer") issues multiple
series (e.g., A, B, C, Z) of CMO bonds ("Bonds"). Proceeds of the Bond offering
are used to purchase mortgages or mortgage pass-through certificates
("Collateral"). The Collateral is pledged to a third party trustee as security
for the Bonds. Principal and interest payments from the Collateral are used to
pay principal on the Bonds in the order A, B, C, Z. The Series A, B, and C Bonds
all bear current interest. Interest on the Series Z Bond is accrued and added to
principal and a like amount is paid as principal on the Series A, B, or C Bond
currently being paid off. When the Series A, B, and C Bonds are paid in full,
interest and principal on the Series Z Bond begins to be paid currently. With
some CMOs, the issuer serves as a conduit to allow loan originators (primarily
builders or savings and loan associations) to borrow against their loan
portfolios.
CMOs that are issued or guaranteed by the U.S. government or by any of
its agencies or instrumentalities will be considered U.S. government securities
by the Funds, while other CMOs, even if collateralized by U.S. government
securities, will have the same status as other privately issued securities for
purposes of applying a Fund's diversification tests.
Mortgage-backed bonds --- are general obligations of the issuer fully
collateralized directly or indirectly by a pool of mortgages. The mortgages
serve as collateral for the issuer's payment obligations on the bonds but
interest and principal payments on the mortgages are not passed through either
directly (as with GNMA certificates and Fannie Mae and FHLMC pass-through
securities) or on a modified basis (as with CMOs). Accordingly, a change in the
rate of prepayments on the pool of mortgages could change the effective maturity
of a CMO but not that of a mortgage-backed bond (although, like many bonds,
mortgage-backed bonds can provide that they are callable by the issuer prior to
maturity).
Asset-backed securities --- are securities representing interests in
other types of financial assets, such as automobile-finance receivables or
credit-card receivables. Such securities are subject to many of the same risks
as are mortgage-backed securities, including prepayment risks and risks of
foreclosure. They may or may not be secured by the receivables themselves or may
be unsecured obligations of their issuers.
FHLMC CMOs. FHLMC CMOs are debt obligations of FHLMC issued in multiple
classes having different maturity dates which are secured by the pledge of a
pool of conventional mortgage loans purchased by FHLMC. Unlike FHLMC PCs,
payments of principal and interest on the CMOs are made semiannually, as opposed
to monthly. The amount of principal payable on each semiannual payment date is
determined in accordance with FHLMC's mandatory sinking fund schedule, which, in
turn, is equal to approximately 100% of FHA prepayment experience applied to the
mortgage collateral pool. All sinking fund payments in the CMOs are allocated to
the retirement of the individual classes of bonds in the order of their stated
maturities. Payment of principal on the mortgage loans in the collateral pool in
excess of the amount of FHLMC's minimum sinking fund obligation for any payment
date are paid to the holders of the CMOs as additional sinking fund payments.
Because of the "pass-through" nature of all principal payments received on the
collateral pool in excess of FHLMC's minimum sinking fund requirement, the rate
at which principal of the CMOs is actually repaid is likely to be such that each
class of bonds will be retired in advance of its scheduled maturity date.
If collection of principal (including prepayments) on the mortgage
loans during any semiannual payment period is not sufficient to meet FHLMC's
minimum sinking fund obligation on the next sinking fund payment date, FHLMC
agrees to make up the deficiency from its general funds.
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<PAGE> 71
Criteria for the mortgage loans in the pool backing the FHLMC CMOs are
identical to those of FHLMC PCs. FHLMC has the right to substitute collateral in
the event of delinquencies and/or defaults.
RISKS OF MORTGAGE-RELATED SECURITIES
Investment in mortgage-backed securities poses several risks, including
prepayment, market, and credit risk. Prepayment risk reflects the risk that
borrowers may prepay their mortgages faster than expected, thereby affecting the
investment's average life and perhaps its yield. Whether or not a mortgage loan
is prepaid is almost entirely controlled by the borrower. Borrowers are most
likely to exercise prepayment options at the time when it is least advantageous
to investors, generally prepaying mortgages as interest rates fall, and slowing
payments as interest rates rise. Besides the effect of prevailing interest
rates, the rate of prepayment and refinancing of mortgages may also be affected
by home value appreciation, ease of the refinancing process and local economic
conditions.
Market risk reflects the risk that the price of the security may
fluctuate over time. The price of mortgage-backed securities may be particularly
sensitive to prevailing interest rates, the length of time the security is
expected to be outstanding, and the liquidity of the issue. In a period of
unstable interest rates, there may be decreased demand for certain types of
mortgage-backed securities, and a Fund invested in such securities wishing to
sell them may find it difficult to find a buyer, which may in turn decrease the
price at which they may be sold.
Credit risk reflects the risk that a Fund may not receive all or part
of its principal because the issuer or credit enhancer has defaulted on its
obligations. Obligations issued by U.S. government-related entities are
guaranteed as to the payment of principal and interest, but are not backed by
the full faith and credit of the U.S. government. The performance of private
label mortgage-backed securities, issued by private institutions, is based on
the financial health of those institutions. With respect to GNMA certificates,
although GNMA guarantees timely payment even if homeowners delay or default,
tracking the "pass-through" payments may, at times, be difficult.
REAL-ESTATE INDUSTRY SECURITIES
Because each of the funds can invest in securities of companies engaged
in the real-estate industry, they could conceivably own real estate directly as
a result of a default on debt securities it owns. A 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 conditions, adverse
changes in the climate for real estate, environmental liability risks, increases
in property taxes and operating expenses, 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 any 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 qualify for tax-free pass-through of income under the Internal
Revenue Code and of failing to maintain exemption from the 1940 Act. Changes in
interest rates may also affect the value of debt securities held by a fund. By
investing in REITs indirectly through a fund, a shareholder will bear not only
his proportionate share of the expenses of a fund, but also, indirectly, similar
expenses of the REITs.
REPURCHASE AGREEMENTS
Each of the Funds may engage in repurchase agreements. A repurchase
agreement, which may be considered a "loan" under the 1940 Act, is a transaction
in which a Fund purchases a security and
16
<PAGE> 72
simultaneously commits to sell the security to the seller at an agreed-upon
price and date (usually not more than seven days) after the date of purchase.
The resale price reflects the purchase price plus an agreed-upon market rate of
interest which is unrelated to the coupon rate or maturity of the purchased
security. A Fund's risk is limited to the ability of the seller to pay the
agreed-upon amount on the delivery date. In the opinion of management this risk
is not material; if the seller defaults, the underlying security constitutes
collateral for the seller's obligations to pay. This collateral, equal to or in
excess of 100% of the repurchase agreement, will be held by the custodian for
the particular Fund's assets. Repurchase agreements carry certain risks not
associated with direct investments in securities, including a possible decline
in the market value of the underlying securities and delays and costs to the
Funds if the other party to the repurchase agreement becomes insolvent. To the
extent that the proceeds from a sale upon a default in the obligation to
repurchase are less than the repurchase price, the particular Fund would suffer
a loss. It is intended (but not required) that at no time will the market value
of any of the Fund's securities subject to repurchase agreements exceed 50% of
the total assets of such Fund entering into such agreements. It is intended for
these Funds to enter into repurchase agreements with commercial banks and
securities dealers. The Board of Trustees will monitor the creditworthiness of
such entities.
LENDING OF PORTFOLIO SECURITIES
Consistent with applicable regulatory requirements, the Funds may lend
their portfolio securities (principally to broker-dealers) to the extent of
one-third of their respective total assets. Such loans would be callable at any
time and would be continuously secured by collateral equal to no less than the
market value, determined daily, of the loaned securities. Such collateral will
be cash, letters of credit or debt securities issued or guaranteed by the U.S.
Government or any of its agencies. The Funds would continue to receive the
income on loaned securities and would, at the same time, earn interest on the
loan collateral or on the investment of the loan collateral if it were cash. Any
cash collateral pursuant to these loans would be invested in short-term money
market instruments or affiliated money market funds. Where voting or consent
rights with respect to loaned securities pass to the borrower, the Funds will
follow the policy of calling the loan, in whole or in part as may be
appropriate, to permit the exercise of such voting or consent rights if the
matters involved are expected to have a material effect on the Funds' investment
in the loaned securities. Lending securities entails a risk of loss to the Funds
if and to the extent that the market value of the securities loaned were to
increase and the lender did not increase the collateral accordingly.
INTERFUND LOANS
Each Fund may lend up to 33 1/3% of its total assets to another AIM
Fund, on such terms and conditions as the SEC may require in an exemptive order.
An application for exemptive relief has been filed with the SEC on behalf of the
Funds and others. Each Fund may also borrow from another AIM Fund to satisfy
redemption requests or to cover unanticipated cash shortfalls due to a delay in
the delivery of cash to the Fund's custodian or improper delivery instructions
by a broker effectuating a transaction.
EQUITY-LINKED DERIVATIVES
Each of the Funds 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 investments in other investment companies. See
"Investment in Other Investment Companies."
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<PAGE> 73
INVESTMENT IN OTHER INVESTMENT COMPANIES
Each of the Funds 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) a Fund may not purchase more than 3% of the
total outstanding voting stock of another investment company; (ii) a Fund may
not invest more than 5% of its total assets in securities issued by another
investment company; and (iii) a 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 a 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 Funds have obtained an exemptive order
from the SEC allowing them to invest in money market funds that have AIM or an
affiliate of AIM as an investment advisor (the "Affiliated Money Market Funds"),
provided that investments in Affiliated Money Market Funds do not exceed 25% of
the total assets of the investing Fund.
TEMPORARY DEFENSIVE INVESTMENTS
In anticipation of or in response to adverse market conditions, for
cash management purposes, or for defensive purposes, each of the Funds may
temporarily hold all or a portion of its assets in cash, money market
instruments, bonds, or other debt securities. Each of the Funds may also invest
up to 25% of its total assets in Affiliated Money Market Funds for these
purposes. For a description of the various rating categories of corporate bonds
and commercial paper in which the Funds may invest, see the Appendix to this
Statement of Additional Information.
INVESTMENT RESTRICTIONS
FUNDAMENTAL RESTRICTIONS
Each Fund is subject to the following investment restrictions, which
may be changed only by a vote of a majority of such Fund's outstanding shares,
except that REAL ESTATE FUND is not subject to restriction (4). Fundamental
restrictions may be changed only by a vote of the lesser of (i) 67% of more of
the Fund's shares present at a meeting if the holders of more than 50% of the
outstanding shares are present in person or represented by proxy, or (ii) more
than 50% of the Fund's outstanding shares.
(1) 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.
(2) The Fund may not borrow money or issue senior securities, except as
permitted by the 1940 Act Laws, Interpretations and Exemptions.
(3) 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 1933 Act.
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<PAGE> 74
(4) 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 governments. In complying
with this restriction, the Fund will not consider a bank-issued guaranty or
financial guaranty insurance as a separate security.
(5) 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.
(6) 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.
(7) 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.
(8) The Fund may, notwithstanding any other fundamental investment
policy or limitation, invest all of its assets in the securities of a single
open-end management investment company with substantially the same fundamental
investment objectives, policies and restrictions as the Fund.
REAL ESTATE FUND will concentrate (as that term may be defined or
interpreted by the 1940 Act Laws, Interpretations and Exemptions) its
investments in the securities of domestic and foreign real estate and
real-estate related companies.
The investment restrictions set forth above provide each of the Funds
with the ability to operate under new interpretations of the 1940 Act or
pursuant to exemptive relief from the SEC without receiving prior shareholder
approval of the change. Even though each of the Funds has this flexibility, the
Board of Trustees has adopted non-fundamental restrictions for each of the Funds
relating to certain of these restrictions which the advisor must follow in
managing the Funds. Any changes to these non-fundamental restrictions, which are
set forth below, require the approval of the Board of Trustees.
NON-FUNDAMENTAL RESTRICTIONS
The following non-fundamental investment restrictions apply to each of
the Funds, except THAT REAL ESTATE FUND is not subject to restriction (3). They
may be changed for any Fund without approval of that Fund's voting securities.
Any investment restriction that involves a maximum or minimum percentage of
securities or assets shall not be considered to be violated unless an excess
over or a deficiency under the percentage occurs immediately after, and is
caused by, an acquisition or disposition of securities or utilization of assets
by the Fund.
(1) In complying with the fundamental restriction regarding issuer
diversification, the Fund will not, with respect to 75% of its total assets,
purchase securities of any issuer (other than securities issued or guaranteed by
the U.S. Government or any of its agencies or instrumentalities), if, as a
result, (i) more than 5% of the Fund's total assets would be invested in the
securities of that issuer, or (ii) the Fund would hold more than 10% of the
outstanding voting securities of that issuer. The Fund may (i) purchase
securities of other investment companies as permitted by Section 12(d)(1) of the
1940 Act and (ii) invest its assets in securities of other money market funds
and lend money to other investment companies and their series portfolios that
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<PAGE> 75
have AIM or an affiliate of AIM as an investment advisor (an "AIM Advised
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 Advised 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 Advised Fund, on such terms and conditions as the SEC may require in
an exemptive order.
(5) Notwithstanding the fundamental restriction with regard to
investing all assets in an open-end fund, the Fund may not invest all of its
assets in the securities of a single open-end management investment company with
the same fundamental investment objectives, policies and restrictions as the
Fund.
For purposes of REAL ESTATE FUND'S fundamental restriction regarding
industry concentration, real estate and real-estate related companies shall
consist of companies (i) that at least 50% of its assets, gross income or net
profits are attributable to ownership, construction, management, or sale of
residential, commercial or industrial real estate, including listed equity REITs
which own properties, and listed mortgage REITs which make short-term
construction and development mortgage loans or which invest in long-term
mortgages or mortgage pools, or (ii) its products and services are related to
the real estate industry, such as manufacturers and distributors of building
supplies and financial institutions which issue or service mortgages.
PORTFOLIO SECURITIES LOANS
Each of the Funds may lend limited amounts of Fund securities (not to
exceed 10% of total assets) to broker-dealers or other institutional investors.
The sub-advisors will monitor the creditworthiness of such broker-dealers in
accordance with procedures adopted by the Trustees. Fund management understands
that it is the current view of the staff of the SEC that the Funds are permitted
to engage in loan transactions only if the following conditions are met: (1) the
applicable Fund must receive 100% collateral in the form of cash or U.S.
government securities, e.g., U.S. Treasury bills or notes, from the borrower;
(2) the borrower must increase the collateral whenever the market value of the
borrowed securities (determined on a daily basis) rises above the level of the
collateral; (3) the applicable Fund must be able to terminate the loan after
notice; (4) the applicable Fund must receive reasonable interest on the loan or
a flat fee from the borrower, as well as amounts equivalent to any dividends,
interest or other distributions on the securities loaned and any increase in
market value; (5) the applicable Fund may pay only reasonable custodian fees in
connection with the loan; and (6) voting rights on the securities loaned may
pass to the borrower; however, if a material event affecting the investment
occurs, the Fund must be able to terminate the loan and vote proxies or enter
into an alternative arrangement with the borrower to enable the Fund to vote
proxies. Excluding items (1) and (2), these practices may be amended from time
to time as regulatory provisions permit.
While there may be delays in recovery of loaned securities or even a
loss of rights in collateral supplied should the borrower fail financially,
loans will be made only to firms deemed by the sub-advisers to be of good
standing and will not be made unless, in the judgment of the respective
sub-adviser, the consideration to be earned from such loans would justify the
risk.
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<PAGE> 76
It is expected that each of the Funds will use the cash portions of
loan collateral to invest in short-term income producing securities for such
Fund's account and that such Fund may share some of the income from these
investments with the borrower.
MANAGEMENT OF THE TRUST
The overall management of the business and affairs of the Fund and the
Trust is vested in the Trust's Board of Trustees. The Board of Trustees approves
all significant agreements between the Trust on behalf of one or more of the
Funds, and persons or companies furnishing services to the Funds. The day-to-day
operations of each Fund are delegated to the officers of the Trust and to AIM,
subject always to the objectives, restrictions and policies of the applicable
Fund and to the general supervision of the Trust's Board of Trustees. Certain
trustees and officers of the Trust are affiliated with AIM and A I M Management
Group Inc. ("AIM Management"), the parent corporation of AIM.
TRUSTEES AND OFFICERS
The trustees and officers of the Trust and their principal occupations
during the last five years are set forth below. Unless otherwise indicated, the
address of each trustee and officer is 11 Greenway Plaza, Suite 100, Houston,
Texas 77046. All of the Trust's executive officers hold similar offices with
some or all of the AIM Funds.
<TABLE>
<CAPTION>
POSITIONS HELD WITH PRINCIPAL OCCUPATION DURING, AT LEAST, THE
NAME, ADDRESS AND AGE REGISTRANT PAST 5 YEARS
--------------------- ------------------- ------------------------------------------
<S> <C> <C>
*CHARLES T. BAUER (81) Trustee and Chairman 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 Executive Vice Chairman and Director,
AMVESCAP PLC.
BRUCE L. CROCKETT (56) Trustee Director, ACE Limited (insurance company).
906 Frome Lane Formerly, Director, President and Chief Executive
McLean, VA 22102 Officer, COMSAT Corporation and Chairman, Board
of Governors of INTELSAT (international
communications company.)
OWEN DALY II (75) Trustee Formerly, Director, Cortland Trust Inc.
Six Blythewood Road (investment company), CF & I Steel Corp.,
Baltimore, MD 21210 Monumental Life Insurance Company and Monumental
General Insurance Company; and Chairman of the
Board of Equitable Bancorporation.
</TABLE>
----------
* A trustee who is an "interested person" of A I M Advisors, Inc. and the
Trust as defined in the 1940 Act. Mr. Bauer has notified the Board that
he intends to retire from his positions as an officer and trustee of
the Fund effective September 30, 2000. The Board does not presently
intend to fill the vacancy that will result from Mr. Bauer's
retirement. Effective September 30, 2000, Mr. Graham will succeed Mr.
Bauer as Chairman of the Board.
21
<PAGE> 77
<TABLE>
<CAPTION>
POSITIONS HELD WITH PRINCIPAL OCCUPATION DURING, AT LEAST, THE
NAME, ADDRESS AND AGE REGISTRANT PAST 5 YEARS
--------------------- ------------------- ------------------------------------------
<S> <C> <C>
EDWARD K. DUNN, JR. (65) Trustee Chairman of the Board of Directors, Mercantile
2 Hopkins Plaza, 8th Floor Mortgage Corp. Formerly, Vice Chairman of the
Suite 805 Board of Directors, President and Chief Operating
Baltimore, MD 21201 Officer, Mercantile-Safe Deposit & Trust Co.; and
President, Mercantile Bankshares.
JACK FIELDS (48) Trustee Chief Executive Officer, Texana Global, Inc.
434 New Jersey Avenue, S.E. (foreign trading company) and Twenty-First
Washington, DC 20003 Century Group, Inc. (governmental affairs
company). Formerly, Member of the U. S. House of
Representatives.
**CARL FRISCHLING (63) Trustee Partner, Kramer, Levin, Naftalis & Frankel LLP
919 Third Avenue (law firm).
New York, NY 10022
*ROBERT H. GRAHAM (53) Trustee and Director, President and Chief Executive Officer,
President A I M Management Group Inc.; Director and
President, A I M Advisors, Inc.; Director and
Senior Vice President, A I M Capital Management,
Inc., A I M Distributors, Inc., A I M Fund
Services, Inc. and Fund Management Company;
Director and CEO, Managed Products, AMVESCAP PLC.
PREMA MATHAI-DAVIS (49) Trustee Formerly, Chief Executive Officer, YWCA of the
370 East 76th Street, Apt. A 1402 USA.
New York, NY 10021
LEWIS F. PENNOCK (57) Trustee Partner, Pennock & Cooper (law firm).
6363 Woodway, Suite 825
Houston, TX 77057
LOUIS S. SKLAR (60) Trustee Executive Vice President, Development and
The Williams Tower, 50th Floor Operations, Hines Interests Limited Partnership
2800 Post Oak Blvd. (real estate development).
Houston, TX 77056
</TABLE>
----------
** A trustee who is an "interested person" of the Trust as defined in the
1940 Act.
* A trustee who is an "interested person" of A I M Advisors, Inc. and the
Trust as defined in the 1940 Act.
22
<PAGE> 78
<TABLE>
<CAPTION>
POSITIONS HELD WITH PRINCIPAL OCCUPATION DURING, AT LEAST, THE
NAME, ADDRESS AND AGE REGISTRANT PAST 5 YEARS
--------------------- ------------------- ------------------------------------------
<S> <C> <C>
GARY T. CRUM (52) Senior Vice Director and President, A I M Capital Management,
President Inc.; Director and Executive Vice President,
A I M Management Group Inc.; Director and Senior
Vice President, A I M Advisors, Inc.; and
Director, A I M Distributors, Inc. and AMVESCAP
PLC.
CAROL F. RELIHAN (45) Senior Vice Director, Senior Vice President, General Counsel
President and and Secretary, A I M Advisors, Inc.; Senior Vice
Secretary President, General Counsel and Secretary, A I M
Management Group Inc.; Director, Vice President
and General Counsel, Fund Management Company;
General Counsel and Vice President, A I M Fund
Services, Inc.; and Vice President, A I M Capital
Management, Inc. and A I M Distributors, Inc.
DANA R. SUTTON (41) Vice President and Vice President and Fund Controller, A I M
Treasurer Advisors, Inc.; and Assistant Vice President and
Assistant Treasurer, Fund Management Company.
ROBERT G. ALLEY (51) Vice President Senior Vice President, A I M Capital Management,
Inc.; and Vice President,
A I M Advisors, Inc.
STUART W. COCO (45) Vice President Senior Vice President, A I M Capital Management,
Inc.; and Vice President, A I M Advisors, Inc.
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.
KAREN DUNN KELLEY (40) Vice President Senior Vice President, A I M Capital Management,
Inc.; and Vice President, A I M Advisors, Inc.
EDGAR M. LARSEN (60) Vice President Vice President, A I M Capital Management, Inc.
</TABLE>
23
<PAGE> 79
The standing committees of the Board of Trustees are the Audit
Committee, the Investments Committee and the 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 each Fund and evaluating such accountants'
performance, costs and financial stability; (ii) with AIM, reviewing and
coordinating audit plans prepared by the Funds' independent accountants and
management's internal audit staff; and (iii) reviewing financial statements
contained in periodic reports to shareholders with the Funds' independent
accountants and management.
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 trustees as long
as the Trust 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 trustees; and (iii) making recommendations to the Board regarding
matters related to compensation, including deferred compensation plans and
retirement plans for the independent trustees.
The Nominating and Compensation Committee will consider nominees
recommended by a shareholder to serve as trustees, 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 trustees will be
elected, and (ii) that the Nominating and Compensation Committee or the Board of
Trustees, as applicable, shall make the final determination of persons to be
nominated.
REMUNERATION OF TRUSTEES
Each trustee is reimbursed for expenses incurred in connection with each
meeting of the Board of Trustees or any committee thereof. Each trustee who is
not also an officer of the Trust is compensated for his or her services
according to a fee schedule which recognizes the fact that such trustee also
serves as a director or trustee of other AIM Funds as well as a trustee of the
Funds. Each such trustee receives a fee, allocated among the AIM Funds for which
he or she serves as a director or trustee, which consists of an annual retainer
component and a meeting fee component.
Set forth below is information regarding compensation paid or accrued
for each trustee of the Trust during the year ended December 31, 1999:
24
<PAGE> 80
<TABLE>
<CAPTION>
RETIREMENT TOTAL
BENEFITS COMPENSATION
ESTIMATED COMPENSATION ACCRUED BY ALL FROM ALL
TRUSTEE FROM TRUST(1) AIM FUNDS(2) AIM FUNDS(3)
------- ---------------------- -------------- -------------
<S> <C> <C> <C>
Charles T. Bauer $ 0 $ 0 $ 0
Bruce L. Crockett 4,735 37,485 103,500
Owen Daly II 4,735 122,898 103,500
Edward K. Dunn, Jr. 4,735 0 103,500
Jack Fields 4,634 15,826 101,500
Carl Frischling(4) 4,735 97,791 103,500
Robert H. Graham 0 0 0
Prema Mathai-Davis 4,655 0 101,500
Lewis F. Pennock 4,735 45,766 103,500
Ian W. Robinson(5) 1,304 94,442 25,000
Louis S. Sklar 4,655 90,232 101,500
</TABLE>
----------
(1) The total amount of compensation deferred by all directors of the
Trust's predecessor during the fiscal year ended December 31, 1999,
including earnings thereon, was $31,806.
(2) During the fiscal year ended December 31, 1999, the total amount of
expenses allocated to the Trust's predecessor in respect of such
retirement benefits was $6,864. Data reflects compensation for the
calendar year ended December 31, 1999.
(3) Each trustee serves as director or trustee of at least twelve
registered investment companies advised by AIM. Data reflects total
compensation earned during the calendar year ended December 31, 1999.
(4) During the fiscal year ended December 31, 1999, the Trust's predecessor
paid $4,844 in legal fees for services rendered by Kramer Levin
Naftalis & Frankel LLP. Mr. Frischling, a trustee of the Trust, is a
partner in such firm.
(5) Mr. Robinson was a director of the Trust's predecessor until March 12,
1999, when he retired.
25
<PAGE> 81
AIM FUNDS RETIREMENT PLAN FOR ELIGIBLE DIRECTORS/TRUSTEES
Under the terms of the AIM Funds Retirement Plan for Eligible
Directors/Trustees (the "Plan"), each trustee (who is not an employee of any of
the AIM Funds, A I M Management Group Inc. or any of their affiliates) may be
entitled to certain benefits upon retirement from the Board of Trustees.
Pursuant to the Plan, a trustee becomes eligible to retire and receive full
benefits under the Plan when he or she 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 trustee 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 trustee during the twelve-month period
immediately preceding the trustee's retirement (including amounts deferred under
a separate agreement between the Applicable AIM Funds and the trustee) and based
on the number of such trustee'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 trustee in quarterly installments. If an eligible
trustee dies after attaining the normal retirement date but before receipt of
all benefits under the Plan commences, the trustee's surviving spouse (if any)
shall receive a quarterly survivor's benefit equal to 50% of the amount payable
to the deceased trustee for no more than ten years beginning the first day of
the calendar quarter following the date of the trustee'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 trustee upon retirement assuming the retainer amount
reflected below and various years of service. The estimated credited years of
service for Messrs. Crockett, Daly, Fields, Frischling, Pennock, Robinson and
Sklar and Dr. Mathai-Davis are 13, 13, 2, 3, 23, 18, 11, 10 and 1 years,
respectively.
ESTIMATED ANNUAL BENEFITS UPON RETIREMENT
<TABLE>
<CAPTION>
Number of
Years of Annual Retirement
Service with Compensation
the Applicable Paid by All
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 Trustees") have each
executed a Deferred Compensation Agreement (collectively, the "Compensation
Agreements"). Pursuant to the Compensation Agreements, the Deferring Trustees
may elect to defer receipt of up to 100% of their compensation payable by the
Trust, and such amounts are placed into a deferral account. Currently, the
Deferring Trustees may select various AIM Funds in which all or part of their
deferral accounts shall be deemed to be invested. Distributions from the
Deferring Trustees' deferral accounts will be paid in cash, generally in equal
quarterly installments over a period of five (5) or ten (10) years
26
<PAGE> 82
(depending on the Compensation Agreement) beginning on the date the Deferring
Trustee's retirement benefits commence under the Plan. The Trust's Board of
Trustees, in its sole discretion, may accelerate or extend the distribution of
such deferral accounts after the Deferring Trustee's termination of service as a
trustee of the Trust. If a Deferring Trustee 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 Trustee's death. The Compensation
Agreements are not funded and, with respect to the payments of amounts held in
the deferral accounts, the Deferring Trustees have the status of unsecured
creditors of the Trust and of each other AIM Fund from which they are deferring
compensation.
INVESTMENT ADVISORY AND OTHER SERVICES
The Trust has entered into a Master Investment Advisory Agreement with
AIM. AIM was organized in 1976, and, together with its subsidiaries, advises or
manages approximately 120 investment portfolios encompassing a broad range of
investment objectives. AIM is a direct wholly owned subsidiary of A I M
Management Group Inc. ("AIM Management"), a holding company that has been
engaged in the financial services business since 1976. The address of AIM is 11
Greenway Plaza, Suite 100, Houston, TX 77046. AIM Management is an indirect
wholly owned subsidiary of AMVESCAP PLC, 11 Devonshire Square, London EC2M 4YR,
England. 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 trustees and officers of AIM are also executive officers of the
Trust and their affiliations are shown under "Trustees and Officers."
AIM and the Trust have adopted a Code of Ethics which requires
investment personnel and certain other employees to (a) pre-clear all personal
securities transactions subject to the Code of Ethics; (b) file reports
regarding such transactions; (c) 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 (subject to a
de minimis exception), and (iii) transactions involving securities being
considered for investment by an AIM Fund (subject to the de minimis exception);
and (d) abide by certain other provisions of the Code of Ethics. The de minimis
exception under the Code of Ethics covers situations where there is no material
conflict of interest because of the large market capitalization of a security
and the relatively small number of shares involved in a personal transaction.
The Code of Ethics also generally prohibits AIM employees from purchasing
securities in initial public offerings. Personal trading reports are
periodically reviewed by AIM, and the Board of Trustees reviews quarterly and
annual reports (which summarize any significant violations of the Code of
Ethics). Sanctions for violating the Code of Ethics may include censure,
monetary penalties, suspension or termination of employment.
The Trust, on behalf of each Fund, has entered into a Master Investment
Advisory Agreement dated [September 11, 2000] (the "Master Advisory Agreement")
and a Master Administrative Services Agreement (the "Master Administrative
Services Agreement") with AIM. In addition, AIM has entered into a Master
Intergroup Sub-Advisory Contract for Mutual Funds (the "Master Sub-Advisory
Contract") with INVESCO, Inc. with respect to FLEX FUND and REAL ESTATE FUND and
with IGAM with respect to INTERNATIONAL VALUE FUND. A prior investment advisory
agreement with similar terms to the Master Advisory Agreement and a prior
administrative services agreement with substantially similar terms to the Master
Administrative Services Agreement were in effect prior to [September 11, 2000].
Prior sub-advisory agreements with similar terms to the Master Sub-Advisory
Contracts were in effect prior to [September 11, 2000].
Under the terms of the Master Advisory Agreement, AIM supervises all
aspects of the Funds' operations and provides investment advisory services to
the Funds. AIM obtains and evaluates economic, statistical and financial
information to formulate and implement investment programs for the Funds. AIM
will not be liable to the Funds or their shareholders except in the case of
AIM's willful misfeasance, bad faith, gross negligence or reckless disregard of
duty.
27
<PAGE> 83
Pursuant to the Master Administrative Services Agreement, AIM has
agreed to provide or arrange for the provision of certain accounting and other
administrative services to the Funds, including the services of a principal
financial officer of the Funds and related staff. As compensation to AIM for its
services under the Master Administrative Service Agreements, the Funds reimburse
AIM for expenses incurred by AIM or its subsidiaries in connection with such
services.
Under the terms of the Master Sub-Advisory Contracts, dated [September
11, 2000], AIM has appointed INVESCO, Inc. to provide certain investment
advisory services for FLEX FUND and REAL ESTATE FUND, and IGAM to provide
certain investment advisory services for INTERNATIONAL VALUE FUND, subject to
overall supervision by AIM and the Trust's Board of Trustees.
The sub-advisor to the FLEX FUND and REAL ESTATE FUND is INVESCO, Inc.
(formerly known as INVESCO Capital Management, Inc.), a Delaware corporation,
which has its principal office at 1315 Peachtree Street, N. E., Atlanta, Georgia
30309. INVESCO, Inc. is registered as an investment advisor under the Investment
Advisers Act of 1940, as amended (the "Advisers Act"). INVESCO, Inc. believes it
has one of the nation's largest discretionary portfolios of tax-exempt accounts
(such as pension and profit sharing funds for corporations and state and local
governments). Funds are supervised by investment managers who utilize INVESCO,
Inc.'s facilities for investment research and analysis, review of current
economic conditions and trends, and consideration of long-range investment
policy matters. Prior to January 1, 2000, the sub-advisor to REAL ESTATE FUND
was INVESCO Realty Advisors, Inc.
The sub-advisor to INTERNATIONAL VALUE FUND is IGAM, a Delaware
corporation, which has its principal office at 1315 Peachtree Street, N.E.,
Atlanta, GA 30309. IGAM is registered as an investment advisor under the
Advisers Act. IGAM's responsibilities include analyzing global economic trends
and establishing AMVESCAP PLC's global investment asset allocation for AMVESCAP
PLC affiliates. Prior to June 19, 2000, the sub-advisor for INTERNATIONAL VALUE
FUND was INVESCO Global Asset Management, Limited.
AIM, INVESCO, Inc. and IGAM are indirect wholly owned subsidiaries of
AMVESCAP (formerly, AMVESCO PLC and INVESCO PLC). AMVESCAP is one of the largest
independent investment management businesses in the world.
Effective August 4, 1997, AIM became the investment advisor for the
Funds pursuant to an investment advisory agreement with terms substantially
identical to those of the Trust's prior investment advisory contracts with
INVESCO Services, Inc. The sub-advisors did not change at that time other than
the substitution of INVESCO Global Asset Management, Limited for INVESCO Capital
Management, Inc. as sub-advisor to INTERNATIONAL VALUE FUND.
Under their Master Investment Advisory Agreement and Master
Sub-Advisory Contracts (the "Agreements") with the respective Funds, the Advisor
and sub-advisors will, subject to the supervision of the Trustees of the Trust
and in conformance with the stated policies of the Funds, manage the investment
operations of the Funds. In this regard, it will be the responsibility of the
Advisor and sub-advisors not only to make investment decisions for the Funds,
but also to place the purchase and sale orders for the portfolio transactions of
the Funds. (See "Brokerage and Portfolio Transactions.") The sub-advisors may
follow a policy of considering sales of shares of the Trust as a factor in the
selection of broker-dealers to execute portfolio transactions. The Investment
Advisory Agreement provides that, in fulfilling its responsibilities, the
Advisor may engage the services of other investment managers with respect to one
or more of the Funds. In accordance with policies established by the Board of
Trustees, AIM may take into account sales of shares of the Funds and other funds
advised by AIM in selecting broker-dealers to effect portfolio transactions on
behalf of the Funds.
The Advisor is also responsible for furnishing to the Funds, at the
Advisor's expense, the services of persons believed to be competent to perform
all supervisory and administrative services required by the Funds, in the
judgment of the Trustees, to conduct their respective businesses effectively, as
well as the offices, equipment and other facilities necessary for their
operations. Such functions include the maintenance of each Fund's accounts and
records, and the preparation of all requisite corporate documents such as tax
returns and reports to the SEC and shareholders.
28
<PAGE> 84
The Master Advisory Agreement provides that the Fund will pay or cause
to be paid all expenses of the Fund not assumed by AIM, including, without
limitation: 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 trustees and shareholder meetings, the cost of preparing and
distributing reports and notices to shareholders, the fees and other expenses
incurred by the Trust on behalf of each Fund in connection with membership in
investment company organizations, and the cost of printing copies of
prospectuses and statements of additional information distributed to the Funds'
shareholders.
Rule 18f-3 under the 1940 Act ("Rule 18f-3") permits a fund to use a
multiclass system including separate class arrangements for distribution of
shares and related exchange privileges applicable to the classes. The Trust has
adopted a multiple class plan pursuant to Rule 18f-3, which provides that
advisory fees are expenses of a particular Fund and are not attributable to a
particular class of the Fund ("Fund Expenses") and, therefore, shall be
allocated to each class on the basis of its net asset value relative to the net
asset value of the Fund. (See "Computation of Net Asset Value.")
Each of the Funds is responsible for the payment of its own expenses.
Interest, taxes, distribution expenses, trustees' fees and expenses and
extraordinary items such as litigation costs will be borne by the Trust or
particular Fund, as applicable. Expenditures, including costs incurred in
connection with the purchase or sale of Fund securities, which are capitalized
in accordance with generally accepted accounting principles applicable to
investment companies, are accounted for as capital items and not as expenses.
For the services to be rendered and the expenses to be assumed by the
Advisor under the Master Investment Advisory Agreement, each Fund will pay to
the Advisor an advisory fee which will be computed daily and paid as of the last
day of each month on the basis of the Fund's daily net asset value, using for
each daily calculation the most recently determined net asset value of the Fund.
In order to increase the return to investors, AIM may from time to time waive or
reduce its fee. Voluntary fee waivers or reductions may be rescinded at any time
without further notice to investors. During periods of voluntary fee waivers or
reductions, AIM will retain its ability to be reimbursed for such fee prior to
the end of each fiscal year. Contractual fee waivers or reductions set forth in
the Fee Tables in the Prospectuses may not be terminated or amended to the
Fund's detriment during the period stated in the agreement between AIM and the
Fund. On an annual basis, the advisory fee is equal to 0.75% of the average net
asset value of the FLEX FUND, 0.90% of the average net asset value of the REAL
ESTATE FUND and 1.00% of the average net asset value of INTERNATIONAL VALUE
FUND. Those fees which equal 0.75% of average annual net assets are higher than
those generally charged by investment advisors to similar funds for advisory
services. However, the Advisor also provides certain supervisory services to the
Funds pursuant to the Master Investment Advisory Agreement.
For the services to be rendered and the expenses to be assumed by IGAM
and INVESCO, Inc. under their respective Master Sub-Advisory Contracts, the
Advisor will pay to each sub-advisor a fee which will be computed daily and paid
as of the last day of each month on the basis of each Fund's daily net asset
value, using for each daily calculation the most recently determined net asset
value of the Fund. (See "Computation of Net Asset Value.") On an annual basis,
the sub-advisory fee is equal to 0.40% of the Advisor's compensation of the
sub-advised assets per year, for each of the FLEX FUND, INTERNATIONAL VALUE FUND
and REAL ESTATE FUND.
The Agreements will continue in effect from year to year only if such
continuance is specifically approved at least annually by (i) the Trust's Board
of Trustees or the vote of a "majority of the outstanding voting securities" of
the Funds (as defined in the 1940 Act), and (ii) the affirmative vote of a
majority of the trustees who are not parties to the agreements or "interested
persons" of any such party (the "Non-Interested Trustees") by votes cast in
person at a meeting called for such purpose. Each agreement provides that the
Funds, AIM (in the case of the Master Advisory Agreement) or INVESCO, Inc. or
IGAM (in the case of the Master Sub-Advisory Contracts) may terminate such
agreement on 60 days' written notice without penalty Each agreement terminates
automatically in the event of its assignment. The Agreements are terminable on
60 days' written notice by either party thereto and will terminate automatically
if assigned.
29
<PAGE> 85
For the fiscal years ended December 31, 1999, 1998 and 1997, the
aggregate amounts of the advisory fees paid to AIM (or INVESCO Services, Inc.,
the prior advisor) by the Funds, were as follows:
<TABLE>
<CAPTION>
Aug. 4 Jan. 1
to Dec. 31 to Aug. 3
Fund 1999 1998 1997* 1997
---- ---------- ---------- ---------- -----------
<S> <C> <C> <C> <C>
FLEX FUND $5,635,894 $5,051,593 $2,511,884 $1,732,896
REAL ESTATE FUND $ 473,702 $ 625,129 $ 229,632 $ 90,122
INTERNATIONAL VALUE FUND $1,307,027 $1,238,568 $ 536,578 $ 272,940
</TABLE>
*Effective August 4, 1997, AIM became advisor to the Funds.
The payments set forth above were made pursuant to a similar advisory
agreement between AIM and the Trust's predecessor.
The investment advisory services of the Advisor and the investment
sub-advisory services of the sub-advisors to the Funds are not exclusive and the
Advisor and sub-advisors are free to render investment advisory services to
others, including other investment companies.
In addition, if a Fund engages in securities lending, AIM will provide
the Fund investment advisory services and related administrative services. The
Master Investment Advisory Agreement describes the administrative services to be
rendered by AIM if a Fund engages in securities lending activities, as well as
the compensation AIM may receive for such administrative services. Services to
be provided include: (a) overseeing participation in the securities lending
program to ensure compliance with all applicable regulatory and investment
guidelines; (b) assisting the securities lending agent or principal (the agent)
in determining which specific securities are available for loan; (c) monitoring
the agent to ensure that securities loans are effected in accordance with AIM's
instructions and with procedures adopted by the Board; (d) preparing appropriate
periodic reports for, and seeking appropriate approvals from, the Board with
respect to securities lending activities; (e) responding to agent inquiries; and
(f) performing such other duties as may be necessary.
AIM's compensation for advisory services rendered in connection with
securities lending is included in the advisory fee schedule. As compensation for
the related administrative services AIM will provide, a lending Fund will pay
AIM a fee equal to 25% of the net monthly interest or fee income retained or
paid to the Fund from such activities. AIM currently intends to waive such fee,
and has agreed to seek Board approval prior to its receipt of all or a portion
of such fee.
AIM Distributors has contractually agreed to limit the Funds' Class A
shares' Rule 12b-1 distribution plan payments to 0.25%. AIM has contractually
agreed to limit total annual operating expenses, excluding management fees, Rule
12b-1 distribution fees, interest expense and extraordinary items for REAL
ESTATE FUND, to 0.45%.
The Master Administrative Services Agreement provides that AIM may
perform or arrange for the performance of certain accounting and other
administrative services to each Fund. For such services, AIM is entitled to
receive from each Fund reimbursement of its costs or such reasonable
compensation as may be approved by the Trust's Board of Trustees. The Master
Administrative Services Agreement will continue in effect from year to year only
if such continuance is specifically approved at least annually by (i) the
Trust's Board of Trustees or the vote of a "majority of the outstanding voting
securities" of the Funds (as defined in the 1940 Act), and (ii) the affirmative
vote of a majority of the Non-Interested Trustees by votes cast in person at a
meeting called for such purpose.
30
<PAGE> 86
The Funds paid AIM the following amounts as reimbursement of
administrative services costs under a substantially similar administrative
services agreement between AIM and the Trust's predecessor for the period July
1, 1999 through December 31, 1999:
<TABLE>
<S> <C>
Flex Fund............................................ $64,957
International Value Fund............................. 25,721
Real Estate Fund..................................... 25,205
</TABLE>
The prior administrative services agreement between AIM and the Trust's
predecessor became effective on July 1, 1999. Prior to that date, AIM provided
operating services, including certain administrative services, to the Funds
pursuant to an operating and services agreement between AIM and the Funds. The
Funds paid AIM the following amounts under the operating services agreement for
the fiscal years ended December 31, 1999, 1998 and 1997:
<TABLE>
<CAPTION>
AUG. 4 JAN. 1
TO DEC. 31 TO AUG. 3
1999 1998 1997* 1997
-------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
FLEX FUND............................... $443,754 $1,703,905 $1,106,526 $1,407,357
INTERNATIONAL VALUE FUND................ 151,347 390,044 178,446 185,826
REAL ESTATE FUND........................ 114,556 275,972 84,332 73,736
</TABLE>
----------
*Effective August 4, 1997, AIM became advisor to the Funds.
AIM used these amounts to reimburse itself for certain costs it
incurred under the prior operating services agreement and to pay certain third
party service provides for accounting, legal, dividend disbursing, registrar,
custodial, shareholder reporting, sub-accounting and recordkeeping services and
functions.
In addition, the Transfer Agency and Service agreement for the Fund
provides that A I M Fund Services, Inc. ("AFS"), a registered transfer agent and
wholly owned subsidiary of AIM, will perform certain shareholder services for
the Fund for a fee per account serviced. The Transfer Agency and Service
Agreement provides that AFS will receive a per account fee plus out-of-pocket
expenses to process orders for purchases, redemptions and exchanges of shares,
prepare and transmit payments for dividends and distributions declared by the
Fund, maintain shareholder accounts and provide shareholders with information
regarding the Fund and their accounts.
THE DISTRIBUTION PLANS
[Rule 12b-1 under the 1940 Act ("Rule 12b-1") permits a fund to use its
assets to bear expenses of distributing its shares if it complies with various
conditions, including adoption of a plan of distribution containing certain
provisions set forth in the Rule. The plans described below were approved with
respect to each Fund by the trustees of the Fund, including a majority of the
trustees who are not "interested persons" of the Funds as defined in the 1940
Act ("Independent Trustees") and the trustees who have no direct or indirect
financial interest in the plan or any agreement related thereto (the "Rule 12b-1
Trustees"). The trustees determined that, in their judgment, there was a
reasonable likelihood that the plans will benefit each Fund and its shareholders
by, among other things, providing broker-dealers with an incentive to sell
additional shares of the Trust, thereby helping to satisfy the Trust's liquidity
needs and helping to increase the Trust's investment flexibility. Continuation
of the plans is approved annually.
THE CLASS A AND C PLAN
The Trust has adopted a Master Distribution Plan pursuant to Rule 12b-1
under the 1940 Act relating to the Class A and Class C shares of the Funds (the
"Class A and C Plan"). The Class A and C Plan provides that Class A shares of
each Fund pay 0.35% per annum of their daily average net assets for the Flex
Fund,
31
<PAGE> 87
International Value Fund and Real Estate Fund as compensation to AIM
Distributors for the purpose of financing any activity which is primarily
intended to result in the sale of Class A shares. Under the Class A and C Plan,
Class C shares of each Fund pay compensation to AIM Distributors at an annual
rate of 1.00% of the average daily net assets attributable to Class C shares.
The Class A and C Plan is designed to compensate AIM Distributors, on a
quarterly basis, for certain promotional and other sales-related costs, and to
implement a dealer incentive program which provides for periodic payments to
selected dealers who furnish continuing personal shareholder services to their
customers who purchase and own Class A or Class C shares of a Fund. Payments can
also be directed by AIM Distributors to selected institutions who have entered
into service agreements with respect to Class A and Class C shares of each Fund
and who provide continuing personal services to their customers who own Class A
and Class C shares of the Fund. Activities appropriate for financing under the
Class A and C Plan include, but are not limited to, the following: printing of
prospectuses and statements of additional information and reports for other than
existing shareholders; overhead; preparation and distribution of advertising
material and sales literature; expenses of organizing and conducting sales
seminars; supplemental payments to dealers and other institutions such as
asset-based sales charges or as payments of service fees under shareholder
service arrangements; and costs of administering the Class A and C Plan.
Of the aggregate amount payable under the Class A and C Plan, payments
to dealers and other financial institutions that provide continuing personal
shareholder services to their customers who purchase and own shares of the Fund,
in amounts of up to 0.25% of the average daily net assets of the Fund
attributable to the customers of such dealers or financial institutions are
characterized as a service fee, and payments to dealers and other financial
institutions in excess of such amount and payments to AIM Distributors would be
characterized as an asset-based sales charge pursuant to the Class A and C Plan.
THE CLASS B PLAN
The Trust has also adopted a Master Distribution Plan pursuant to Rule
12b-1 under the 1940 Act relating to Class B shares of the Funds. Under the
Class B Plan, the Funds pay compensation to AIM Distributors at an annual rate
of 1.00% of the average daily net assets attributable to Class B shares. Of such
amount, the Funds pay a service fee of 0.25% of the average daily net assets
attributable to Class B shares to selected dealers and other institutions which
furnish continuing personal shareholder services to their customers who purchase
and own Class B shares. Any amounts not paid as a service fee would constitute
an asset-based sales charge. Amounts paid in accordance with the Class B Plan
may be used to finance any activity primarily intended to result in the sale of
Class B shares, including, but not limited to, printing of prospectuses and
statements of additional information and reports for other than existing
shareholders; overhead; preparation and distribution of advertising material and
sales literature; expenses of organizing and conducting sales seminars;
supplemental payments to dealers and other institutions such as asset-based
sales charges or as payments of service fees under shareholder service
arrangements; and costs of administering the Class B Plan.
BOTH PLANS
Pursuant to an incentive program, AIM Distributors may enter into
agreements ("Shareholder Service Agreements") with investment dealers selected
from time to time by AIM Distributors for the provision of distribution
assistance in connection with the sale of the Funds' shares to such dealers'
customers, and for the provision of continuing personal shareholder services to
customers who may from time to time directly or beneficially own shares of the
Funds. The distribution assistance and continuing personal shareholder services
to be rendered by dealers under the Shareholder Service Agreements may include,
but shall not be limited to, the following: distributing sales literature;
answering routine customer inquiries concerning the Funds; assisting customers
in changing dividend options, account designations and addresses, and in
enrolling in any of several special investment plans offered in connection with
the purchase of the Fund's shares; assisting in the establishment and
maintenance of customer accounts and records and in the processing of purchase
and redemption transactions; investing dividends and any capital gains
distributions automatically in the Fund's shares; and providing such other
information and services as the Funds or the customer may reasonably request.
32
<PAGE> 88
Under the Plans, in addition to the Shareholder Service Agreements
authorizing payments to selected dealers, banks may enter into Shareholder
Service Agreements authorizing payments under the Plans to be made to banks
which provide services to their customers who have purchased shares. Services
provided pursuant to Shareholder Service Agreements with banks may include some
or all of the following: answering shareholder inquiries regarding the Funds and
the Trust; performing sub-accounting; establishing and maintaining shareholder
accounts and records; processing customer purchase and redemption transactions;
providing periodic statements showing a shareholder's account balance and the
integration of such statements with those of other transactions and balances in
the shareholder's other accounts serviced by the bank; forwarding applicable
prospectuses, proxy statements, reports and notices to bank clients who hold
shares of the Funds; and such other administrative services as the Funds
reasonably may request, to the extent permitted by applicable statute, rule or
regulation. Similar agreements may be permitted under the Plans for institutions
which provide recordkeeping for and administrative services to 401(k) plans.
The Trust may also enter into Variable Group Annuity Contractholder
Service Agreements ("Variable Contract Agreements") on behalf of the Funds
authorizing payments to selected insurance companies offering variable annuity
contracts to employers as funding vehicles for retirement plans qualified under
Section 401(a) of the Internal Revenue Code. Services provided pursuant to such
Variable Contract Agreements may include some or all of the following: answering
inquiries regarding the Fund and the Trust; performing sub-accounting;
establishing and maintaining Contractholder accounts and records; processing and
bunching purchase and redemption transactions; providing periodic statements of
contract account balances; forwarding such reports and notices to
Contractholders relative to the Fund as deemed necessary; generally,
facilitating communications with Contractholders concerning investments in a
Fund on behalf of Plan participants; and performing such other administrative
services as deemed to be necessary or desirable, to the extent permitted by
applicable statute, rule or regulation to provide such services.
Financial intermediaries and any other person entitled to receive
compensation for selling shares of the Funds may receive different compensation
for selling shares of one particular class over another.
Under a Shareholder Service Agreement, the Funds agree to pay
periodically fees to selected dealers and other institutions who render the
foregoing services to their customers. The fees payable under a Shareholder
Service Agreement generally will be calculated at the end of each payment period
for each business day of the Funds during such period at the annual rate of
0.25% of the average daily net asset value of the Funds' shares purchased or
acquired through exchange. Fees calculated in this manner shall be paid only to
those selected dealers or other institutions who are dealers or institutions of
record at the close of business on the last business day of the applicable
payment period for the account in which the Funds' shares are held.
The Plans are 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 Class A shares and Class C shares. Voluntary fee waivers or
reductions may be rescinded at any time without further notice to investors.
During periods of voluntary fee waivers or reductions, AIM Distributors will
retain its ability to be reimbursed for such fee prior to the end of each fiscal
year. Contractual fee waivers or reductions set forth in the Fee Table in the
Prospectuses 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 Plans, certain financial institutions which have entered into
service agreements and which sell shares of the Funds on an agency basis, may
receive payments from the Funds pursuant to the respective Plans. AIM
Distributors does not act as principal, but rather as agent for the Funds, in
making dealer incentive and shareholder servicing payments under the Plans.
These payments are an obligation of the Funds and not of AIM Distributors.
33
<PAGE> 89
An estimate by category of the allocation of actual fees paid by each
of the Funds under the Plan for Class A shares for the year ended December 31,
1999, was as follows:
<TABLE>
<CAPTION>
REAL INTERNATIONAL
FLEX FUND ESTATE FUND VALUE FUND
--------- ----------- -------------
<S> <C> <C> <C>
CLASS A
Advertising .............. $ 2,987 $ 289 $ 1,355
Printing and mailing
prospectuses, semi-
annual reports and
annual reports
(other than to current
shareholders) ............ 295 24 134
Seminars ................. 597 134 447
Compensation to
Underwriters to partially
offset other marketing
expenses.................. 0 0 0
Compensation to
Dealers including
finder's fees............. 109,992 46,815 65,699
Compensation to
Sales Personnel........... 0 0 0
Annual Report Total....... 113,871 47,262 67,635
</TABLE>
An estimate by category of the allocation of actual fees paid by each of the
Funds under the Plan for Class B shares for the year ended December 31, 1999,
was as follows:
34
<PAGE> 90
<TABLE>
<CAPTION>
REAL INTERNATIONAL
FLEX FUND ESTATE FUND VALUE FUND
--------- ----------- -------------
<S> <C> <C> <C>
CLASS B
Advertising .............. $ 7,029 $ 3,963 $ 6,265
Printing and mailing
prospectuses, semi-
annual reports and
annual reports
(other than to current
shareholders)............. 262 0 0
Seminars.................. 1,458 0 0
Compensation to
Underwriters to partially
offset other marketing
expenses.................. 68,479 55,344 31,913
Compensation to
Dealers including
finder's fees............. 14,077 14,485 4,373
Compensation to
Sales Personnel........... 0 0 0
Annual Report Total....... 91,305 73,792 42,551
</TABLE>
35
<PAGE> 91
An estimate by category of the allocation of actual fees paid by each of the
Funds under the Plan for Class C shares for the year ended December 31, 1999,
was as follows:
<TABLE>
<CAPTION>
REAL INTERNATIONAL
FLEX FUND ESTATE FUND VALUE FUND
----------- ----------- -------------
<S> <C> <C> <C>
CLASS C
Advertising............... $ 0 $ 0 $ 0
Printing and mailing
prospectuses, semi-
annual reports and
annual reports
(other than to current
shareholders) ............ 0 0 0
Seminars.................. 0 0 0
Compensation to
Underwriters to partially
offset other marketing
expenses.................. 785,172 40,509 180,143
Compensation to
Dealers including
finder's fees............. 6,182,562 222,987 813,792
Compensation to
Sales Personnel........... 0 0 0
Annual Report Total....... 6,967,734 263,495 993,935
</TABLE>
For the fiscal year ended December 31, 1999, each Fund paid AIM
Distributors the following amounts with respect to the Class A shares under the
Distribution Plans:
<TABLE>
<CAPTION>
CLASS A SHARES
1999
--------------
<S> <C>
FLEX FUND 113,871
REAL ESTATE FUND 47,262
INTERNATIONAL VALUE FUND 67,620
</TABLE>
For the fiscal year ended December 31, 1999, each Fund paid AIM
Distributors the following amount with respect to the Class B shares under the
Distribution Plans:
<TABLE>
<CAPTION>
CLASS B SHARES
1999
--------------
<S> <C>
FLEX FUND 91,305
REAL ESTATE FUND 73,791
INTERNATIONAL VALUE FUND 42,551
</TABLE>
36
<PAGE> 92
For the fiscal year ended December 31, 1999, each Fund paid AIM
Distributors the following amount with respect to the Class C shares under the
Distribution Plans:
<TABLE>
<CAPTION>
CLASS C SHARES
1999
--------------
<S> <C>
FLEX FUND 6,967,734
REAL ESTATE FUND 263,496
INTERNATIONAL VALUE FUND 993,935
</TABLE>
The payments set forth above for Class A, Class B and Class C shares
were made pursuant to distribution plans in existence prior to September 11,
2000 that were adopted by the Trust's predecessor.
The Plans require AIM Distributors to provide the Board of Trustees at
least quarterly with a written report of the amounts expended pursuant to the
Plans and the purposes for which such expenditures were made. The Board of
Trustees reviews these reports in connection with their decisions with respect
to the Plans.
As required by Rule 12b-1, the Plans and related forms of Shareholder
Service Agreements were approved by the Board of Trustees, including a majority
of the trustees who are not "interested persons" (as defined in the 1940 Act) of
the Trust and who have no direct or indirect financial interest in the operation
of the Plans or in any agreements related to the Plans ("Qualified Trustees").
In approving the Plans in accordance with the requirements of Rule 12b-1, the
trustees considered various factors and determined that there is a reasonable
likelihood that the Plans would benefit each class of each Fund and its
respective shareholders.
The Plans do not obligate the Fund to reimburse AIM Distributors for
the actual expenses AIM Distributors may incur in fulfilling its obligations
under the Plans. Thus, even if AIM Distributors' actual expenses exceed the fee
payable to AIM Distributors thereunder at any given time, the Fund will not be
obligated to pay more than that fee. If AIM Distributors' expenses are less than
the fee it receives, AIM Distributors will retain the full amount of the fee.
Unless the Plans are terminated earlier in accordance with their terms,
the Plans continue in effect from year to year as long as such continuance is
specifically approved at least annually by the Board of Trustees, including a
majority of the Qualified Trustees.
The Plans may be terminated by the vote of a majority of the Qualified
Trustees, or, with respect to a particular class, by the vote of a majority of
the outstanding voting securities of that class.
Any change in the Plans that would increase materially the distribution
expenses paid by the applicable class requires shareholder approval; otherwise,
it may be amended by the trustees, including a majority of the Qualified
Trustees, by votes cast in person at a meeting called for the purpose of voting
upon such amendment. As long as the Plans are in effect, the selection or
nomination of the Qualified Trustees is committed to the discretion of the
Qualified Trustees. In the event the Class A and C Plan is amended in a manner
which the Board of Trustees determines would materially increase the charges
paid by holders of Class A shares under the Class A and C Plan, the Class B
shares of the Fund will no longer convert into Class A shares of the Fund unless
the Class B shares, voting separately, approve such amendment. If the Class B
shareholders do not approve such amendment, the Board of Trustees will (i)
create a new class of shares of the Fund which is identical in all material
respects to the Class A shares as they existed prior to the implementation of
the amendment, and (ii) ensure that the existing Class B shares of the Fund will
be exchanged or converted into such new class of shares no later than the date
the Class B shares were scheduled to convert into Class A shares.
37
<PAGE> 93
The principal differences between the Class A and C Plan and the Class
B Plan are: (i) the Class A and C Plan allows payment to AIM Distributors or to
dealers or financial institutions of up to 0.35% of average daily net assets of
the Funds' Class A shares as compared to 1.00% of such assets of the Funds'
Class B shares; (ii) the Class B Plan obligates the Class B shares to continue
to make payments to AIM Distributors following termination of the Class B shares
Distribution Agreement with respect to Class B shares sold by or attributable to
the distribution efforts of AIM Distributors unless there has been a complete
termination of the Class B Plan (as defined in such Plan); and (iii) the Class B
Plan expressly authorizes AIM Distributors to assign, transfer or pledge its
rights to payments pursuant to the Class B Plan.
THE DISTRIBUTOR
The Trust has entered into distribution arrangements with AIM
Distributors, P.O. Box 4739, Houston, TX 77210-4739, a registered broker-dealer
and a wholly owned subsidiary of AIM, to act as the distributor in the
continuous offering of Class A, Class B and Class C shares of the Funds. Certain
trustees and officers of the Trust are affiliated with AIM Distributors. The
Trust has entered into a Master Distribution Agreement with AIM Distributors
relating to the Class A shares and Class C shares of the Funds and a Master
Distribution Agreement with AIM Distributors relating to the Class B shares of
the Funds. Both such Master Distribution Agreements are hereinafter
collectively, referred to as the "Distribution Agreements." Prior to August 4,
1997, INVESCO Services, Inc. (the "Prior Distributor") was the principal
underwriter of the Trust.
The Distribution Agreements provide AIM Distributors with the exclusive
right to distribute shares of the Funds directly and through institutions with
whom AIM Distributors has entered into selected dealer agreements. Under the
Distribution Agreement for the Class B shares, AIM Distributors sells Class B
shares of the Funds at net asset value subject to a contingent deferred sales
charge established by AIM Distributors. AIM Distributors is authorized to
advance to institutions through whom Class B shares are sold a sales commission
under schedules established by AIM Distributors. The Distribution Agreement for
the Class B shares provides that AIM Distributors (or its assignee or
transferee) will receive 0.75% (of the total 1.00% payable under the
distribution plan applicable to Class B shares) of each Fund's average daily net
assets attributable to Class B shares attributable to the sales efforts of AIM
Distributors.
The Distribution Agreements provide that AIM Distributors will bear the
expenses of printing from the final proof and distributing the Funds'
prospectuses and statements of additional information relating to public
offerings made by AIM Distributors pursuant to the Distribution Agreements
(other than those prospectuses and statements of additional information
distributed to existing shareholders of the Funds), and any promotional or sales
literature used by AIM Distributors or furnished by AIM Distributors to dealers
in connection with the public offering of the Funds' shares, including expenses
of advertising in connection with such public offerings. AIM Distributors has
not undertaken to sell any specified number of shares of any classes of the
Funds.
AIM Distributors expects to pay sales commissions from its own
resources to dealers and institutions who sell Class B and Class C shares of the
Funds at the time of such sales. Payments with respect to Class B shares will
equal 4.00% of the purchase price of the Class B shares sold by the dealer or
institution, and will consist of a sales commission equal to 3.75% of the
purchase price of the Class B shares sold plus an advance of the first year
service fee of 0.25% with respect to such shares. The portion of the payments to
AIM Distributors under the Class B Plan which constitutes an asset-based sales
charge (0.75%) is intended in part to permit AIM Distributors to recoup a
portion of such sales commissions plus financing costs. AIM Distributors
anticipates that it will require a number of years to recoup from Class B Plan
payments the sales commissions paid to dealers and institutions in connection
with sales of Class B shares. In the future, if multiple distributors serve a
Fund, each such distributor (or its assignee or transferee) would receive a
share of the payments under the Class B Plan based on the portion of such Fund's
Class B shares sold by or attributable to the distribution efforts of that
distributor.
AIM Distributors may pay sales commissions to dealers and institutions
who sell Class C shares of the AIM Funds at the time of such sales. Payments
with respect to Class C shares will equal 1.00% of the
38
<PAGE> 94
purchase price of the Class C shares sold by the dealer or institution, and will
consist of a sales commission of 0.75% of the purchase price of the Class C
shares sold plus an advance of the first year service fee of 0.25% with respect
to such shares. AIM Distributors will retain all payments received by it
relating to Class C shares for the first year after they are purchased. The
portion of the payments to AIM Distributors under the Class A and C Plan
attributable to Class C shares which constitutes an asset-based sales charge
(0.75%) is intended in part to permit AIM Distributors to recoup a portion of
on-going sales commissions to dealers plus financing costs, if any. After the
first full year, AIM Distributors will make such payments quarterly to dealers
and institutions based on the average net asset value of Class C shares which
are attributable to shareholders for whom the dealers and institutions are
designated as dealers of record.
The Trust (on behalf of any class of any Fund) or AIM Distributors may
terminate the Distribution Agreements on sixty (60) days' written notice without
penalty. The Distribution Agreements will terminate automatically in the event
of their assignment. In the event the Class B shares Distribution Agreement is
terminated, AIM Distributors would continue to receive payments of asset-based
distribution fees in respect of the outstanding Class B shares attributable to
the distribution efforts of AIM Distributors; provided, however, that a complete
termination of the Class B Plan (as defined in such Plan) would terminate all
payments to AIM Distributors. Termination of the Class B Plan or the
Distribution Agreement does not affect the obligation of a Fund and its Class B
shareholders to pay contingent deferred sales charges.
From time to time, AIM Distributors may transfer and sell its rights to
payments under the distribution agreement relating to Class B shares in order to
finance distribution expenditures in respect of Class B shares.
The following chart reflects the total sales charges paid in connection
with the sale of Class A shares of each Fund and the amount retained by AIM
Distributors for the years ended December 31, 1999, 1998 and for the period
August 4, 1997 to December 31, 1997, and the amount retained by the Prior
Distributor for the period December 31, 1996 to August 3, 1997:
<TABLE>
<CAPTION>
AUGUST 4, 1997 JANUARY 1, 1997
TO TO
1999 1998 DECEMBER 31, 1997 AUGUST 3, 1997
------------------ ------------------ ------------------- ---------------
SALES AMOUNT SALES AMOUNT SALES AMOUNT AMOUNT
CHARGES RETAINED CHARGES RETAINED CHARGES RETAINED RETAINED
-------- -------- -------- -------- -------- -------- ---------------
<S> <C> <C> <C> <C> <C> <C> <C>
FLEX FUND $149,959 $22,488 $209,334 $ 33,479 $ 80,657 $11,729 $6,860
REAL ESTATE FUND 85,422 13,906 495,211 85,554 356,286 54,138 1,424
INTERNATIONAL VALUE FUND 57,098 9,075 159,987 24,723 113,771 16,464 8,333
</TABLE>
The following chart reflects the contingent deferred sales charges paid
by Class A shareholders for the years ended December 31, 1999 and 1998 and for
the period August 4, 1997 to December 31, 1997, and by Class B shareholder for
the year ended December 31, 1999 and the period March 3, 1998 (inception date
for Class B shares) to December 31, 1998, and by Class C shareholders for the
years ended December 31, 1999 and 1998 and for the period August 4, 1997 to
December 1997, and the amount paid by Class A and Class C shareholders to the
Prior Distributor for the period January 1, 1997 to August 3, 1997:
<TABLE>
<CAPTION>
AUGUST 4, 1997 JANUARY 1, 1997
TO TO
1999 1998 DECEMBER 31, 1997 AUGUST 3, 1997
-------- -------- ----------------- ---------------
<S> <C> <C> <C> <C>
FLEX FUND $133,285 $100,172 $18,422 $18,877
REAL ESTATE FUND 9,617 25,274 2,643 1,935
INTERNATIONAL VALUE FUND 63,088 67,046 13,392 8,692
</TABLE>
CATEGORY I. Certain AIM Funds are currently sold with a sales charge
ranging from 5.50% to 2.00% of the offering price on purchases of less than
$1,000,000. These AIM Funds include Class A shares of each of AIM Advisor Flex
Fund, AIM Advisor International Value Fund, AIM Aggressive Growth Fund, AIM
Asian Growth Fund, AIM Basic Value Fund, AIM Blue Chip Fund, AIM Capital
Development Fund, AIM Charter
39
<PAGE> 95
Fund, AIM Constellation Fund, AIM Dent Demographic Trends Fund, AIM Emerging
Growth Fund, AIM European Development Fund, AIM Euroland Growth Fund, AIM Global
Utilities Fund, AIM International Equity Fund, AIM Japan Growth Fund, AIM Large
Cap Basic Value Fund, AIM Large Cap Growth Fund, AIM Large Cap Opportunities
Fund, AIM Mid Cap Equity Fund, AIM Mid Cap Growth Fund, AIM Mid Cap
Opportunities Fund, AIM Select Growth Fund, AIM Small Cap Growth Fund, AIM Small
Cap Opportunities Fund, AIM Value Fund and AIM Weingarten Fund.
<TABLE>
<CAPTION>
Dealer
Concession
Investor's Sales Charge ----------
----------------------------- As a
As a As a Percentage
Percentage Percentage of the
of the Public of the Net Public
Amount of Investment in Offering Amount Offering
Single Transaction(1) Price Invested Price
----------------------- ------------- ---------- ----------
<S> <C> <C> <C>
Less than $ 25,000 5.50% 5.82% 4.75%
$ 25,000 but less than $ 50,000 5.25 5.54 4.50
$ 50,000 but less than $ 100,000 4.75 4.99 4.00
$100,000 but less than $ 250,000 3.75 3.90 3.00
$250,000 but less than $ 500,000 3.00 3.09 2.50
$500,000 but less than $1,000,000 2.00 2.04 1.60
</TABLE>
----------
(1) AIM Small Cap Opportunities Fund will not accept any single purchase in
excess of $250,000.
CATEGORY II. Certain AIM Funds are currently sold with a sales charge
ranging from 4.75% to 2.00% of the offering price on purchases of less than
$1,000,000. These AIM Funds are: the Class A shares of each of AIM Advisor Real
Estate Fund, AIM Balanced Fund, AIM Developing Markets Fund, AIM Global
Aggressive Growth Fund, AIM Global Consumer Products and Services Fund, AIM
Global Financial Services Fund, AIM Global Growth Fund, AIM Global Health Care
Fund, AIM Global Income Fund, AIM Global Infrastructure Fund, AIM Global
Resources Fund, AIM Global Telecommunications and Technology Fund, AIM Global
Trends Fund, AIM High Income Municipal Fund, AIM High Yield Fund, AIM High Yield
Fund II, AIM Large Cap Growth Fund, AIM Income Fund, AIM Intermediate Government
Fund, AIM Latin American Growth Fund, AIM Municipal Bond Fund, AIM Strategic
Income Fund and AIM Tax-Exempt Bond Fund of Connecticut.
<TABLE>
<CAPTION>
Dealer
Concession
Investor's Sales Charge ----------
-------------------------- As a
As a As a Percentage
Percentage Percentage of the
of the Public of the Net Public
Amount of Investment in Offering Amount Offering
Single Transaction Price Invested Price
----------------------- ------------- ---------- ----------
<S> <C> <C> <C>
Less than $ 50,000 4.75% 4.99% 4.00%
$ 50,000 but less than $ 100,000 4.00 4.17 3.25
$100,000 but less than $ 250,000 3.75 3.90 3.00
$250,000 but less than $ 500,000 2.50 2.56 2.00
$500,000 but less than $1,000,000 2.00 2.04 1.60
</TABLE>
CATEGORY III. Certain AIM Funds are currently sold with a sales charge
ranging from 1.00% to 0.50% of the offering price on purchases of less than
$1,000,000. These AIM Funds are the Class A shares of each of AIM Limited
Maturity Treasury Fund and AIM Tax-Free Intermediate Fund.
40
<PAGE> 96
<TABLE>
<CAPTION>
Dealer
Concession
Investor's Sales Charge ----------
-------------------------- As a
As a As a Percentage
Percentage Percentage of the
of the Public of the Net Public
Amount of Investment In Offering Amount Offering
Single Transaction Price Invested Price
----------------------- ------------- ---------- ----------
<S> <C> <C> <C>
Less than $ 100,000 1.00% 1.01% 0.75%
$100,000 but less than $ 250,000 0.75 0.76 0.50
$250,000 but less than $1,000,000 0.50 0.50 0.40
</TABLE>
There is no sales charge on purchases of $1,000,000 or more of Category
I, II or III funds; however, AIM Distributors may pay a dealer concession and/or
advance a service fee on such transactions as set forth below.
ALL GROUPS OF AIM FUNDS. AIM Distributors may elect to re-allow the
entire initial sales charge to dealers for all sales with respect to which
orders are placed with AIM Distributors during a particular period. Dealers to
whom substantially the entire sales charge is re-allowed may be deemed to be
"underwriters" as that term is defined under the Securities Act of 1933.
In addition to amounts paid to dealers as a dealer concession out of the
initial sales charge paid by investors, AIM Distributors may, from time to time,
at its expense or as an expense for which it may be compensated under a
distribution plan, if applicable, pay a bonus or other consideration or
incentive to dealers who sell a minimum dollar amount of the shares of the AIM
Funds during a specified period of time. At the option of the dealer, such
incentives may take the form of payment for travel expenses, including lodging,
incurred in connection with trips taken by qualifying registered representatives
and their families to places within or outside the United States. The total
amount of such additional bonus payments or other consideration shall not exceed
0.25% of the public offering price of the shares sold. Any such bonus or
incentive programs will not change the price paid by investors for the purchase
of the applicable AIM Fund's shares or the amount that any particular AIM Fund
will receive as proceeds from such sales. Dealers may not use sales of the AIM
Funds' shares to qualify for any incentives to the extent that such incentives
may be prohibited by the laws of any state.
AIM Distributors may make payments to dealers and institutions who are
dealers of record for purchases of $1 million or more of Class A shares (or
shares which normally involve payment of initial sales charges), which are sold
at net asset value and are subject to a contingent deferred sales charge, for
all AIM Funds other than Class A shares of each of AIM Limited Maturity Treasury
Fund and AIM Tax-Free Intermediate Fund as follows: 1% of the first $2 million
of such purchases, plus 0.80% of the next $1 million of such purchases, plus
0.50% of the next $17 million of such purchases, plus 0.25% of amounts in excess
of $20 million of such purchases. AIM Distributors may make payments to dealers
and institutions who are dealers of record for purchases of $1 million or more
of Class A shares (or shares which normally involve payment of initial sales
charges), and which are sold at net asset value and are not subject to a
contingent deferred sales charge, in an amount up to 0.10% of such purchases of
Class A shares of AIM Limited Maturity Treasury Fund, and in an amount up to
0.25% of such purchases of Class A shares of AIM Tax-Free Intermediate Fund.
AIM Distributors may pay sales commissions to dealers and institutions
who sell Class B shares of the AIM Funds at the time of such sales. Payments
with respect to Class B shares will equal 4.00% of the purchase price of the
Class B shares sold by the dealer or institution, and will consist of a sales
commission equal to 3.75% of the purchase price of the Class B shares sold plus
an advance of the first year service fee of 0.25% with respect to such shares.
The portion of the payments to AIM Distributors under the Class B Plan
41
<PAGE> 97
which constitutes an asset-based sales charge (0.75%) is intended in part to
permit AIM Distributors to recoup a portion of such sales commissions plus
financing costs.
AIM Distributors may pay sales commissions to dealers and institutions
who sell Class C shares of the AIM Funds at the time of such sales. Payments
with respect to Class C shares will equal 1.00% of the purchase price of the
Class C shares sold by the dealer or institution, and will consist of a sales
commission of 0.75% of the purchase price of the Class C shares sold plus an
advance of the first year service fee of 0.25% with respect to such shares. AIM
Distributors will retain all payments received by it relating to Class C shares
for the first year after they are purchased. The portion of the payments to AIM
Distributors under the Class A and C Plan attributable to Class C shares which
constitutes an asset-based sales charge (0.75%) is intended in part to permit
AIM Distributors to recoup a portion of on-going sales commissions to dealers
plus financing costs, if any. After the first full year, AIM Distributors will
make such payments quarterly to dealers and institutions based on the average
net asset value of Class C shares which are attributable to shareholders for
whom the dealers and institutions are designated as dealers of record. These
commissions are not paid on sales to investors exempt from the CDSC, including
shareholders of record of AIM Advisor Funds, Inc. on April 30, 1995, who
purchase additional shares in any of the Funds on or after May 1, 1995, and in
circumstances where AIM Distributors grants an exemption on particular
transactions.
Exchanges of AIM Cash Reserve Fund of AIM Money Market Fund for Class B
shares or Class C shares are considered sales of such Class B or Class C shares
for purposes of the sales charges and dealer concessions discussed above.
AIM Distributors may pay investment dealers or other financial service
firms for share purchases (measured on an annual basis) of Class A Shares of all
AIM Funds except AIM Limited Maturity Treasury Fund, AIM Tax-Free Intermediate
Fund and AIM Tax-Exempt Cash Fund sold at net asset value to an employee benefit
plan as follows: 1.00% of the first $2 million of such purchases, plus 0.80% of
the next $1 million of such purchases, plus 0.50% of the next $17 million of
such purchases, plus 0.25% of amounts in excess of $20 million of such purchases
and up to 0.10% of the net asset value of any Class A shares of AIM Limited
Maturity Treasury Fund sold at net asset value to an employee benefit plan in
accordance with this paragraph.
REDUCTIONS IN INITIAL SALES CHARGES
Reductions in the initial sales charges shown in the sales charge tables
(quantity discounts) apply to purchases of shares of the AIM Funds that are
otherwise subject to an initial sales charge, provided that such purchases are
made by a "purchaser" as hereinafter defined. Purchases of Class A shares of AIM
Tax-Exempt Cash Fund, AIM Cash Reserve Shares of AIM Money Market Fund and Class
B and Class C shares of the AIM Funds will not be taken into account in
determining whether a purchase qualifies for a reduction in initial sales
charges.
The term "purchaser" means:
o an individual and his or her spouse and children, including any
trust established exclusively for the benefit of any such
person; or a pension, profit-sharing, or other benefit plan
established exclusively for the benefit of any such person, such
as an IRA, Roth IRA, a single-participant
money-purchase/profit-sharing plan or an individual participant
in a 403(b) Plan (unless such 403(b) plan qualifies as the
purchaser as defined below);
o a 403(b) plan, the employer/sponsor of which is an organization
described under Section 501(c)(3) of the Internal Revenue Code
of 1986, as amended (the "Code"), if:
a. the employer/sponsor must submit contributions for all
participating employees in a single contribution
transmittal (i.e., the Funds will not accept
contributions submitted with respect to individual
participants);
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b. each transmittal must be accompanied by a single check
or wire transfer; and
c. all new participants must be added to the 403(b) plan by
submitting an application on behalf of each new
participant with the contribution transmittal;
o a trustee or fiduciary purchasing for a single trust, estate or
single fiduciary account (including a pension, profit-sharing or
other employee benefit trust created pursuant to a plan
qualified under Section 401 of the Code) and 457 plans, although
more than one beneficiary or participant is involved;
o a Simplified Employee Pension (SEP), Salary Reduction and other
Elective Simplified Employee Pension account (SAR-SEP) or a
Savings Incentive Match Plans for Employees IRA (SIMPLE IRA),
where the employer has notified the distributor in writing that
all of its related employee SEP, SAR-SEP or SIMPLE IRA accounts
should be linked; or
o any other organized group of persons, whether incorporated or
not, provided the organization has been in existence for at
least six months and has some purpose other than the purchase at
a discount of redeemable securities of a registered investment
company.
Investors or dealers seeking to qualify orders for a reduced initial
sales charge must identify such orders and, if necessary, support their
qualification for the reduced charge. AIM Distributors reserves the right to
determine whether any purchaser is entitled, by virtue of the foregoing
definition, to the reduced sales charge. No person or entity may distribute
shares of the AIM Funds without payment of the applicable sales charge other
than to persons or entities who qualify for a reduction in the sales charge as
provided herein.
1. LETTERS OF INTENT. A purchaser, as previously defined, may pay
reduced initial sales charges by completing the appropriate section of the
account application and by fulfilling a Letter of Intent ("LOI"). The LOI
privilege is also available to holders of the Connecticut General Guaranteed
Account, established for tax qualified group annuities, for contracts purchased
on or before June 30, 1992. The LOI confirms such purchaser's intention as to
the total investment to be made in shares of the AIM Funds (except for (i) Class
A shares of AIM Tax-Exempt Cash Fund and AIM Cash Reserve Shares of AIM Money
Market Fund, (ii) Class B and Class C shares of the AIM Funds and (iii) shares
of AIM Floating Rate Fund) within the following 13 consecutive months. By
marking the LOI section on the account application and by signing the account
application, the purchaser indicates that he understands and agrees to the terms
of the LOI and is bound by the provisions described below.
Each purchase of fund shares normally subject to an initial sales
charge made during the 13-month period will be made at the public offering price
applicable to a single transaction of the total dollar amount indicated by the
LOI, as described under "Sales Charges and Dealer Concessions." It is the
purchaser's responsibility at the time of purchase to specify the account
numbers that should be considered in determining the appropriate sales charge.
The offering price may be further reduced as described under "Rights of
Accumulation" if the Transfer Agent is advised of all other accounts at the time
of the investment. Shares acquired through reinvestment of dividends and capital
gains distributions will not be applied to the LOI. At any time during the
13-month period after meeting the original obligation, a purchaser may revise
his intended investment amount upward by submitting a written and signed
request. Such a revision will not change the original expiration date. By
signing an LOI, a purchaser is not making a binding commitment to purchase
additional shares, but if purchases made within the 13-month period do not total
the amount specified, the investor will pay the increased amount of sales charge
as described below. Purchases made within 90 days before signing an LOI will be
applied toward completion of the LOI. The LOI effective date will be the date of
the first purchase within the 90-day period. The Transfer Agent will process
necessary adjustments upon the expiration or completion date of the LOI.
Purchases made more than 90 days before signing an LOI will be applied toward
completion of the LOI based on the value of the shares purchased calculated at
the public offering price on the effective date of the LOI.
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<PAGE> 99
To assure compliance with the provisions of the 1940 Act, out of the
initial purchase (or subsequent purchases if necessary) the Transfer Agent will
escrow in the form of shares an appropriate dollar amount (computed to the
nearest full share). All dividends and any capital gain distributions on the
escrowed shares will be credited to the purchaser. All shares purchased,
including those escrowed, will be registered in the purchaser's name. If the
total investment specified under this LOI is completed within the 13-month
period, the escrowed shares will be promptly released. If the intended
investment is not completed, the purchaser will pay the Transfer Agent the
difference between the sales charge on the specified amount and the amount
actually purchased. If the purchaser does not pay such difference within 20 days
of the expiration date, he irrevocably constitutes and appoints the Transfer
Agent as his attorney to surrender for redemption any or all shares, to make up
such difference within 60 days of the expiration date.
If at any time before completing the LOI Program, the purchaser wishes
to cancel the agreement, he must give written notice to AIM Distributors. If at
any time before completing the LOI Program the purchaser requests the Transfer
Agent to liquidate or transfer beneficial ownership of his total shares, a
cancellation of the LOI will automatically be effected. If the total amount
purchased is less than the amount specified in the LOI, the Transfer Agent will
redeem an appropriate number of escrowed shares equal to the difference between
the sales charge actually paid and the sales charge that would have been paid if
the total purchases had been made at a single time.
2. RIGHTS OF ACCUMULATION. A "purchaser," as previously defined, may
also qualify for reduced initial sales charges based upon such purchaser's
existing investment in shares of any of the AIM Funds (except for (i) Class A
shares of AIM Tax-Exempt Cash Fund and AIM Cash Reserve Shares of AIM Money
Market Fund and (ii) Class B and Class C shares of the AIM Funds and (iii)
shares of AIM Floating Rate Fund) at the time of the proposed purchase. Rights
of Accumulation are also available to holders of the Connecticut General
Guaranteed Account, established for tax-qualified group annuities, for contracts
purchased on or before June 30, 1992. To determine whether or not a reduced
initial sales charge applies to a proposed purchase, AIM Distributors takes into
account not only the money which is invested upon such proposed purchase, but
also the value of all shares of the AIM Funds (except for (i) Class A shares of
AIM Tax-Exempt Cash Fund and AIM Cash Reserve Shares of AIM Money Market Fund,
(ii) Class B and Class C shares of the AIM Funds and (iii) shares of AIM
Floating Rate Fund) owned by such purchaser, calculated at their then current
public offering price. If a purchaser so qualifies for a reduced sales charge,
the reduced sales charge applies to the total amount of money then being
invested by such purchaser and not just to the portion that exceeds the
breakpoint above which a reduced sales charge applies. For example, if a
purchaser already owns qualifying shares of any AIM Fund with a value of $20,000
and wishes to invest an additional $20,000 in a fund, with a maximum initial
sales charge of 5.50%, the reduced initial sales charge of 5.25% will apply to
the full $20,000 purchase and not just to the $15,000 in excess of the $25,000
breakpoint. To qualify for obtaining the discount applicable to a particular
purchase, the purchaser or his dealer must furnish AFS with a list of the
account numbers and the names in which such accounts of the purchaser are
registered at the time the purchase is made.
PURCHASES AT NET ASSET VALUE. Purchases of shares of any of the AIM
Funds at net asset value (without payment of an initial sales charge) may be
made in connection with: (a) the reinvestment of dividends and distributions
from a fund; (b) exchanges of shares of certain funds; (c) use of the
reinstatement privilege; or (d) a merger, consolidation or acquisition of assets
of a fund.
The following purchasers will not pay initial sales charges on
purchases of Class A shares because there is a reduced sales effort involved in
sales to these purchasers:
o AIM Management and its affiliates, or their clients;
o Any current or retired officer, director or employee (and
members of their immediate family) of AIM Management, its
affiliates or The AIM Family of Funds,--Registered
Trademark-- and any foundation, trust or employee benefit
plan established exclusively for the benefit of, or by,
such persons;
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<PAGE> 100
o Any current or retired officer, director, or employee (and
members of their immediate family), of CIGNA Corporation or
its affiliates, or of First Data Investor Services Group; and
any deferred compensation plan for directors of investment
companies sponsored by CIGNA Investments, Inc. or its
affiliates;
o Sales representatives and employees (and members of their
immediate family) of selling group members or financial
institutions that have arrangements with such selling group
members;
o Purchases through approved fee-based programs;
o Employee benefit plans designated as purchasers as defined
above, and non-qualified plans offered in conjunction
therewith, provided the initial investment in the plan(s) is
at least $1 million; the sponsor signs a $1 million LOI; the
employer-sponsored plan(s) has at least 100 eligible
employees; or all plan transactions are executed through a
single omnibus account per Fund and the financial institution
or service organization has entered into the appropriate
agreements with the distributor. Section 403(b) plans
sponsored by public educational institutions are not eligible
for a sales charge exception based on the aggregate investment
made by the plan or the number of eligible employees.
Purchases of AIM Small Cap Opportunities Fund by such plans
are subject to initial sales charges;
o Shareholders of record or discretionary advised clients of any
investment advisor holding shares of AIM Weingarten Fund or
AIM Constellation Fund on September 8, 1986, or of AIM Charter
Fund on November 17, 1986, who have continuously owned shares
having a market value of at least $500 and who purchase
additional shares of the same Fund;
o Shareholders of record of Advisor Class shares of AIM
International Growth Fund or AIM Worldwide Growth Fund on
February 12, 1999 who have continuously owned shares of the
AIM Funds;
o Unitholders of G/SET series unit investment trusts investing
proceeds from such trusts in shares of AIM Weingarten Fund or
AIM Constellation Fund; provided, however, prior to the
termination date of the trusts, a unitholder may invest
proceeds from the redemption or repurchase of his units only
when the investment in shares of AIM Weingarten Fund and AIM
Constellation Fund is effected within 30 days of the
redemption or repurchase;
o A shareholder of a fund that merges or consolidates with an
AIM Fund or that sells its assets to an AIM Fund in exchange
for shares of an AIM Fund;
o Shareholders of the GT Global funds as of April 30, 1987 who
since that date continually have owned shares of one or more
of these funds;
o Certain former AMA Investment Advisers' shareholders who
became shareholders of the AIM Global Health Care Fund in
October 1989, and who have continuously held shares in the GT
Global funds since that time; and
o Shareholders of record of Advisor Class shares of an AIM Fund
on February 11, 2000 who have continuously owned shares of
that AIM Fund, and who purchase additional shares of that AIM
Fund.
As used above, immediate family includes an individual and his or her
spouse, children, parents and parents of spouse.
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<PAGE> 101
CONTINGENT DEFERRED SALES CHARGE EXCEPTIONS
Former GT Global funds Class A shares that are subject to a contingent
deferred sales charge and that were purchased before June 1, 1998 are entitled
to the following waivers from the contingent deferred sales charge otherwise due
upon redemption: (1) minimum required distributions made in connection with an
IRA, Keogh Plan or custodial account under Section 403(b) of the Code or other
retirement plan following attainment of age 70 1/2; (2) total or partial
redemptions resulting from a distribution following retirement in the case of a
tax-qualified employer-sponsored retirement plan; (3) when a redemption results
from a tax-free return of an excess contribution pursuant to Section 408(d)(4)
or (5) of the Code or from the death or disability of the employee; (4)
redemptions pursuant to a Fund's right to liquidate a shareholder's account
involuntarily; (5) redemptions pursuant to distributions from a tax-qualified
employer-sponsored retirement plan, which is invested in the former GT Global
funds, which are permitted to be made without penalty pursuant to the Code,
other than tax-free rollovers or transfers of assets, and the proceeds of which
are reinvested in the former GT Global funds; (6) redemptions made in connection
with participant-directed exchanges between options in an employer-sponsored
benefit plan; (7) redemptions made for the purpose of providing cash to fund a
loan to a participant in a tax-qualified retirement plan; (8) redemptions made
in connection with a distribution from any retirement plan or account that is
permitted in accordance with the provisions of Section 72(t)(2) of the Code, and
the regulations promulgated thereunder; (9) redemptions made in connection with
a distribution from any retirement plan or account that involves the return of
an excess deferral amount pursuant to Section 401(k)(8) or Section 402(g)(2) of
the Code; (10) redemptions made in connection with a distribution from a
qualified profit-sharing or stock bonus plan described in Section 401(k) of the
Code to a participant or beneficiary under Section 401(k)(2)(B)(IV) of the Code
upon hardship of the covered employee (determined pursuant to Treasury
Regulation Section 1.401(k)-1(d)(2)); and (11) redemptions made by or for the
benefit of certain states, counties or cities, or any instrumentalities,
departments or authorities thereof where such entities are prohibited or limited
by applicable law from paying a sales charge or commission.
Former GT Global funds Class B shares purchased before June 1, 1998 are
subject to the following waivers from the contingent deferred sales charge
otherwise due upon redemption in addition to the waivers provided for
redemptions of currently issued Class B shares as described in a Prospectus: (1)
total or partial redemptions resulting from a distribution following retirement
in the case of a tax-qualified employer-sponsored retirement; (2) minimum
required distributions made in connection with an IRA, Keogh Plan or custodial
account under Section 403(b) of the Code or other retirement plan following
attainment of age 70 1/2; (3) redemptions pursuant to distributions from a
tax-qualified employer-sponsored retirement plan, which is invested in the
former GT Global funds, which are permitted to be made without penalty pursuant
to the Code, other than tax-free rollovers or transfers of assets, and the
proceeds of which are reinvested in the former GT Global funds; (4) redemptions
made in connection with participant-directed exchanges between options in an
employer-sponsored benefit plan; (5) redemptions made for the purpose of
providing cash to fund a loan to a participant in a tax-qualified retirement
plan; (6) redemptions made in connection with a distribution from any retirement
plan or account that is permitted in accordance with the provisions of Section
72(t)(2) of the Code, and the regulations promulgated thereunder; (7)
redemptions made in connection with a distribution from a qualified
profit-sharing or stock bonus plan described in Section 401(k) of the Code to a
participant or beneficiary under Section 401(k)(2)(B)(IV) of the Code upon
hardship of the covered employee (determined pursuant to Treasury Regulation
Section 1.401(k)-1(d)(2)); and (8) redemptions made by or for the benefit of
certain states, counties or cities, or any instrumentalities, departments or
authorities thereof where such entities are prohibited or limited by applicable
law from paying a sales charge or commission.
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<PAGE> 102
CDSCs will not apply to the following:
o Additional purchases of Class C shares of AIM Advisor Flex
Fund, AIM Advisor International Value Fund and AIM Advisor
Real Estate Fund by shareholders of record on April 30, 1995,
of these Funds, except that shareholders whose broker-dealers
maintain a single omnibus account with AFS on behalf of those
shareholders, perform sub-accounting functions with respect to
those shareholders, and are unable to segregate shareholders
of record prior to April 30, 1995, from shareholders whose
accounts were opened after that date will be subject to a CDSC
on all purchases made after March 1, 1996;
o Redemptions following the death or post-purchase disability of
(1) any registered shareholders on an account or (2) a settlor
of a living trust, of shares held in the account at the time
of death or initial determination of post-purchase disability;
o Certain distributions from individual retirement accounts,
Section 403(b) retirement plans, Section 457 deferred
compensation plans and Section 401 qualified plans, where
redemptions result from (i) required minimum distributions to
plan participants or beneficiaries who are age 70 1/2 or
older, and only with respect to that portion of such
distributions that does not exceed 12% annually of the
participant's or beneficiary's account value in a particular
AIM Fund; (ii) in kind transfers of assets where the
participant or beneficiary notifies the distributor of the
transfer no later than the time the transfer occurs; (iii)
tax-free rollovers or transfers of assets to another plan of
the type described above invested in Class B or Class C shares
of one or more of the AIM Funds; (iv) tax-free returns of
excess contributions or returns of excess deferral amounts;
and (v) distributions on the death or disability (as defined
in the Internal Revenue Code of 1986, as amended) of the
participant or beneficiary;
o Amounts from a Systematic Withdrawal Plan of up to an annual
amount of 12% of the account value on a per fund basis, at the
time the withdrawal plan is established, provided the investor
reinvests his dividends;
o Liquidation by the Fund when the account value falls below the
minimum required account size of $500;
o Investment account(s) of AIM; and
o Class C shares where the investor's dealer of record notifies
the distributor prior to the time of investment that the
dealer waives the payment otherwise payable to him.
Upon the redemption of shares of funds in sales charge Categories I and
II (See "Sales Charges and Dealer Concessions") purchased in amounts of $1
million or more, no CDSC will be applied in the following situations:
o Shares held more than 18 months;
o Redemptions from employee benefit plans designated as
qualified purchasers, as defined above, where the redemptions
are in connection with employee terminations or withdrawals,
provided the total amount invested in the plan is at least
$1,000,000; the sponsor signs a $1 million LOI; or the
employer-sponsored plan has at least 100 eligible employees;
provided, however, that 403(b) plans sponsored by public
educational institutions shall qualify for the CDSC waiver on
the basis of the value of each plan participant's aggregate
investment in the AIM Funds, and not on the aggregate
investment made by the plan or on the number of eligible
employees;
o Private foundations or endowment funds;
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<PAGE> 103
o Redemption of shares by the investor where the investor's
dealer waives the amounts otherwise payable to it by the
distributor and notifies the distributor prior to the time of
investment; and
o Shares acquired by exchange from Class A shares of funds in
sales charge Categories I and II unless the shares acquired by
exchange are redeemed within 18 months of the original
purchase of the Class A shares.
HOW TO PURCHASE AND REDEEM SHARES
A complete description of the manner by which shares of the Funds may
be purchased appears in the Prospectuses under the caption "Purchasing Shares -
How to Purchase Shares."
The sales charge normally deducted on purchases of Class A shares of
the Funds is used to compensate AIM Distributors and participating dealers for
their expenses incurred in connection with the distribution of such shares.
Since there is little expense associated with unsolicited orders placed directly
with AIM Distributors by persons, who because of their relationship with the
Funds or with AIM and its affiliates, are familiar with the Funds, or whose
programs for purchase involve little expense (e.g., because of the size of the
transaction and shareholder records required), AIM Distributors believes that it
is appropriate and in the Funds' best interests that such persons be permitted
to purchase Class A shares of the Funds through AIM Distributors without payment
of a sales charge. The persons who may purchase Class A shares of the Funds
without a sales charge are described in "REDUCTIONS IN INITIAL SALES
CHARGES--Purchases At Net Asset Value".
Complete information concerning the method of exchanging shares of the
Funds for shares of the other mutual funds managed or advised by AIM is set
forth in the Prospectuses under the caption "Exchanging Shares."
Information concerning redemption of the Funds' shares is set forth in
the Prospectuses under the caption "Redeeming Shares - How to Redeem Shares."
Shares of the AIM Funds may be redeemed directly through AIM Distributors or
through any dealer who has entered into an agreement with AIM Distributors. In
addition to the Funds' obligation to redeem shares, AIM Distributors may also
repurchase shares as an accommodation to shareholders. To effect a repurchase,
those dealers who have executed Selected Dealer Agreements with AIM Distributors
must phone orders to the order desk of the Fund at (800) 959-4246 and guarantee
delivery of all required documents in good order. A repurchase is effected at
the net asset value of a Fund next determined after such order is received. Such
arrangement is subject to timely receipt by AFS of all required documents in
good order. If such documents are not received within a reasonable time after
the order is placed, the order is subject to cancellation. While there is no
charge imposed by the Funds or by AIM Distributors (other than any applicable
CDSC) when shares are redeemed or repurchased, dealers may charge a fair service
fee for handling the transaction.
The right of redemption may be suspended or the date of payment
postponed when (a) trading on the New York Stock Exchange ("NYSE") is
restricted, as determined by applicable rules and regulations of the SEC, (b)
the NYSE is closed for other than customary weekend and holiday closings, (c)
the SEC has by order permitted such suspension, or (d) an emergency as
determined by the SEC exists making disposition of portfolio securities or the
valuation of the net assets of a Fund not reasonably practicable.
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<PAGE> 104
BACKUP WITHHOLDING
Accounts submitted without a correct, certified taxpayer identification
number or, alternatively, a completed Internal Revenue Service ('IRS") Form W-8
(for non-resident aliens) or Form W-9 (certifying exempt status) accompanying
the registration information will generally be subject to backup withholding.
Each AIM Fund, and other payers, must, according to IRS regulations,
withhold 31% of redemption payments and reportable dividends (whether paid or
accrued) in the case of any shareholder who fails to provide the Fund with a
taxpayer identification number ("TIN") and a certification that he is not
subject to backup withholding.
An investor is subject to backup withholding if:
1. the investor fails to furnish a correct TIN to the Fund, or
2. the IRS notifies the Fund that the investor furnished an
incorrect TIN, or
3. the investor or the Fund is notified by the IRS that the
investor is subject to backup withholding because the investor
failed to report all of the interest and dividends on such
investor's tax return (for reportable interest and dividends
only), or
4. the investor fails to certify to the Fund that the investor is
not subject to backup withholding under (3) above (for
reportable interest and dividend accounts opened after 1983
only), or
5. the investor does not certify his TIN. This applies only to
non-exempt mutual fund accounts opened after 1983.
Interest and dividend payments are subject to backup withholding in all
five situations discussed above. Redemption proceeds and long-term gain
distributions are subject to backup withholding only if (1), (2) or (5) above
applies.
Certain payees and payments are exempt from backup withholding and
information reporting. A complete listing of such exempt entities appears in the
Instructions for the Requester of Form W-9 (which can be obtained from the IRS)
and includes, among others, the following:
o a corporation
o an organization exempt from tax under Section 501(a), an
individual retirement plan (IRA), or a custodial account under
Section 403(b)(7)
o the United States or any of its agencies or instrumentalities
o a state, the District of Columbia, a possession of the United
States, or any of their political subdivisions or
instrumentalities
o a foreign government or any of its political subdivisions,
agencies or instrumentalities
o an international organization or any of its agencies or
instrumentalities
o a foreign central bank of issue
o a dealer in securities or commodities required to register in
the U.S. or a possession of the U.S.
o a futures commission merchant registered with the Commodity
Futures Trading Commission
o a real estate investment trust
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<PAGE> 105
o an entity registered at all times during the tax year under
the 1940 Act
o a common trust fund operated by a bank under Section 584(a)
o a financial institution
o a middleman known in the investment community as a nominee or
listed in the most recent publication of the American Society
of Corporate Secretaries, Inc., Nominee List
o a trust exempt from tax under Section 664 or described in
Section 4947.
Investors should contact the IRS if they have any questions concerning
entitlement to an exemption from backup withholding.
NOTE: Section references are to sections of the Code.
IRS PENALTIES -- Investors who do not supply the AIM Funds with a
correct TIN will be subject to a $50 penalty imposed by the IRS unless such
failure is due to reasonable cause and not willful neglect. If an investor
falsifies information on this form or makes any other false statement resulting
in no backup withholding on an account which should be subject to backup
withholding, such investor may be subject to a $500 penalty imposed by the IRS
and to certain criminal penalties including fines and/or imprisonment.
NONRESIDENT ALIENS -- Nonresident alien individuals and foreign
entities are not subject to the backup withholding previously discussed, but
must certify their foreign status by attaching IRS Form W-8 to their
application. Form W-8 remains in effect for three calendar years beginning with
the calendar year in which it is received by the Fund. Such shareholders may,
however, be subject to federal income tax withholding at a 30% rate on ordinary
income dividends and distributions and return of capital distributions. Under
applicable treaty law, residents of treaty countries may qualify for a reduced
rate of withholding or a withholding exemption.
NET ASSET VALUE DETERMINATION
In accordance with the current rules and regulations of the SEC, the
net asset value of a share of each Fund is determined once daily as of the close
of the customary trading session of the NYSE (generally 4:00 p.m. Eastern Time),
on each business day of the Fund. In the event the NYSE closes early (i.e.,
before 4:00 p.m. Eastern Time) on a particular day, the net asset value of a
Fund share is determined as of the close of the NYSE on such day. For purposes
of determining net asset value per share, futures and options contract closing
prices which are available fifteen (15) minutes after the close of the customary
trading session of the NYSE will generally be used. The income or loss and the
expenses (except those listed below) of a 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 and service fees
and transfer agency fees (to the extent different rates are charged to different
classes) are allocated only to the class to which such expenses relate. The net
asset value per share of a 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 such class. Determination of each Fund's net asset value
per share is made in accordance with generally accepted accounting principles.
A security listed or traded on an exchange (except convertible bonds)
is valued at its last 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, 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
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NASDAQ National Market System is valued at the last sales price on the valuation
date, or lacking a last sale, 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; 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 an 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 date. Securities for which market
quotations are not readily available or for which market quotations are not
reflective of fair value are valued at fair value as determined in good faith by
or under the supervision of the Trust's officers in a manner specifically
authorized by the Board of Trustees of the Trust. Short-term obligations having
sixty (60) days or less to maturity are valued at amortized cost, which
approximates market value. (See also "Purchasing Shares - How to Purchase
Shares," and "Redeeming Shares - How to Redeem Shares" and "Pricing of Shares"
in each Prospectus.)
Generally, trading in foreign securities, as well as corporate bonds,
U.S. Government securities and money market instruments, is substantially
completed each day at various times prior to the close of the NYSE. The values
of such securities used in computing the net asset value of a 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 customary trading session of the
NYSE which will not be reflected in the computation of a Fund's net asset value.
If events materially affecting the value of such securities occur during such
period, then these securities will be valued at their fair value as determined
in good faith by or under the supervision of the Board of Trustees.
Fund securities primarily traded in foreign markets may be traded in
such markets on days which are not business days of the Fund. Because the net
asset value per share of each Fund is determined only on business days of the
Fund, the net asset value per share of a Fund may be significantly affected on
days when an investor can not exchange or redeem shares of the Fund.
DIVIDENDS, DISTRIBUTIONS AND TAX MATTERS
REINVESTMENT OF DIVIDENDS AND DISTRIBUTIONS
It is the intention of each of the Funds to distribute to its
respective shareholders all of the applicable Fund's net investment income and
net realized capital gains, if any. The per share dividends and distribution on
each class of shares of a Fund will be reduced as a result of any service fees
applicable to that class. The gross income, realized and unrealized capital
gains and losses and expenses (other than Class Expenses, as defined below) of
each Fund shall be allocated to each class on the basis of its net asset value
relative to the net asset value of the Fund. Expenses to be so allocated include
expenses of the Trust that are allocated to a Fund and are not attributable to a
particular Fund or class of a Fund ("Trust Expenses") and expenses of the
particular Fund that are not attributable to a particular class of the Fund
("Fund Expenses"). Trust Expenses include, but are not limited to, trustees'
fees. Fund Expenses include advisory fees and operating service fees. Expenses
attributable to a particular class ("Class Expenses") include distribution plan
expenses, which must be allocated to the class for which they are incurred.
Other expenses may be allocated as Class Expenses, consistent with applicable
legal principles under the 1940 Act and the Internal Revenue Code of 1986, as
amended ("Code").
The FLEX FUND and REAL ESTATE FUND make periodic distributions of
their net investment income (including any net short-term capital gain) during
the months of March, June, September and December and distribute any realized
net capital gains at least annually, during the month of December. The
INTERNATIONAL VALUE FUND makes semiannual distributions of net investment income
(including any net short-term capital gain) during the months of June and
December and distributes any realized net capital gain at least annually, during
the month of December.
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All such distributions will be reinvested automatically in additional
shares (or fractions thereof) of each applicable Fund and class pursuant to each
Fund's Automatic Dividend Reinvestment Plan unless a shareholder has elected not
to participate in this plan or has elected to terminate his participation in the
plan and to receive his distributions in excess of ten dollars in cash. (See
"Special Plans - Automatic Dividend Investment Plan" in each Prospectus.)
For taxable clients, a portion of the dividends paid by a REIT may be
considered return on capital and would not currently be regarded as taxable
income. Therefore, depending upon an individual's tax bracket, the dividend
yield may have a higher tax effective yield.
TAX MATTERS
The following is only a summary of certain additional tax
considerations generally affecting the Funds and their shareholders that are not
described in the Prospectuses. No attempt is made to present a detailed
explanation of the tax treatment of each Fund or its shareholders, and the
discussion here and in the Prospectuses is not intended as a substitute for
careful tax planning.
SPECIAL TAX INFORMATION
For taxable years in which it is eligible to do so, the Funds may
elect to pass through to shareholders credits for foreign taxes paid. If the
fund makes such an election, a shareholder who receives a distribution (1) will
be required to include in gross income his proportionate share of foreign taxes
allocable to the distribution and (2) may claim a credit or deduction for such
share for his taxable year in which the distribution is received, subject to the
general limitations imposed on the allowance of foreign tax credits and
deductions. Shareholders should also note that certain gains or losses
attributable to fluctuations in exchange rates or foreign currency forward
contracts may increase or decrease the amount of income of the fund available
for distribution to shareholders, and should note that if such losses exceed
other income during a taxable year, the fund would not be able to pay ordinary
income dividends.
QUALIFICATION AS A REGULATED INVESTMENT COMPANY
Each Fund has elected to be taxed as a regulated investment company
under Subchapter M of the Code. As a regulated investment company, each 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 a 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.
Each Fund may use "equalization accounting" in determining the portion
of its net investment income and capital gain net income that has been
distributed. A Fund that elects to use equalization accounting will allocate a
portion of its realized investment income and capital gains to redemptions of
Fund shares and will reduce the amount that it distributes in cash. However,
each 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 a Fund is using an
improper method of allocation and has underdistributed its net investment income
and capital gain net income for any taxable year, such Fund may be liable for
additional federal income tax.
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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").
In addition to satisfying the requirements described above, each 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 each 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
companies, and securities of other issuers, 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 a 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 such Fund's current and accumulated earnings
and profits. Such distributions generally will be eligible for the dividends
received deduction in the case of corporate shareholders.
DETERMINATION OF TAXABLE INCOME OF A REGULATED INVESTMENT COMPANY
In general, gain or loss recognized by a 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 a 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, absent an
election, be treated as ordinary income or loss.
In general, for purposes of determining whether capital gain or loss
recognized by a 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.
Other hedging transactions that may be engaged in by certain of the
Funds (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,
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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 generally take into account any gain for the taxable year which
includes such date).
Some of the forward foreign currency exchange contracts, options and
futures contracts that certain of the Funds 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), absent an election, treated as
ordinary income or loss.
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 a regulated investment
company that fails 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 shall
(a) reduce its capital gain net income (but not below its net capital gain) by
the amount of any net ordinary loss for the calendar year, and (b) exclude
foreign currency gains and losses incurred after October 31 of any year (or
after the end of its taxable year if it has made a taxable year election) 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).
Each 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 a 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 a Fund may in certain circumstances be required to liquidate
portfolio investments to make sufficient distributions to avoid excise tax
liability.
SWAP AGREEMENTS
Each Fund may enter into swap agreements. The rules governing the tax
aspects of swap agreements are in a developing stage and are not entirely clear
in certain respects. Accordingly, while a Fund intends to account for such
transactions in a manner deemed to be appropriate, the Internal Revenue Service
(the "IRS") might not accept such treatment. If it did not, the status of the
Trust as a regulated investment company might be affected. The Trust intends to
monitor developments in this area. Certain requirements that
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must be met under the Code in order for the Trust to qualify as a regulated
investment company may limit the extent to which the Fund will be able to engage
in swap agreements.
INVESTMENT IN PASSIVE FOREIGN INVESTMENT COMPANIES
Each Fund may invest in shares of foreign corporations which may be
classified under the Code as passive foreign investment companies ("PFICs"). In
general, a foreign corporation is classified as a PFIC if at least one-half of
its assets constitute investment-type assets, or 75% or more of its gross income
is investment-type income. If a Fund receives a so-called "excess distribution"
with respect to PFIC stock, the Fund itself may be subject to a tax on a portion
of the excess distribution, whether or not the corresponding income is
distributed by the Fund to shareholders. In general, under the PFIC rules, an
excess distribution is treated as having been realized ratably over the period
during which the Fund held the PFIC shares. The Fund itself will be subject to
tax on the portion, if any, of an excess distribution that is so allocated to
prior Fund taxable years and an interest factor will be added to the tax, as if
the tax had been payable in such prior taxable years. Certain distributions from
a PFIC as well as gain from the sale of PFIC shares are treated as excess
distributions. Excess distributions are characterized as ordinary income even
though, absent application of the PFIC rules, certain excess distributions might
have been classified as capital gain.
Each Fund may elect alternative tax treatment with respect to PFIC
shares. Under one such election (the "QEF Election") the Fund generally would be
required to include in its gross income its share of the earnings of a PFIC on a
current basis, regardless of whether distributions are received from the PFIC in
a given year. Alternatively, each Fund may make an election to mark any shares
of PFIC stock that it holds to market (the "Section 1296 Election"). If the
Section 1296 Election is made with respect to any PFIC stock, a Fund will
recognize ordinary income to the extent that the fair market value of such PFIC
stock at the close of any taxable year exceeds its adjusted basis and will also
recognize ordinary income in the event that it disposes of any shares of such
PFIC stock at a gain. In each case, such ordinary income will be treated as
dividend income for purposes of the Income Requirement. A Fund making the
Section 1296 Election with respect to any PFIC stock will similarly recognize a
deductible ordinary loss to the extent that the adjusted basis of such PFIC
stock exceeds its fair market value at the close of any taxable year and will
also recognize a deductible ordinary loss in the event that it disposes of such
PFIC stock at a loss. However, the amount of any ordinary loss recognized by a
Fund making a Section 1296 Election with respect to any PFIC stock may not
exceed the amount of ordinary income previously recognized by such Fund by
reason of marking such PFIC stock to market. If either the QEF Election or the
Section 1296 Election is made, the special rules, discussed above, relating to
the taxation of excess distributions, would not apply. A Fund's intention to
qualify annually as a regulated investment company may limit its ability to
invest and hold PFIC shares.
Because the application of the PFIC rules may affect, among other
things, the character of gains, the amount of gain or loss and the timing of the
recognition of income with respect to PFIC shares, as well as subject a Fund
itself to tax on certain income from PFIC shares, the amount that must be
distributed to shareholders, and which will be taxed to shareholders as ordinary
income or long-term capital gain, may be increased or decreased substantially as
compared to a fund that did not invest in PFIC shares.
DEBT SECURITIES ACQUIRED AT A DISCOUNT
Some of the debt securities (with a fixed maturity date of more than
one year from the date of issuance) that may be acquired by a Fund may be
treated as debt securities that are issued originally at a discount. Generally,
the amount of the original issue discount ("OID") is treated as interest income
and is included in income over the term of the debt security, even though
payment of that amount is not received until a later time, usually when the debt
security matures.
Some of the debt securities (with a fixed maturity date of more than
one year from the date of issuance) that may be acquired by a Fund in the
secondary market may be treated as having market discount. Generally, gain
recognized on the disposition of, and any partial payment of principal on, a
debt security having market discount is treated as ordinary income to the extent
the gain, or principal payment, does not exceed
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the "accrued market discount" on such debt security. In addition, the deduction
of any interest expenses attributable to debt securities having market discount
may be deferred. Market discount generally accrues in equal daily installments.
A Fund may make one or more of the elections applicable to debt securities
having market discount, which could affect the amount, character and timing of
recognition of income.
Some debt securities (with a fixed maturity date of one year or less
from the date of issuance) that may be acquired by a Fund may be treated as
having acquisition discount, or OID in the case of certain types of debt
securities. Generally, a Fund will be required to include the acquisition
discount, or OID, in income over the term of the debt security, even though
payment of that amount is not received until a later time, usually when the debt
security matures. A Fund may make one or more of the elections applicable to
debt securities having acquisition discount, or OID, which could affect the
character and timing of recognition of income.
A Fund generally will be required to distribute dividends to
shareholders representing discount on debt securities that is currently
includable in income, even though cash representing such income may not have
been received by the Fund. Cash to pay such dividends may be obtained from sales
proceeds of securities held by the Fund or by borrowing.
DISTRIBUTIONS
With respect to tax-exempt shareholders, distributions from the Funds
will not be subject to federal income taxation to the extent permitted under the
applicable tax-exemption. With respect to shareholders that are not exempt from
federal taxation, distributions of investment company taxable income are taxable
to a U.S. shareholder as ordinary income, whether paid in cash or shares.
Dividends paid by a Fund to a corporate shareholder, to the extent such
dividends are attributable to dividends received from U.S. corporations, may
qualify for the dividends received deduction. However, the alternative minimum
tax applicable to corporations may reduce the value of the dividends received
deduction. Distributions of net capital gain (the excess of net long-term
capital gains over net short-term capital losses), if any, designated by a Fund
as capital gain dividends, are taxable as long-term capital gain, whether paid
in cash or in shares, regardless of how long the shareholder has held the Fund's
shares and are not eligible for the dividends received deduction. Shareholders
will be notified annually as to the U.S. federal tax status of distributions in
accordance with the guidance that has been provided by the IRS.
If the net asset value of shares is reduced below a shareholder's cost
as a result of a distribution by a Fund, such distribution generally will be
taxable even though it represents a return of invested capital. Investors should
be careful to consider the tax implications of buying shares of a Fund just
prior to a distribution. The price of shares purchased at this time may reflect
the amount of the forthcoming distribution. Those purchasing just prior to a
distribution will receive a distribution which generally will be taxable to
them.
DISPOSITION OF SHARES
With respect to tax-exempt shareholders, a redemption, sale or
exchange of shares of a Fund will not be subject to federal income taxation to
the extent permitted under the applicable tax-exemption. Upon a redemption, sale
or exchange of his or her shares of a Fund, a shareholder that is not exempt
from federal income taxation will realize a taxable gain or loss depending upon
his or her basis in the shares. A gain or loss will be treated as capital gain
or loss if the shares are capital assets in the shareholder's hands and
generally will be long-term or short-term, depending upon the shareholder's
holding period for the shares. 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%. Any loss realized
on a redemption, sale or exchange will be disallowed to the extent the shares
disposed of are replaced (including through reinvestment of dividends) within a
period of 61 days beginning 30 days before and ending 30 days after the shares
are disposed of. In such a case, the basis of the shares acquired will be
adjusted to reflect the disallowed loss. Any loss realized by a shareholder on
the sale of a Fund's shares held by the shareholder for six months or less will
be treated for tax purposes as a long-term capital loss to the extent of any
distributions of capital gain dividends received or treated as having been
received by the shareholder with respect to such shares.
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If a shareholder (a) incurs a sales load in acquiring shares of a
Fund, (b) disposes of such shares less than 91 days after they are acquired, and
(c) subsequently acquires shares of the Fund 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.
OTHER TAXATION
Distributions may also be subject to additional state, local and
foreign taxes depending on each shareholder's particular situation. Non-U.S.
shareholders may be subject to U.S. tax rules that differ significantly from
those summarized above. The tax effects discussed hereunder are those in effect
on July 1, 2000. Future tax law changes may change the effects discussed herein.
This discussion does not purport to deal with all of the tax consequences
applicable to the Funds or shareholders. Shareholders are advised to consult
their own tax advisers with respect to the particular tax consequences to them
of an investment in a Fund.
PORTFOLIO TRANSACTIONS AND BROKERAGE
GENERAL BROKERAGE POLICY
The Advisor or sub-advisor make decisions to buy and sell securities
for each Fund, selects broker-dealers, effects the Funds' 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 Funds may not pay the lowest commission or spread available. See
"Section 28(e) Standards" below.
Some of the securities in which the Funds invest are traded in
over-the-counter markets. In such transactions, a 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 Funds) 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 Funds and the AIM Funds in particular, including sales of
the Funds and of the other AIM Funds. In connection with (3) above, the Funds'
trades may be executed directly by dealers that sell shares of the AIM Funds or
by other broker-dealers with which such dealers have clearing arrangements. AIM
will not use a specific formula in connection with any of these considerations
to determine the target levels.
AIM will seek, whenever possible, to recapture for the benefit of a
Fund any commissions, fees, brokerage or similar payments paid by the Fund on
portfolio transactions. Normally, the only fees which AIM can recapture are the
soliciting dealer fees on the tender of a Fund's portfolio securities in a
tender or exchange offer.
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The Funds may engage in certain principal and agency transactions with
banks and their affiliates that own 5% or more of the outstanding voting
securities of an AIM Fund, provided the conditions of an exemptive order
received by the Funds from the SEC are met. In addition, a Fund may purchase or
sell a security from or to another AIM Fund or account provided the Funds follow
procedures adopted by the Board of Directors/Trustees of the various AIM Funds,
including the Trust. These inter-fund transactions do not generate brokerage
commissions but may result in custodial fees or taxes or other related expenses.
Under the 1940 Act, certain persons affiliated with the Trust are
prohibited from dealing with the funds as principal in any purchase or sale of
securities unless an exemptive order allowing such transactions is obtained from
the SEC. The 1940 Act also prohibits the funds from purchasing a security being
publicly underwritten by a syndicate of which certain persons affiliated with
the Trust are members except in accordance with certain conditions.
ALLOCATION OF PORTFOLIO TRANSACTIONS
AIM and its affiliates manage numerous other investment accounts. Some
of these accounts may have investment objectives similar to the Funds.
Occasionally, identical securities will be appropriate for investment by one of
the Funds and by another Fund or one or more of these investment accounts.
However, the position of each account in the same securities and the length of
time that each account may hold its investment in the same securities may vary.
The timing and amount of purchase by each account will also be determined by its
cash position. If the purchase or sale of securities is consistent with the
investment policies of the Fund(s) and one or more of these accounts, and is
considered at or about the same time, AIM will fairly allocate transactions in
such securities among the Fund(s) and these accounts. AIM may combine such
transactions, in accordance with applicable laws and regulations, to obtain the
most favorable execution. Simultaneous transactions could, however, adversely
affect a Fund's ability to obtain or dispose of the full amount of a security
which it seeks to purchase or sell.
Sometimes the procedure for allocating portfolio transactions among
the various investment accounts advised by AIM could have an adverse effect on
the price or amount of securities available to a Fund. In making such
allocations, AIM considers the investment objectives and policies of its
advisory clients, the relative size of portfolio holdings of the same or
comparable securities, the availability of cash for investment, the size of
investment commitments generally held, and the judgments of the persons
responsible for recommending the investment.
SECTION 28(e) STANDARDS
Section 28(e) of the Securities Exchange Act of 1934 provides that
AIM, under certain circumstances, lawfully may cause an account to pay a higher
commission than the lowest available. Under Section 28(e), AIM must make a good
faith determination that the commissions paid are "reasonable in relation to the
value of the brokerage and research services provided ... viewed in terms of
either that particular transaction or [AIM's] overall responsibilities with
respect to the accounts as to which it exercises investment discretion." The
services provided by the broker also must lawfully and appropriately assist AIM
in the performance of its investment decision-making responsibilities.
Accordingly, in recognition of research services provided to it, a 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 Trust's trustees with respect to the
performance, investment activities, and fees and expenses of other mutual
funds. Broker-
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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 Funds. However, the Funds are 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 Funds 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.
TRANSACTIONS WITH REGULAR BROKERS
At December 31, 1999, certain of the Funds held securities of the
Trust's regular brokers or dealers, or their parents, as follows:
<TABLE>
<CAPTION>
Value of Securities
Fund Broker or Dealer at December 31, 1999
---- ---------------- --------------------
<S> <C> <C>
FLEX FUND Morgan Stanley Dean Witter & Co. 11,420,000
</TABLE>
BROKERAGE COMMISSIONS PAID
For the fiscal years ended December 31, 1999, 1998 and 1997, the FLEX
FUND paid total brokerage commissions of $492,276, $291,570 and $166,653,
respectively. For the fiscal year ended December 31, 1999, AIM allocated certain
of FLEX FUND'S brokerage transactions to certain broker-dealers that provide AIM
with certain research, statistical and other information. Such transactions
amounted to $46,040,822, and the related commissions were $60,141. For the
fiscal years ended December 31, 1999, 1998, and 1997, the REAL ESTATE FUND paid
total brokerage commissions of $157,871, $256,164 and $115,951, respectively.
For the fiscal year ended December 31, 1999, AIM allocated certain of REAL
ESTATE FUND'S brokerage transactions to certain broker-dealers that provide AIM
with certain research, statistical and other information. Such transactions
amounted to $11,617,438 and the related commissions were $33,118. For the fiscal
years ended December 31, 1999, 1998 and 1997, the INTERNATIONAL VALUE FUND paid
total brokerage commissions of $82,505, $42,855 and $44,731, respectively. For
the fiscal year ended December 31, 1999, AIM allocated certain of INTERNATIONAL
VALUE FUND'S brokerage transactions to certain broker-dealers that provide AIM
with certain research, statistical and other information. Such transactions
amounted to $585,747, and the related commissions were $1,464. There were no
brokerage commissions paid to affiliated broker-dealers during the fiscal years
ended December 31, 1999,1998 and 1997, by any of the Funds.
59
<PAGE> 115
PORTFOLIO TURNOVER
The portfolio turnover rate of FLEX FUND, INTERNATIONAL VALUE FUND and
REAL ESTATE FUND is shown under "Financial Highlights" in the applicable
Prospectus. Higher portfolio turnover increases transaction costs to the Funds.
REDEMPTIONS
It is possible that in the future conditions may exist which would, in
the opinion of the Trustees, make it undesirable for a Fund to pay for redeemed
shares in cash. In such cases, the Trustees may authorize payment to be made in
Fund securities or other property of the applicable Fund. However, each Fund has
made an election under Rule 18f-1 under the 1940 Act, which obligates the Fund
to redeem for cash all shares presented to such Fund for redemption by any one
shareholder up to $250,000 (or 1% of the applicable Fund's net assets if that is
less) in any 90-day period. Securities delivered in payment of redemptions are
valued at the same value assigned to them in computing the applicable Fund's net
asset value per share. Shareholders receiving such securities are likely to
incur brokerage costs on their subsequent sales of such securities.
PERFORMANCE INFORMATION
The Funds may from time to time include figures indicating their yield
and total return in advertisements or reports to shareholders or prospective
investors. From time to time, AIM or its affiliates may waive all or a portion
of their fees and/or assume certain expenses of any Fund. Voluntary fee waivers
or reductions or commitments to assume expenses may be rescinded at any time
without further notice to investors. During periods of voluntary fee waivers or
reductions or commitments to assume expenses, AIM will retain its ability to be
reimbursed for such fee prior to the end of each fiscal year. Contractual fee
waivers or reductions or reimbursement of expenses set forth in the Fee Table in
the Prospectuses 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 each Fund will vary from time to time and past
results are not necessarily indicative of future results. A Fund's performance
is a function of its portfolio management in selecting the type and quality of
portfolio securities and is affected by operating expenses of the Fund and
market conditions. A shareholder's investment in a Fund is not insured or
guaranteed. These factors should be carefully considered by the investor before
making an investment in any Fund.
Yield
-----
ALL FUNDS
All Funds may advertise "yield," "dividend yield" and "distribution
yield" for each class. Quotations of yield for each class of these Funds will be
based on all investment income per share earned during a particular 30-day
period (including dividends and interest), less expenses accrued during the
period ("net investment income"), and are computed by dividing net investment
income by the maximum offering price per share (which includes the maximum sales
charge) on the last day of the period, according to the following formula:
6
Yield = 2[(a-b + 1) -1]
---
cd
where a = dividends and interest earned during the period
b = expenses accrued for the period (net of reimbursements or
waivers),
60
<PAGE> 116
c = the average daily number of shares outstanding during
period that were entitled to receive dividends, and
d = the maximum offering price per share on the last day of
the period.
For the 30-day period ended December 31, 1999, the yield for Class A
shares, Class B shares and Class C shares of REAL ESTATE FUND were 5.39%, 4.79%
and 4.80%, respectively.
Dividend yield is a measure of investment return during a specified
period based on dividends actually paid by a class of a Fund during that period.
Dividend yield is calculated by totaling the dividends paid by a class from its
net investment income during the specified period and dividing that sum by the
net asset value per share of the class on the last day of the period.
Distribution yield is computed in the same way, but includes distributions paid
with respect to a class from short-term capital gains realized by the Fund, as
well as dividends from the net investment income of the class. Where the
dividend or distribution yield is calculated for a period of less than a year,
results may be annualized by using the following calculation method:
Total dividends/distributions paid by the class during the specified
period are divided by the net asset value of a class share on the last
day of the specified period. This result is divided by the number of
days in the specified period and the result is multiplied by 365.
The dividend yields for the 30-day period ended December 31, 1999, for
Class A shares, Class B shares and Class C shares of REAL ESTATE FUND were
5.60%, 4.79% and 4.80%, respectively.
The distribution yields (including income and short-term capital gains
distributions) for the 365-day period ended December 31, 1999, for Class A
shares, Class B shares and Class C shares of REAL ESTATE FUND were 4.92%, 4.11%
and 4.12%, respectively.
Total Return
------------
Funds may advertise their "average annual total return" and their
"total return." Average annual total return and total return figures represent
the increase (or decrease) in the value of an investment in the Fund over a
specified period. Both calculations assume that all income dividends and capital
gains distributions during the period are reinvested at net asset value in
additional shares of the respective Fund.
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.
Quotations of the average annual total return for each class reflect
the deduction of a proportional share of expenses allocated to the class and
Class Expenses on an annual basis. The results, which are annualized, represent
an average annual compound rate of return on a hypothetical investment in the
class over a period of 1, 5 and 10 years ending on the most recent calendar
quarter.
The average annual total return as of December 31, 1999, for Class A
shares of each of the following Funds for the periods listed below are as
follows:
61
<PAGE> 117
<TABLE>
<CAPTION>
Fund 1 Year Since Inception*
---- ------ ---------------
<S> <C> <C>
FLEX FUND (6.32)% 9.76%
REAL ESTATE FUND (7.48)% (4.96)%
INTERNATIONAL VALUE FUND 15.83% 13.60%
</TABLE>
----------
* From December 31, 1996 (commencement of operations) (3 years).
The average annual total return as of December 31, 1999, for Class B
shares of each of the following Funds for the period listed below is as follows:
<TABLE>
<CAPTION>
Fund 1 Year Since Inception*
---- ------ ---------------
<S> <C> <C>
FLEX FUND (5.89)% 1.22%
REAL ESTATE FUND (8.17)% (15.54)%
INTERNATIONAL VALUE FUND 16.70% 10.34%
</TABLE>
* From March 3, 1998 (commencement of operations) (1 year, 9 months)
The average annual total return as of December 31, 1999, for shares now
designated as Class C shares of each of the following Funds for the periods
listed below are as follows:
<TABLE>
<CAPTION>
Since
Fund 1 Year 5 Years 10 Years Inception
---- ------ ------- -------- ---------
<S> <C> <C> <C> <C>
FLEX FUND (2.44)% 14.63% 11.27% 11.23%*
REAL ESTATE FUND (4.47)% N/A N/A 5.99%**
INTERNATIONAL VALUE FUND 20.64% N/A N/A 16.53%**
</TABLE>
----------
* From February 24, 1988 (commencement of operations) (11 years, 10
months).
** From May 1, 1995 (commencement of operations) (4 years, 7 months).
Quotations of total return, which are not annualized, represent
historical earnings and asset value fluctuations. Total return is based on past
performance and is not a guarantee of future results. These rates of return are
net of all expenses and assume all dividends and distributions by the Funds have
been reinvested on the reinvestment dates during each period.
The following table provides the actual total rates of return for Class
A shares of the indicated Funds for the fiscal years ended December 31, 1999,
1998 and 1997.
<TABLE>
<CAPTION>
REAL INTERNATIONAL
FLEX ESTATE VALUE
FUND FUND FUND
----- ------- -------------
<S> <C> <C> <C>
1999 (0.85)% (2.88)% 22.54%
1998 13.26% (22.54)% 11.20%
1997* 24.60% 19.78% 13.84%
</TABLE>
----------
* Period December 31, 1996 (commencement of operation) through December
31, 1997.
62
<PAGE> 118
The following table provides the actual total rates of return for Class
B shares of the indicated Funds for the fiscal years ended December 31, 1999 and
1998.
<TABLE>
<CAPTION>
REAL INTERNATIONAL
FLEX ESTATE VALUE
FUND FUND FUND
----- ------- -------------
<S> <C> <C> <C>
1999 (1.50)% (3.53)% 21.70%
1998* 7.25% (21.02)% 1.67%
</TABLE>
* Period March 3, 1998 (commencement of operation) through December 31,
1998.
The following table provides the actual total rates of return for Class
C shares of the indicated Funds for the fiscal years ended December 31, 1999,
1998, 1997, 1996, 1995, 1994, 1993 and 1992.
<TABLE>
<CAPTION>
REAL INTERNATIONAL
FLEX ESTATE VALUE
FUND FUND FUND
------ ------- -------------
<S> <C> <C> <C>
1999 (1.56)% (3.54)% 21.64%
1998 12.41% (23.16)% 10.38%
1997 23.63% 18.88% 12.98%
1996 13.62% 36.44% 20.99%
1995 27.30% 9.12%* 11.28%*
1994 0.65% N/A N/A
1993 10.48% N/A N/A
1992 7.73% N/A N/A
</TABLE>
* Period May 1, 1995 (commencement of operations) through December 31,
1995.
Performance information for a Fund or class reflects only the
performance of a hypothetical investment in that Fund or class during the
particular time period on which the calculations are based. Performance
information should be considered in light of the Fund's investment objectives
and policies, the types of quality of the Fund's portfolio investments, market
conditions during the particular time period and operating expenses. Such
information should not be considered as a representation of the future
performance of a Fund or class.
SHAREHOLDER INFORMATION
This information supplements the discussion in each Fund's Prospectus
under the title "Shareholder Information."
TIMING OF PURCHASE ORDERS. It is the responsibility of the dealer to
ensure that all orders are transmitted on a timely basis to the Transfer Agent,
as hereinafter defined. Any loss resulting from the dealer's failure to submit
an order within the prescribed time frame will be borne by that dealer. If a
check used to purchase shares does not clear, or if any investment order must be
canceled due to nonpayment, the investor will be responsible for any resulting
loss to an AIM Fund or to AIM Distributors.
SHARE CERTIFICATES. Shareholders of the Funds do not have the right to
demand or require the Trust to issue share certificates, although the Trust in
its sole discretion may issue them.
SYSTEMATIC WITHDRAWAL PLAN. Under a Systematic Withdrawal Plan, all
shares are to be held by the Transfer Agent and all dividends and distributions
are reinvested in shares of the applicable AIM Fund by the
63
<PAGE> 119
Transfer Agent. To provide funds for payments made under the Systematic
Withdrawal Plan, the Transfer Agent redeems sufficient full and fractional
shares at their net asset value in effect at the time of each such redemption.
Payments under a Systematic Withdrawal Plan constitute taxable events.
Since such payments are funded by the redemption of shares, they may result in a
return of capital and in capital gains or losses, rather than in ordinary
income. Because sales charges are imposed on additional purchases of shares
(other than Class B or Class C Shares of the AIM Funds and AIM Cash Reserve
Shares of AIM Money Market Fund), it is disadvantageous to effect such purchases
while a Systematic Withdrawal Plan is in effect.
Each AIM Fund bears its share of the cost of operating the Systematic
Withdrawal Plan.
TERMS AND CONDITIONS OF EXCHANGES. Normally, shares of an AIM Fund to
be acquired by exchange are purchased at their net asset value or applicable
offering price, as the case may be, determined on the date that such request is
received, but under unusual market conditions such purchases may be delayed for
up to five business days if it is determined that a fund would be materially
disadvantaged by an immediate transfer of the proceeds of the exchange. If a
shareholder is exchanging into a fund paying daily dividends, and the release of
the exchange proceeds is delayed for the foregoing five-day period, such
shareholder will not begin to accrue dividends until the sixth business day
after the exchange.
EXCHANGES BY TELEPHONE. AIM Distributors has made arrangements with
certain dealers and investment advisory firms to accept telephone instructions
to exchange shares between any of the AIM Funds. AIM Distributors reserves the
right to impose conditions on dealers or investment advisors who make telephone
exchanges of shares of the funds, including the condition that any such dealer
or investment advisor enter into an agreement (which contains additional
conditions with respect to exchanges of shares) with AIM Distributors. To
exchange shares by telephone, a shareholder, dealer or investment advisor who
has satisfied the foregoing conditions must call AFS at (800) 959-4246. If a
shareholder is unable to reach AFS by telephone, he may also request exchanges
by telegraph or use overnight courier services to expedite exchanges by mail,
which will be effective on the business day received by the Transfer Agent as
long as such request is received prior to the close of the customary trading
session of the NYSE. The Transfer Agent and AIM Distributors may in certain
cases be liable for losses due to unauthorized or fraudulent transactions if
they do not follow reasonable procedures for verification of telephone
transactions. Such reasonable procedures may include recordings of telephone
transactions (maintained for six months), requests for confirmation of the
shareholder's Social Security Number and current address, and mailings of
confirmations promptly after the transaction.
By signing an account application form, an investor appoints the
Transfer Agent as his true and lawful attorney-in-fact to surrender for
redemption any and all unissued shares held by the Transfer Agent in the
designated account(s), or in any other account with any of the AIM Funds,
present or future, which has the identical registration as the designated
account(s), with full power of substitution in the premises. The Transfer Agent
and AIM Distributors are thereby authorized and directed to accept and act upon
any telephone redemptions of shares held in any of the account(s) listed, from
any person who requests the redemption proceeds to be applied to purchase shares
in any one or more of the AIM Funds, provided that such fund is available for
sale and provided that the registration and mailing address of the shares to be
purchased are identical to the registration of the shares being redeemed. An
investor acknowledges by signing the form that he understands and agrees that
the Transfer Agent and AIM Distributors may not be liable for any loss, expense
or cost arising out of any telephone exchange requests effected in accordance
with the authorization set forth in these instructions if they reasonably
believe such request to be genuine, but may in certain cases be liable for
losses due to unauthorized or fraudulent transactions. Procedures for
verification of telephone transactions may include recordings of telephone
transactions (maintained for six months), requests for confirmation of the
shareholder's Social Security Number and current address, and mailings of
confirmations promptly after the transactions. The Transfer Agent reserves the
right to modify or terminate the telephone exchange privilege at any time
without notice. An investor may elect not to have this privilege by marking the
appropriate box on the application. Then any exchanges must be effected in
writing by the investor.
64
<PAGE> 120
REDEMPTIONS BY TELEPHONE. By signing an account application form, an
investor appoints the Transfer Agent as his true and lawful attorney-in-fact to
surrender for redemption any and all unissued shares held by the Transfer Agent
in the designated account(s), present or future, with full power of substitution
in the premises. The Transfer Agent and AIM Distributors are thereby authorized
and directed to accept and act upon any telephone redemptions of shares held in
any of the account(s) listed, from any person who requests the redemption. An
investor acknowledges by signing the form that he understands and agrees that
the Transfer Agent and AIM Distributors may not be liable for any loss, expense
or cost arising out of any telephone redemption requests effected in accordance
with the authorization set forth in these instructions if they reasonably
believe such request to be genuine, but may in certain cases be liable for
losses due to unauthorized or fraudulent transactions. Procedures for
verification of telephone transactions may include recordings of telephone
transactions (maintained for six months), requests for confirmation of the
shareholder's Social Security Number and current address, and mailings of
confirmations promptly after the transactions. The Transfer Agent reserves the
right to cease to act as attorney-in-fact subject to this appointment, and AIM
Distributors reserves the right to modify or terminate the telephone redemption
privilege at any time without notice. An investor may elect not to have this
privilege by marking the appropriate box on the application. If the investor so
elects, any redemptions must be effected in writing.
SIGNATURE GUARANTEES. In addition to those circumstances listed in the
"Shareholder Information" section of each Fund's prospectus, signature
guarantees are required in the following situations: (1) requests to transfer
the registration of shares to another owner; (2) telephone exchange and
telephone redemption authorization forms; (3) changes in previously designated
wiring or electronic funds transfer instructions; and (4) written redemptions or
exchanges of shares previously reported as lost, whether or not the redemption
amount is under $50,000 or the proceeds are to be sent to the address of record.
AIM Funds may waive or modify any signature guarantee requirements at any time.
Acceptable guarantors include banks, broker-dealers, credit unions,
national securities exchanges, savings associations and any other organization,
provided that such institution or organization qualifies as an "eligible
guarantor institution" as that term is defined in rules adopted by the SEC, and
further provided that such guarantor institution is listed in one of the
reference guides contained in the Transfer Agent's current Signature Guarantee
Standards and Procedures, such as certain domestic banks, credit unions,
securities dealers, or securities exchanges. The Transfer Agent will also accept
signatures with either: (1) a signature guaranteed with a medallion stamp of the
STAMP Program, or (2) a signature guaranteed with a medallion stamp of the NYSE
Medallion Signature Program, provided that in either event, the amount of the
transaction involved does not exceed the surety coverage amount indicated on the
medallion. For information regarding whether a particular institution or
organization qualifies as an "eligible guarantor institution," an investor
should contact the Client Services Department of AFS.
TRANSACTIONS BY INTERNET. An investor may effect transactions in his
account through the Internet by selecting the AIM Internet Connect option on his
completed account application form or completing an AIM Internet Connect
Authorization Form. By signing either form the investor acknowledges and agrees
that the Transfer Agent and AIM Distributors will not be liable for any loss,
expense or cost arising out of any internet transaction effected in accordance
with the instructions set forth in the forms if they reasonably believe such
request to be genuine. Procedures for verification of internet transactions
include requests for confirmation of the shareholder's personal identification
number and mailing of confirmations promptly after the transactions. The
investor also acknowledges that (1) if he no longer wants the AIM Internet
Contract option, he will notify the Transfer Agent in writing, and (2) the AIM
Internet Connect option may be terminated at any time by the AIM Funds.
DIVIDENDS AND DISTRIBUTIONS. In determining the amount of capital
gains, if any, available for distribution, net capital gains are offset against
available net capital losses, if any, carried forward from previous fiscal
periods.
65
<PAGE> 121
For funds that do not declare a dividend daily, such dividends and
distributions will be reinvested at the net asset value per share determined on
the ex-dividend date. For funds that declare a dividend daily, such dividends
and distributions will be reinvested at the net asset value per share determined
on the payable date.
Dividends on Class B and Class C shares are expected to be lower than
those for Class A shares or AIM Cash Reserve Shares because of higher
distribution fees paid by Class B and Class C shares. Dividends on all shares
may also be affected by other class-specific expenses.
Changes in the form of dividend and distribution payments may be made
by the shareholder at any time by notice to the Transfer Agent and are effective
as to any subsequent payment if such notice is received by the Transfer Agent
prior to the record date of such payment. Any dividend and distribution election
remains in effect until the Transfer Agent receives a revised written election
by the shareholder.
Any dividend or distribution paid by a fund which does not declare
dividends daily has the effect of reducing the net asset value per share on the
ex-dividend date by the amount of the dividend or distribution. Therefore, a
dividend or distribution declared shortly after a purchase of shares by an
investor would represent, in substance, a return of capital to the shareholder
with respect to such shares even though it would be subject to income taxes.
MISCELLANEOUS INFORMATION
CHARGES FOR CERTAIN ACCOUNT INFORMATION
The Transfer Agent may impose certain copying charges for requests for
copies of shareholder account statements and other historical account
information older than the current year and the immediately preceding year.
AUDIT REPORTS
The Board of Trustees will issue semi-annual reports of the
transactions of the Funds to the shareholders. Financial statements, audited by
independent auditors, will be issued annually. The firm of KPMG LLP, 700
Louisiana, Houston, Texas 77002, currently serves as the auditors of each Fund.
LEGAL MATTERS
Legal matters for the Trust have been passed upon by Ballard Spahr
Andrews & Ingersoll, LLP, 1735 Market Street, Philadelphia, Pennsylvania.
CUSTODIAN AND TRANSFER AGENT
State Street Bank and Trust Company (the "Custodian"), 225 Franklin
Street, Boston, Massachusetts 02110, is custodian of all securities and cash of
the Funds. The custodian attends to the collection of principal and income, pays
and collects all monies for securities bought and sold by the Funds and performs
certain other ministerial duties. A I M Fund Services, Inc. (the "Transfer
Agent"), a wholly owned subsidiary of AIM, P.O. Box 4739, Houston, Texas
77210-4739, acts as transfer and dividend disbursing agent for the Funds. These
services do not include any supervisory function over management or provide any
protection against any possible depreciation of assets. The Funds pay the
Custodian and the Transfer Agent such compensation as may be agreed upon from
time to time.
Chase Bank of Texas, N.A., 712 Main, Houston, Texas 77002, serves as
Sub-Custodian for retail purchase of the AIM Funds.
66
<PAGE> 122
Merrill Lynch, Pierce, Fenner & Smith Incorporated ("MLPF&S") has
entered into an agreement with the Trust (and certain other AIM Funds), First
Data Investor Service Group and Financial Data Services, Inc., pursuant to which
MLPF&S has agreed to perform certain shareholder sub-accounting services for its
customers who beneficially own shares of the Fund(s).
PRINCIPAL HOLDERS OF SECURITIES
As of June 30, 2000, the following entities owned of record or
beneficially 5% or more of the shares of a Fund:
<TABLE>
<CAPTION>
Percent
Owned of
Percent Record
Name and Address of Owned of and
Beneficial Owner Record* Beneficially
------------------- -------- ------------
<S> <C> <C>
CLASS A
-------
FLEX FUND
Cypress Enterprises -0- 9.26%
A Partnership
730 S. Tonti Street
New Orleans, LA 70119
INTERNATIONAL VALUE FUND
Merrill Lynch Pierce Fenner & Smith 22.48%** -0-
FBO the Sole Benefit of Customers
Attn: Fund Administration
4800 Deer Lake Dr. E.
Jacksonville, FL 32246
Commerce Bank FBO -0- 7.93%
Baker University Endowment
(Mutual Funds)
8th and Grove
Baldwin City, KS 66006
Morgan Keegan Company, Inc. -0- 7.24%
FBO Mulvihill Family Trust
DTD 10/1/73, Willard Thompson Trust
c/o Bessemer Trust Company
100 Woodbridge Center Drive
Woodbridge, NJ 07095
</TABLE>
----------
* The Trust has no knowledge as to whether all or any portion of the
shares owned of record only are also owned beneficially.
** A shareholder who holds 25% or more of the outstanding shares of a Fund
may be presumed to be in "control" of such Fund as defined in the 1940
Act.
67
<PAGE> 123
<TABLE>
<CAPTION>
Percent
Owned of
Percent Record
Name and Address of Owned of and
Beneficial Owner Record* Beneficially
------------------- -------- ------------
<S> <C> <C>
Salomon Smith Barney Inc. 5.92% -0-
00165249542
388 Greenwich Street
New York, NY 10013
Morgan Keegan Company, Inc. 5.09% -0-
FBO The W.W. Williams Company
Employee Pension Trust
INVESCO/Vanguard
Columbus, OH 43121
CLASS B
FLEX FUND
Merrill Lynch Pierce Fenner & Smith 11.09% -0-
FBO the Sole Benefit of Its Customers
Attn: Fund Administration
4800 Deer Lake Dr. E.
Jacksonville, FL 32246
REAL ESTATE FUND
Merrill Lynch Pierce Fenner & Smith 8.67% -0-
FBO the Sole Benefit of Its Customers
Attn: Fund Administration
4800 Deer Lake Dr. E.
Jacksonville, FL 32246
INTERNATIONAL VALUE FUND
Merrill Lynch Pierce Fenner & Smith 32.54%** -0-
FBO the Sole Benefit of Its Customers
Attn: Fund Administration
4800 Deer Lake Dr. E.
Jacksonville, FL 32246
</TABLE>
----------
* The Trust has no knowledge as to whether all or any portion of the
shares owned of record only are also owned beneficially.
** A shareholder who holds 25% or more of the outstanding shares of a Fund
may be presumed to be in "control" of such Fund as defined in the 1940
Act.
68
<PAGE> 124
<TABLE>
<CAPTION>
Percent
Owned of
Percent Record
Name and Address of Owned of and
Beneficial Owner Record* Beneficially
------------------- -------- ------------
<S> <C> <C>
CLASS C
FLEX FUND
Merrill Lynch Pierce Fenner & Smith 11.32% -0-
FBO the Sole Benefit of Its Customers
Attn: Fund Administration
4800 Deer Lake Dr. E.
Jacksonville, FL 32246
REAL ESTATE FUND
Merrill Lynch Pierce Fenner & Smith 6.65% -0-
FBO the Sole Benefit of Its Customers
Attn: Fund Administration
4800 Deer Lake Dr. E.
Jacksonville, FL 32246
INTERNATIONAL VALUE FUND
Merrill Lynch Pierce Fenner & Smith 59.08%** -0-
FBO the Sole Benefit of Its Customers
Attn: Fund Administration
4800 Deer Lake Dr. E.
Jacksonville, FL 32246
</TABLE>
As of June 30, 2000, the officers and trustees of the Trust, as a
group, owned less than 1% of the outstanding shares of the Funds.
----------
* The Trust has no knowledge as to whether all or any portion of the
shares owned of record only are also owned beneficially.
** A shareholder who holds 25% or more of the outstanding shares of a Fund
may be presumed to be in "control" of such Fund as defined in the 1940
Act.
69
<PAGE> 125
APPENDIX
Some of the terms used in the Funds' Prospectuses and this Statement of
Additional Information are described below.
The term "MONEY MARKET" refers to the marketplace composed of the
financial institutions which handle the purchase and sale of liquid, short-term,
high-grade debt instruments. The money market is not a single entity, but
consists of numerous separate markets, each of which deals in a different type
of short-term debt instrument. These include U.S. Government obligations,
commercial paper, certificates of deposit, bankers' acceptances and master
notes, which are generally referred to as money market instruments.
U.S. GOVERNMENT OBLIGATIONS are debt securities (including bills, notes
and bonds) issued by the U.S. Treasury or issued by an agency or instrumentality
of the U.S. Government which is established under the authority of an Act of
Congress. Such agencies or instrumentalities include, but are not limited to,
the Federal National Mortgage Association, Government National Mortgage
Association, the Federal Farm Credit Bank, and the Federal Home Loan Bank.
Although all obligations of agencies, authorities and instrumentalities are not
direct obligations of the U.S. Treasury, payment of the interest and principal
on these obligations is generally backed directly or indirectly by the U.S.
Government. This support can range from the backing of the full faith and credit
of the United States to U.S. Treasury guarantees, or to the backing solely of
the issuing instrumentality itself. In the case of securities not backed by the
full faith and credit of the United States, the investor must look principally
to the agency issuing or guaranteeing the obligation for ultimate repayment, and
may not be able to assert a claim against the United States itself in the event
the agency or instrumentality does not meet its commitments.
BANK OBLIGATIONS include certificates of deposit which are negotiable
certificates evidencing the indebtedness of a commercial bank to repay funds
deposited with it for a definite period of time (usually from 14 days to one
year) at a stated interest rate.
BANKERS' ACCEPTANCES are credit instruments evidencing the obligation
of a bank to pay a draft which has been drawn on it by a customer. These
instruments reflect the obligation both of the bank and of the drawer to pay the
face amount of the instrument upon maturity.
TIME DEPOSITS are non-negotiable deposits maintained in a banking
institution for a specified period of time at a stated interest rate.
COMMERCIAL PAPER consists of short-term (usually one to 180 days)
unsecured promissory notes issued by corporations in order to finance their
current operations.
CORPORATE DEBT obligations are bonds and notes issued by corporations
and other business organizations, including business trusts, in order to finance
their long-term credit needs.
CERTIFICATES OF DEPOSIT are negotiable certificates issued against
funds deposited in a commercial bank for a definite period of time and earning a
specified return.
MORTGAGE-BACKED SECURITIES are interests in a pool of mortgage loans.
Most mortgage securities are pass-through securities, which means that they
provide investors with payments consisting of both principal and interest as
mortgages in the underlying mortgage pool are paid off by the borrowers. The
dominant issuers or guarantors of mortgage securities are the Government
National Mortgage Association ("GNMA"), the Federal National Mortgage
Association ("FNMA") and the Federal Home Loan Mortgage Corporation ("FHLMC").
COLLATERALIZED MORTGAGE OBLIGATIONS ("CMOS") are hybrid instruments
with characteristics of both mortgage-backed and mortgage pass-through
securities. Similar to a bond, interest and pre-paid principal on a CMO are
paid, in most cases, semi-annually. CMOs may be collateralized by whole mortgage
loans but are
70
<PAGE> 126
more typically collateralized by Funds of mortgage pass-through securities
guaranteed by GNMA, FHLMC, or FNMA. CMOs are structured into multiple classes,
with each class bearing a different stated maturity. Monthly payments of
principal, including prepayments, are first returned to investors holding the
shortest maturity class; investors holding the longer maturity classes receive
principal only after the first class has been retired.
MUNICIPAL BONDS are debt obligations which generally have a maturity at
the time of issue in excess of one year and are issued to obtain funds for
various public purposes. The two principal classifications of municipal bonds
are "general obligation" and "revenue" bonds. General obligation bonds are
secured by the issuer's pledge of its full faith, credit and taxing power for
the payment of principal and interest. Revenue bonds are payable only from the
revenues derived from a particular facility or class of facilities, or, in some
cases, from the proceeds of a special excise or specific revenue source.
Industrial development bonds or private activity bonds are issued by or on
behalf of public authorities to obtain funds for privately operated facilities
and are, in most cases, revenue bonds which do not generally carry the pledge of
the full faith and credit of the issuer of such bonds, but depend for payment on
the ability of the industrial user to meet its obligations (or any property
pledged as security).
RATINGS OF CORPORATE DEBT OBLIGATIONS Fund purchases of taxable
obligations are not limited to those obligations rated within the four highest
categories by Moody's and S&P. However, the Flex Fund's standards for investment
grade obligations are generally similar to those standards included in the four
highest categories by Moody's and S&P.
The characteristics of corporate debt obligations rated by Moody's are
generally as follows:
Aaa -- Bonds which are rated Aaa are judged to be of the best quality.
They carry the smallest degree of investment risk and are generally referred to
as "gilt edge." Interest payments are protected by a large or by an
exceptionally stable margin and principal is secure. While the various
protective elements are likely to change, such changes as can be visualized are
most unlikely to impair the fundamentally strong position of such issues.
Aa -- Bonds which are rated Aa are judged to be of high quality by all
standards. Together with the Aaa group they comprise what are generally known as
high grade bonds. They are rated lower than the best bonds because margins of
protection may not be as large as in Aaa securities or fluctuation of protective
elements may be of greater amplitude or there may be other elements present
which make the long-term risks appear somewhat larger than in Aaa securities.
A -- Bonds which are rated A possess many favorable investment
attributes and are to be considered as upper medium grade obligations. Factors
giving security to principal and interest are considered adequate but elements
may be present which suggest a susceptibility to impairment sometime in the
future.
Baa -- Bonds which are rated Baa are considered as medium grade
obligations, i.e., they are neither highly protected nor poorly secured.
Interest payments and principal security appear adequate for the present but
certain protective elements may be lacking or may be characteristically
unreliable over any great length of time. Such bonds lack outstanding investment
characteristics and in fact have speculative characteristics as well.
Ba -- Bonds which are rated Ba are judged to have speculative elements.
The future of such bonds cannot be considered as well assured.
B -- Bonds which are rated B generally lack characteristics of a
desirable investment.
Caa -- Bonds rated Caa are of poor standing. Such issues may be in
default or there may be present elements of danger with respect to principal or
interest.
Ca -- Bonds rated Ca are speculative to a high degree.
71
<PAGE> 127
C -- Bonds rated C are the lowest rated class of bonds and are regarded
as having extremely poor prospects.
The characteristics of corporate debt obligations rated by S&P are
generally as follows:
AAA -- This is the highest rating assigned by S&P to a debt obligation
and indicates an extremely strong capacity to pay principal and interest.
AA -- Bonds rated AA also qualify as high quality debt obligations.
Capacity to pay principal and interest is very strong, and in the majority of
instances they differ from AAA issues only in small degree.
A -- Debt rated A has a strong capacity to pay interest and repay
principal although it is somewhat more susceptible to the adverse effects of
changes in circumstances and economic conditions than debt in higher rated
categories.
BBB -- Debt rated BBB is regarded as having an adequate capacity to pay
interest and repay principal. Whereas it normally exhibits adequate protection
parameters, adverse economic conditions or changing circumstances are more
likely to lead to a weakened capacity to pay interest and repay principal for
debt in this category than in higher rated categories.
BB -- Debt rated BB is predominantly speculative with respect to
capacity to pay interest and repay principal in accordance with terms of the
obligation. BB indicates the lowest degree of speculation; CC indicates the
highest degree of speculation.
BB,B,CCC,CC -- Debt in these ratings is predominantly speculative with
respect to capacity to pay interest and repay principal in accordance with terms
of the obligation. BB indicates the lowest degree of speculation and CC the
highest.
A bond rating is not a recommendation to purchase, sell or hold a
security, inasmuch as it does not comment as to market price or suitability for
a particular investor.
The ratings are based on current information furnished by the issuer or
obtained by the rating services from other sources which they consider reliable.
The ratings may be changed, suspended or withdrawn as a result of changes in or
unavailability of, such information, or for other reasons.
RATINGS OF COMMERCIAL PAPER. Commercial paper rated A-1 by Standard &
Poor's has the following characteristics: liquidity ratios are adequate to meet
cash requirements; the issuer's long-term debt is rated "A" or better; the
issuer has access to at least two additional channels of borrowing; and basic
earnings and cash flow have an upward trend with allowances made for unusual
circumstances. Typically, the issuer's industry is well established and the
issuer has a strong position within the industry.
Commercial paper rated Prime 1 by Moody's is the highest commercial
paper assigned by Moody's. Among the factors considered by Moody's in assigning
ratings are the following: (1) evaluation of the management of the issuer; (2)
economic evaluation of the issuer's industry or industries and an appraisal of
speculative-type risks which may be inherent in certain areas; (3) evaluation of
the issuer's products in relation to competition and consumer acceptance; (4)
liquidity; (5) amount and quality of long-term debt; (6) trend of earnings over
a period of ten years; (7) financial strength of a parent company and the
relationships which exist with the issuer; and (8) recognition by the management
of obligations which may be present or may arise as a result of public interest
questions and preparations to meet such obligations. Relative strength or
weakness of the above factors determine how the issuer's commercial paper is
rated within various categories.
72
<PAGE> 128
DETERMINATION OF CREDIT QUALITY OF UNRATED SECURITIES. In determining
whether an unrated debt security is of comparable quality to a rated security,
the sub-adviser may consider the following factors, among others:
(1) other securities of the issuer that are rated;
(2) the issuer's liquidity, debt structure, repayment schedules,
and external credit support facilities;
(3) the reliability and quality of the issuer's management;
(4) the length to maturity of the security and the percentage of
the Fund represented by securities of that issuer;
(5) the issuer's earnings and cash flow trends;
(6) the issuer's industry, the issuer's position in its industry,
and an appraisal of speculative risks which may be inherent in
the industry;
(7) the financial strength of the issuer's parent and its
relationship with the issuer;
(8) the extent and reliability of credit support, including a
letter of credit or third party guarantee applicable to
payment of principal and interest;
(9) the issuer's ability to repay its debt from cash sources or
asset liquidation in the event that the issuer's backup credit
facilities are unavailable;
(10) other factors deemed relevant by the subadvisor.
73
<PAGE> 129
FINANCIAL STATEMENTS
FS
<PAGE> 130
INDEPENDENT AUDITORS REPORT
The Board of Trustees and Shareholders of
AIM Advisor Flex Fund:
We have audited the accompanying statement of assets and
liabilities of AIM Advisor Flex Fund (a portfolio of AIM
Advisor Funds, Inc.), including the schedule of
investments, as of December 31, 1999, and the related
statement of operations for the year then ended, and the
statement of changes in net assets and the financial
highlights for each of the years in the two-year period
then ended. These financial statements and financial
highlights are the responsibility of the Fund's
management. Our responsibility is to express and 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 December 31, 1999, by
correspondence with the custodian. An audit also includes
assessing the accounting principles used and significant
estimates made by management, as well as evaluating the
overall financial statement presentation. We believe that
our audits provide a reasonable basis for our opinion.
In our opinion, the 1999 financial statements and
financial highlights referred to above present fairly, in
all material respects, the financial position of AIM
Advisor Flex Fund as of December 31, 1999, the results of
its operations for the year then ended, and the changes
in its net assets and the financial highlights for each
of the years in the two-year period then ended, in
conformity with generally accepted accounting principles.
/s/ KPMG LLP
KPMG LLP
February 4, 2000
Houston, Texas
FS-1
<PAGE> 131
SCHEDULE OF INVESTMENTS
December 31, 1999
<TABLE>
<CAPTION>
MARKET
SHARES VALUE
<S> <C> <C>
DOMESTIC COMMON STOCKS-72.48%
AEROSPACE/DEFENSE-1.52%
Boeing Co. (The) 65,000 $ 2,701,562
--------------------------------------------------------------
Lockheed Martin Corp. 150,000 3,281,250
--------------------------------------------------------------
Precision Castparts Corp. 154,500 4,055,625
--------------------------------------------------------------
10,038,437
--------------------------------------------------------------
AGRICULTURAL PRODUCTS-0.37%
Archer-Daniels-Midland Co. 200,000 2,437,500
--------------------------------------------------------------
AIRLINES-0.71%
Southwest Airlines Co. 288,525 4,670,498
--------------------------------------------------------------
AUTO PARTS & EQUIPMENT-1.56%
Cooper Tire & Rubber Co. 160,000 2,490,000
--------------------------------------------------------------
Genuine Parts Co. 180,000 4,466,250
--------------------------------------------------------------
Snap-on, Inc. 125,000 3,320,312
--------------------------------------------------------------
10,276,562
--------------------------------------------------------------
AUTOMOBILES-0.99%
Ford Motor Co. 121,600 6,498,000
--------------------------------------------------------------
BANKS (MAJOR REGIONAL)-2.42%
Bank One Corp. 185,000 5,931,562
--------------------------------------------------------------
FleetBoston Financial Corp. 100,000 3,481,250
--------------------------------------------------------------
National City Corp. 275,000 6,514,062
--------------------------------------------------------------
15,926,874
--------------------------------------------------------------
BANKS (MONEY CENTER)-2.04%
Bank of America Corp. 150,000 7,528,125
--------------------------------------------------------------
First Union Corp. 180,000 5,906,250
--------------------------------------------------------------
13,434,375
--------------------------------------------------------------
BEVERAGES (ALCOHOLIC)-0.54%
Anheuser Busch Co., Inc. 50,000 3,543,750
--------------------------------------------------------------
CHEMICALS-1.18%
Praxair, Inc. 35,000 1,760,937
--------------------------------------------------------------
Dow Chemical Co. (The) 45,000 6,013,125
--------------------------------------------------------------
7,774,062
--------------------------------------------------------------
CHEMICALS (SPECIALTY)-0.43%
Great Lakes Chemical Corp. 75,000 2,864,062
--------------------------------------------------------------
COMPUTERS (HARDWARE)-3.38%
Compaq Computer Corp. 250,000 6,765,625
--------------------------------------------------------------
Hewlett-Packard Co. 70,000 7,975,625
--------------------------------------------------------------
International Business Machines
Corp. 70,000 7,560,000
--------------------------------------------------------------
22,301,250
--------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
MARKET
SHARES VALUE
<S> <C> <C>
COMPUTERS (SOFTWARE & SERVICES)-2.59%
Cadence Design Systems, Inc.(a) 125,000 $ 3,000,000
--------------------------------------------------------------
Computer Associates International,
Inc. 148,000 10,350,750
--------------------------------------------------------------
Compuware Corp.(a) 100,000 3,725,000
--------------------------------------------------------------
17,075,750
--------------------------------------------------------------
CONSUMER (JEWELRY, NOVELTIES &
GIFTS)-0.36%
American Greetings Corp.-Class A 100,000 2,362,500
--------------------------------------------------------------
CONSUMER FINANCE-0.28%
Household International, Inc. 50,000 1,862,500
--------------------------------------------------------------
CONTAINERS (METAL & GLASS)-0.51%
Crown Cork & Seal Co., Inc. 150,000 3,356,250
--------------------------------------------------------------
DISTRIBUTORS (FOOD & HEALTH)-0.86%
SUPERVALU, INC. 285,000 5,700,000
--------------------------------------------------------------
ELECTRIC COMPANIES-2.64%
DTE Energy Co. 75,000 2,353,125
--------------------------------------------------------------
Entergy Corp. 255,000 6,566,250
--------------------------------------------------------------
GPU, Inc. 200,000 5,987,500
--------------------------------------------------------------
Teco Energy, Inc. 135,000 2,505,937
--------------------------------------------------------------
17,412,812
--------------------------------------------------------------
ELECTRICAL EQUIPMENT-1.84%
Emerson Electric Co. 50,000 2,868,750
--------------------------------------------------------------
General Electric Co. 35,000 5,416,250
--------------------------------------------------------------
Rockwell International Corp. 80,000 3,830,000
--------------------------------------------------------------
12,115,000
--------------------------------------------------------------
ELECTRONICS (COMPONENT DISTRIBUTORS)-0.43%
W.W. Grainger, Inc. 60,000 2,868,750
--------------------------------------------------------------
ELECTRONICS (DEFENSE)-0.32%
Raytheon Co.-Class A 85,000 2,109,062
--------------------------------------------------------------
ELECTRONICS (SEMICONDUCTORS)-0.44%
Intel Corp. 35,000 2,880,937
--------------------------------------------------------------
FINANCIAL (DIVERSIFIED)-2.78%
American General Corp. 90,000 6,828,750
--------------------------------------------------------------
Fannie Mae 40,000 2,497,500
--------------------------------------------------------------
MGIC Investment Corp. 150,000 9,028,125
--------------------------------------------------------------
18,354,375
--------------------------------------------------------------
FOODS-0.75%
Sara Lee Corp. 100,000 2,206,250
--------------------------------------------------------------
</TABLE>
FS-2
<PAGE> 132
<TABLE>
<CAPTION>
MARKET
SHARES VALUE
<S> <C> <C>
FOODS-(CONTINUED)
H.J. Heinz Co. 69,000 $ 2,747,063
--------------------------------------------------------------
4,953,313
--------------------------------------------------------------
HEALTH CARE (DIVERSIFIED)-1.96%
Abbott Laboratories 204,500 7,425,906
--------------------------------------------------------------
American Home Products Corp. 100,000 3,943,750
--------------------------------------------------------------
Bristol-Myers Squibb Co. 24,000 1,540,500
--------------------------------------------------------------
12,910,156
--------------------------------------------------------------
HEALTH CARE (DRUGS-GENERIC & OTHER)-0.67%
Mylan Laboratories, Inc. 175,000 4,407,813
--------------------------------------------------------------
HEALTH CARE (DRUGS-MAJOR PHARMACEUTICALS)-2.51%
Lilly (Eli) & Co. 50,000 3,325,000
--------------------------------------------------------------
Merck & Co., Inc. 130,000 8,718,125
--------------------------------------------------------------
Schering-Plough Corp. 107,200 4,522,500
--------------------------------------------------------------
16,565,625
--------------------------------------------------------------
HEALTH CARE (HOSPITAL MANAGEMENT)-0.78%
Columbia/HCA Healthcare Corp. 175,000 5,129,688
--------------------------------------------------------------
HEALTH CARE (SPECIALIZED SERVICES)-0.37%
Quintiles Transnational Corp.(a) 130,000 2,429,375
--------------------------------------------------------------
HOUSEHOLD FURNISHING & APPLIANCES-0.74%
Whirlpool Corp. 75,000 4,879,688
--------------------------------------------------------------
HOUSEHOLD PRODUCTS (NON-DURABLES)-0.49%
Kimberly-Clark Corp. 50,000 3,262,500
--------------------------------------------------------------
HOUSEWARES-0.25%
Fortune Brands, Inc. 50,000 1,653,125
--------------------------------------------------------------
INSURANCE (LIFE/HEALTH)-0.35%
Torchmark Corp. 80,000 2,325,000
--------------------------------------------------------------
INSURANCE (MULTI-LINE)-0.74%
Loews Corp. 80,000 4,855,000
--------------------------------------------------------------
INSURANCE (PROPERTY-CASUALTY)-3.55%
Allstate Corp. (The) 230,000 5,520,000
--------------------------------------------------------------
Ohio Casualty Corp. 350,000 5,621,875
--------------------------------------------------------------
Old Republic International Corp. 200,000 2,725,000
--------------------------------------------------------------
SAFECO Corp. 140,000 3,482,500
--------------------------------------------------------------
St. Paul Co., Inc. (The) 180,000 6,063,750
--------------------------------------------------------------
23,413,125
--------------------------------------------------------------
INSURANCE BROKERS-1.16%
Marsh & McLennan Cos. Inc. 80,000 7,655,000
--------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
MARKET
SHARES VALUE
<S> <C> <C>
INVESTMENT BANKING/BROKERAGE-1.73%
Morgan Stanley Dean Witter & Co. 80,000 $ 11,420,000
--------------------------------------------------------------
IRON & STEEL-0.96%
Nucor Corp. 115,000 6,303,438
--------------------------------------------------------------
LEISURE TIME (PRODUCTS)-0.20%
Mattel, Inc. 100,000 1,312,500
--------------------------------------------------------------
LODGING-HOTELS-0.08%
Host Marriott Corp. 62,000 511,500
--------------------------------------------------------------
MACHINERY (DIVERSIFIED)-1.93%
Caterpillar, Inc. 100,000 4,706,250
--------------------------------------------------------------
Deere & Co. 90,000 3,903,750
--------------------------------------------------------------
Dover Corp. 90,000 4,083,750
--------------------------------------------------------------
12,693,750
--------------------------------------------------------------
MANUFACTURING (DIVERSIFIED)-3.34%
Illinois Tool Works, Inc. 74,000 4,999,625
--------------------------------------------------------------
Minnesota Mining and Manufacturing Co. 35,000 3,425,625
--------------------------------------------------------------
National Service Industries, Inc. 100,000 2,950,000
--------------------------------------------------------------
United Technologies Corp. 50,000 3,250,000
--------------------------------------------------------------
Johnson Controls, Inc. 90,000 5,118,750
--------------------------------------------------------------
Textron, Inc. 30,000 2,300,625
--------------------------------------------------------------
22,044,625
--------------------------------------------------------------
MANUFACTURING (SPECIALIZED)-0.91%
Federal Signal Corp. 160,000 2,570,000
--------------------------------------------------------------
York International Corp. 124,600 3,418,713
--------------------------------------------------------------
5,988,713
--------------------------------------------------------------
METALS MINING-0.71%
Phelps Dodge Corp. 70,000 4,698,750
--------------------------------------------------------------
OIL (DOMESTIC INTEGRATED)-0.36%
Phillips Petroleum Co. 50,000 2,350,000
--------------------------------------------------------------
OIL (INTERNATIONAL INTEGRATED)-1.19%
Exxon Mobil Corp. 97,400 7,846,788
--------------------------------------------------------------
PAPER & FOREST PRODUCTS-0.46%
Westvaco Corp. 93,400 3,047,175
--------------------------------------------------------------
PHOTOGRAPHY/IMAGING-0.95%
IKON Office Solutions, Inc. 340,000 2,316,250
--------------------------------------------------------------
Xerox Corp. 175,000 3,970,313
--------------------------------------------------------------
6,286,563
--------------------------------------------------------------
PUBLISHING (NEWSPAPERS)-0.87%
Gannett Co., Inc. 70,000 5,709,375
--------------------------------------------------------------
RAILROADS-0.52%
CSX Corp. 110,000 3,451,250
--------------------------------------------------------------
</TABLE>
FS-3
<PAGE> 133
<TABLE>
<CAPTION>
MARKET
SHARES VALUE
<S> <C> <C>
REAL ESTATE INVESTMENT TRUSTS-4.00%
Arden Realty Group, Inc. 75,200 $ 1,508,700
--------------------------------------------------------------
Avalonbay Communities, Inc. 59,100 2,027,869
--------------------------------------------------------------
Beacon Capital 60,000 720,000
--------------------------------------------------------------
Beacon Capital Voting Trust 2,705 254,543
--------------------------------------------------------------
CarrAmerica Realty Corp. 57,300 1,210,463
--------------------------------------------------------------
CBL & Associates Properties, Inc. 39,800 820,875
--------------------------------------------------------------
Charles E. Smith Residential
Realty, Inc. 21,800 771,175
--------------------------------------------------------------
Duke-Weeks Realty Corp. 60,000 1,170,000
--------------------------------------------------------------
Equity Office Properties Trust 90,979 2,240,358
--------------------------------------------------------------
Equity Residential Properties Trust 55,100 2,352,081
--------------------------------------------------------------
First Industrial Realty Trust, Inc. 41,500 1,138,656
--------------------------------------------------------------
Highwoods Properties, Inc. 46,800 1,088,100
--------------------------------------------------------------
Hospitality Properties Trust 45,700 871,156
--------------------------------------------------------------
Kimco Realty Corp. 34,200 1,158,525
--------------------------------------------------------------
Liberty Property Trust 67,500 1,636,875
--------------------------------------------------------------
New Plan Excel Realty Trust 35,060 554,386
--------------------------------------------------------------
Prentiss Properties Trust 85,100 1,787,100
--------------------------------------------------------------
Public Storage, Inc. 95,400 2,164,388
--------------------------------------------------------------
Simon Property Group, Inc. 73,500 1,685,906
--------------------------------------------------------------
Vornado Realty Trust 36,700 1,192,750
--------------------------------------------------------------
26,353,906
--------------------------------------------------------------
RETAIL (BUILDING SUPPLIES)-1.07%
Lowe's Cos., Inc. 50,000 2,987,500
--------------------------------------------------------------
Sherwin-Williams Co. 195,000 4,095,000
--------------------------------------------------------------
7,082,500
--------------------------------------------------------------
RETAIL (DEPARTMENT STORES)-1.04%
Dillards, Inc.-Class A 190,000 3,835,625
--------------------------------------------------------------
J.C. Penney Co., Inc. 150,000 2,990,625
--------------------------------------------------------------
6,826,250
--------------------------------------------------------------
RETAIL (DRUG STORES)-0.68%
Rite Aid Corp. 400,000 4,475,000
--------------------------------------------------------------
RETAIL (FOOD CHAINS)-0.37%
Albertson's, Inc. 75,000 2,418,750
--------------------------------------------------------------
RETAIL (SPECIALTY)-0.25%
Office Depot, Inc.(a) 150,000 1,640,625
--------------------------------------------------------------
SERVICES (DATA PROCESSING)-0.45%
First Data Corp. 60,000 2,958,750
--------------------------------------------------------------
SPECIALTY PRINTING-0.77%
Deluxe Corp. 183,900 5,045,756
--------------------------------------------------------------
TELECOMMUNICATIONS (LONG DISTANCE)-1.54%
AT&T Corp. 200,000 10,150,000
--------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
MARKET
SHARES VALUE
<S> <C> <C>
TELEPHONE-2.29%
Bell Atlantic Corp. 80,000 $ 4,925,000
--------------------------------------------------------------
SBC Communications, Inc. 150,000 7,312,500
--------------------------------------------------------------
US West, Inc. 40,000 2,880,000
--------------------------------------------------------------
15,117,500
--------------------------------------------------------------
TEXTILES (APPAREL)-1.45%
Liz Claiborne, Inc. 135,000 5,079,375
--------------------------------------------------------------
VF Corp. 150,000 4,500,000
--------------------------------------------------------------
9,579,375
--------------------------------------------------------------
TEXTILES (SPECIALTY)-0.37%
Unifi, Inc.(a) 200,000 2,462,500
--------------------------------------------------------------
TOBACCO-0.79%
Philip Morris Cos. Inc. 225,000 5,217,188
--------------------------------------------------------------
WASTE MANAGEMENT-0.69%
Waste Management, Inc. 265,000 4,554,688
--------------------------------------------------------------
Total Domestic Common Stocks
(Cost $392,397,411) 477,849,929
--------------------------------------------------------------
FOREIGN STOCKS & OTHER EQUITY
INTERESTS-5.17%
MEXICO-1.19%
Telefonos de Mexico S.A.-ADR
(Telephone) 70,000 7,875,000
--------------------------------------------------------------
NETHERLANDS-0.75%
Unilever N.V.-ADR (Foods) 90,249 4,912,930
--------------------------------------------------------------
NORWAY-0.88%
Norsk Hydro A.S.A.-ADR
(Manufacturing- Diversified) 135,000 5,771,250
--------------------------------------------------------------
SPAIN-1.68%
Repsol S.A.-ADR (Oil-International
Integrated) 475,000 11,043,750
--------------------------------------------------------------
UNITED KINGDOM-0.67%
Hanson PLC-ADR
(Manufacturing-Diversified) 110,000 4,448,125
--------------------------------------------------------------
Total Foreign Stocks & Other
Equity Interests (Cost
$18,887,089) 34,051,055
--------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT
<S> <C> <C>
CORPORATE BONDS & NOTES-12.97%
AUTOMOBILES-1.25%
Ford Motor Co., Unsec. Bonds,
6.50%, 08/01/18 $3,250,000 2,877,582
--------------------------------------------------------------
General Motors Acceptance Corp.,
Unsec. Bonds, 5.50%, 01/14/02 5,500,000 5,344,845
--------------------------------------------------------------
8,222,427
--------------------------------------------------------------
BANKS (MAJOR REGIONAL)-1.89%
Bank of America Corp., Notes,
6.63%, 06/15/04 5,000,000 4,890,750
--------------------------------------------------------------
National City Corp., Sub. Notes,
7.20%, 05/15/05 1,000,000 989,810
--------------------------------------------------------------
</TABLE>
FS-4
<PAGE> 134
<TABLE>
<CAPTION>
PRINCIPAL MARKET
AMOUNT VALUE
<S> <C> <C>
BANKS (MAJOR REGIONAL)-(CONTINUED)
Nationsbank Corp., Sr. Notes,
5.38%, 04/15/00 $1,550,000 $ 1,546,776
--------------------------------------------------------------
Wachovia Corp., Unsec. Sub. Notes,
6.25%, 08/04/08 5,500,000 5,069,240
--------------------------------------------------------------
12,496,576
--------------------------------------------------------------
BEVERAGES (ALCOHOLIC)-0.73%
Anheuser-Busch Cos. Inc., Unsec.
Notes, 5.38%, 09/15/08 5,500,000 4,828,890
--------------------------------------------------------------
BUILDING MATERIALS-0.75%
Masco Corp., Unsec. Deb., 7.75%,
08/01/29 5,000,000 4,938,150
--------------------------------------------------------------
COMMUNICATIONS EQUIPMENT-1.31%
Diageo Capital PLC, Unsec. Gtd.
Notes, 6.63%, 06/24/04 4,000,000 3,917,864
--------------------------------------------------------------
Motorola, Inc., Notes, 6.50%,
03/01/08 5,000,000 4,738,300
--------------------------------------------------------------
8,656,164
--------------------------------------------------------------
CONSUMER FINANCE-1.33%
Beneficial Corp., Medium Term
Series I Notes, 6.63%, 09/27/04 3,000,000 2,871,870
--------------------------------------------------------------
Commercial Credit Co., Unsec.
Notes, 5.55%, 02/15/01 3,000,000 2,959,470
--------------------------------------------------------------
Ford Motor Credit Co., Sr. Unsec.
Notes, 5.13%, 10/15/01 3,000,000 2,909,931
--------------------------------------------------------------
8,741,271
--------------------------------------------------------------
ELECTRIC COMPANIES-0.56%
Penn Power & Lighting, First
Mortgage Notes, 6.55%, 03/01/06 3,900,000 3,715,296
--------------------------------------------------------------
FOODS-0.67%
Bestfoods, Notes, 6.63%, 04/15/28 5,000,000 4,399,100
--------------------------------------------------------------
HEALTH CARE (MEDICAL PRODUCTS &
SUPPLIES)-0.28%
Guidant Corp., Notes, 6.15%,
02/15/06 2,000,000 1,837,080
--------------------------------------------------------------
INSURANCE (PROPERTY-CASUALTY)-0.32%
Travelers Property Casualty Corp.,
Sr. Unsec. Notes, 6.75%, 11/15/06 2,200,000 2,110,218
--------------------------------------------------------------
INSURANCE BROKERS-0.74%
Marsh & McLennan Cos. Inc., Sr.
Unsec. Notes, 6.63%, 06/15/04 5,000,000 4,886,100
--------------------------------------------------------------
OIL (DOMESTIC INTEGRATED)-0.77%
Atlantic Richfield Co., Notes,
5.55%, 04/15/03 5,300,000 5,082,594
--------------------------------------------------------------
RAILROADS-0.68%
Norfolk Southern Corp., Sr. Unsec.
Notes, 6.20%, 04/15/09 5,000,000 4,504,670
--------------------------------------------------------------
RETAIL (BUILDING SUPPLIES)-0.45%
Sherwin-Williams Co., Notes, 6.50%,
02/01/02 3,000,000 2,964,630
--------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
PRINCIPAL MARKET
AMOUNT VALUE
<S> <C> <C>
RETAIL (DISCOUNTERS)-0.82%
Wal-Mart Stores, Inc., Sr. Unsec.
Notes, 6.55%, 08/10/04 $5,500,000 $ 5,402,485
--------------------------------------------------------------
TELECOMMUNICATIONS (CELLULAR/
WIRELESS)-0.42%
AT&T Corp., Notes, 6.50%, 03/15/29 3,200,000 2,750,624
--------------------------------------------------------------
Total Corporate Bonds & Notes
(Cost $89,114,354) 85,536,275
--------------------------------------------------------------
ASSET-BACKED SECURITIES-0.36%
SERVICES (COMMERCIAL & CONSUMER)-0.36%
Discover Card Master Trust I,
Series. 1998-7 A, 5.60%, 05/16/06
(Cost $2,523,340) 2,500,000 2,382,813
--------------------------------------------------------------
U.S. GOVERNMENT AGENCY SECURITIES-6.00%
FEDERAL HOME LOAN BANK-1.29%
Debentures
5.165%, 04/12/01 1,000,000 984,310
--------------------------------------------------------------
Disc. Notes,
1.50%, 01/03/00(b) 529,000 528,956
--------------------------------------------------------------
Sr. Unsec. Unsub. Notes
5.50%, 07/14/00 7,000,000 6,978,510
--------------------------------------------------------------
8,491,776
--------------------------------------------------------------
FEDERAL HOME LOAN MORTGAGE CORP.
("FHLMC")-2.55%
Pass Through Certificates
6.50%, 07/01/01 to 05/01/29 5,382,998 5,136,553
--------------------------------------------------------------
8.00%, 10/01/10 1,007,527 1,028,303
--------------------------------------------------------------
5.50%, 01/01/14 3,791,232 3,528,196
--------------------------------------------------------------
6.00%, 01/01/29 7,762,978 7,122,532
--------------------------------------------------------------
16,815,584
--------------------------------------------------------------
FEDERAL NATIONAL MORTGAGE
ASSOCIATION ("FNMA")-1.57%
Pass Through Certificates
8.50%, 03/01/10 904,828 933,665
--------------------------------------------------------------
6.50%, 06/01/11 to 05/01/26 5,030,402 4,823,878
--------------------------------------------------------------
7.50%, 11/01/26 to 05/01/29 4,685,919 4,641,791
--------------------------------------------------------------
10,399,334
--------------------------------------------------------------
GOVERNMENT NATIONAL MORTGAGE
ASSOCIATION ("GNMA")-0.59%
Pass Through Certificates
6.50%, 10/15/08 711,791 696,437
--------------------------------------------------------------
7.00%, 10/15/08 728,732 724,403
--------------------------------------------------------------
6.00%, 11/15/08 852,885 815,298
--------------------------------------------------------------
7.50%, 03/15/26 1,651,987 1,640,621
--------------------------------------------------------------
3,876,759
--------------------------------------------------------------
Total U.S. Government Agency
Securities (Cost $40,475,868) 39,583,453
--------------------------------------------------------------
</TABLE>
FS-5
<PAGE> 135
<TABLE>
<CAPTION>
PRINCIPAL MARKET
AMOUNT VALUE
<S> <C> <C>
U.S. TREASURY SECURITIES-3.39%
U.S. TREASURY BONDS-2.81%
9.25%, 02/15/16 $1,000,000 $ 1,234,120
--------------------------------------------------------------
7.25%, 08/15/22 8,000,000 8,428,160
--------------------------------------------------------------
7.625%, 02/15/25 8,000,000 8,862,640
--------------------------------------------------------------
18,524,920
--------------------------------------------------------------
U.S. TREASURY NOTES-0.58%
6.25%, 02/15/03 1,000,000 997,390
--------------------------------------------------------------
9.375%, 02/15/06 2,500,000 2,852,525
--------------------------------------------------------------
3,849,915
--------------------------------------------------------------
Total U.S. Treasury Securities
(Cost $23,232,422) 22,374,835
--------------------------------------------------------------
TOTAL INVESTMENTS-100.37% (Cost
$566,630,484) 661,778,360
--------------------------------------------------------------
LIABILITIES LESS OTHER
ASSETS-(0.37%) (2,466,184)
--------------------------------------------------------------
NET ASSETS-100.00% $659,312,176
==============================================================
</TABLE>
Investment Abbreviations:
ADR - American Depositary Receipt
Deb. - Debentures
Disc. - Discount
Gtd. - Guaranteed
Sr. - Senior
Sub. - Subordinated
Unsec. - Unsecured
Unsub. - Unsubordinated
Notes to Schedule of Investments:
(a) Non-income producing security.
(b) Interest rate shown represents the rate of discount paid or received at the
time of purchase by the Fund.
See Notes to Financial Statements.
FS-6
<PAGE> 136
STATEMENT OF ASSETS AND LIABILITIES
December 31, 1999
<TABLE>
<S> <C>
ASSETS:
Investments, at market value (cost
$566,630,484) $661,778,360
---------------------------------------------------------
Cash 710,099
---------------------------------------------------------
Receivables for:
Capital stock sold 173,662
---------------------------------------------------------
Interest and dividends 3,727,457
---------------------------------------------------------
Investment for deferred compensation plan 26,134
---------------------------------------------------------
Other assets 51,659
---------------------------------------------------------
Total assets 666,467,371
---------------------------------------------------------
LIABILITIES:
Payables for:
Capital stock reacquired 4,910,428
---------------------------------------------------------
Deferred compensation plan 26,134
---------------------------------------------------------
Accrued advisory fees 430,963
---------------------------------------------------------
Accrued distribution fees 1,650,981
---------------------------------------------------------
Accrued transfer agent fees 24,062
---------------------------------------------------------
Accrued operating expenses 112,627
---------------------------------------------------------
Total liabilities 7,155,195
---------------------------------------------------------
Net assets applicable to shares outstanding $659,312,176
---------------------------------------------------------
NET ASSETS:
Class A $ 39,194,936
=========================================================
Class B $ 10,075,882
=========================================================
Class C $610,041,358
=========================================================
CAPITAL STOCK, $0.001 PAR VALUE PER SHARE:
Class A:
Authorized 100,000,000
---------------------------------------------------------
Outstanding 2,230,312
=========================================================
Class B:
Authorized 100,000,000
---------------------------------------------------------
Outstanding 572,966
=========================================================
Class C:
Authorized 100,000,000
---------------------------------------------------------
Outstanding 34,692,912
=========================================================
Class A:
Net asset value and redemption price per
share $ 17.57
---------------------------------------------------------
Offering price per share:
(Net asset value of $17.57 divided
by 94.50%) $ 18.59
=========================================================
Class B:
Net asset value and offering price per
share $ 17.59
=========================================================
Class C:
Net asset value and offering price per
share $ 17.58
=========================================================
</TABLE>
See Notes to Financial Statements.
STATEMENT OF OPERATIONS
For the year ended December 31, 1999
<TABLE>
<S> <C>
INVESTMENT INCOME:
Interest $ 13,196,366
---------------------------------------------------------
Dividends (net of $195,724 foreign
withholding tax) 12,609,266
---------------------------------------------------------
Total investment income 25,805,632
---------------------------------------------------------
EXPENSES:
Advisory fees 5,635,894
---------------------------------------------------------
Administrative services fees 64,957
---------------------------------------------------------
Custodian fees 37,789
---------------------------------------------------------
Operating services fees 1,606,380
---------------------------------------------------------
Distribution fees-Class A 159,420
---------------------------------------------------------
Distribution fees-Class B 91,305
---------------------------------------------------------
Distribution fees-Class C 6,967,734
---------------------------------------------------------
Directors' fees and expenses 8,750
---------------------------------------------------------
Transfer Agent fees-Class A 17,905
---------------------------------------------------------
Transfer Agent fees-Class B 10,056
---------------------------------------------------------
Transfer Agent fees-Class C 184,755
---------------------------------------------------------
Other 87,966
---------------------------------------------------------
Total expenses 14,872,911
---------------------------------------------------------
Less: Fees waived by advisor (1,208,175)
---------------------------------------------------------
Expenses paid indirectly (4,752)
---------------------------------------------------------
Net expenses 13,659,984
---------------------------------------------------------
Net investment income 12,145,648
---------------------------------------------------------
REALIZED AND UNREALIZED GAIN FROM
INVESTMENT SECURITIES:
Net realized gain (loss) from investment
securities 98,684,082
---------------------------------------------------------
Change in net unrealized appreciation
(depreciation) of investment securities (110,583,574)
---------------------------------------------------------
Net gain (loss) from investment
securities (11,899,492)
---------------------------------------------------------
Net increase in net assets resulting from
operations $ 246,156
=========================================================
</TABLE>
FS-7
<PAGE> 137
STATEMENT OF CHANGES IN NET ASSETS
For the years ended December 31, 1999 and 1998
<TABLE>
<CAPTION>
1999 1998
------------ ------------
<S> <C> <C>
OPERATIONS:
Net investment income $ 12,145,648 $ 8,482,076
-----------------------------------------------------------------------------------------
Net realized gain from investment securities 98,684,082 59,176,179
-----------------------------------------------------------------------------------------
Change in net unrealized appreciation (depreciation) of
investment securities (110,583,574) 11,782,197
-----------------------------------------------------------------------------------------
Net increase in net assets resulting from operations 246,156 79,440,452
-----------------------------------------------------------------------------------------
DISTRIBUTIONS TO SHAREHOLDERS FROM NET INVESTMENT INCOME:
Class A (1,034,236) (693,499)
-----------------------------------------------------------------------------------------
Class B (160,013) (14,661)
-----------------------------------------------------------------------------------------
Class C (10,863,435) (7,001,855)
-----------------------------------------------------------------------------------------
DISTRIBUTIONS TO SHAREHOLDERS FROM NET REALIZED GAINS ON
INVESTMENT SECURITIES:
Class A (3,757,847) (3,877,358)
-----------------------------------------------------------------------------------------
Class B (958,788) (270,410)
-----------------------------------------------------------------------------------------
Class C (58,115,071) (56,203,971)
-----------------------------------------------------------------------------------------
SHARE TRANSACTIONS-NET:
Class A (3,267,326) 21,305,857
-----------------------------------------------------------------------------------------
Class B 7,515,438 3,715,719
-----------------------------------------------------------------------------------------
Class C 9,573,755 55,402,752
-----------------------------------------------------------------------------------------
Net increase (decrease) in net assets (60,821,367) 91,803,026
-----------------------------------------------------------------------------------------
NET ASSETS:
Beginning of period 720,133,543 628,330,517
-----------------------------------------------------------------------------------------
End of period $659,312,176 $720,133,543
=========================================================================================
NET ASSETS CONSIST OF:
Capital (par value and additional paid-in) $530,444,492 $510,018,210
-----------------------------------------------------------------------------------------
Undistributed net investment income 952,680 938,111
-----------------------------------------------------------------------------------------
Undistributed net realized gain from investment securities 32,767,128 3,445,772
-----------------------------------------------------------------------------------------
Unrealized appreciation of investment securities 95,147,876 205,731,450
-----------------------------------------------------------------------------------------
$659,312,176 $720,133,543
=========================================================================================
</TABLE>
See Notes to Financial Statements
FS-8
<PAGE> 138
NOTES TO FINANCIAL STATEMENTS
December 31, 1999
NOTE 1-SIGNIFICANT ACCOUNTING POLICIES
AIM Advisor Flex Fund (the "Fund") is a series portfolio of AIM Advisor Funds,
Inc. (the "Company"). The Company is a Maryland corporation registered under the
Investment Company Act of 1940, as amended (the "1940 Act"), as an open-end
series management investment company consisting of four separate portfolios. The
Fund currently offers three different classes of shares: Class A shares, Class B
shares and Class C shares. Class A shares are sold with a front-end sales
charge. Class B shares and Class C shares are sold with a contingent deferred
sales charge. Matters affecting each portfolio or class will be voted on
exclusively by the shareholders of such portfolio or class. The assets,
liabilities and operations of each portfolio are accounted for separately.
Information presented in these financial statements pertains only to the Fund.
The Fund's investment objective is to achieve a high total return on investment
through growth of capital and current income, without regard to federal income
tax considerations.
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities at the date of the
financial statements and the reported amounts of revenues and expenses during
the reporting period. Actual results could differ from those estimates. The
following is a summary of the significant accounting policies followed by the
Fund in the preparation of its financial statements.
A. Security Valuations -- A security listed or traded on an exchange
(except convertible bonds) is valued at its last sales price on the
exchange where the security is principally traded, or lacking any sales on
a particular day, the security is valued at the closing bid price on that
day. Each security reported on the NASDAQ National Market System is valued
at the last sales price on the valuation date or absent a last sales price,
at the closing bid price. Debt obligations (including convertible bonds)
are valued on the basis of prices provided by an independent pricing
service. Prices provided by the pricing service may be determined without
exclusive reliance on quoted prices, and may reflect appropriate factors
such as yield, type of issue, coupon rate and maturity date. Securities for
which market prices are not provided by any of the above methods are valued
based upon quotes furnished by independent sources and are valued at the
last bid price in the case of equity securities and in the case of debt
obligations, the mean between the last bid and asked prices. Securities for
which market quotations are not readily available or are questionable are
valued at fair value as determined in good faith by or under the
supervision of the Company's officers in a manner specifically authorized
by the Board of Directors of the Company. Short-term obligations having 60
days or less to maturity are valued at amortized cost which approximates
market value. For purposes of determining net asset value per share,
futures and option contracts generally will be valued 15 minutes after the
close of trading of the New York Stock Exchange ("NYSE").
Generally, trading in foreign securities is substantially completed each
day at various times prior to the close of the NYSE. The values of such
securities used in computing the net asset value of the Fund's shares are
determined as of such times. Foreign currency exchange rates are also
generally determined prior to the close of the NYSE. Occasionally, events
affecting the values of such securities and such exchange rates may occur
between the times at which they are determined and the close of the NYSE
which would not be reflected in the computation of the Fund's net asset
value. If events materially affecting the value of such securities occur
during such period, then these securities will be valued at their fair
value as determined in good faith by or under the supervision of the Board
of Directors.
B. Securities Transactions and Investment Income -- Securities transactions
are accounted for on a trade date basis. Realized gains or losses on sales
are computed on the basis of specific identification of the securities
sold. Interest income is recorded as earned from settlement date and is
recorded on the accrual basis. Dividend income is recorded on the
ex-dividend date. On December 31, 1999, undistributed net investment income
was decreased by $73,395, undistributed net realized gains decreased by
$6,531,020 and paid-in capital increased by $6,604,415 as a result of
differing book/tax treatment of paydowns, equalization credits and other
reclassifications. Net assets of the Fund were unaffected by the
reclassifications.
C. Distributions -- Distributions from income are recorded on ex-dividend
date, and are declared and paid quarterly. Distributions from net realized
capital gains, if any, are generally paid annually and recorded on
ex-dividend date. The Fund may elect to use a portion of the proceeds of
capital stock redemptions as distributions for federal income tax purposes.
D. Federal Income Taxes -- The Fund intends to comply with the requirements of
the Internal Revenue Code necessary to qualify as a regulated investment
company and, as such, will not be subject to federal income taxes on
otherwise taxable income (including net realized capital gains) which is
distributed to shareholders. Therefore, no provision for federal income
taxes is recorded in the financial statements.
E. Bond Premiums -- It is the policy of the Fund not to amortize market
premiums on bonds for financial reporting purposes.
F. Expenses -- Distribution expenses directly attributable to a class of
shares are charged to that class' operations. All other expenses which are
attributable to more than one class are allocated among the classes.
NOTE 2-ADVISORY FEES AND OTHER TRANSACTIONS WITH AFFILIATES
The Company has entered into a master investment advisory agreement with A I M
Advisors, Inc. ("AIM"). Under the terms of the master investment advisory
agreement, the Fund pays an advisory fee to AIM at the annual rate of 0.75% of
the Fund's
FS-9
<PAGE> 139
average daily net assets. AIM has entered into a sub-advisory agreement with
INVESCO Capital Management, Inc. ("ICM") whereby AIM pays ICM an annual rate of
0.20% of the Fund's average daily net assets.
The Company, pursuant to an operating services agreement with AIM, agreed to
pay AIM an annual rate of 0.45% of the Fund's average daily net assets for
providing or arranging to provide accounting, legal (except litigation),
dividend disbursing, transfer agency, registrar, custodial, shareholder
reporting, sub-accounting and recordkeeping services and functions. The
agreement provided that AIM pay all fees and expenses associated with these and
other functions, including, but not limited to, registration fees, shareholder
meeting fees, and proxy statement and shareholder report expenses. During the
year ended December 31, 1999, AIM was paid $443,754 under the agreement. As of
June 1, 1998, AIM voluntarily agreed to limit the operating services fees to an
annual rate of 0.45% of the first $50 million of the Fund's average daily net
assets and 0.10% of the Fund's average daily net assets in excess of $50
million. During the year ended December 31, 1999, AIM voluntarily waived
operating services fees in the amount of $1,162,626.
Pursuant to an amended operating services agreement effective July 1, 1999,
the Fund shall pay costs incurred for providing operating services, such as
accounting, legal (except litigation), dividend disbursing, transfer agency,
registrar, custodial, shareholder reporting, sub-accounting and recordkeeping
services and functions, including, but not limited to, registration fees,
shareholder meeting fees, and proxy statement and shareholder report expenses.
Further, the Fund's operating expenses are limited to 0.45% of the Fund's
average daily net assets.
Following the amendment to the operating services agreement effective July 1,
1999, the Fund entered into a master administrative services agreement with AIM.
Pursuant to a master administrative services agreement, the Fund has agreed to
pay AIM for certain administrative costs incurred in providing accounting
services to the Fund. For the period July 1, 1999 though December 31, 1999, AIM
was paid $64,957 for such services.
Following the amendment to the operating services agreement effective July 1,
1999, the Fund entered into a transfer agency and service agreement with A I M
Fund Services, Inc. ("AFS"). Pursuant to a transfer agency and service
agreement, the Fund agreed to pay AFS a fee for providing transfer agency and
shareholder services to the Fund. For the period July 1, 1999 through December
31, 1999, AFS was paid $135,055 for such services.
The Company has entered into master distribution agreements with A I M
Distributors, Inc. ("AIM Distributors") to serve as the distributor for the
shares of the Fund. The Company has adopted plans pursuant to Rule 12b-1 under
the 1940 Act with respect to the Fund's Class A shares, Class B shares and Class
C shares (collectively the "Plans"). The Fund, pursuant to the Plans, pays AIM
Distributors compensation at the annual rate of 0.35% of the Fund's average
daily net assets of Class A shares and 1.00% of the average daily net assets of
Class B and C shares. AIM Distributors has contractually agreed to limit the
Class A shares plan payments to 0.25% for three years beginning August 4, 1997.
Of these amounts, the Fund may pay a service fee of 0.25% of the average daily
net assets of the Class A, Class B or Class C shares to selected dealers and
financial institutions who furnish continuing personal shareholder services to
their customers who purchase and own the appropriate class of shares of the
Fund. Any amounts not paid as a service fee under the Plans would constitute an
asset-based sales charge. The Plans also impose a cap on the total sales
charges, including asset-based sales charges that may be paid by the respective
classes. During the year ended December 31, 1999, the Class A, Class B and Class
C shares paid AIM Distributors $113,871, $91,305 and $6,967,734, respectively,
as compensation under the Plans. During the year ended December 31, 1999, AIM
Distributors waived fees of $45,549 for Class A shares.
AIM Distributors received commissions of $22,488 from sales of the Class A
shares of the Fund during the year ended December 31, 1999. Such commissions are
not an expense of the Fund. They are deducted from, and are not included in, the
proceeds from sales of Class A shares. During the year ended December 31, 1999,
AIM Distributors received $133,285 in contingent deferred sales charges imposed
on redemptions of Fund shares.
Certain officers and directors of the Company are officers and directors of
AIM, AFS and AIM Distributors.
During the period July 1, 1999 through December 31, 1999, the Fund paid legal
fees of $1,446 for services rendered by Kramer, Levin, Naftalis & Frankel LLP as
counsel to the Company's directors. A member of that firm is a director of the
Company.
NOTE 3-INDIRECT EXPENSES
During the year ended December 31, 1999, the Fund received reductions in
transfer agency fees from AFS (an affiliate of AIM) and reductions in custodian
fees of $515 and $4,237, respectively, under expense offset arrangements. The
effect of the above arrangements resulted in a reduction of the Fund's total
expenses of $4,752 during the year ended December 31, 1999.
NOTE 4-DIRECTORS' FEES
Directors' fees represent remuneration paid to directors who are not an
"interested person" of AIM. The Company invests directors' fees, if so elected
by a director, in mutual fund shares in accordance with a deferred compensation
plan.
NOTE 5-BANK BORROWINGS
The Fund is a participant in a committed line of credit facility with a
syndicate administered by The Chase Manhattan Bank. The Fund may borrow up to
the lesser of (i) $1,000,000,000 or (ii) the limits set by its prospectus for
borrowings. The Fund and other funds advised by AIM which are parties to the
line of credit may borrow on a first come, first served basis. During the year
ended December 31, 1999, the Fund did not borrow under the line of credit
agreement. The funds which are party to the line of credit are charged a
commitment fee of 0.09% on the unused balance of the committed line. Prior to
May 28, 1999, the commitment fee rate was 0.05%. The commitment fee is allocated
among the funds based on their respective average net assets for the period.
FS-10
<PAGE> 140
NOTE 6-INVESTMENT SECURITIES
The aggregate amount of investment securities (other than short-term securities)
purchased and sold by the Fund during the year ended December 31, 1999 was
$405,990,945 and $436,537,739, respectively.
The amount of unrealized appreciation (depreciation) of investment securities,
for tax purposes, as of December 31, 1999 was as follows:
<TABLE>
<S> <C>
Aggregate unrealized appreciation of investment securities $150,129,444
--------------------------------------------------------------------------
Aggregate unrealized (depreciation) of investment securities (55,056,781)
--------------------------------------------------------------------------
Net unrealized appreciation of investment securities $ 95,072,663
==========================================================================
Cost of investments for tax purposes is $566,705,697.
</TABLE>
NOTE 7-CAPITAL STOCK
Changes in capital stock outstanding during the years ended December 31, 1999
and 1998 were as follows:
<TABLE>
<CAPTION>
1999 1998
--------------------------- --------------------------
SHARES AMOUNT SHARES AMOUNT
----------- ------------- ---------- -------------
<S> <C> <C> <C> <C>
Sold:
Class A 647,940 $ 13,033,761 1,076,842 $ 22,390,887
----------------------------------------------------------------------------------------------------------------------
Class B* 289,189 5,853,184 175,059 3,648,126
----------------------------------------------------------------------------------------------------------------------
Class C 3,933,740 79,330,393 5,318,582 109,967,149
----------------------------------------------------------------------------------------------------------------------
Issued in connection with acquisition**:
Class A 623,953 11,614,157 -- --
----------------------------------------------------------------------------------------------------------------------
Class B 256,293 4,785,508 -- --
----------------------------------------------------------------------------------------------------------------------
Class C 7,871,114 146,770,808 -- --
----------------------------------------------------------------------------------------------------------------------
Issued as reinvestment of dividends:
Class A 240,465 4,199,593 223,596 4,399,200
----------------------------------------------------------------------------------------------------------------------
Class B* 59,674 1,031,441 14,140 277,225
----------------------------------------------------------------------------------------------------------------------
Class C 3,685,888 63,875,426 3,067,888 60,325,811
----------------------------------------------------------------------------------------------------------------------
Reacquired:
Class A (1,589,802) (32,114,838) (266,823) (5,484,230)
----------------------------------------------------------------------------------------------------------------------
Class B* (211,198) (4,154,695) (10,191) (209,632)
----------------------------------------------------------------------------------------------------------------------
Class C (14,205,464) (280,402,871) (5,531,566) (114,890,208)
----------------------------------------------------------------------------------------------------------------------
1,601,792 $ 13,821,867 4,067,527 $ 80,424,328
======================================================================================================================
</TABLE>
* Class B shares commenced sales on March 3, 1998.
** On June 21, 1999, pursuant to a plan of reorganization and termination, AIM
MultiFlex Fund ("MultiFlex Fund") transferred all of its assets to the Fund.
The Fund assumed all of the liabilities of the MultiFlex Fund. Shareholders
of the MultiFlex Fund were issued full and fractional shares of the
applicable class of the Fund. The acquisition, which was approved by the
shareholders of MultiFlex Fund on June 16, 1999, was accomplished by an
exchange of 8,751,360 shares of the Fund for the 15,054,075 shares then
outstanding of the MultiFlex Fund. Based on the opinion of Fund counsel, the
reorganization qualified as a tax-free reorganization for federal income tax
purposes with no gain or loss recognized to the Funds or its shareholders.
MultiFlex Fund's net assets, including $21,805,397 of unrealized
appreciation, were combined with the Fund for total net assets after the
acquisition of $892,863,343.
FS-11
<PAGE> 141
NOTE 8-FINANCIAL HIGHLIGHTS
Shown below are the financial highlights for a share of Class A capital stock
outstanding during each of the years in the three-year period ended December 31,
1999, for a share of Class B capital stock outstanding during the year ended
December 31, 1999 and the period March 3, 1998 (date sales commenced) through
December 31, 1998, and for a share of Class C capital stock outstanding during
each of the years in the five-year period ended December 31, 1999.
<TABLE>
<CAPTION>
CLASS A(a) CLASS B
-------------------------------- -----------------
1999 1998 1997(b) 1999 1998
------- ------- ------- ------- ------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of period $ 20.06 $ 19.74 $ 16.63 $ 20.06 $20.69
------------------------------------------------------------ ------- ------- ------- ------- ------
Income from investment operations:
Net investment income 0.46 0.39 0.41 0.31 0.22
------------------------------------------------------------ ------- ------- ------- ------- ------
Net gains (losses) on securities (both realized and
unrealized) (0.68) 2.16 3.63 (0.66) 1.22
------------------------------------------------------------ ------- ------- ------- ------- ------
Total from investment operations (0.22) 2.55 4.04 (0.35) 1.44
------------------------------------------------------------ ------- ------- ------- ------- ------
Less distributions:
Dividends from net investment income (0.48) (0.39) (0.43) (0.33) (0.23)
------------------------------------------------------------ ------- ------- ------- ------- ------
Distributions from net realized gains (1.79) (1.84) (0.50) (1.79) (1.84)
------------------------------------------------------------ ------- ------- ------- ------- ------
Total distributions (2.27) (2.23) (0.93) (2.12) (2.07)
------------------------------------------------------------ ------- ------- ------- ------- ------
Net asset value, end of period $ 17.57 $ 20.06 $ 19.74 $ 17.59 $20.06
============================================================ ======= ======= ======= ======= ======
Total return(c) (0.85)% 13.26% 24.60% (1.50)% 7.25%
============================================================ ======= ======= ======= ======= ======
Ratios/supplemental data:
Net assets, end of period (000s omitted) $39,195 $46,286 $25,151 $10,076 $3,592
============================================================ ======= ======= ======= ======= ======
Ratio of expenses to average net assets(d) 1.13%(e) 1.23% 1.45% 1.86%(e) 2.00%(f)
============================================================ ======= ======= ======= ======= ======
Ratio of net investment income to average net assets(g) 2.30%(e) 1.99% 2.34% 1.57%(e) 1.22%(f)
============================================================ ======= ======= ======= ======= ======
Portfolio turnover rate 55% 34% 17% 55% 34%
============================================================ ======= ======= ======= ======= ======
</TABLE>
(a) Per share information and shares have been restated to
reflect a 4 for 1 stock split, effected in the form of a
300% stock dividend, on November 7, 1997.
(b) Calculated using average shares outstanding.
(c) Does not deduct sales charges and for periods less than one
year is not annualized.
(d) After fee waivers and/or expense reimbursements. Ratio of
expenses to average net assets prior to fee waivers and/or
expense reimbursements were 1.39%, 1.52% and 1.55% for
1999-1997 for Class A and 2.02% and 2.19% (annualized) for
1999-1998 for Class B.
(e) Ratios are based on average net assets of $45,548,558 and
$9,130,498 for Class A and Class B, respectively.
(f) Annualized.
(g) After fee waivers and/or expense reimbursements. Ratio of
net investment income to average net assets prior to fee
waivers and/or expense reimbursements were 2.04%, 1.70% and
2.24% for 1999-1997 for Class A and 1.41% and 1.03%
(annualized) for 1999-1998 for Class B.
<TABLE>
<CAPTION>
CLASS C(a)
--------------------------------------------------------
1999(b) 1998 1997(b) 1996 1995
-------- -------- ------- -------- --------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of period $ 20.06 $ 19.74 $ 16.63 $ 15.66 $ 12.63
------------------------------------------------------------ -------- -------- -------- -------- --------
Income from investment operations:
Net investment income 0.32 0.25 0.30 0.30 0.32
------------------------------------------------------------ -------- -------- -------- -------- --------
Net gains (losses) on securities (both realized and
unrealized) (0.68) 2.14 3.60 1.81 3.09
------------------------------------------------------------ -------- -------- -------- -------- --------
Total from investment operations (0.36) 2.39 3.90 2.11 3.41
------------------------------------------------------------ -------- -------- -------- -------- --------
Less distributions:
Dividends from net investment income (0.33) (0.23) (0.29) (0.29) (0.32)
------------------------------------------------------------ -------- -------- -------- -------- --------
Distributions from net realized gains (1.79) (1.84) (0.50) (0.85) (0.06)
------------------------------------------------------------ -------- -------- -------- -------- --------
Total distributions (2.12) (2.07) (0.79) (1.14) (0.38)
------------------------------------------------------------ -------- -------- -------- -------- --------
Net asset value, end of period $ 17.58 $ 20.06 $ 19.74 $ 16.63 $ 15.66
============================================================ ======== ======== ======== ======== ========
Total return(c) (1.56)% 12.41% 23.64% 13.61% 27.30%
============================================================ ======== ======== ======== ======== ========
Ratios/supplemental data:
Net assets, end of period (000s omitted) $610,041 $670,256 $603,179 $489,918 $399,162
============================================================ ======== ======== ======== ======== ========
Ratio of expenses to average net assets(d) 1.86%(e) 2.00% 2.20% 2.26% 2.28%
============================================================ ======== ======== ======== ======== ========
Ratio of net investment income to average net assets(f) 1.57%(e) 1.22% 1.59% 1.81% 2.28%
============================================================ ======== ======== ======== ======== ========
Portfolio turnover rate 55% 34% 17% 26% 5%
============================================================ ======== ======== ======== ======== ========
</TABLE>
(a) Per share information and shares have been restated to reflect a 4 for 1
stock split, effected in the form of a 300% stock dividend, on November 7,
1997.
(b) Calculated using average shares outstanding.
(c) Does not deduct contingent deferred sales charges.
(d) After fee waivers and/or expense reimbursements. Ratios of expenses to
average net assets prior to fee waivers and/or expense reimbursements were
2.02% and 2.19% for 1999-1998.
(e) Ratios are based on average net assets of $696,773,444.
(f) After fee waivers and/or expense reimbursements. Ratios of net investment
income to average net assets prior to fee waivers and/or expense
reimbursements were 1.41% and 1.03% for 1999-1998.
FS-12
<PAGE> 142
INDEPENDENT AUDITORS' REPORT
The Board of Directors and Shareholders of
AIM Advisor International Value Fund:
We have audited the accompanying statement of assets and
liabilities of AIM Advisor International Value Fund (a
portfolio of AIM Advisor Funds, Inc.), including the
schedule of investments, as of December 31, 1999, and the
related statement of operations for the year then ended,
the statement of changes in net assets and the financial
highlights for each of the years in the two-year period
then ended. These financial statements and financial
highlights are the responsibility of the Fund's
management. Our responsibility is to express an opinion
on these financial statements and the financial
highlights based on our audits.
We conducted our audits in accordance with generally
accepted auditing standards. Those standards require that
we plan and perform the audit to obtain reasonable
assurance about whether the financial statements and
financial highlights are free of material misstatement.
An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial
statements. Our procedures included confirmation of
securities owned as of December 31, 1999, by
correspondence with the custodian. An audit also includes
assessing the accounting principles used and significant
estimates made by management, as well as evaluating the
overall financial statement presentation. We believe that
our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements and financial
highlights referred to above present fairly, in all
material respects, the financial position of AIM Advisor
International Value Fund as of December 31, 1999, the
results of its operations for the year then ended, the
changes in its net assets and the financial highlights
for each of the years in the two-year period then ended,
in conformity with generally accepted accounting
principles.
/s/ KPMG LLP
KPMG LLP
February 4, 2000
Houston, Texas
FS-13
<PAGE> 143
SCHEDULE OF INVESTMENTS
December 31, 1999
<TABLE>
<CAPTION>
MARKET
SHARES VALUE
<S> <C> <C>
FOREIGN STOCKS-99.58%
AUSTRALIA-5.31%
National Australia Bank Ltd.-ADR
(Banks- Regional) 40,000 $ 3,050,000
--------------------------------------------------------------
News Corp. Ltd. (The) (Publishing-
Newspapers) 325,000 3,158,035
--------------------------------------------------------------
Rio Tinto Ltd.-ADR (Metals Mining) 18,000 1,541,565
--------------------------------------------------------------
7,749,600
--------------------------------------------------------------
DENMARK-2.23%
Den Danske Bank-ADR (Banks-Money
Center) 15,000 1,636,512
Novo-Nordisk A.S.-ADR (Health
Care-Drugs- Major
Pharmaceuticals) 25,000 1,615,625
--------------------------------------------------------------
3,252,137
--------------------------------------------------------------
FRANCE-8.14%
Credit Commercial de France
(Banks-Major Regional) 15,000 1,867,468
--------------------------------------------------------------
Groupe Danone-ADR (Foods) 40,000 1,862,500
--------------------------------------------------------------
Michelin-Class B (Automobile/Truck
Parts & Tires)(a) 30,000 1,177,546
--------------------------------------------------------------
Societe Generale (Banks-Major
Regional) 85,000 3,936,052
--------------------------------------------------------------
Total Fina S.A.-ADR
(Oil-International Integrated) 43,833 3,035,435
--------------------------------------------------------------
11,879,001
--------------------------------------------------------------
GERMANY-8.29%
BASF A.G.-ADR
(Chemicals-Diversified) 60,000 3,067,056
--------------------------------------------------------------
Bayer A.G.-ADR
(Chemicals-Diversified) 45,000 2,119,873
--------------------------------------------------------------
DaimlerChrysler A.G. (Automobiles) 23,000 1,799,750
--------------------------------------------------------------
Deutsche Bank A.G.-ADR (Banks-Money
Center) 36,000 3,025,559
--------------------------------------------------------------
SAP A.G.-ADR (Computers-Software &
Services) 40,000 2,082,500
--------------------------------------------------------------
12,094,738
--------------------------------------------------------------
ITALY-7.75%
Enel S.p.A. (Electric Companies)(a) 300,000 1,256,050
--------------------------------------------------------------
ENI S.p.A.-ADR (Oil-International
Integrated) 25,000 1,378,125
--------------------------------------------------------------
San Paolo-IMI S.p.A.-ADR
(Banks-Major Regional) 109,725 3,003,722
--------------------------------------------------------------
Telecom Italia Mobile S.p.A.
(Telecommunications-Cellular/Wireless) 200,000 2,232,306
--------------------------------------------------------------
Telecom Italia S.p.A.-ADR
(Telephone) 24,500 3,430,000
--------------------------------------------------------------
11,300,203
--------------------------------------------------------------
JAPAN-26.11%
Bank of Tokyo-Mitsubishi Ltd.
(Banks- Regional)(a) 75,000 1,045,777
--------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
MARKET
SHARES VALUE
<S> <C> <C>
JAPAN-(CONTINUED)
Canon, Inc.-ADR (Office Equipment &
Supplies) 75,000 $ 3,042,187
--------------------------------------------------------------
Fuji Photo Film-ADR
(Photography/Imaging) 50,000 1,912,500
--------------------------------------------------------------
Hitachi Ltd.-ADR
(Manufacturing-Diversified) 20,000 3,237,500
--------------------------------------------------------------
Honda Motor Co., Ltd. (Automobiles) 18,000 1,377,000
--------------------------------------------------------------
Kyocera Corp.-ADR
(Electronics-Component
Distributors) 28,000 7,336,000
--------------------------------------------------------------
Mitsubishi Heavy Industries, Ltd.
(Manufacturing-Diversified)(a) 300,000 1,001,714
--------------------------------------------------------------
Murata Manufacturing Co., Ltd.
(Electronics- Component
Distributors) 30,000 7,050,184
--------------------------------------------------------------
Nintendo Co. Ltd. (Leisure
Time-Products) 25,000 4,156,671
--------------------------------------------------------------
Nippon Telegraph & Telephone Corp.
(Telephone) 150 2,570,379
--------------------------------------------------------------
Sony Corp-ADR (Electrical
Equipment) 10,000 2,847,500
--------------------------------------------------------------
Takefuji Corp.
(Financial-Diversified) 20,000 2,504,774
--------------------------------------------------------------
38,082,186
--------------------------------------------------------------
NETHERLANDS-9.94%
ABN AMRO Holding N.V. (Banks-Major
Regional) 60,000 1,497,598
--------------------------------------------------------------
Akzo Nobel N.V.-ADR (Chemicals) 30,000 1,492,500
--------------------------------------------------------------
ING Groep N.V.-ADR
(Insurance-Life/Health) 60,000 3,660,000
--------------------------------------------------------------
Koninklijke (Royal) Philips
Electronics N.V.-ADR (Electrical
Equipment) 20,000 2,700,000
--------------------------------------------------------------
Royal Dutch Petroleum Co.-New York
Shares- ADR (Oil-International
Integrated) 45,000 2,719,687
--------------------------------------------------------------
Unilever N.V.-ADR (Foods) 44,642 2,430,199
--------------------------------------------------------------
14,499,984
--------------------------------------------------------------
PORTUGAL-2.05%
Portugal Telecom S.A.-ADR
(Telephone) 275,000 2,990,625
--------------------------------------------------------------
SPAIN-5.80%
Banco Popular Espanol S.A.
(Banks-Major Regional) 20,000 1,303,353
--------------------------------------------------------------
Endesa S.A.-ADR (Electric
Companies) 130,000 2,624,375
--------------------------------------------------------------
Repsol S.A.-ADR (Oil-International
Integrated) 195,000 4,533,750
--------------------------------------------------------------
8,461,478
--------------------------------------------------------------
SWITZERLAND-4.80%
Nestle S.A.-ADR (Foods) 30,000 2,733,441
--------------------------------------------------------------
Novartis A.G.-ADR (Health
Care/Drugs-Major Pharmaceuticals) 35,000 2,556,022
--------------------------------------------------------------
Zurich Allied A.G.
(Insurance-Multi-Line) 3,000 1,710,733
--------------------------------------------------------------
7,000,196
--------------------------------------------------------------
UNITED KINGDOM-19.16%
Associated British Foods PLC-ADR
(Foods) 264,000 1,449,862
--------------------------------------------------------------
</TABLE>
FS-14
<PAGE> 144
<TABLE>
<CAPTION>
MARKET
SHARES VALUE
<S> <C> <C>
UNITED KINGDOM-(CONTINUED)
AstraZeneca Group PLC-ADR (Health
Care- Drugs-Major
Pharmaceuticals) 65,000 $ 2,713,750
--------------------------------------------------------------
British Airways PLC-ADR (Airlines) 25,000 1,609,375
--------------------------------------------------------------
British Telecommunications PLC
(Telephone) 14,000 3,332,000
--------------------------------------------------------------
Carlton Communications PLC-ADR
(Electrical Equipment) 55,000 2,619,375
--------------------------------------------------------------
Corus Group PLC-ADR (Iron & Steel) 55,000 1,423,125
--------------------------------------------------------------
Glaxo Wellcome PLC-ADR (Health
Care-Drugs- Major
Pharmaceuticals) 40,000 2,235,000
--------------------------------------------------------------
HSBC Holdings PLC-ADR (Banks-Money
Center) 75,000 5,258,227
--------------------------------------------------------------
Marks & Spencer PLC (Retail-Stores) 300,000 1,427,798
--------------------------------------------------------------
PowerGen PLC-ADR (Electric
Companies) 55,000 1,739,375
--------------------------------------------------------------
Scottish Power PLC (Electric
Companies) 250,000 1,893,236
--------------------------------------------------------------
SmithKline Beecham PLC-ADR (Health
Care- Drugs-Major
Pharmaceuticals) 35,000 2,255,313
--------------------------------------------------------------
27,956,436
--------------------------------------------------------------
Total Foreign Stocks (Cost
$96,020,162) 145,266,584
--------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
PRINCIPAL MARKET
AMOUNT VALUE
<S> <C> <C>
U.S. GOVERNMENT AGENCY
SECURITIES-0.88%
FEDERAL HOME LOAN BANK-0.88%
Disc. Notes,(b)
1.50%, 01/03/00 (Cost $1,279,893) $1,280,000 $ 1,279,893
--------------------------------------------------------------
TOTAL INVESTMENTS-100.46% (Cost
$97,300,055) 146,546,477
--------------------------------------------------------------
LIABILITIES LESS OTHER
ASSETS-(0.46%) (670,743)
--------------------------------------------------------------
NET ASSETS-100.00% $145,875,734
==============================================================
</TABLE>
Investment Abbreviations:
ADR - American Depositary Receipt
Notes to Schedule of Investments:
(a) Non-income producing security.
(b) Interest rate shown represents the rate of discount paid or received at the
time of purchase by the Fund.
See Notes to Financial Statements.
FS-15
<PAGE> 145
STATEMENT OF ASSETS AND LIABILITIES
December 31, 1999
<TABLE>
<S> <C>
ASSETS:
Investments, at market value (cost
$97,300,055) $146,546,477
---------------------------------------------------------
Foreign currencies, at value (cost $20,378) 20,600
---------------------------------------------------------
Receivables for:
Capital stock sold 146,305
---------------------------------------------------------
Interest and dividends 351,799
---------------------------------------------------------
Investment for deferred compensation plan 12,194
---------------------------------------------------------
Other assets 6,445
---------------------------------------------------------
Total assets 147,083,820
---------------------------------------------------------
LIABILITIES:
Payables for:
Capital stock reacquired 749,388
---------------------------------------------------------
Deferred compensation plan 12,194
---------------------------------------------------------
Accrued advisory fees 117,574
---------------------------------------------------------
Accrued distribution fees 253,604
---------------------------------------------------------
Accrued transfer agent fees 21,004
---------------------------------------------------------
Accrued administrative services fees 4,247
---------------------------------------------------------
Accrued operating expenses 50,075
---------------------------------------------------------
Total liabilities 1,208,086
---------------------------------------------------------
NET ASSETS APPLICABLE TO SHARES OUTSTANDING $145,875,734
=========================================================
NET ASSETS:
Class A $ 31,412,114
=========================================================
Class B $ 5,642,468
=========================================================
Class C $108,821,152
=========================================================
CAPITAL STOCK, $0.001 PAR VALUE PER SHARE:
Class A:
Authorized 100,000,000
---------------------------------------------------------
Outstanding 1,576,677
=========================================================
Class B:
Authorized 100,000,000
---------------------------------------------------------
Outstanding 284,889
=========================================================
Class C:
Authorized 100,000,000
---------------------------------------------------------
Outstanding 5,496,171
=========================================================
Class A:
Net asset value and redemption price per
share $ 19.92
---------------------------------------------------------
Offering price per share:
(Net asset value of $19.92 divided
by 94.50%) $ 21.08
=========================================================
Class B:
Net asset value and offering price per
share $ 19.81
=========================================================
Class C:
Net asset value and offering price per
share $ 19.80
=========================================================
</TABLE>
See Notes to Financial Statements.
STATEMENT OF OPERATIONS
For the year ended December 31, 1999
<TABLE>
<S> <C>
INVESTMENT INCOME:
Dividends (net of $350,255 foreign
withholding tax) $ 2,789,892
--------------------------------------------------------
Interest 110,773
--------------------------------------------------------
Total investment income 2,900,665
--------------------------------------------------------
EXPENSES:
Advisory fees 1,307,027
--------------------------------------------------------
Administrative services fees 25,721
--------------------------------------------------------
Custodian fees 29,499
--------------------------------------------------------
Operating services fees 290,546
--------------------------------------------------------
Distribution fees-Class A 94,674
--------------------------------------------------------
Distribution fees-Class B 42,551
--------------------------------------------------------
Distribution fees-Class C 993,935
--------------------------------------------------------
Directors' fees and expenses 3,847
--------------------------------------------------------
Transfer Agent fees-Class A 17,199
--------------------------------------------------------
Transfer Agent fees-Class B 7,228
--------------------------------------------------------
Transfer Agent fees-Class C 65,930
--------------------------------------------------------
Other 45,538
--------------------------------------------------------
Total expenses 2,923,695
--------------------------------------------------------
Less: Fees waived (166,253)
--------------------------------------------------------
Expenses paid indirectly (759)
--------------------------------------------------------
Net expenses 2,756,683
--------------------------------------------------------
Net investment income 143,982
--------------------------------------------------------
REALIZED AND UNREALIZED GAIN (LOSS) FROM
INVESTMENT SECURITIES AND FOREIGN CURRENCIES:
Net realized gain (loss) from:
Investment securities 7,711,836
--------------------------------------------------------
Foreign currencies (100,916)
--------------------------------------------------------
7,610,920
--------------------------------------------------------
Change in net unrealized appreciation of:
Investment securities 18,910,641
--------------------------------------------------------
Foreign currencies 1,968
--------------------------------------------------------
18,912,609
--------------------------------------------------------
Net gain from investment securities and
foreign currencies 26,523,529
--------------------------------------------------------
Net increase in net assets resulting from
operations $26,667,511
=========================================================
</TABLE>
FS-16
<PAGE> 146
STATEMENT OF CHANGES IN NET ASSETS
For the years ended December 31, 1999 and 1998
<TABLE>
<CAPTION>
1999 1998
------------ ------------
<S> <C> <C>
OPERATIONS:
Net investment income $ 143,982 $ 226,806
-----------------------------------------------------------------------------------------
Net realized gain (loss) from investment securities and
foreign currencies 7,610,920 (5,494,200)
-----------------------------------------------------------------------------------------
Change in net unrealized appreciation (depreciation) of
investment securities and foreign currencies 18,912,609 15,275,348
-----------------------------------------------------------------------------------------
Net increase in net assets resulting from operations 26,667,511 10,007,954
-----------------------------------------------------------------------------------------
DISTRIBUTIONS TO SHAREHOLDERS FROM NET INVESTMENT INCOME:
Class A (432,681) (160,712)
-----------------------------------------------------------------------------------------
Class B (42,668) --
-----------------------------------------------------------------------------------------
Class C (838,386) --
-----------------------------------------------------------------------------------------
DISTRIBUTIONS TO SHAREHOLDERS FROM NET REALIZED GAINS ON
INVESTMENT SECURITIES:
Class A (115,532) (237)
-----------------------------------------------------------------------------------------
Class B (20,873) (51)
-----------------------------------------------------------------------------------------
Class C (410,586) (1,274)
-----------------------------------------------------------------------------------------
SHARE TRANSACTIONS-NET:
Class A (2,103,894) 18,784,781
-----------------------------------------------------------------------------------------
Class B 446,063 4,303,232
-----------------------------------------------------------------------------------------
Class C (14,925,148) 3,112,106
-----------------------------------------------------------------------------------------
Net increase in net assets 8,223,806 36,045,799
-----------------------------------------------------------------------------------------
NET ASSETS:
Beginning of period 137,651,928 101,606,129
-----------------------------------------------------------------------------------------
End of period $145,875,734 $137,651,928
=========================================================================================
NET ASSETS CONSIST OF:
Capital (par value and additional paid-in) $ 96,576,058 $113,159,037
-----------------------------------------------------------------------------------------
Undistributed net investment income (1,208,005) 58,330
-----------------------------------------------------------------------------------------
Undistributed net realized gain (loss) from investment
securities and foreign currencies 1,261,120 (5,899,391)
-----------------------------------------------------------------------------------------
Unrealized appreciation of investment securities and
foreign currencies 49,246,561 30,333,952
-----------------------------------------------------------------------------------------
$145,875,734 $137,651,928
=========================================================================================
</TABLE>
See Notes to Financial Statements.
FS-17
<PAGE> 147
NOTES TO FINANCIAL STATEMENTS
December 31, 1999
NOTE 1-SIGNIFICANT ACCOUNTING POLICIES
AIM Advisor International Value Fund (the "Fund") is a series portfolio of AIM
Advisor Funds, Inc. (the "Company"). The Company is a Maryland corporation
registered under the Investment Company Act of 1940, as amended (the "1940
Act"), as an open-end series management investment company consisting of four
separate portfolios. The Fund currently offers three different classes of
shares: Class A shares, Class B shares and Class C shares. Class A shares are
sold with a front-end sales charge. Class B shares and Class C shares are sold
with a contingent deferred sales charge. Matters affecting each portfolio or
class will be voted on exclusively by the shareholders of such portfolio or
class. The assets, liabilities and operations of each portfolio are accounted
for separately. Information presented in these financial statements pertains
only to the Fund. The Fund's investment objective is to achieve a high total
return on investment through growth of capital and current income, without
regard to federal income tax considerations.
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities at the date of the
financial statements and the reported amounts of revenues and expenses during
the reporting period. Actual results could differ from those estimates. The
following is a summary of the significant accounting policies followed by the
Fund in the preparation of its financial statements.
A. Security Valuations -- A security listed or traded on an exchange (except
convertible bonds) is valued at its last sales price on the exchange where
the security is principally traded, or lacking any sales on a particular
day, the security is valued at the closing bid price on that day. Each
security reported on the NASDAQ National Market System is valued at the
last sales price on the valuation date or absent a last sales price, at the
closing bid price. Debt obligations (including convertible bonds) are
valued on the basis of prices provided by an independent pricing service.
Prices provided by the pricing service may be determined without exclusive
reliance on quoted prices, and may reflect appropriate factors such as
yield, type of issue, coupon rate and maturity date. Securities for which
market prices are not provided by any of the above methods are valued based
upon quotes furnished by independent sources and are valued at the last bid
price in the case of equity securities and in the case of debt obligations,
the mean between the last bid and asked prices. Securities for which market
quotations are not readily available or are questionable are valued at fair
value as determined in good faith by or under the supervision of the
Company's officers in a manner specifically authorized by the Board of
Directors of the Company. Short-term obligations having 60 days or less to
maturity are valued at amortized cost which approximates market value. For
purposes of determining net asset value per share, futures and option
contracts generally will be valued 15 minutes after the close of trading of
the New York Stock Exchange ("NYSE").
Generally, trading in foreign securities is substantially completed each
day at various times prior to the close of the NYSE. The values of such
securities used in computing the net asset value of the Fund's shares are
determined as of such times. Foreign currency exchange rates are also
generally determined prior to the close of the NYSE. Occasionally, events
affecting the values of such securities and such exchange rates may occur
between the times at which they are determined and the close of the NYSE
which would not be reflected in the computation of the Fund's net asset
value. If events materially affecting the value of such securities occur
during such period, then these securities will be valued at their fair
value as determined in good faith by or under the supervision of the Board
of Directors.
B. Securities Transactions and Investment Income -- Securities transactions
are accounted for on a trade date basis. Realized gains or losses on sales
are computed on the basis of specific identification of the securities
sold. Interest income is recorded as earned from settlement date and is
recorded on the accrual basis. Dividend income is recorded on the
ex-dividend date. On December 31, 1999, undistributed net investment income
was decreased by $96,582 and undistributed net realized gains increased by
$96,582 as a result of differing book/tax treatment of foreign currency
transactions and foreign tax credits. Net assets of the Fund were
unaffected by the reclassifications.
C. Distributions -- Distributions from income and net realized capital gains,
if any, are generally paid annually and recorded on ex-dividend date. The
Fund may elect to use a portion of the proceeds of capital stock
redemptions as distributions for federal income tax purposes.
D. Federal Income Taxes -- The Fund intends to comply with the requirements of
the Internal Revenue Code necessary to qualify as a regulated investment
company and, as such, will not be subject to federal income taxes on
otherwise taxable income (including net realized capital gains) which is
distributed to shareholders. Therefore, no provision for federal income
taxes is recorded in the financial statements.
E. 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
FS-18
<PAGE> 148
fluctuations are included with the net realized and unrealized gain or loss
from investments.
F. Foreign Currency Contracts -- A foreign currency contract is an obligation
to purchase or sell a specific currency for an agreed-upon price at a
future date. The Fund may enter into a foreign currency contract to attempt
to minimize the risk to the Fund from adverse changes in the relationship
between currencies. The Fund may also enter into a foreign currency
contract for the purchase or sale of a security denominated in a foreign
currency in order to "lock in" the U.S. dollar price of that security. The
Fund could be exposed to risk if counterparties to the contracts are unable
to meet the terms of their contracts or if the value of the foreign
currency changes unfavorably.
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 Company has entered into a master investment advisory agreement with A I M
Advisors, Inc. ("AIM"). Under the terms of the master investment advisory
agreement, the Fund pays an advisory fee to AIM at the annual rate of 1.00% of
the Fund's average daily net assets. AIM has entered into a sub-advisory
agreement with INVESCO Global Asset Management Limited ("IGAM") whereby AIM pays
IGAM an annual rate of 0.35% of the first $50 million of the Fund's average
daily net assets, plus 0.30% of the Fund's average daily net assets in excess of
$50 million to and including $100 million, plus 0.25% of the Fund's average
daily net assets in excess of $100 million.
The Company, pursuant to an operating services agreement with AIM, agreed to
pay AIM an annual rate of 0.45% of the Fund's average daily net assets for
providing or arranging to provide accounting, legal (except litigation),
dividend disbursing, transfer agency, registrar, custodial, shareholder
reporting, sub-accounting and recordkeeping services and functions. The
agreement provided that AIM pay all fees and expenses associated with these and
other functions, including, but not limited to, registration fees, shareholder
meeting fees, and proxy statement and shareholder report expenses. During the
year ended December 31, 1999, AIM was paid $151,347 under the agreement. As of
June 1, 1998, AIM voluntarily agreed to limit the operating services fees to an
annual rate of 0.45% of the first $50 million of the Fund's average daily net
assets and 0.10% of the Fund's average daily net assets in excess of $50
million. During the year ended December 31, 1999, AIM voluntarily waived
operating services fees in the amount of $139,199.
Pursuant to an amended operating services agreement effective July 1, 1999,
the Fund shall pay costs incurred for providing operating services, such as
accounting, legal (except litigation), dividend disbursing, transfer agency,
registrar, custodial, shareholder reporting, sub-accounting and recordkeeping
services and functions, including, but not limited to, registration fees,
shareholder meeting fees, and proxy statement and shareholder report expenses.
Further, the Fund's operating expenses are limited to 0.45% of the Fund's
average daily net assets.
Following the amendment to the operating services agreement effective July 1,
1999, the Fund entered into a master administrative services agreement with AIM.
Pursuant to a master administrative services agreement, the Fund has agreed to
pay AIM for certain administrative costs incurred in providing accounting
services to the Fund. For the period July 1, 1999 though December 31, 1999, AIM
was paid $25,721 for such services.
Following the amendment to the operating services agreement effective July 1,
1999, the Fund entered into a transfer agency and service agreement with A I M
Fund Services, Inc. ("AFS"). Pursuant to a transfer agency and service
agreement, the Fund agreed to pay AFS a fee for providing transfer agency and
shareholder services to the Fund. For the period July 1, 1999 through December
31, 1999, AFS was paid $34,877 for such services.
The Company has entered into master distribution agreements with A I M
Distributors, Inc. ("AIM Distributors") to serve as the distributor for the
shares of the Fund. The Company has adopted plans pursuant to Rule 12b-1 under
the 1940 Act with respect to the Fund's Class A shares, Class B shares and Class
C shares (collectively, the "Plans"). The Fund, pursuant to the Plans, pays AIM
Distributors compensation at the annual rate of 0.35% of the Fund's average
daily net assets of Class A shares and 1.00% of the average daily net assets of
Class B and C shares. AIM Distributors has contractually agreed to limit the
Class A shares plan payments to 0.25% for three years beginning August 4, 1997.
Of these amounts, the Fund may pay a service fee of 0.25% of the average daily
net assets of the Class A, Class B or Class C shares to selected dealers and
financial institutions who furnish continuing personal shareholder services to
their customers who purchase and own the appropriate class of shares of the
Fund. Any amounts not paid as a service fee under the Plans would constitute an
asset-based sales charge. The Plans also impose a cap on the total sales
charges, including asset-based sales charges that may be paid by the respective
classes. During the year ended December 31, 1999, the Class A, Class B and Class
C shares paid AIM Distributors $67,620, $42,551 and $993,935, respectively, as
compensation under the Plans. During the year ended December 31, 1999, AIM
Distributors waived fees of $27,054 for Class A shares.
AIM Distributors received commissions of $9,075 from sales of the Class A
shares of the Fund during the year ended December 31, 1999. Such commissions are
not an expense of the Fund. They are deducted from, and are not included in, the
proceeds from sales of Class A shares. During the year ended December 31, 1999,
AIM Distributors received $63,088 in contingent deferred sales charges imposed
on redemptions of Fund shares.
Certain officers and directors of the Company are officers and directors of
AIM, AFS and AIM Distributors.
During the period July 1, 1999 through December 31, 1999, the Fund paid legal
fees of $1,087 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.
FS-19
<PAGE> 149
NOTE 3-INDIRECT EXPENSES
During the year ended December 31, 1999, the Fund received reductions in
transfer agency fees from AFS (an affiliate of AIM) and reductions in custodian
fees of $46 and $713, respectively, under expense offset arrangements. The
effect of the above arrangements resulted in a reduction of the Fund's total
expenses of $759 during the year ended December 31, 1999.
NOTE 4-DIRECTORS' FEES
Directors' fees represent remuneration paid to directors who are not an
"interested person" of AIM. The Company invests directors' fees, if so elected
by a director, in mutual fund shares in accordance with a deferred compensation
plan.
NOTE 5-BANK BORROWINGS
The Fund is a participant in a committed line of credit facility with a
syndicate administered by The Chase Manhattan Bank. The Fund may borrow up to
the lesser of (i) $1,000,000,000 or (ii) the limits set by its prospectus for
borrowings. The Fund and other funds advised by AIM which are parties to the
line of credit may borrow on a first come, first served basis. During the year
ended December 31, 1999, the Fund did not borrow under the line of credit
agreement. The funds which are party to the line of credit are charged a
commitment fee of 0.09% on the unused balance of the committed line. Prior to
May 28, 1999, the commitment fee rate was 0.05%. The commitment fee is allocated
among the funds based on their respective average net assets for the period.
NOTE 6-INVESTMENT SECURITIES
The aggregate amount of investment securities (other than short-term securities)
purchased and sold by the Fund during the year ended December 31, 1999 was
$30,504,918 and $43,581,993, respectively.
The amount of unrealized appreciation (depreciation) of investment securities,
for tax purposes, as of December 31, 1999 was as follows:
<TABLE>
<S> <C>
Aggregate unrealized appreciation of
investment securities $52,043,747
---------------------------------------------------------
Aggregate unrealized (depreciation) of
investment securities (3,905,912)
---------------------------------------------------------
Net unrealized appreciation of investment
securities $48,137,835
=========================================================
</TABLE>
Cost of investments for tax purposes is $98,408,642.
NOTE 7-CAPITAL STOCK
Changes in capital stock outstanding during the years ended December 31, 1999
and 1998 were as follows:
<TABLE>
<CAPTION>
1999 1998
------------------------- -------------------------
SHARES AMOUNT SHARES AMOUNT
---------- ------------ ---------- ------------
<S> <C> <C> <C> <C>
Sold:
Class A 1,038,717 $ 17,709,368 1,753,054 $ 28,241,964
-------------------------------------------------------------------------------------------------------------------
Class B 154,805 2,600,272 309,463 5,088,103
-------------------------------------------------------------------------------------------------------------------
Class C 914,757 15,303,016 1,767,625 28,826,767
-------------------------------------------------------------------------------------------------------------------
Issued as reinvestment of dividends:
Class A 28,852 526,848 9,847 156,574
-------------------------------------------------------------------------------------------------------------------
Class B 3,257 59,148 3 46
-------------------------------------------------------------------------------------------------------------------
Class C 59,722 1,083,956 71 1,122
-------------------------------------------------------------------------------------------------------------------
Reacquired:
Class A (1,198,053) (20,340,110) (619,207) (9,613,757)
-------------------------------------------------------------------------------------------------------------------
Class B (133,374) (2,213,357) (49,265) (784,917)
-------------------------------------------------------------------------------------------------------------------
Class C (1,855,582) (31,312,120) (1,630,166) (25,715,783)
-------------------------------------------------------------------------------------------------------------------
(986,899) $(16,582,979) 1,541,425 $ 26,200,119
===================================================================================================================
</TABLE>
FS-20
<PAGE> 150
NOTE 8-FINANCIAL HIGHLIGHTS
Shown below are the financial highlights for a share of Class A capital stock
outstanding during each of the years in the three-year period ended December 31,
1999, for a share of Class B capital stock outstanding during the year ended
December 31, 1999 and the period March 3, 1998 (date sales commenced) through
December 31, 1998 and for a share of Class C capital stock outstanding during
each of the years in the four-year period ended December 31, 1999 and the period
May 1, 1995 (date operations commenced) through December 31, 1995.
<TABLE>
<CAPTION>
CLASS A(a) CLASS B
----------------------------------- ------------------------
1999 1998 1997(b) 1999 1998
-------- ------- ------------ -------- ------------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of period $ 16.57 $ 14.99 $13.42 $16.48 $16.21
------------------------------------------------------------ ------- ------- ------ ------ ------
Income from investment operations:
Net investment income 0.13 0.09 0.17 (0.01) --
------------------------------------------------------------ ------- ------- ------ ------ ------
Net gains on securities (both realized and unrealized) 3.57 1.59 1.69 3.56 0.27
------------------------------------------------------------ ------- ------- ------ ------ ------
Total from investment operations 3.70 1.68 1.86 3.55 0.27
------------------------------------------------------------ ------- ------- ------ ------ ------
Less distributions:
Dividends from net investment income (0.28) (0.10) (0.07) (0.15) --
------------------------------------------------------------ ------- ------- ------ ------ ------
Distributions from net realized gains (0.07) -- (0.22) (0.07) --
------------------------------------------------------------ ------- ------- ------ ------ ------
Total distributions (0.35) (0.10) (0.29) (0.22) --
------------------------------------------------------------ ------- ------- ------ ------ ------
Net asset value, end of period $ 19.92 $ 16.57 $14.99 $19.81 $16.48
============================================================ ======= ======= ====== ====== ======
Total return(c) 22.54% 11.20% 13.84% 21.70% 1.67%
============================================================ ======= ======= ====== ====== ======
Ratios/supplemental data:
Net assets, end of period (000s omitted) $31.412 $28,281 $8,444 $5,642 $4,289
============================================================ ======= ======= ====== ====== ======
Ratio of expenses to average net assets(d) 1.51%(e) 1.57% 1.71% 2.27%(e) 2.32%(f)
============================================================ ======= ======= ====== ====== ======
Ratio of net investment income (loss) to average net
assets(g) 0.71%(e) 0.84% 0.83% (0.05)%(e) 0.09%(f)
============================================================ ======= ======= ====== ====== ======
Portfolio turnover rate 24% 9% 9% 24% 9%
============================================================ ======= ======= ====== ====== ======
</TABLE>
(a) Per share information and shares have been restated to reflect a 4 for 1
stock split, effected in the form of a 300% stock dividend, on November 7,
1997.
(b) Calculated using average shares outstanding.
(c) Does not deduct sales charges and is not annualized for periods less than
one year.
(d) After fee waivers and/or expense reimbursements. Ratios of expenses to
average net assets prior to fee waivers and/or expense reimbursements were
1.72%, 1.81% and 1.81% for 1999-1997 for Class A and 2.38% and 2.46%
(annualized) for 1999-1998 for Class B.
(e) Ratios are based on average net assets of $27,054,104 and $4,255,071 for
Class A and Class B, respectively.
(f) Annualized.
(g) After fee waivers and/or expense reimbursements. Ratios of net investment
income (loss) to average net assets prior to fee waivers and/or expense
reimbursements were 0.50%, 0.60% and 0.73% for 1999-1997 for Class A and
(0.16)% and (0.05)% (annualized) for 1999-1998 for Class B.
<TABLE>
<CAPTION>
CLASS C(a)
------------------------------------------------------------
1999(b) 1998 1997(b) 1996 1995
-------- -------- ------- ------- ------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of period $ 16.48 $ 14.93 $ 13.42 $ 11.13 $10.00
------------------------------------------------------------ -------- -------- ------- ------- ------
Income from investment operations:
Net investment income (loss) (0.01) -- 0.01 (0.01) --
------------------------------------------------------------ -------- -------- ------- ------- ------
Net gains on securities (both realized and unrealized) 3.55 1.55 1.73 2.34 1.13
------------------------------------------------------------ -------- -------- ------- ------- ------
Total from investment operations 3.54 1.55 1.74 2.33 1.13
------------------------------------------------------------ -------- -------- ------- ------- ------
Less distributions:
Dividends from net investment income (0.15) -- (0.01) -- --
------------------------------------------------------------ -------- -------- ------- ------- ------
Distributions from net realized gains (0.07) -- (0.22) (0.04) --
------------------------------------------------------------ -------- -------- ------- ------- ------
Total distributions (0.22) -- (0.23) (0.04) --
------------------------------------------------------------ -------- -------- ------- ------- ------
Net asset value, end of period $ 19.80 $ 16.48 $ 14.93 $ 13.42 $11.13
============================================================ ======== ======== ======= ======= ======
Total return(c) 21.64% 10.38% 12.98% 20.99% 11.28%
============================================================ ======== ======== ======= ======= ======
Ratios/supplemental data:
Net assets, end of period (000s omitted) $108,821 $105,083 $93,162 $51,916 $9,467
============================================================ ======== ======== ======= ======= ======
Ratio of expenses to average net assets(d) 2.27%(e) 2.32% 2.46% 2.50% 2.50%(f)
============================================================ ======== ======== ======= ======= ======
Ratio of net investment income (loss) to average net
assets(g) (0.05)%(e) 0.09% 0.08% (0.16)% 0.03%(f)
============================================================ ======== ======== ======= ======= ======
Portfolio turnover rate 24% 9% 9% 5% 2%
============================================================ ======== ======== ======= ======= ======
</TABLE>
(a) Per share information and shares have been restated to reflect a 4 for 1
stock split, effected in the form of a 300% stock dividend, on November 7,
1997.
(b) Calculated using average shares outstanding.
(c) Does not deduct contingent deferred sales charges and is not annualized for
periods less than one year.
(d) After fee waivers and/or expense reimbursements. Ratio of expenses to
average net assets prior to fee waivers and/or expense reimbursements was
2.38% and 2.46% for 1999-1998.
(e) Ratios are based on average net assets of $99,393,505.
(f) Annualized.
(g) After fee waivers and/or expense reimbursements. Ratios of net investment
income (loss) to average net assets prior to fee waivers and/or expense
reimbursements were (0.16)% and (0.05)% for 1999-1998.
FS-21
<PAGE> 151
INDEPENDENT AUDITORS' REPORT
The Board of Directors and Shareholders of
AIM Advisor Real Estate Fund:
We have audited the accompanying statement of assets and
liabilities of AIM Advisor Real Estate Fund (a portfolio
of AIM Advisor Funds, Inc.), including the schedule of
investments, as of December 31, 1999, and the related
statement of operations for the year then ended, and the
statement of changes in net assets and financial
highlights for each of the years in the two-year period
then ended. These financial statements and financial
highlights are the responsibility of the Fund's
management. Our responsibility is to express an opinion
on these financial statements and the financial
highlights based on our audits.
We conducted our audits in accordance with generally
accepted auditing standards. Those standards require that
we plan and perform the audit to obtain reasonable
assurance about whether the financial statements and
financial highlights are free of material misstatement.
An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial
statements. Our procedures included confirmation of
securities owned as of December 31, 1999, by
correspondence with the custodian. An audit also includes
assessing the accounting principles used and significant
estimates made by management, as well as evaluating the
overall financial statement presentation. We believe that
our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements and financial
highlights referred to above present fairly, in all
material respects, the financial position of AIM Advisor
Real Estate Fund as of December 31, 1999, the results of
its operations for the year then ended, the changes in
its net assets and the financial highlights for each of
the years in the two-year period then ended, in
conformity with generally accepted accounting principles.
/s/ KPMG LLP
KPMG LLP
February 4, 2000
Houston, Texas
FS-22
<PAGE> 152
SCHEDULE OF INVESTMENTS
DECEMBER 31, 1999
<TABLE>
<CAPTION>
MARKET
SHARES VALUE
<S> <C> <C>
REAL ESTATE INVESTMENT TRUSTS &
COMMON STOCKS-90.09%
APARTMENTS-23.23%
Apartment Investment & Management
Co. 44,400 $ 1,767,675
--------------------------------------------------------------
Avalonbay Communities, Inc. 60,000 2,058,750
--------------------------------------------------------------
Charles E. Smith Residential Realty,
Inc. 61,700 2,182,328
--------------------------------------------------------------
Equity Residential Properties Trust 50,000 2,134,375
--------------------------------------------------------------
Essex Property Trust, Inc. 33,800 1,149,200
--------------------------------------------------------------
Home Properties of New York, Inc. 30,000 823,125
--------------------------------------------------------------
Post Properties, Inc. 15,600 596,700
--------------------------------------------------------------
10,712,153
--------------------------------------------------------------
DIVERSIFIED-3.19%
Beacon Capital 55,000 660,000
--------------------------------------------------------------
Vornado Realty Trust 25,000 812,500
--------------------------------------------------------------
1,472,500
--------------------------------------------------------------
INDUSTRIAL PROPERTIES-5.40%
First Industrial Realty Trust, Inc. 50,000 1,371,875
--------------------------------------------------------------
ProLogis Trust 58,000 1,116,500
--------------------------------------------------------------
2,488,375
--------------------------------------------------------------
INDUSTRIAL/OFFICE PROPERTIES-10.31%
Duke-Weeks Realty Corp. 90,000 1,755,000
--------------------------------------------------------------
Liberty Property Trust 72,950 1,769,037
--------------------------------------------------------------
Reckson Associates Realty Corp. 60,000 1,230,000
--------------------------------------------------------------
4,754,037
--------------------------------------------------------------
LODGING-HOTELS-3.61%
Hospitality Properties Trust 83,000 1,582,187
--------------------------------------------------------------
MeriStar Hotels & Resorts, Inc.(a) 22,700 80,869
--------------------------------------------------------------
1,663,056
--------------------------------------------------------------
MANUFACTURING (SPECIALIZED)-1.57%
Sun Communities, Inc. 22,500 724,219
--------------------------------------------------------------
OFFICE PROPERTIES-23.81%
Arden Realty Group, Inc. 79,800 1,600,987
--------------------------------------------------------------
Boston Properties, Inc. 45,500 1,416,187
--------------------------------------------------------------
Equity Office Properties Trust 89,000 2,191,625
--------------------------------------------------------------
Highwoods Properties, Inc. 52,950 1,231,088
--------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
MARKET
SHARES VALUE
<S> <C> <C>
OFFICE PROPERTIES-(CONTINUED)
Kilroy Realty Corp. 45,700 $ 1,005,400
--------------------------------------------------------------
Prentiss Properties Trust 71,700 1,505,700
--------------------------------------------------------------
SL Green Realty Corp. 51,100 1,111,425
--------------------------------------------------------------
Spieker Properties, Inc. 25,100 914,581
--------------------------------------------------------------
10,976,993
--------------------------------------------------------------
REGIONAL MALLS-7.93%
General Growth Properties 56,500 1,582,000
--------------------------------------------------------------
Macerich Co. (The) 39,000 811,688
--------------------------------------------------------------
Simon Property Group, Inc. 55,100 1,263,856
--------------------------------------------------------------
3,657,544
--------------------------------------------------------------
SELF-STORAGE-4.32%
Public Storage, Inc. 87,900 1,994,231
--------------------------------------------------------------
SHOPPING CENTERS-6.72%
Federal Realty Investment Trust 23,000 432,688
--------------------------------------------------------------
JDN Realty Corp. 54,500 878,813
--------------------------------------------------------------
Kimco Realty Corp. 38,900 1,317,738
--------------------------------------------------------------
Pan Pacific Retail Properties, Inc. 28,700 468,169
--------------------------------------------------------------
3,097,408
--------------------------------------------------------------
Total Real Estate Investment
Trusts & Common Stocks (Cost
$43,837,662) 41,540,516
--------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT
<S> <C> <C>
U.S. GOVERNMENT AGENCY
SECURITIES-8.73%
FEDERAL HOME LOAN MORTGAGE CORP.
("FHLMC")-8.73%
Disc. Notes,(b)
5.20%, 01/03/00 (Cost $4,024,665) $4,025,000 4,024,665
--------------------------------------------------------------
TOTAL INVESTMENTS-98.82% (Cost
$47,862,327) 45,565,181
--------------------------------------------------------------
OTHER ASSETS LESS LIABILITIES-1.18% 544,859
--------------------------------------------------------------
NET ASSETS-100.00% $46,110,040
==============================================================
</TABLE>
Notes to Schedule of Investments:
(a) Non-income producing security.
(b) Interest rate shown represents the rate of discount paid or received at the
time of purchase by the Fund.
See Notes to Financial Statements.
FS-23
<PAGE> 153
STATEMENT OF ASSETS AND LIABILITIES
DECEMBER 31, 1999
<TABLE>
<S> <C>
ASSETS:
Investments, at market value (cost
$47,862,327) $ 45,565,181
---------------------------------------------------------
Cash 1,474
---------------------------------------------------------
Receivables for:
Capital stock sold 621,622
---------------------------------------------------------
Interest and dividends 394,484
---------------------------------------------------------
Investment for deferred compensation plan 11,796
---------------------------------------------------------
Other assets 1,198
---------------------------------------------------------
Total assets 46,595,755
---------------------------------------------------------
LIABILITIES:
Payables for:
Capital stock reacquired 357,366
---------------------------------------------------------
Deferred compensation plan 11,796
---------------------------------------------------------
Accrued advisory fees 32,576
---------------------------------------------------------
Accrued administrative services fees 4,247
---------------------------------------------------------
Accrued distribution fees 69,412
---------------------------------------------------------
Accrued transfer agent fees 1,171
---------------------------------------------------------
Accrued operating expenses 9,147
---------------------------------------------------------
Total liabilities 485,715
---------------------------------------------------------
NET ASSETS APPLICABLE TO SHARES
OUTSTANDING $ 46,110,040
---------------------------------------------------------
NET ASSETS:
Class A $ 16,278,924
=========================================================
Class B $ 9,839,261
=========================================================
Class C $ 19,991,855
=========================================================
CAPITAL STOCK, $0.001 PAR VALUE PER SHARE:
Class A:
Authorized 100,000,000
---------------------------------------------------------
Outstanding 1,534,334
=========================================================
Class B:
Authorized 100,000,000
---------------------------------------------------------
Outstanding 924,769
=========================================================
Class C:
Authorized 100,000,000
---------------------------------------------------------
Outstanding 1,882,276
=========================================================
Class A:
Net asset value and redemption price per
share $ 10.61
---------------------------------------------------------
Offering price per share:
(Net asset value of $10.61 divided by
95.25%) $ 11.14
=========================================================
Class B:
Net asset value and offering price per
share $ 10.64
=========================================================
Class C:
Net asset value and offering price per
share $ 10.62
=========================================================
</TABLE>
STATEMENT OF OPERATIONS
For the year ended December 31, 1999
<TABLE>
<S> <C>
INVESTMENT INCOME:
Dividends (net of $7,786 foreign withholding
tax) $ 2,693,620
---------------------------------------------------------
Interest 101,227
---------------------------------------------------------
Total investment income 2,794,847
---------------------------------------------------------
EXPENSES:
Advisory fees 473,702
---------------------------------------------------------
Administrative services fees 25,205
---------------------------------------------------------
Operating Services Fees 124,989
---------------------------------------------------------
Custodian fees 7,249
---------------------------------------------------------
Distribution fees-Class A 66,167
---------------------------------------------------------
Distribution fees-Class B 73,791
---------------------------------------------------------
Distribution fees-Class C 263,496
---------------------------------------------------------
Directors' fees and expenses 10,020
---------------------------------------------------------
Transfer Agent fees-Class A 21,664
---------------------------------------------------------
Transfer Agent fees-Class B 8,293
---------------------------------------------------------
Transfer Agent fees-Class C 29,612
---------------------------------------------------------
Other 21,903
---------------------------------------------------------
Total expenses 1,126,091
---------------------------------------------------------
Less:
Expenses paid indirectly (268)
---------------------------------------------------------
Fees waived by advisor (29,338)
---------------------------------------------------------
Net expenses 1,096,485
---------------------------------------------------------
Net investment income 1,698,362
---------------------------------------------------------
REALIZED AND UNREALIZED GAIN (LOSS) FROM
INVESTMENT SECURITIES AND FOREIGN
CURRENCIES:
Net realized gain (loss) from:
Investment securities (8,493,728)
---------------------------------------------------------
Foreign currencies 461
---------------------------------------------------------
(8,493,267)
---------------------------------------------------------
Change in net unrealized appreciation
(depreciation) of:
Investment securities 4,697,040
---------------------------------------------------------
Foreign currencies (56)
---------------------------------------------------------
4,696,984
---------------------------------------------------------
Net gain (loss) from investment securities
and foreign currencies (3,796,283)
---------------------------------------------------------
Net increase (decrease) in net assets
resulting from operations $(2,097,921)
=========================================================
</TABLE>
See Notes to Financial Statements.
FS-24
<PAGE> 154
STATEMENT OF CHANGES IN NET ASSETS
For the years ended December 31, 1999 AND 1998
<TABLE>
<CAPTION>
1999 1998
------------ ------------
<S> <C> <C>
OPERATIONS:
Net investment income $ 1,698,362 $ 2,687,688
-----------------------------------------------------------------------------------------
Net realized gain (loss) from investment securities and
foreign currencies (8,493,267) (7,868,208)
-----------------------------------------------------------------------------------------
Change in net unrealized appreciation (depreciation) of
investment securities and foreign currencies 4,696,984 (13,364,502)
-----------------------------------------------------------------------------------------
Net increase (decrease) in net assets resulting from
operations (2,097,921) (18,545,022)
-----------------------------------------------------------------------------------------
Distributions to shareholders from net investment income:
Class A (880,747) (879,078)
-----------------------------------------------------------------------------------------
Class B (292,274) (195,557)
-----------------------------------------------------------------------------------------
Class C (1,010,658) (1,184,516)
-----------------------------------------------------------------------------------------
Distributions to shareholders from net realized gains on
investment securities:
Class A -- (434,776)
-----------------------------------------------------------------------------------------
Class B -- (143,531)
-----------------------------------------------------------------------------------------
Class C -- (703,226)
-----------------------------------------------------------------------------------------
Share transactions-net:
Class A (2,285,404) 11,098,948
-----------------------------------------------------------------------------------------
Class B 3,517,105 8,539,414
-----------------------------------------------------------------------------------------
Class C (10,749,346) 1,916,228
-----------------------------------------------------------------------------------------
Net increase (decrease) in net assets (13,799,245) (531,116)
-----------------------------------------------------------------------------------------
NET ASSETS:
Beginning of period 59,909,285 60,440,401
-----------------------------------------------------------------------------------------
End of period $ 46,110,040 $ 59,909,285
=========================================================================================
NET ASSETS CONSIST OF:
Capital (par value and additional paid-in) $ 64,744,590 $ 74,263,053
-----------------------------------------------------------------------------------------
Undistributed net investment income (1,935) 490,850
-----------------------------------------------------------------------------------------
Undistributed net realized gain (loss) on sales of
investment securities (16,335,470) (7,850,489)
-----------------------------------------------------------------------------------------
Unrealized appreciation (depreciation) of investment
securities (2,297,145) (6,994,129)
-----------------------------------------------------------------------------------------
$ 46,110,040 $ 59,909,285
=========================================================================================
</TABLE>
See Notes to Financial Statements.
FS-25
<PAGE> 155
NOTES TO FINANCIAL STATEMENTS
December 31, 1999
NOTE 1-SIGNIFICANT ACCOUNTING POLICIES
AIM Advisor Real Estate Fund (the "Fund") is a series portfolio of AIM Advisor
Funds, Inc. (the "Company"). The Company is a Maryland corporation registered
under the Investment Company Act of 1940, as amended (the "1940 Act"), as an
open-end series management investment company consisting of four separate
portfolios. The Fund currently offers three different classes of shares: Class A
shares, Class B shares and Class C shares. Class A shares are sold with a
front-end sales charge. Class B shares and Class C shares are sold with a
contingent deferred sales charge. Matters affecting each portfolio or class will
be voted on exclusively by the shareholders of such portfolio or class. The
assets, liabilities and operations of each portfolio are accounted for
separately. Information presented in these financial statements pertains only to
the Fund. The Fund's investment objective is to achieve a high total return on
investment through growth of capital and current income, without regard to
federal income tax considerations.
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities at the date of the
financial statements and the reported amounts of revenues and expenses during
the reporting period. Actual results could differ from those estimates. The
following is a summary of the significant accounting policies followed by the
Fund in the preparation of its financial statements.
A. Security Valuations -- A security listed or traded on an exchange (except
convertible bonds) is valued at its last sales price on the exchange where
the security is principally traded, or lacking any sales on a particular
day, the security is valued at the closing bid price on that day. Each
security reported on the NASDAQ National Market System is valued at the
last sales price on the valuation date or absent a last sales price, at the
closing bid price. Debt obligations (including convertible bonds) are
valued on the basis of prices provided by an independent pricing service.
Prices provided by the pricing service may be determined without exclusive
reliance on quoted prices, and may reflect appropriate factors such as
yield, type of issue, coupon rate and maturity date. Securities for which
market prices are not provided by any of the above methods are valued based
upon quotes furnished by independent sources and are valued at the last bid
price in the case of equity securities and in the case of debt obligations,
the mean between the last bid and asked prices. Securities for which market
quotations are not readily available or are questionable are valued at fair
value as determined in good faith by or under the supervision of the
Company's officers in a manner specifically authorized by the Board of
Directors of the Company. Short-term obligations having 60 days or less to
maturity are valued at amortized cost which approximates market value. For
purposes of determining net asset value per share, futures and option
contracts generally will be valued 15 minutes after the close of trading of
the New York Stock Exchange ("NYSE").
Generally, trading in foreign securities is substantially completed each
day at various times prior to the close of the NYSE. The values of such
securities used in computing the net asset value of the Fund's shares are
determined as of such times. Foreign currency exchange rates are also
generally determined prior to the close of the NYSE. Occasionally, events
affecting the values of such securities and such exchange rates may occur
between the times at which they are determined and the close of the NYSE
which would not be reflected in the computation of the Fund's net asset
value. If events materially affecting the value of such securities occur
during such period, then these securities will be valued at their fair
value as determined in good faith by or under the supervision of the Board
of Directors.
B. Securities Transactions and Investment Income -- Securities transactions
are accounted for on a trade date basis. Realized gains or losses on sales
are computed on the basis of specific identification of the securities
sold. Interest income is recorded as earned from settlement date and is
recorded on the accrual basis. Dividend income is recorded on the
ex-dividend date. On December 31, 1999, undistributed net investment income
was decreased by $7,468, undistributed net realized gains increased by
$8,286 and paid-in capital decreased by $818 as a result of differing
book/tax treatment of foreign currency transactions and other
reclassifications. Net assets of the Fund were unaffected by the
reclassifications.
C. Distributions -- Distributions from income are recorded on ex-dividend
date, and are declared and paid quarterly. Distributions from net realized
capital gains, if any, are generally paid annually and recorded on
ex-dividend date. The Fund may elect to use a portion of the proceeds of
capital stock redemptions as distributions for federal income tax purposes.
D. Federal Income Taxes -- The Fund intends to comply with the requirements of
the Internal Revenue Code necessary to qualify as a regulated investment
company and, as such, will not be subject to federal income taxes on
otherwise taxable income (including net realized capital gains) which is
distributed to shareholders. Therefore, no provision for federal income
taxes is recorded in the financial statements. The Fund has a capital loss
carryforward of $14,698,073 as of December 31, 1999 which may be carried
forward to offset future taxable gains, if any, which expires in varying
increments, if not previously utilized, in the year 2007.
E. Expenses -- Distribution expenses directly attributable to a class of
shares are charged to that class' operations. All other expenses which are
attributable to more than one class are allocated among the classes.
FS-26
<PAGE> 156
NOTE 2-ADVISORY FEES AND OTHER TRANSACTIONS WITH AFFILIATES
The Company has entered into a master investment advisory agreement with A I M
Advisors, Inc. ("AIM"). Under the terms of the master investment advisory
agreement, the Fund pays an advisory fee to AIM at the annual rate of 0.90% of
the Fund's average daily net assets. AIM has entered into a sub-advisory
agreement with INVESCO Realty Advisors, Inc. ("IRAI") whereby AIM pays IRAI an
annual rate of 0.35% of the first $100 million of the Fund's average daily net
assets, plus 0.25% of the Fund's average daily net assets in excess of $100
million.
The Company, pursuant to an operating services agreement with AIM, agreed to
pay AIM an annual rate of 0.45% of the Fund's average daily net assets for
providing or arranging to provide accounting, legal (except litigation),
dividend disbursing, transfer agency, registrar, custodial, shareholder
reporting, sub-accounting and recordkeeping services and functions. The
agreement provided that AIM pay all fees and expenses associated with these and
other functions, including, but not limited to, registration fees, shareholder
meeting fees, and proxy statement and shareholder report expenses. During the
year ended December 31, 1999, AIM was paid $114,556 under the agreement. As of
June 1, 1998, AIM voluntarily agreed to limit the operating services fees to an
annual rate of 0.45% of the first $50 million of the Fund's average daily net
assets and 0.10% of the Fund's average daily net assets in excess of $50
million. During the year ended December 31, 1999, AIM voluntarily waived
operating services fees in the amount of $10,433.
Pursuant to an amended operating services agreement effective July 1, 1999,
the Fund shall pay costs incurred for providing operating services, such as
accounting, legal (except litigation), dividend disbursing, transfer agency,
registrar, custodial, shareholder reporting, sub-accounting and recordkeeping
services and functions, including, but not limited to, registration fees,
shareholder meeting fees, and proxy statement and shareholder report expenses.
Further, the Fund's operating expenses are limited to 0.45% of the Fund's
average daily net assets.
Following the amendment to the operating services agreement effective July 1,
1999, the Fund entered into a master administrative services agreement with AIM.
Pursuant to a master administrative services agreement, the Fund has agreed to
pay AIM for certain administrative costs incurred in providing accounting
services to the Fund. For the period July 1, 1999 though December 31, 1999, AIM
was paid $25,205 for such services.
Following the amendment to the operating services agreement effective July 1,
1999, the Fund entered into a transfer agency and service agreement with A I M
Fund Services, Inc. ("AFS"). Pursuant to a transfer agency and service
agreement, the Fund agreed to pay AFS a fee for providing transfer agency and
shareholder services to the Fund. For the period July 1, 1999 through December
31, 1999, AFS was paid $44,655 for such services.
The Company has entered into master distribution agreements with A I M
Distributors, Inc. ("AIM Distributors") to serve as the distributor for the
shares of the Fund. The Company has adopted plans pursuant to Rule 12b-1 under
the 1940 Act with respect to the Fund's Class A shares, Class B shares and Class
C shares (collectively, the "Plans"). The Fund, pursuant to the Plans, pays AIM
Distributors compensation at the annual rate of 0.35% of the Fund's average
daily net assets of Class A shares and 1.00% of the average daily net assets of
Class B and C shares. AIM Distributors has contractually agreed to limit the
Class A shares plan payments to 0.25% for three years beginning August 4, 1997.
Of these amounts, the Fund may pay a service fee of 0.25% of the average daily
net assets of the Class A, Class B or Class C shares to selected dealers and
financial institutions who furnish continuing personal shareholder services to
their customers who purchase and own the appropriate class of shares of the
Fund. Any amounts not paid as a service fee under the Plans would constitute an
asset-based sales charge. The Plans also impose a cap on the total sales
charges, including asset-based sales charges that may be paid by the respective
classes. During the year ended December 31, 1999, the Class A, Class B and Class
C shares paid AIM Distributors $47,262, $73,791 and $263,496, respectively, as
compensation under the Plans. During the year ended December 31, 1999, AIM
Distributors waived fees of $18,905 for Class A shares.
AIM Distributors received commissions of $13,906 from sales of the Class A
shares of the Fund during the year ended December 31, 1999. Such commissions are
not an expense of the Fund. They are deducted from, and are not included in, the
proceeds from sales of Class A shares. During the year ended December 31, 1999,
AIM Distributors received $9,617 in contingent deferred sales charges imposed on
redemptions of Fund shares.
Certain officers and directors of the Company are officers and directors of
AIM, AFS and AIM Distributors.
During the period July 1, 1999 through December 31, 1999, the Fund paid legal
fees of $1,198 for services rendered by Kramer, Levin, Naftalis & Frankel LLP as
counsel to the Company's directors. A member of that firm is a director of the
Company.
NOTE 3-INDIRECT EXPENSES
During the year ended December 31, 1999, the Fund received reductions in
custodian fees of $268, under an expense offset arrangement. The effect of the
above arrangement resulted in a reduction of the Fund's total expenses of $268
during the year ended December 31, 1999.
NOTE 4-DIRECTORS' FEES
Directors' fees represent remuneration paid to directors who are not an
"interested person" of AIM. The Company invests directors' fees, if so elected
by a director, in mutual fund shares in accordance with a deferred compensation
plan.
FS-27
<PAGE> 157
NOTE 5-BANK BORROWINGS
The Fund is a participant in a committed line of credit facility with a
syndicate administered by The Chase Manhattan Bank. The Fund may borrow up to
the lesser of (i) $1,000,000,000 or (ii) the limits set by its prospectus for
borrowings. The Fund and other funds advised by AIM which are parties to the
line of credit may borrow on a first come, first served basis. During the year
ended December 31, 1999, the Fund did not borrow under the line of credit
agreement. The funds which are party to the line of credit are charged a
commitment fee of 0.09% on the unused balance of the committed line. Prior to
May 28, 1999, the commitment fee rate was 0.05%. The commitment fee is allocated
among the funds based on their respective average net assets for the period.
NOTE 6-INVESTMENT SECURITIES
The aggregate amount of investment securities (other than short-term securities)
purchased and sold by the Fund during the year ended December 31, 1999 was
$26,296,390 and $39,815,191, respectively.
The amount of unrealized appreciation (depreciation) of investment securities,
for tax purposes, as of December 31, 1999 was as follows:
<TABLE>
<S> <C>
Aggregate unrealized appreciation of investment securities $ 813,712
-------------------------------------------------------------------------
Aggregate unrealized (depreciation) of investment securities (3,302,531)
-------------------------------------------------------------------------
Net unrealized appreciation (depreciation) of investment
securities $(2,488,819)
=========================================================================
</TABLE>
Cost of investments for tax purposes is $48,054,000.
NOTE 7-CAPITAL STOCK
Changes in capital stock outstanding during the years ended December 31, 1999
and 1998 were as follows:
<TABLE>
<CAPTION>
1999 1998
------------------------- -------------------------
SHARES AMOUNT SHARES AMOUNT
---------- ------------ ---------- ------------
<S> <C> <C> <C> <C>
Sold:
Class A 805,892 $ 9,057,241 1,866,966 $ 26,220,226
-------------------------------------------------------------------------------------------------------------------
Class B 554,129 6,045,844 965,596 13,668,547
-------------------------------------------------------------------------------------------------------------------
Class C 301,049 3,371,676 867,066 12,416,738
-------------------------------------------------------------------------------------------------------------------
Issued as reinvestment of dividends:
Class A 73,515 798,302 103,931 1,234,506
-------------------------------------------------------------------------------------------------------------------
Class B 24,076 261,703 26,797 312,988
-------------------------------------------------------------------------------------------------------------------
Class C 81,508 887,308 146,264 1,732,251
-------------------------------------------------------------------------------------------------------------------
Reacquired:
Class A (1,098,601) (12,140,947) (1,266,277) (16,355,784)
-------------------------------------------------------------------------------------------------------------------
Class B (254,623) (2,790,442) (391,207) (5,442,121)
-------------------------------------------------------------------------------------------------------------------
Class C (1,372,447) (15,008,330) (933,062) (12,232,761)
-------------------------------------------------------------------------------------------------------------------
(885,502) $ (9,517,645) 1,386,074 $ 21,554,590
===================================================================================================================
</TABLE>
FS-28
<PAGE> 158
NOTE 8-FINANCIAL HIGHLIGHTS
Shown below are the financial highlights for a share of Class A capital stock
outstanding during each of the years in the three-year period ended December 31,
1999, for a share of Class B capital stock outstanding during the year ended
December 31, 1999 and the period March 3, 1998 (date sales commenced) through
December 31, 1998, and a share of Class C capital stock outstanding during each
of the years in the four-year period ended December 31, 1999 and the period May
1, 1995 (date operations commenced) through December 31, 1995.
<TABLE>
<CAPTION>
CLASS A(a) CLASS B
-------------------------------- --------------------
1999 1998(b) 1997(b) 1999 1998(b)
-------- -------- -------- -------- -------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of period $ 11.46 $ 15.74 $ 14.19 $ 11.48 $ 15.34
------------------------------------------------------------ -------- -------- -------- -------- -------
Income from investment operations:
Net investment income 0.42 0.58 0.34 0.32 0.37
------------------------------------------------------------ -------- -------- -------- -------- -------
Net gains (losses) on securities (both realized and
unrealized) (0.75) (4.11) 2.39 (0.72) (3.58)
------------------------------------------------------------ -------- -------- -------- -------- -------
Total from investment operations (0.33) (3.53) 2.73 (0.40) (3.21)
------------------------------------------------------------ -------- -------- -------- -------- -------
Less distributions:
Dividends from net investment income (0.52) (0.50) (0.44) (0.44) (0.40)
------------------------------------------------------------ -------- -------- -------- -------- -------
Distributions from net realized gains -- (0.25) (0.74) -- (0.25)
------------------------------------------------------------ -------- -------- -------- -------- -------
Total distributions (0.52) (0.75) (1.18) (0.44) (0.65)
------------------------------------------------------------ -------- -------- -------- -------- -------
Net asset value, end of period $ 10.61 $ 11.46 $ 15.74 $ 10.64 $ 11.48
============================================================ ======== ======== ======== ======== =======
Total return(c) (2.88)% (22.54)% 19.78% (3.53)% (21.02)%
============================================================ ======== ======== ======== ======== =======
Ratios/supplemental data:
Net assets, end of period (000s omitted) $ 16,279 $ 20,087 $ 16,507 $ 9,839 $ 6,901
============================================================ ======== ======== ======== ======== =======
Ratio of expenses to average net assets(d) 1.61%(e) 1.55% 1.60% 2.35%(e) 2.31%(f)
============================================================ ======== ======== ======== ======== =======
Ratio of net investment income to average net assets(g) 3.70%(e) 4.37% 3.26% 2.96%(e) 3.62%(f)
============================================================ ======== ======== ======== ======== =======
Portfolio turnover rate 52% 69% 57% 52% 69%
============================================================ ======== ======== ======== ======== =======
</TABLE>
(a) Per share information and shares have been restated to reflect a 4 for 1
stock split, effected in the form of a 300% stock dividend, on November 7,
1997.
(b) Calculated using average shares outstanding.
(c) Does not deduct sales charges and is not annualized for periods less than
one year.
(d) After fee waivers and/or expense reimbursements. Ratios of expenses to
average net assets prior to fee waivers and/or expense reimbursements were
1.73% , 1.71% and 1.70% for 1999-1997 for Class A and 2.37% and 2.35%
(annualized) for 1999-1998 for Class B.
(e) Ratios are based on average net assets of $18,904,818 and $7,379,172 for
Class A and Class B, respectively.
(f) Annualized.
(g) After fee waivers and/or expense reimbursements. Ratios of net investment
income to average net assets prior to fee waivers and/or expense
reimbursements were 3.58%, 4.21% and 3.16% for 1999-1997 for Class A and
2.94% and 3.56% (annualized) for 1999-1998 for Class B.
<TABLE>
<CAPTION>
CLASS C(a)
------------------------------------------------------
1999(b) 1998(b) 1997(b) 1996 1995
-------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of period $ 11.46 $ 15.74 $ 14.19 $ 10.76 $ 10.00
------------------------------------------------------------ -------- -------- -------- -------- --------
Income from investment operations:
Net investment income 0.33 0.50 0.36 0.33 0.16
------------------------------------------------------------ -------- -------- -------- -------- --------
Net gains (losses) on securities (both realized and
unrealized) (0.73) (4.13) 2.26 3.51 0.75
------------------------------------------------------------ -------- -------- -------- -------- --------
Total from investment operations (0.40) (3.63) 2.62 3.84 0.91
------------------------------------------------------------ -------- -------- -------- -------- --------
Less distributions:
Dividends from net investment income (0.44) (0.40) (0.33) (0.31) (0.15)
------------------------------------------------------------ -------- -------- -------- -------- --------
Distributions from net realized gains -- (0.25) (0.74) (0.10) --
------------------------------------------------------------ -------- -------- -------- -------- --------
Total distributions (0.44) (0.65) (1.07) (0.41) (0.15)
------------------------------------------------------------ -------- -------- -------- -------- --------
Net asset value, end of period $ 10.62 $ 11.46 $ 15.74 $ 14.19 $ 10.76
============================================================ ======== ======== ======== ======== ========
Total return(c) (3.54)% (23.16)% 18.88% 36.43% 9.12%
============================================================ ======== ======== ======== ======== ========
Ratios/supplemental data:
Net assets, end of period (000s omitted) $ 19,992 $ 32,921 $ 43,934 $ 20,566 $ 5,565
============================================================ ======== ======== ======== ======== ========
Ratio of expenses to average net assets(d) 2.35%(e) 2.31% 2.35% 2.40% 2.40%(f)
============================================================ ======== ======== ======== ======== ========
Ratio of net investment income to average net assets(g) 2.96%(e) 3.62% 2.54% 3.21% 4.68%(f)
============================================================ ======== ======== ======== ======== ========
Portfolio turnover rate 52% 69% 57% 25% 7%
============================================================ ======== ======== ======== ======== ========
</TABLE>
(a) Per share information and shares have been restated to reflect a 4 for 1
stock split, effected in the form of a 300% stock dividend, on November 7,
1997.
(b) Calculated using average shares outstanding.
(c) Does not deduct contingent deferred sales charges and is not annualized for
periods less than one year.
(d) After fee waivers and/or expense reimbursements. Ratio of expenses to
average net assets prior to fee waivers and/or expense reimbursements was
2.37% and 2.37% for 1999-1998.
(e) Ratios are based on average net assets of $26,349,554.
(f) Annualized.
(g) After fee waivers and/or expense reimbursements. Ratio of net investment
income to average net assets prior to fee waivers and/or expense
reimbursements was 2.94% and 3.56% for 1999-1998.
FS-29
<PAGE> 159
PART C
OTHER INFORMATION
Item 23. Exhibits
-------- --------
a (1) (a) Amended and Restated Articles of Incorporation
dated March 7, 1995, previously filed with
Post-Effective Amendment No. 24 to the Registrant's
Registration Statement on May 1, 1995, and were filed
electronically as an Exhibit to Registrant's
Post-Effective Amendment No. 33 on December 30, 1997.
(b) Articles of Amendment to the Articles of
Incorporation, as filed with the State Department of
Assessments and Taxation of the state of Maryland on
January 16, 1996, filed on EDGAR with Post-Effective
Amendment No. 26 on April 22, 1996.
(c) Articles Supplementary, dated February 14, 1996,
to the Articles of Incorporation were filed
electronically as an Exhibit to Registrant's
Post-Effective Amendment No. 34 on February 24, 1998.
(d) Articles Supplementary to the Articles of
Incorporation dated August 13, 1996, were filed
electronically as an Exhibit to Registrant's
Post-Effective Amendment No. 34 on February 24, 1998.
(e) Articles Supplementary, dated September 29, 1997,
to the Articles of Incorporation were filed
electronically as an Exhibit to Registrant's
Post-Effective Amendment No. 33 on December 30, 1997.
(f) Articles of Amendment, dated June 18, 1999, to
the Amended and Restated Articles of Incorporation,
dated March 7, 1995, was filed as an Exhibit to
Registrant's Post-Effective Amendment No. 37, on
April 24, 2000.
(g) Articles Supplementary, dated August 9, 1999, to
the Amended and Restated Articles of Incorporation,
dated March 7, 1995, was filed as an Exhibit to
Registrant's Post-Effective Amendment No. 37, on
April 24, 2000.
(h) Articles Supplementary, dated December 23, 1999,
to the Amended and Restated Articles of
Incorporation, dated March 7, 1995, was filed as an
Exhibit to Registrant's Post-Effective Amendment No.
37, on April 24, 2000.
(2) (a) Agreement and Declaration of Trust of AIM Advisor
Funds, dated December 6, 1999, is filed herewith
electronically.
(b) Amendment No. 1, dated May 10, 2000, to the
Agreement and Declaration of Trust, dated December 6,
1999, is filed herewith electronically.
b (1) By-Laws of Registrant, as amended, previously filed
with Post-Effective Amendment No. 24 to the
Registrant's Registration Statement on May 1, 1995,
was filed on EDGAR with Post-Effective Amendment No.
31 on April 30, 1997.
(2) (a) Amended and Restated Bylaws of Registrant, dated
September 20, 1997, was filed electronically as an
Exhibit to Registrant's Post-Effective Amendment No.
33 on December 30, 1997.
(b) First Amendment, dated June 9, 1999, to Amended
and Restated Bylaws of Registrant, dated September
20, 1997.
C-1
<PAGE> 160
(3) (a) Bylaws of AIM Advisor Funds, adopted effective
December 6, 1999, are filed herewith electronically.
(b) Amendment No. 1, adopted effective June 14, 2000,
to the Bylaws of AIM Advisor Funds, adopted effective
December 6, 1999, is filed herewith electronically.
c Instruments Defining Rights of Security Holders -
None.
d (1) Investment Advisory Agreement between Registrant and
INVESCO Services, Inc. dated as of February 28, 1997
was filed on EDGAR with Post-Effective Amendment No.
31 on April 30, 1997.
(2) (a) Investment Advisory Agreement between Registrant
and A I M Advisors, Inc. dated August 4, 1997, was
filed electronically as an Exhibit to Registrant's
Post-Effective Amendment No. 33 on December 30, 1997,
and is incorporated by reference herein.
(b) Amendment No. 1, dated March 2, 1998, to the
Investment Advisory Agreement, dated August 4, 1997,
was filed as an Exhibit to Registrant's
Post-Effective Amendment No. 37, on April 24, 2000,
and is incorporated by reference herein.
(c) Amendment No. 2, dated June 21, 1999, to the
Investment Advisory Agreement, dated August 4, 1997,
was filed as an Exhibit to Registrant's
Post-Effective Amendment No. 37, on April 24, 2000,
and is incorporated by reference herein.
(3) Form of Master Investment Advisory Agreement between
A I M Advisors, Inc. and AIM Advisor Funds, is filed
herewith electronically.
(4) Sub-Advisory Agreement between INVESCO Services, Inc.
and INVESCO Capital Management, Inc. dated as of
February 28, 1997, was filed on EDGAR with
Post-Effective Amendment No. 31 on April 30, 1997.
(5) Sub-Advisory Agreement between A I M Advisors, Inc.
and INVESCO, Inc. (formerly, INVESCO Capital
Management, Inc.) dated August 4, 1997, was filed
electronically as an Exhibit to Registrant's
Post-Effective Amendment No. 33 on December 30, 1997,
and is incorporated by reference herein.
(6) Sub-Advisory Agreement between INVESCO Services, Inc.
and INVESCO Management & Research, Inc. dated as of
February 28, 1997 was filed on EDGAR with
Post-Effective Amendment No. 31 on April 30, 1997.
(7) Sub-Advisory Agreement between A I M Advisors, Inc.
and INVESCO Management & Research, Inc. dated August
4, 1997, was filed electronically as an Exhibit to
Registrant's Post-Effective Amendment No. 33 on
December 30, 1997.
(8) Sub-Advisory Agreement between INVESCO Services, Inc.
and INVESCO Realty Advisors, Inc. dated as of
February 28, 1997 was filed on EDGAR with
Post-Effective Amendment No. 31 on April 30, 1997.
(9) Sub-Advisory Agreement between A I M Advisors, Inc.
and INVESCO, Inc. (formerly, INVESCO Realty Advisors,
Inc.) dated August 4, 1997, was filed electronically
as an Exhibit to Registrant's Post-Effective
Amendment No. 33 on December 30, 1997, and is
incorporated by reference herein.
C-2
<PAGE> 161
(10) Sub-Advisory Agreement between A I M Advisors, Inc.
and INVESCO Global Asset Management (N.A.), Inc.
(formerly, INVESCO Global Asset Management Limited)
dated August 4, 1997, was filed electronically as an
Exhibit to Registrant's Post-Effective Amendment No.
34 on February 24, 1998, and is incorporated by
reference herein.
(11) Form of Master Intergroup Sub-Advisory Contract for
Mutual Funds between A I M Advisors, Inc. and
INVESCO, Inc. is filed herewith electronically.
(12) Form of Master Intergroup Sub-Advisory Contract for
Mutual Funds between A I M Advisors, Inc. and INVESCO
Global Asset Management (N.A.), Inc. is filed
herewith electronically.
(13) Master Administrative Services Agreement, dated July
1, 1999, between Registrant and A I M Advisors, Inc.,
was filed as an Exhibit to Registrant's
Post-Effective Amendment No. 37, on April 24, 2000,
and is incorporated by reference herein.
(14) Form of Master Administrative Services Agreement,
between Registrant and A I M Advisors, Inc. is filed
herewith electronically.
(15) (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 to Registrant's
Post-Effective Amendment No. 35 on February 16, 1999,
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 to Registrant's
Post-Effective Amendment No. 35 on February 16, 1999,
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 to Registrant's
Post-Effective Amendment No. 35 on February 16, 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 to Registrant's
Post-Effective Amendment No. 35 on February 16, 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 to Registrant's
Post-Effective Amendment No. 35 on February 16, 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
C-3
<PAGE> 162
filed electronically as an Exhibit to Registrant's
Post-Effective Amendment No. 35 on February 16,
1999, and is incorporated by reference herein.
(g) Amendment No. 6, dated March 18, 1999, to Foreign
Country Selection and Mandatory Securities Depository
Responsibilities Delegation Agreement, dated
September 9, 1998, between Registrant and A I M
Advisors, Inc., was filed as an Exhibit to
Registrant's Post-Effective Amendment No. 37, on
April 24, 2000, and is incorporated by reference
herein.
(h) Amendment No. 7, dated November 15, 1999, to
Foreign Country Selection and Mandatory Securities
Depository Responsibilities Delegation Agreement,
dated September 9, 1998, between Registrant and A I M
Advisors, Inc., was filed as an Exhibit to
Registrant's Post-Effective Amendment No. 37, on
April 24, 2000, and is incorporated by reference
herein.
e (1) Distribution Agreement between Registrant and INVESCO
Services, Inc., dated as of February 28, 1997 was
filed on EDGAR with Post-Effective Amendment No. 31
on April 30, 1997.
(2) (a) Distribution Agreement between Registrant and
A I M Distributors, Inc. dated August 4, 1997, was
filed electronically as an Exhibit to Registrant's
Post-Effective Amendment No. 33 on December 30, 1997,
and is incorporated by reference herein.
(b) Amendment No. 1, dated as of March 2, 1998, to
the Distribution Agreement, dated August 4, 1997,
between Registrant and A I M Distributors, Inc.
(relating to Class A and Class C shares), was filed
as an Exhibit to Registrant's Post-Effective
Amendment No. 37, on April 24, 2000, and is
incorporated by reference herein.
(c) Amendment No. 2, dated as of June 21, 1999, to
the Distribution Agreement, dated August 4, 1997,
between Registrant and A I M Distributors, Inc.
(relating to Class A and Class C shares), was filed
as an Exhibit to Registrant's Post-Effective
Amendment No. 37, on April 24, 2000, and is
incorporated by reference herein.
(3) Form of Master Distribution Agreement between
Registrant and A I M Distributors, Inc. (relating to
Class A and Class C shares) is filed herewith
electronically.
(4) (a) Master Distribution Agreement between Registrant
and A I M Distributors, Inc. (relating to Class B
shares) was filed electronically as an Exhibit to
Registrant's Post-Effective Amendment No. 35 on
February 16, 1999, and is incorporated by reference
herein.
(b) Amendment No. 1, dated June 21, 1999, to the
Master Distribution Agreement, dated March 3, 1998,
between Registrant and A I M Distributors, Inc.
(relating to Class B shares), was filed as an Exhibit
to Registrant's Post-Effective Amendment No. 37, on
April 24, 2000, and is incorporated by reference
herein.
(5) Form of Master Distribution Agreement between
Registrant and A I M Distributors, Inc. (relating to
Class B shares) is filed herewith electronically.
(6) Form of Selected Dealer Agreement between A I M
Distributors, Inc. and selected dealers was filed
electronically as an Exhibit to Registrant's
Post-Effective Amendment No. 35 on February 16, 1999,
and is incorporated by reference herein.
C-4
<PAGE> 163
(7) Form of Bank Selling Group Agreement between A I M
Distributors, Inc. and banks was filed electronically
as an Exhibit to Registrant's Post-Effective
Amendment No. 35 on February 16, 1999, and is
incorporated by reference herein.
f (1) Defined Benefit Deferred Compensation Plan for
Non-Interested Directors and Trustees was filed on
EDGAR with Post-Effective Amendment No. 31 on April
30, 1997.
(2) Form of Deferred Compensation Agreement for
Registrant's Non-Affiliated Directors for
Non-Interested Directors and Trustees was filed
electronically as an Exhibit to Post-Effective
Amendment No. 32 on June 9, 1997 and is incorporated
by reference herein.
(3) Form of Deferred Compensation Agreement for
Registrant's Non-Affiliated Directors was filed
electronically as an Exhibit to Registrant's
Post-Effective Amendment No. 34 on February 24, 1998,
and is incorporated by reference herein.
(4) Form of Deferred Compensation Agreement for
Registrant's Non-Affiliated Directors, as amended
March 7, 2000, is filed electronically herewith.
(5) 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 to Post-Effective Amendment No. 32 on June 9,
1997.
(6) Retirement Plan for Registrant's Non-Affiliated
Directors, effective as of March 8, 1994, as restated
September 18, 1995 and March 7, 2000, is filed
electronically herewith.
g (1) Form of Custodian Agreement between Registrant and
United Missouri Bank of Kansas City, N.S., dated as
of November 1, 1993, previously filed with
Post-Effective Amendment No. 20 to the Registrant's
Registration Statement on September 10, 1993.
Custodian Agreement between Registrant and United
Missouri Bank of Kansas City, N.S., dated as of
November 1, 1993, previously filed with
Post-Effective Amendment No. 22 to the Registrant's
Registration Statement on April 28, 1994. Form of
Custodian Agreement between Registrant and United
Missouri Bank, dated May 1, 1995, previously filed
with Post-Effective Amendment No. 24 to the
Registrant's Registration Statement on May 1, 1995,
and filed on EDGAR with Post-Effective Amendment No.
26 on April 22, 1996.
(2) (a) Custodian Contract, dated August 4, 1997, between
Registrant and State Street Bank and Trust Company
was filed electronically as an Exhibit to
Registrant's Post-Effective Amendment No. 34 on
February 24, 1998.
(b) Amendment to Custodian Contract dated September
9, 1998, between Registrant and State Street Bank and
Trust Company was filed electronically as an Exhibit
to Registrant's Post-Effective Amendment No. 35 on
February 16, 1999.
(3) (a) Master Custodian Contract, dated May 1, 2000,
between Registrant and State Street Bank and Trust
Company is filed herewith electronically.
(b) Amendment, dated May 1, 2000, to Custodian
Contract, dated May 1, 2000, between Registrant and
State Street Bank and Trust Company is filed herewith
electronically.
C-5
<PAGE> 164
h (1) (a) Operating Services Agreement between Registrant
and INVESCO Services, Inc., dated as of February 28,
1997 was filed on EDGAR with Post-Effective Amendment
No. 31 on April 30, 1997.
(b) Operating Services Agreement between Registrant
and A I M Advisors, Inc. dated August 4, 1997, was
filed electronically as an Exhibit to Registrant's
Post-Effective Amendment No. 33 on December 30, 1997.
(c) Amended and Restated Operating Services
Agreement, dated as of July 1, 1999, between
Registrant and A I M Advisors, Inc., was filed as an
Exhibit to Registrant's Post-Effective Amendment No.
37, on April 24, 2000, and is incorporated by
reference herein.
(2) (a) Transfer Agency and Service Agreement between
Registrant, A I M Advisors, Inc. and A I M Fund
Services, Inc. dated August 4, 1997, was filed
electronically as an Exhibit to Registrant's
Post-Effective Amendment No. 33 on December 30, 1997.
(b) Amended and Restated Transfer Agency and Service
Agreement, dated July 1, 1999, between Registrant and
A I M Fund Services, Inc., was filed as an Exhibit to
Registrant's Post-Effective Amendment No. 37, on
April 24, 2000, and is incorporated by reference
herein.
(3) (a) Remote Access and Related Services Agreement,
dated as of December 23, 1994, between the Registrant
and The Shareholder Services Group, Inc. was filed
electronically as an Exhibit to Registrant's
Post-Effective Amendment No. 34 on February 24, 1998,
and is incorporated by reference herein.
(b) Amendment No. 1, dated October 4, 1995, to the
Remote Access and First Data Investor Services Group,
Inc. (formerly The Shareholder Services Group, Inc.)
was filed electronically as an Exhibit to
Registrant's Post-Effective Amendment No. 34 on
February 24, 1998, and is incorporated by reference
herein.
(c) Addendum No. 2, dated October 12, 1995, to the
Remote Access and Related Services Agreement, dated
December 23, 1994, between Registrant and First Data
Investor Services Group, Inc. was filed
electronically as an Exhibit to Registrant's
Post-Effective Amendment No. 34 on February 24, 1998,
and is incorporated by reference herein.
(d) Amendment No. 3, dated as of February 1, 1997, to
the Remote Access and Related Services Agreement,
dated December 23, 1994, between the Registrant and
First Data Investor Services Group, Inc. was filed
electronically as an Exhibit to Registrant's
Post-Effective Amendment No. 34 on February 24, 1998,
and is incorporated by reference herein.
(e) Exhibit 1, effective as of August 4, 1997, to the
Remote Access and Related Services Agreement, dated
December 23, 1994, between the Registrant and First
Data Investor Services Group, Inc. was filed
electronically as an Exhibit to Registrant's
Post-Effective Amendment No. 34 on February 24, 1998,
and is incorporated by reference herein.
(f) Preferred Registration Technology Escrow
Agreement, dated September 10, 1997, between
Registrant and First Data Investor Services Group,
Inc., was filed electronically as an Exhibit to
Registrant's Post-Effective Amendment No. 34 on
February 24, 1998, and is incorporated by reference
herein.
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<PAGE> 165
(g) Amendment No. 4, dated as of June 30, 1998, to
the Remote Access and Related Services Agreement,
dated December 23, 1994, between the Registrant and
First Data Investor Services Group, Inc. was filed
electronically as an Exhibit to Registrant's
Post-Effective Amendment No. 35 on February 16, 1999,
and is incorporated by reference herein.
(h) Amendment No. 5, dated July 1, 1998, to the
Remote Access and Related Services Agreement, dated
December 23, 1994, between the Registrant and First
Data Investor Services Group, Inc. was filed
electronically as an Exhibit to Registrant's
Post-Effective Amendment No. 35 on February 16, 1999,
and is incorporated by reference herein.
(i) Amendment No. 6, dated August 30, 1999, to the
Remote Access and Related Services Agreement, dated
December 23, 1994, between Registrant and First Data
Investor Services Group, Inc., was filed as an
Exhibit to Registrant's Post-Effective Amendment No.
37, on April 24, 2000, and is incorporated by
reference herein.
(4) (a) Memorandum of Agreement, dated May 3, 1999,
between Registrant, on behalf of AIM Advisor Flex
Fund, AIM Advisor International Value Fund, AIM
Advisor Large Cap Value Fund, AIM Advisor MultiFlex
Fund and AIM Advisor Real Estate Fund, and A I M
Advisors, Inc., was filed as an Exhibit to
Registrant's Post-Effective Amendment No. 37, on
April 24, 2000, and is incorporated by reference
herein.
(b) Memorandum of Agreement, dated May 3, 1999,
between Registrant, on behalf of AIM Advisor Flex
Fund, AIM Advisor International Value Fund, AIM
Advisor Large Cap Value Fund, AIM Advisor MultiFlex
Fund and AIM Advisor Real Estate Fund, and A I M
Distributors, Inc., was filed as an Exhibit to
Registrant's Post-Effective Amendment No. 37, on
April 24, 2000, and is incorporated by reference
herein.
(5) (a) Agreement and Plan of Reorganization, dated March
22, 2000, between AIM Advisor Funds, Inc., on behalf
of AIM Advisor Large Cap Value Fund, and AIM Growth
Series, on behalf of AIM Basic Value Fund, is filed
herewith electronically.
(b) Amendment, dated June 16, 2000, to the Agreement
and Plan of Reorganization, dated March 22, 2000,
between AIM Advisor Funds, Inc., on behalf of AIM
Advisor Large Cap Value Fund, and AIM Growth Series,
on behalf of AIM Basic Value Fund, is filed herewith
electronically.
(c) Agreement and Plan of Reorganization, dated May
10, 2000, between AIM Advisor Funds, Inc., a Maryland
corporation, and AIM Advisor Funds, a Delaware
business trust, is filed herewith electronically.
i (1) Opinion and Consent of Ballard Spahr Andrews &
Ingersoll was filed electronically as an Exhibit to
Registrant's Post-Effective Amendment No. 33 on
December 30, 1997, and is incorporated by reference
herein.
(2) Opinion and Consent of Ballard Spahr Andrews &
Ingersoll LLP is filed herewith electronically.
j Consent of KPMG LLP is filed herewith electronically.
k Financial Statements - None.
l Initial Capital Agreements - Not applicable.
C-7
<PAGE> 166
m (1) Plan and Agreement of Distribution pursuant to Rule
12b-1 between the Registrant and INVESCO Services,
Inc., dated as of January 1, 1997 was filed on EDGAR
with Post-Effective Amendment No. 31 on April 30,
1997.
(2) (a) Plan and Agreement of Distribution Pursuant to
Rule 12b-1, dated August 4, 1997, between the
Registrant (on behalf of Class A and Class C shares)
and A I M Distributors, Inc. dated August 4, 1997,
was filed electronically as an Exhibit to
Registrant's Post-Effective Amendment No. 33 on
December 30, 1997, and is incorporated by reference
herein.
(b) Amendment No. 1, dated as of March 2, 1998, to
the Plan and Agreement of Distribution Pursuant to
Rule 12b-1, dated August 4, 1997, between Registrant
(on behalf of Class A and Class C shares) and A I M
Distributors, Inc., was filed as an Exhibit to
Registrant's Post-Effective Amendment No. 37, on
April 24, 2000, and is incorporated by reference
herein.
(c) Amendment No. 2, dated as of June 21, 1999, to
the Plan and Agreement of Distribution Pursuant to
Rule 12b-1, dated August 4, 1997, between Registrant
(on behalf of Class A and Class C shares) and A I M
Distributors, Inc. was filed as an Exhibit to
Registrant's Post-Effective Amendment No. 37, on
April 24, 2000, and is incorporated by reference
herein.
(3) Form of Master Distribution Plan of the Registrant
(on behalf of Class A and Class C shares) is filed
herewith electronically.
(4) (a) Master Distribution Plan, dated as of March 3,
1998, of the Registrant (on behalf of Class B shares)
was filed electronically as an Exhibit to
Registrant's Post-Effective Amendment No. 35 on
February 16, 1999, and is incorporated by reference
herein.
(b) Amendment No. 1, dated June 21, 1999, to the
Master Distribution Plan, dated as of March 3, 1998,
of the Registrant (on behalf of Class B shares), was
filed as an Exhibit to Registrant's Post-Effective
Amendment No. 37, on April 24, 2000, and is
incorporated by reference herein.
(5) Form of Master Distribution Plan of the Registrant
(on behalf of Class B shares) is filed herewith
electronically.
(6) Form of Shareholder Service Agreement to be used in
connection with Registrant's Master Distribution Plan
was filed electronically as an Exhibit to
Registrant's Post-Effective Amendment No. 35 on
February 16, 1999, and is incorporated by reference
herein.
(7) Form of Bank Shareholder Service Agreement to be used
in connection with Registrant's Master Distribution
Plan was filed electronically as an Exhibit to
Registrant's Post-Effective Amendment No. 35 on
February 16, 1999, and is incorporated by reference
herein.
(8) Form of Variable Group Annuity Contractholder Service
Agreement to be used in connection with Registrant's
Master Distribution Plan was filed electronically as
an Exhibit to Registrant's Post-Effective Amendment
No. 35 on February 16, 1999, and is incorporated by
reference herein.
C-8
<PAGE> 167
(9) Form of Agency Pricing Agreement to be used in
connection with Registrant's Master Distribution Plan
was filed electronically as an Exhibit to
Registrant's Post-Effective Amendment No. 35 on
February 16, 1999, and is incorporated by reference
herein.
(10) Form of Service Agreement of Bank Trust Departments
and for Brokers for Bank Trust Departments to be used
in connection with Registrant's Master Distribution
Plan was filed electronically as an Exhibit to
Registrant's Post-Effective Amendment No. 35 on
February 16, 1999, and is incorporated by reference
herein.
(11) Form of Shareholder Service Agreement for Shares of
AIM Mutual Funds is filed herewith electronically.
n (1) Plan Pursuant To Rule 18f-3 under the Investment
Company Act of 1940 by the Registrant adopted by the
Board of Directors was filed on EDGAR with
Post-Effective Amendment No. 31 on April 30, 1997.
(2) Second Amended and Restated Multiple Class Plan (Rule
18f-3) (effective September 1, 1997) was filed
electronically as an Exhibit to Registrant's
Post-Effective Amendment No. 33 on December 30, 1997.
(3) Third Amended and Restated Multiple Class Plan (Rule
18f-3) was filed as an Exhibit to Registrant's
Post-Effective Amendment No. 37, on April 24, 2000,
and is incorporated by reference herein.
o [Reserved]
p (1) A I M Management Group Inc. Code of Ethics, as
amended February 24, 2000, relating to A I M
Management Group Inc. and A I M Advisors, Inc., was
filed as an Exhibit to Registrant's Post-Effective
Amendment No. 37 on April 24, 2000, and is
incorporated by reference herein.
(2) (a) Code of Ethics of AIM Advisor Funds, Inc.,
effective as of August 4, 1997, was filed as an
Exhibit to Registrant's Post-Effective Amendment No.
37 on April 24, 2000.
(b) Code of Ethics of AIM Advisor Funds, Inc.,
effective as of June 14, 2000, is filed herewith
electronically.
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.
None.
Item 25. Indemnification
State the general effect of any contract, arrangements or
statute under which any director, officer, underwriter or
affiliated person of the Registrant is insured or indemnified
against any liability incurred in their official capacity,
other than insurance provided by any director, officer,
affiliated person or underwriter for their own protection.
C-9
<PAGE> 168
The Registrant's Agreement and Declaration of Trust, dated
December 6, 1999, as amended, provides, among other things (i)
that trustees and officers of the Registrant, when acting as
such, shall not be personally liable for any act, omission or
obligation of the Registrant or any trustee or officer (except
for liabilities to the Registrant or its shareholders by
reason of willful misfeasance, bad faith, gross negligence or
reckless disregard of duty); (ii) for the indemnification by
the Registrant of the trustees, officers, employees and agents
of the Registrant to the fullest extent permitted by the
Delaware Business Trust Act and Bylaws and other applicable
law; (iii) that shareholders of the Registrant shall not be
personally liable for the debts, liabilities, obligations or
expenses of the Registrant or any portfolio or class; and (iv)
for the indemnification by the Registrant, out of the assets
belonging to the applicable portfolio, of shareholders and
former shareholders of the Registrant in case they are held
personally liable solely by reason of being or having been
shareholders of the Registrant or any portfolio or class and
not because of their acts or omissions or for some other
reason.
Insofar as indemnification for liability arising under the
Securities Act of 1933 (the "Act") may be permitted to
trustees, 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 as expressed in the Act 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
trustee, officer or controlling person of the Registrant in
the successful defense of any action, suit or proceeding) is
asserted by such trustee, officer or controlling person in
connection with the securities being registered, 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 as expressed in
the Act and will be governed by the final adjudication of such
issue. Insurance coverage is provided under a joint Mutual
Fund & Investment Advisory Professional and Directors &
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 and Sub-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.
See "Management" in the Prospectus and "The Advisory and
Sub-Advisory Agreements" in the Statement of Additional
Information for information regarding the business of the
investment advisor and sub-advisors. The only employment of a
substantial nature of the Advisor's directors and officers is
with the Advisor and its affiliated companies. For information
as to the business, profession, vocation or employment of a
substantial nature of each of the officers and directors of
INVESCO, Inc. and INVESCO Global Asset Management (N.A.),
Inc., reference is made to Form ADV filed under the Investment
Advisers Act of 1940 by INVESCO, Inc. and INVESCO Global Asset
Management (N.A.), Inc., herein incorporated by reference.
Item 27. Principal Underwriters
(a) State the name of each investment company (other than the
Registrant) for which each principal underwriter currently
distributing the Registrant's securities also acts as a
principal underwriter, depositor, or investment adviser.
C-10
<PAGE> 169
A I M Distributors, Inc., the Registrant's principal
underwriter of its Retail Classes, also acts as a principal
underwriter to the following investment companies:
AIM Equity Funds (Retail Classes)
AIM Floating Rate Fund
AIM Funds Group
AIM Growth Series
AIM International Funds, Inc.
AIM Investment Funds
AIM Investment Securities Funds (Retail Classes)
AIM Series Trust
AIM Special Opportunities Funds
AIM Summit Fund
AIM Tax-Exempt Funds
AIM Variable Insurance Funds
(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 Position and Offices Positions and Offices
Business Address* with Underwriter with Registrant
---------------- ---------------- ---------------
<S> <C> <C>
Charles T. Bauer Chairman & Director Chairman & Trustee
Michael J. Cemo President & Director None
Gary T. Crum Director Senior Vice President
Robert H. Graham Senior Vice President & Director President & Trustee
W. Gary Littlepage Senior Vice President & Director None
James L. Salners Executive Vice President None
Marilyn M. Miller Senior Vice President None
Gene L. Needles Senior Vice President None
Gordon J. Sprague Senior Vice President None
Michael C. Vessels Senior Vice President None
B.J. Thompson First Vice President None
Dawn M. Hawley Vice President & Treasurer None
Ofelia M. Mayo Vice President, General Counsel Assistant Secretary
& Assistant Secretary
Melville B. Cox Vice President & Chief Compliance Vice President
Officer
</TABLE>
----------
* 11 Greenway Plaza, Suite 100, Houston, Texas 77046-1173
C-11
<PAGE> 170
<TABLE>
<CAPTION>
Name and Principal Position and Offices Positions and Offices
Business Address* with Underwriter with Registrant
---------------- ---------------- ---------------
<S> <C> <C>
James R. Anderson Vice President None
Mary K. Coleman Vice President None
Mary A. Corcoran Vice President None
Glenda A. Dayton Vice President None
Sidney M. Dilgren Vice President None
Tony D. Green Vice President None
Charles H. McLaughlin Vice President None
Ivy B. McLemore Vice President None
Terri L. Randsell Vice President None
Carol F. Relihan Vice President Senior Vice President
& Secretary
Kamala C. Sachidanandan Vice President None
Christopher T. Simutis Vice President None
Gary K. Wendler Vice President None
Norman W. Woodson Vice President None
David E. Hessel Assistant Vice President, None
Assistant Treasurer & Controller
Luke P. Beausoleil Assistant Vice President None
Sheila R. Brown Assistant Vice President None
Scott E. Burman Assistant Vice President None
Mary E. Gentempo Assistant Vice President None
Simon R. Hoyle Assistant Vice President None
Kathryn A. Jordan Assistant Vice President None
Kim T. McAuliffe Assistant Vice President None
</TABLE>
----------
* 11 Greenway Plaza, Suite 100, Houston, Texas 77046-1173
C-12
<PAGE> 171
<TABLE>
<CAPTION>
Name and Principal Position and Offices Positions and Offices
Business Address* with Underwriter with Registrant
---------------- ---------------- ---------------
<S> <C> <C>
David B. O'Neil Assistant Vice President None
Rebecca Starling-Klatt Assistant Vice President None
Nicholas D. White Assistant Vice President None
Nancy L. Martin Assistant General Counsel & Assistant Secretary
Assistant Secretary
Samuel D. Sirko Assistant General Counsel & Assistant Secretary
Assistant Secretary
Kathleen J. Pflueger Secretary Assistant Secretary
P. Michelle Grace Assistant Secretary Assistant Secretary
Lisa A. Moss Assistant Secretary Assistant Secretary
</TABLE>
(c) Provide the information required by the following
table for all commissions and other compensation
received, directly or indirectly, from the Registrant
during the last fiscal year by each principal
underwriter who is not an affiliated person of the
Registrant or any affiliated person of an affiliated
person.
Not applicable.
Item 28. Location of Accounts and Records
State the name and address of each person maintaining
physical possession of each account, book, or other
document required to be maintained by Section 31(a)
[15 U.S.C. 80a-30(a)] and the rules under that
section.
A I M Advisors, Inc., 11 Greenway Plaza, Suite 100,
Houston, Texas 77046-1173, 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, State Street Bank and Trust
Company, 225 Franklin Street, Boston, Massachusetts
02110, and the Registrant's Transfer Agent and
Dividend Paying Agent, A I M Fund Services, Inc.,
P.O. Box 4739, Houston, Texas 77210-4739.
----------
* 11 Greenway Plaza, Suite 100, Houston, Texas 77046-1173
C-13
<PAGE> 172
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
C-14
<PAGE> 173
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933 and the
Investment Company Act of 1940, the Registrant has duly caused this Amendment to
its Registration Statement to be signed on its behalf by the undersigned,
thereunto duly authorized, in the city of Houston, Texas on the 12th day of
July, 2000.
REGISTRANT: AIM ADVISOR FUNDS
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 & Trustee July 12, 2000
---------------------------
(Charles T. Bauer)
/s/ ROBERT H. GRAHAM Trustee & President July 12, 2000
--------------------------- (Principal Executive Officer)
(Robert H. Graham)
/s/ BRUCE L. CROCKETT Trustee July 12, 2000
---------------------------
(Bruce L. Crockett)
/s/ OWEN DALY II Trustee July 12, 2000
---------------------------
(Owen Daly II)
/s/ EDWARD K. DUNN, JR. Trustee July 12, 2000
---------------------------
(Edward K. Dunn, Jr.)
/s/ JACK FIELDS Trustee July 12, 2000
---------------------------
(Jack Fields)
/s/ CARL FRISCHLING Trustee July 12, 2000
---------------------------
(Carl Frischling)
/s/ PREMA MATHAI-DAVIS Trustee July 12, 2000
---------------------------
(Prema Mathai-Davis)
/s/ LEWIS F. PENNOCK Trustee July 12, 2000
---------------------------
(Lewis F. Pennock)
/s/ LOUIS S. SKLAR Trustee July 12, 2000
---------------------------
(Louis S. Sklar)
Vice President &
/s/ DANA R. SUTTON Treasurer (Principal Financial July 12, 2000
--------------------------- and Accounting Officer)
(Dana R. Sutton)
</TABLE>
<PAGE> 174
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
Exhibit No. Description
----------- -----------
<S> <C>
a(2)(a) Agreement and Declaration of Trust of AIM Advisor Funds,
dated December 6, 1999
a(2)(b) Amendment No. 1, dated May 10, 2000, to the Agreement and
Declaration of Trust, dated December 6, 1999
b(3)(a) Bylaws of AIM Advisor Funds, adopted effective December 6,
1999
b(3)(b) Amendment No. 1, adopted effective June 14, 2000, to the
Bylaws of AIM Advisor Funds, adopted effective December 6,
1999
d(3) Form of Master Investment Advisory Agreement between A I M
Advisors, Inc. and AIM Advisor Funds
d(11) Form of Master Intergroup Sub-Advisory Contract for Mutual
Funds between A I M Advisors, Inc. and INVESCO, Inc.
d(12) Form of Master Intergroup Sub-Advisory Contract for Mutual
Funds between A I M Advisors, Inc. and INVESCO Global Asset
Management (N.A.), Inc.
d(14) Form of Master Administrative Services Agreement, between
Registrant and A I M Advisors, Inc.
e(3) Form of Master Distribution Agreement between Registrant and
A I M Distributors, Inc. (relating to Class A and Class C
shares)
e(5) Form of Master Distribution Agreement between Registrant and
A I M Distributors, Inc. (relating to Class B shares)
f(4) Form of Deferred Compensation Agreement for Registrant's
Non-Affiliated Directors, as amended March 7, 2000
f(6) Retirement Plan for Registrant's Non-Affiliated Directors,
effective as of March 8, 1994, as restated September 18,
1995 and March 7, 2000
g(3)(a) Master Custodian Contract, dated May 1, 2000, between
Registrant and State Street Bank and Trust Company
g(3)(b) Amendment, dated May 1, 2000, to Custodian Contract, dated
May 1, 2000, between Registrant and State Street Bank and
Trust Company
h(5)(a) Agreement and Plan of Reorganization, dated March 22, 2000,
between AIM Advisor Funds, Inc., on behalf of AIM Advisor
Large Cap Value Fund, and AIM Growth Series, on behalf of
AIM Basic Value Fund
h(5)(b) Amendment, dated June 16, 2000, to the Agreement and Plan of
Reorganization, dated March 22, 2000, between AIM Advisor
Funds, Inc., on behalf of AIM Advisor Large Cap Value Fund,
and AIM Growth Series, on behalf of AIM Basic Value Fund
h(5)(c) Agreement and Plan of Reorganization, dated May 10, 2000,
between AIM Advisor Funds, Inc., a Maryland corporation, and
AIM Advisor Funds, a Delaware business trust
</TABLE>
<PAGE> 175
<TABLE>
<S> <C>
i(2) Opinion and Consent of Ballard Spahr Andrews & Ingersoll LLP
j Consent of KPMG LLP
m(3) Form of Master Distribution Plan of the Registrant (on
behalf of Class A and Class C shares)
m(5) Form of Master Distribution Plan of the Registrant (on
behalf of Class B shares)
m(11) Form of Shareholder Service Agreement for Shares of the
AIM Mutual Funds
p(2)(b) Code of Ethics of AIM Advisor Funds, Inc., effective as of
June 14, 2000
</TABLE>
